[Editor's note: This is story was updated at 12:42 p.m. Dec. 14.]

Callon Petroleum Co. (NYSE: CPE) said Dec. 13 it will increase its Permian Basin position by nearly 30% with a deal to buy undeveloped acreage and producing oil and gas properties from the Ameredev family of companies.

The $615 million cash transaction will give Callon about 16,098 net surface acres centered around a contiguous position in the southern Delaware Basin in Ward County, Texas.

The company will also acquire additional acreage in Pecos and Reeves counties, Texas.

Callon said it will fund the purchase price with net proceeds from an equity offering it upsized on Dec. 14 to sell up to 40 million shares. Callon estimated it would generate gross proceeds of about $656 million. The company will also use current cash balances under its revolving credit facility.

A Callon subsidiary made the purchase from American Resource Development LLC, American Resource Development Upstream LLC and American Resource Development Midstream LLC.

The Natchez, Miss.-based company's acquisition increases the company’s Delaware drilling inventory by about eight years, said Chris Stevens, an analyst at KeyBanc Capital Markets.

Callon will pay about $32,000 per acre for all of the acreage and $2.5 million per location, a lower price than other recent deals in the Delaware. However, excluding the 4,000 net acres that are not located in Ward, Callon agreed to pay $43,000 per acre, which is near the upper end of recent Delaware deals, “but generally in line for Permian acreage that is prospective for three quality benches,” Stevens said.

The deal stands to be about 9% accretive to net asset value-based inventory and type curve assumptions along with average returns on its inventory, Stevens said.

Callon said the acquisition will be a catalyst for increased activity in 2017 and that it will target operating five rigs by early 2018.

The Ameredev acquisition includes:

  • Net production of 1,945 barrels of oil equivalent per day (boe/d), which in October was 71% oil;
  • Twenty gross operated horizontal wells producing from the Wolfcamp and Bone Spring formations;
  • An estimated inventory of 206 net horizontal drilling locations targeting the Wolfcamp A and B zones with average lateral lengths of 7,500 ft, with 36% extending to 10,000 ft;
  • Established infrastructure ownership, including five saltwater disposal wells and more than 13 miles of gathering lines and gas lift return lines; and
  • An agreement to acquire up to an additional 1,006 net acres in Ward, mutually identified by Callon and Ameredev, if the acquisitions are consummated before the Ameredev acquisition.

Ameredev operates about 80% of net surface acreage and an 82% average working interest in its operated properties. At the close of the deal, Callon’s aggregate Permian Basin position will include 55,500 net surface acres concentrated in four core operating areas within both the Midland and Delaware basins.

The acquisition is expected to close by Feb. 13.

Darren Barbee can be reached at dbarbee@hartenergy.com.

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