·

Daily production of 4,355 barrels of oil equivalent per day (“BOE/d”), a sequential quarterly increase of 46% over comparable Permian production in the fourth quarter of 2013, comprised of 85% oil volume

·

Adjusted EBITDA, a non-GAAP financial measure, of $21.9  million (See “Non-GAAP Financial Measures” discussed and reconciled below)

·

Net loss available to common shareholders of $0.00 per diluted share and adjusted income available to common shareholders (“Adjusted income”), a non-GAAP financial measure, of $0.11 per diluted share. Adjusted income excludes certain items that the Company believes affect the comparability of operating results, and are generally non-recurring items or items whose timing and/or amount cannot be reasonably estimated (See “Non-GAAP Financial Measures” discussed and reconciled below)

·

Nine horizontal wells drilled and seven horizontal wells completed in the first quarter of 2014 in Midland, Upton and Reagan Counties

·

Callon’s two initial Midland County horizontal Wolfcamp B wells produced at average 30-day peak rates of 911 BOE/d and average 50-day peak rates of 820  BOE/d  (production metrics on a two-stream basis)

·

Wolfcamp A horiztonal well in Upton County continues to produce under natural flowing pressure after 40 days and will be placed on submersible pump after casing pressure declines 

·

Full redemption of Senior Notes due 2016 completed in April 2014

·

Increased 2014 annual production guidance to 5,100 – 5,400 BOE/d

·

$1.2 million in non-recurring, cash expense related to a withdrawn proxy contest

·

$2.5 million in non-recurring expenses (both non-cash and cash components) primarily related to the accelerated vesting of outstanding equity awards for early retirement of employees

·

$2.7 million in non-cash expense related to the mark-to-market valuation adjustment of performance-based phantom stock incentive awards

Drilled

Completed (a)

Awaiting Completion

Gross

Net

Gross

Net

Gross

Net

Southern Midland Basin

Vertical wells

—

—

Horizontal wells

Total

Central Midland Basin

Vertical wells

—

—

Horizontal wells

Total

Northern Midland Basin

Vertical wells

—

—

Total

—

—

Total vertical wells

Total horizontal wells

Total

Three Months Ended

March 31, 2014

Operational capital expenditures

$

Capitalized G&A and interest

  Total capital expenditures, excluding acquisitions

Acquisitions

  Total capital expenditures

$

2014 Guidance Estimates

2nd Quarter

Full Year

Previous

Revised

Total production (BOE/d)

5,000 - 5,250

4,700 - 5,100

5,100 - 5,400

% Oil

82% - 84%

80%

82% - 85%

Expenses (per BOE)

LOE, including workovers

$9.00 - $10.00

$9.75 - $11.25

$9.00 - $10.00

Production taxes, including ad valorem

$4.75 - $5.00

$4.20 - $4.50

$4.75 - $5.00

Adjusted G&A (a)

$9.50 - $10.50

$9.00 - $10.00

$9.00 - $10.00

(a)

Excludes certain non-recurring expenses and non-cash valuation adjustments. See the reconciliation provided within the Non-GAAP financial measures and reconciliations section of this press release for a reconciliation of G&A expense on a GAAP basis to Adjusted G&A expense.

Oil

2Q - 2014

3Q - 2014

4Q - 2014

Swap

Volume (Mbo)

Price

$

$

$

Put Option (sold)

Volume (Mbo)

Price

$

$

$

Swap

Volume (Mbo)

Price

$

$

$

Swap

Volume (Mbo)

Price

$

Swap

Volume (Mbo)

Price

$

Swap

Volume (Mbo)

Price

$

Swap

Volume (Mbo)

Price

$

Swap

Volume (Mbo)

Price

$

Natural Gas

2Q - 2014

3Q - 2014

4Q - 2014

Swap

Volume (Bbtu)

Price

$

$

$

1Q - 2015

2Q - 2015

3Q - 2015

4Q - 2015

Call Option (sold)

Volume (Bbtu)

Price

$

$

$

$

·

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.

·

We believe that the non-GAAP measure of Adjusted income and Adjusted income per diluted share are useful to investors because they provide readers with a meaningful measure of our profitability before recording certain items whose timing or amount cannot be reasonably determined. These measures exclude the net of tax effects of certain non-recurring items and non-cash valuation adjustments, which are detailed in the reconciliation provided below. Prior to being tax-effected and excluded, the amounts reflected in the determination Adjusted income and Adjusted income per diluted share below were computed in accordance with GAAP.

·

Callon believes that the non-GAAP measure of Adjusted G&A is useful to investors because it provides readers with a meaningful measure of our recurring G&A expense and provides for greater comparability period-over-period. The table below details all adjustments to G&A on a GAAP basis to arrive at Adjusted G&A.

·

We calculate Adjusted Earnings before Interest, Income Taxes, Depreciation, Depletion and Amortization (" Adjusted EBITDA") as Adjusted income plus interest expense, income tax expense (benefit) and depreciation, depletion and amortization expense. Adjusted EBITDA is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income (loss), operating income (loss), cash flow provided by operating activities or other income or cash flow data prepared in accordance with GAAP. However, we believe that Adjusted EBITDA provides additional information with respect to our performance or ability to meet its future debt service, capital expenditures and working capital requirements. Because Adjusted EBITDA excludes some, but not all, items that affect net income (loss) and may vary among companies, the Adjusted EBITDA we present may not be comparable to similarly titled measures of other companies.

