The Boards of Directors of Callon Petroleum Company (Callon) and Carrizo Oil & Gas, Inc. (Carrizo) have unanimously approved a definitive agreement under which Callon will acquire Carrizo in an all-stock transaction valued at US$3.2 billion.

The highly complementary combination will create a leading oil and gas company with scaled development operations across a portfolio of core oil-weighted assets in both the Permian Basin and Eagle Ford Shale.

Under the terms of the agreement, Carrizo shareholders will receive a fixed exchange ratio of 2.05 Callon shares for each share of Carrizo common stock they own.

This represents US$13.12 per Carrizo share based on Callon’s closing common stock price on July 12 and a premium of 18 per cent to Carrizo’s trailing 60-day volume-weighted average price.

Following the close of the transaction, Callon shareholders will own approximately 54 per cent of the combined company, and Carrizo shareholders will own approximately 46 per cent, on a fully diluted basis.

The all-stock transaction is intended to be tax-free to Carrizo shareholders.

Joe Gatto, President and Chief Executive Officer of Callon, said that they are excited about this transformational transaction – creating a differentiated oil and gas company by integrating core asset bases in premier basins.

“Together with Carrizo, we will accelerate our free cash flow, capital efficiency and deleveraging goals through an optimised model of large-scale development across the portfolio. We will also benefit from leading cash margins to navigate commodity price volatility and allow for reliable, continuous development of the combined asset base.”

“With a deep inventory of high rate-of-return well locations in well-established areas and substantial upside opportunities for organic inventory delineation, we will be able to drive differentiated growth deploying our life-of-field development model for many years to come,” he said.

Mr Gatto detailed that as a larger organisation, Callon will be well-positioned to benefit from an expanded infrastructure footprint and critical mass for production marketing and supply chain functions and also leverage its technology and data capture initiatives across a broader base.

“Importantly, this combination brings together two organisations grounded in strong values and a shared commitment to responsible operations, integrity, and a drive to deliver leading results,” he commented.

President and Chief Executive Officer of Carrizo, S.P. ‘Chip’ Johnson, also commented that through the Callon-Carrizo combination, they bring together a strong foundation of Midland Basin and Eagle Ford Shale assets and overlay a substantial Delaware acreage position and value proposition that will be unlocked through an integrated plan of large-scale program development.

“This all-stock transaction provides Carrizo shareholders with the opportunity to participate in the significant near- and long-term upside potential of the merged company. We look forward to a bright future for our employees and all of our stakeholders and expect a seamless integration.”