Callon Petroleum (CPE) 8-K/A Completion of Acquisition or Disposition of Assets

EXHIBIT 99.2

CALLON PETROLEUM COMPANY

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On April 18, 2007, Callon Petroleum Company (the Company or Callon) closed the acquisition of BP Exploration and Production Company’s 80% working interest in the Entrada Field (the acquisition) for total cash consideration of $190 million. The purchase price included $150 million payable at closing and an additional $40 million payable after the achievement of certain production milestones. The purchased interests in the Gulf of Mexico included Garden Banks Blocks 738,782,785,826 and 827, subject to certain depth limitations. Callon now owns a 100% working interest in the Entrada Field and is the operator. In addition, the Company closed a seven-year, $200 million senior secured revolving credit facility with Merrill Lynch Capital Corporation ($200 million ML financing or ML financing), secured by a first priority lien on Callon’s Entrada properties, to finance the initial purchase price of the acquisition and a portion of the related development costs.

The following unaudited pro forma condensed consolidated financial information has been prepared by management utilizing the Company’s historical consolidated financial statements for the year ended December 31, 2006 with respect to the operating data and as of December 31, 2006 with respect to the balance sheet data. The unaudited pro forma condensed consolidated statement of operations gives effect to the acquisition as if the transaction had occurred on January 1, 2006. The transaction and the related adjustments are described in the accompanying notes.

The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only, and does not purport to be indicative of the results that would actually have occurred if the transaction described had occurred as presented in such statements or that may be obtained in the future. In addition, future results may vary significantly from the results reflected in such statements. The following unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company’s historical consolidated financial statements and the notes thereto. The unaudited pro forma condensed consolidated financial information, in the opinion of management, reflects all adjustments necessary to present fairly the pro forma information.

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CALLON PETROLEUM COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2006
(IN THOUSANDS)

				Pro Forma
	Historical			Adjustments			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	1,896		$	8,710	(a)	$	10,606
Accounts receivable		32,166			—			32,166
Other current assets		23,590			—			23,590
Total current assets		57,652			8,710			66,362
Evaluated oil and gas properties		1,096,907			150,000	(a)		1,246,907
Less accumulated depreciation, depletion and amortization		(604,682	)		—			(604,682	)
Unevaluated properties		54,802			—			54,802
Total oil and gas properties		547,027			150,000			697,027
Other assets, net		20,848			6,290	(a)		27,138
	$	625,527		$	165,000		$	790,527
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	46,611		$	—		$	46,611
Asset retirement obligations		14,355			—			14,355
Current maturities of long-term debt		213			—			213
Total current liabilities		61,179			—			61,179
Long-term debt		225,521			165,000	(a)		390,521
Asset retirement obligation		26,824			—			26,824
Deferred tax liability		30,054			—			30,054
Other		586			—			586
Total liabilities		344,164			165,000			509,164
Stockholders’ equity:
Preferred stock		—			—			—
Common stock		207			—			207
Additional paid-in capital		220,785			—			220,785
Accumulated other comprehensive income		8,652			—			8,652
Retained earnings		51,719			—			51,719
Total stockholders’ equity		281,363			—			281,363
	$	625,527		$	165,000		$	790,527

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CALLON PETROLEUM COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2006
(IN THOUSANDS, EXCEPT PER SHARE DATA)

				Pro Forma
	Historical			Adjustments			Pro Forma
Operating revenues:
Oil	$	93,665		$	—		$	93,665
Gas		88,603			—			88,603
		182,268			—			182,268
Operating expenses:
Lease operating expenses		28,881			—			28,881
Depreciation, depletion and amortization		65,283			(7,533	)(b)		57,750
General and administrative		8,591			—			8,591
Accretion		4,960			—			4,960
Derivatives		150			—			150
Total operating expenses		107,865			(7,533	)		100,332
Income from operations		74,403			7,533			81,936
Other (income) expenses:
Interest expense		16,480			25,041	(c)		41,521
Other (income)		(1,869	)		—			(1,869	)
		14,611			25,041			39,652
Income before income taxes		59,792			(17,508	)		42,284
Income tax expense		20,707			(6,128	)(d)		14,579
Income before equity in earnings of Medusa Spar LLC		39,085			(11,380	)		27,705
Equity in earnings of Medusa Spar LLC, net of tax		1,475			—			1,475
Net income	$	40,560		($	11,380	)	$	29,180
Basic earnings per share	$	2.00		($	0.56	)	$	1.44
Diluted earnings per share	$	1.90		($	0.53	)	$	1.37
Shares used in computing net income per share:
Basic		20,270			20,270			20,270
Diluted		21,363			21,363			21,363