Three Months Ended March 31,

2014

2013

Change

Discretionary cash flow

$

$

$

Net working capital changes and other changes

Net cash flow provided by operating activities

$

$

$

Three Months Ended March 31,

2014

2013

Change

Loss available to common shares

$

$

$

Net loss on derivative contracts, net of settlements

Phantom mark-to-market, net of settlements

Early retirement expense

—

Withdrawn proxy contest expenses

—

Gain on sale of equipment

—

Adjusted income (loss)

$

$

$

Adjusted income fully diluted earnings per common share

$

$

$

Three Months Ended March 31, 2014

2014

2013

Change

Net income (loss)

$

$

$

Net pre-tax adjustments to arrive at Adjusted income

Income tax expense (benefit)

Interest expense

Depreciation, depletion and amortization

Accretion expense

Adjusted EBITDA

$

$

$

Three Months Ended March 31,

2014

2013

Change

Total G&A

$

$

$

6,332

  Withdrawn proxy contest

—

(1,193)

  Accelerated vesting of outstanding equity awards for early retirement of employees

—

(2,463)

  Mark-to-market valuation adjustment of performance-based phantom stock incentive awards

(2,850)

Adjusted G&A

$

$

$

(174)

Three Months Ended March 31,

2014

2013

Change

% Change

Net production:

  Oil (MBbls)

  Natural gas (MMcf)

(51)%

  Total production (MBOE)

  Average daily production (BOE/d)

  % Oil (MBOE basis)

—

—

Average realized sales price:

  Oil (Bbl)

$

$

$

(2)%

  Natural gas (Mcf) (includes NGLs)

  Total (BOE)

Oil and natural gas revenues (in thousands):

  Oil revenue

$

$

$

  Gas revenue

(21)%

  Total

$

$

$

Additional per BOE data:

  Sales price

$

$

$

     Lease operating expense

(37)%

     Production taxes

  Operating margin

$

$

$

Other expenses per BOE:

Depletion, depreciation and amortization

$

$

$

(20)%

Adjusted G&A (a)

(20)%

(a)

Excludes certain non-recurring expenses and non-cash valuation adjustments. See the reconciliation provided within the Non-GAAP financial measures and reconciliations section of this press release for a reconciliation of G&A expense on a GAAP basis to Adjusted G&A expense.

March 31, 2014

December 31, 2013

ASSETS

Unaudited

Current assets:

Cash and cash equivalents

$

$

Accounts receivable

Fair market value of derivatives

—

Deferred tax asset, current

Other current assets

Total current assets

Oil and natural gas properties, full-cost accounting method:

Evaluated properties

Less accumulated depreciation, depletion and amortization

Net oil and natural gas properties

Unevaluated properties excluded from amortization

Total oil and natural gas properties

Other property and equipment, net

Restricted investments

Deferred tax asset

Other assets, net

Total assets

$

$

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

$

Asset retirement obligations

Fair market value of derivatives

Total current liabilities

13% Senior Notes:

  Principal outstanding

  Deferred credit, net of accumulated amortization of $26,673 and $26,239, respectively

Total 13% Senior Notes

Senior secured revolving credit facility

Asset retirement obligations

Other long-term liabilities

Total liabilities

Stockholders' equity:

Preferred stock, series A cumulative, $0.01 par value and $50.00 liquidation preference, 2,500,000 shares authorized: 1,578,948 and 1,578,948 shares outstanding, respectively

Common stock, $0.01 par value, 110,000,000 and 60,000,000 shares authorized; 40,365,710 and 40,345,456 shares outstanding, respectively

Capital in excess of par value

Accumulated deficit

Total stockholders' equity

Total liabilities and stockholders' equity

$

$

Three Months Ended March 31,

2014

2013

Operating revenues:

  Oil sales

$

$

  Natural gas sales

Total operating revenues

  Operating expenses:

  Lease operating expenses

  Production taxes

  Depreciation, depletion and amortization

  General and administrative

  Accretion expense

  Gain on sale of other property and equipment

—

  Total operating expenses

  Income from operations

  Other (income) expenses:

  Interest expense

  Loss on derivative contracts

  Other (income) expense

  Total other expenses

  Income (loss) before income taxes

     Income tax expense (benefit)

     Income (loss) before equity in earnings of Medusa Spar  LLC

  Equity in earnings of Medusa Spar LLC

—

     Net income (loss)

     Preferred stock dividends

—

 Loss available to common stockholders

$

$

 Loss per common share:

  Basic

$

$

  Diluted

$

$

  Shares used in computing income per common share:

  Basic

  Diluted

Three Months Ended March 31,

2014

2013

Cash flows from operating activities:

Net income

$

$

Adjustments to reconcile net income to cash provided by operating activities:

  Depreciation, depletion and amortization

  Accretion expense

  Amortization of non-cash debt related items

  Amortization of deferred credit

  Equity in earnings of Medusa Spar LLC

—

  Deferred income tax expense

  Net loss (gain) on derivatives, net of settlements

  Gain on sale of other property and equipment

—

  Non-cash expense related to equity share-based awards

  Change in the fair value of liability share-based awards

  Payments to settle asset retirement obligations

  Changes in current assets and liabilities:

     Accounts receivable

     Other current assets

     Current liabilities

  Payments to settle vested liability share-based awards

—

  Change in other long-term liabilities

—

  Change in other assets, net

     Net cash provided by operating activities

Cash flows from investing activities:

Capital expenditures

Proceeds from sales of mineral interest and equipment

Distribution from Medusa Spar LLC

—

    Net cash used in investing activities

Cash flows from financing activities:

Borrowings on credit facility

Payment of deferred financing costs

—

Payment of preferred stock dividends

—

     Net cash provided by financing activities

Net change in cash and cash equivalents

  Balance, beginning of period

  Balance, end of period

$

$