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Callon Petroleum Company Reports Results For Fourth Quarter, Full Year 2009

The company reported fourth quarter net income of $53.9 million, or $2.27 per share, compared to a net loss of $457.5 million or $21.19 per share for the 2008 fourth quarter. For the year ended December 31, 2009, Callon's net income was $54.4 million or $2.45 per share.

Highlights for 2009 include:

• Restructured Senior Notes due December 2010 and reduced the principal from $200.0 million to $154.0 million, extended debt maturities of $138.0 million until September 2016.
• Filed for recoupment of deepwater royalty payments and associated interest relating to the deepwater Medusa Field. Received $44.8 million in January 2010 representing the royalty recoupment.
• Initiated a new business strategy to reinvest strong offshore cash flow into lower-risk, longer-life onshore plays.
• Acquired conventional oil assets in the Permian Basin, providing a multi-year inventory of drilling locations in the promising onshore Wolfberry oil play.
• Established an initial position in the Haynesville Shale gas play of northern Louisiana.

"We exited the year 2009 with a new strategy and two new onshore assets in the Permian Basin in Texas and the Haynesville Shale play of northern Louisiana," Fred Callon, Chairman and CEO explains. "Our focus in 2010 will be on growing through the drill bit and making selective acquisitions in our core areas to further expand our inventory of drilling opportunities and strengthening our visible, long-term growth potential. Our strategy is supported by the strong cash flow from our deepwater Gulf of Mexico fields into our onshore conventional oil and shale gas projects."

Fourth Quarter and Full Year 2009 Net Income. For the year ended December 31, 2009, the company reported net income of $54.4 million, or $2.45 per share. Earnings include accruals for recoupment of royalties and interest from the U.S. Minerals Management Service (MMS) of $51.5 million, or $2.32 per share. The 2009 results compare to a 2008 net loss of $438.9 million, or $20.68 per share, which resulted primarily from a non-cash charge of $485.5 million due to the impairment of the company's oil and gas properties under full-cost accounting rules. In 2008, the book value of the company's oil and gas properties exceeded the full-cost ceiling due primarily to lower oil and natural gas prices at year-end 2008 and the announced suspension of operations at the deepwater Entrada Field during the fourth quarter of 2008. For the quarter ended December 31, 2009, the company reported net income of $53.9 million, or $2.27 per share, compared to a net loss of $457.5 million, or $21.19 per share for the fourth quarter of 2008.

Fourth Quarter and Full Year 2009 Operating Results. Operating results for the three months ended December 31, 2009 include oil and gas sales of $30.1 million from average production of 35.4 million cubic feet of natural gas equivalent per day (MMcfe/d). This compares with oil and gas sales of $15.5 million from average production of 20.7 MMcfe/d during the comparable 2008 period.

The average price received per thousand cubic feet of natural gas (Mcf) in the fourth quarter of 2009, after the impact of hedging, decreased to $5.01, compared to $7.12 during the fourth quarter of 2008. The average price received per barrel of oil (Bbl) in the fourth quarter of 2009, after the impact of hedging, increased to $77.94, compared to $55.23 during the same period in 2008. Oil and natural gas sales for full year 2009 totaled $101.3 million, excluding the MMS royalty recoupment of $40.9 million related to 2003 through 2008 production, from average production of 32.4 MMcfe/d. This corresponds to oil and natural gas sales of $141.3 million from average production of 31.4 MMcfe/d during 2008. The average price received per Mcf for full year 2009, after the impact of hedging, decreased to $4.78, compared to $9.99 during the full year of 2008. The average price received per Bbl during full year 2009, after the impact of hedging, decreased to $73.00, compared to $88.07 during the same period in 2008.

Fourth Quarter and Full Year 2009 Discretionary Cash Flow. Discretionary cash flow for the three-month period ended December 31, 2009 totaled $64.3 million compared to $3.8 million during the comparable prior year period. Net cash flow provided by operating activities, as defined by U.S. GAAP, was $9.4 million in the fourth quarter 2009, while net cash flow used in operating activities was $31.5 million in the fourth quarter of 2008. Discretionary cash flow for full year 2009 totaled $99.7 million, compared to $84.9 million in 2008. Net cash flow provided by operating activities, as defined by U.S. GAAP, totaled $26.4 million and $93.2 million for the years ended December 31, 2009 and 2008, respectively. (See "Non-GAAP Financial Measure" that follows and the accompanying reconciliation of discretionary cash flow, a non-GAAP measure, to net cash flow provided by operating activities.)

Liquidity. At December 31, 2009 the company's cash balance was $3.6 million. The company received $44.8 million in January 2010 from the MMS for the recoupment of royalties relating the Medusa Field. The company concluded a notes exchange offering on December 31, 2009 and exchanged 92% of the $200 million of senior secured notes due December 2010. At year-end the company had $164 million of principal outstanding, excluding the Callon Entrada non-recourse credit agreement in the amount of $84.8 million. In January 2010, the company announced a new $100 million credit facility with Regions Bank. The initial borrowing base of the new facility is $20 million which will be reviewed semi-annually. As of March 8, 2010, there is nothing drawn on the facility.

Non-GAAP Financial Measure. This news release refers to a non-GAAP financial measure as "discretionary cash flow." Callon believes that the non-GAAP measure of discretionary cash flow is useful as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt. The company also has included this information because changes in operating assets and liabilities relate to the timing of cash receipts and disbursements which the company may not control and may not relate to the period in which the operating activities occurred.

Callon Petroleum Company is engaged in the acquisition, development, exploration and operation of oil and gas properties in Louisiana, Texas, and the offshore waters of the Gulf of Mexico.

This news release is posted on the company's website at www.callon.com and will be archived there for subsequent review. It can be accessed from the "News Releases" link on the left side of the homepage.

It should be noted that this news release contains projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These projections and statements reflect the company's current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results could differ materially from those projected as a result of certain factors. Some of the factors which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements are discussed in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K, available on our website or the SEC's website at www.sec.gov.

Callon Petroleum Company
Rodger W. Smith, 800-451-1294