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CALLON PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION

1. PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed consolidated financial information reflects the following adjustments:

a.	To record the fair value of the acquisition based on the initial purchase price of $150 million. The Company may record the additional $40 million as additional purchase price in the future when certain production milestones are achieved, in accordance with the terms of the agreement. The initial purchase price was funded using borrowings from the $200 million ML financing. This adjustment includes a payment of $35 million on the senior secured credit facility with Union Bank of California, N.A. made with a portion of the proceeds from the ML financing and payment of $6.3 million in deferred financing costs associated with the ML financing.
b.	To adjust depreciation, depletion and amortization expense using the units-of-production method under the full cost method of accounting for oil and gas properties as a result of the acquisition.
c.	To adjust interest expense for the ML financing and the payment of $35 million on the senior secured credit facility.
d.	To adjust income tax expense for the effects of pro forma adjustments based on an effective tax rate of 35%.

2. SUPPLEMENTAL PRO FORMA OIL AND GAS RESERVE DATA

The following pro forma supplemental information concerning the Company’s proved oil and natural gas reserves is presented pursuant to the disclosure requirements of Statement of Financial Accounting Standards No. 69 “Disclosures About Oil and Gas Producing Activities.” The following tables set forth the changes in the net quantities of oil and natural gas reserves on a pro forma basis giving effect to the acquisition as if it had occurred on January 1, 2006. There are numerous uncertainties inherent in estimating the quantities of proved reserves and projecting future rates of production and timing of development expenditures. The following reserve data represents estimates only and should not be construed as being exact:

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PROVED OIL AND NATURAL GAS RESERVES

				Crude Oil (MBbls)
	Historical			Acquisition		Pro Forma
Proved reserves at January 1, 2006		18,428			13,657		32,085
Extensions, discoveries and other additions		204			—		204
Revisions		(3,733	)		—		(3,733	)
Production		(1,634	)		—		(1,634	)
Proved reserves at December 31, 2006		13,265			13,657		26,922

				Natural Gas (MMcf)
	Historical			Acquisition		Pro Forma
Proved reserves at January 1, 2006		78,021			68,069		146,090
Extensions, discoveries and other additions		14,550			—		14,550
Revisions		(15,557	)		—		(15,557	)
Production		(10,977	)		—		(10,977	)
Proved reserves at December 31, 2006		66,037			68,069		134,106

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CALLON PETROLEUM COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION – (CONTINUED)

The following table sets forth the components of the changes in the standardized measure of discounted future net cash flows from proved oil and natural gas reserves of the Company on a combined pro forma basis for the year ended December 31, 2006. Cash flows relating to the acquisition are based on our evaluation of reserves. The information should be viewed only as a form of standardized disclosure concerning possible future cash flows that would result under the assumptions used but should not be viewed as indicative of fair market value. Refer to the Consolidated Financial Statements and related notes for the year ended December 31, 2006 included in the Company’s Annual Report on Form 10-K for a discussion of the assumptions used in preparing the information presented.

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves is as follows:

	Historical			Acquisition			Pro Forma
	(In thousands)
Futures cash inflows	$	1,101,182		$	1,162,762		$	2,263,944
Future production costs		(243,740	)		(168,142	)		(411,882	)
Future development and abandonment costs		(81,700	)		(351,655	)		(433,355	)
Future income tax expense		(119,685	)		(225,612	)		(345,297	)
Future net cash flows after income taxes		656,057			417,353			1,073,410
10% annual discount for estimated timing of cash flows		(185,266	)		(233,337	)		(418,603	)
Standard measure of discounted future net cash flows	$	470,791		$	184,016		$	654,807

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A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil and natural gas reserves is as follows:

	Historical			Acquisition			Pro Forma
	(In thousands)
As of January 1, 2006	$	837,552		$	281,285		$	1,118,837
Sales and transfers, net of production costs		(153,387	)		—			(153,387	)
Net change in sales and transfer prices, net of production costs		(347,193	)		(145,409	)		(492,602	)
Purchases, extensions, discoveries and improved recovery, net of future production and development costs incurred		122,862			—			122,862
Revisions of quantity estimates		(155,342	)		—			(155,342	)
Accretion of discount		108,871			—			108,871
Net change in income taxes		187,209			48,140			235,349
Changes in production rates, timing and other		(129,781	)		—			(129,781	)
As of December 31, 2006	$	470,791		$	184,016		$	654,807

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