Callon Petroleum Company (NYSE:CPE) is raising $400 million in debt. That indicates an increase of $50 million over the amount of debt that the company had earlier announced it was targeting.
Callon Petroleum’s debt fundraiser is in the form of senior unsecured notes. The debt fundraiser is being done through a private placement to qualified purchasers.
The notes that Callon Petroleum is selling will mature in 2024 and they are subject to a coupon of 6.125%.
The company expects to close the debt transaction on Oct. 3, though closing is subject to market conditions and customer closing conditions.
Callon Petroleum had originally announced that it was looking to raise $350 million in debt, before it changed tune and increased the debt to $400 million.
What’s the money for?
Callon Petroleum intends to use a portion of the net proceeds from the notes offering to repay its borrowing under a term loan. Another portion of the funds will be used for general corporate purposes such as increasing drilling activities.
What to keep in mind is that the notes being issued by Callon Petroleum will initially be backed by the company’s subsidiary known as Callon Petroleum Operating Company. In the future, Callon Petroleum’s other subsidiaries may be tapped to back the notes.
Debt position
Callon Petroleum is raising more debt at a time when its debt position stood at $329.6 million at the end of 2Q2016. Debt rose from $289.1 million in the prior quarter, but declined slightly from $375 million in the year-ago quarter.
As for cash, Callon Petroleum had cash balance of $0.21 million at the end of the latest quarter, a steep decline from $9.51 million at the end of the previous quarter.
Acquisitions
Callon Petroleum is on acquisition mode. The company has recently snapped up a number of oil assets, including 5,667 net acres in Howard County, Texas for which it paid $327 million. Callon Petroleum can be seen taking advantage of subdued commodity prices to build its asset portfolio as it waits for recovery in the oil market.
In 2Q2016, Callon Petroleum posted adjusted EPS of $0.05, beating the consensus estimate of $0.04. However, revenue of $45.1 million for the quarter was below the consensus estimate of $46.6 million.