Callon Petroleum Co., Natchez, Miss., is searching for a partner for its Entrada Field, which involves Gulf of Mexico deepwater Garden Banks blocks 738, 782, 785, 826 and 827. Callon has 100% working interest since buying out BP Plc in April for $150 million and is operator. Callon is expected to offer up to 50% interest.

The April deal with BP requires Callon to pay BP another $40 million after 12.5 million barrels of oil equivalent are produced from the field, according to Fred Callon, chairman and chief executive. He spoke at the annual IPAA OGIS-West investment conference in San Francisco. Merrill Lynch Petrie Divestiture Advisors is leading the partner search.

Two discovery and seven delineation wells have been drilled to date. Proved reserves are estimated at (net of royalties) approximately 17.5 million barrels of oil and 87.1 billion cubic feet of gas. Probable reserves are believed to be 17.6 million barrels and 42.2 billion cubic feet, net of royalties.

Combined, the net reserves are 56.6 million barrels equivalent. Initial production is expected in first-quarter 2009.

The acquisition from BP was at $7.60 per net proved barrel equivalent, and $4.40 per net proved plus probable equivalent, Callon said. Interim financing has been secured: $200 million in a seven-year senior, secured revolver from Merrill Lynch Capital.

Callon plans to tie into ConocoPhillips' Magnolia Field tension-leg platform to handle Entrada production. The TLP's throughput capacity is 50,000 barrels and 150 million cubic feet per day.

"Callon's move to the deepwater Gulf has been significant," Callon said. Prior to 2004, the company's production had been entirely from the shallow Gulf. Since 2004, the deepwater Gulf has contributed half of total output of 20 billion cubic feet equivalent in the three-year period.

A 50% net interest alone in Entrada is expected to represent half of Callon's future production, according to Callon.

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