Callon Petroleum (CPE) 8-K Callon Petroleum Company Reports Results

Exhibit 99.1

For further information contact

Rodger Smith, 1-800-451-1294

FOR IMMEDIATE RELEASE

     Callon Petroleum Company Reports Results

     For Second Quarter, First Six Months of 2005

     Natchez, MS (August 4, 2005)—Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the quarter and the six-month period ended June 30, 2005.

     Second Quarter 2005 Net Income.Net income for the quarter was $9.3 million, or $0.46 per diluted share, after a non-cash charge of $928,000, or $0.03 per diluted share, attributable to the accelerated vesting of performance shares of common stock for an executive officer and two directors of the company, two of whom are deceased. The company reported net income of $9.7 million, or $0.58 per share on a diluted basis, for the same period in 2004.

     Second Quarter 2005 Operating Results.Oil and gas sales totaled $41.7 million from average production of 64 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $37.6 million from average daily production of 73 MMcfe/d during the same period in 2004. During the second quarter of 2005, crude oil represented approximately 60% of the company’s total production. The average price realized per barrel of oil in the second quarter of 2005 increased to $41.53 compared to $30.03 during the second three months of 2004, while the average price realized per thousand cubic feet of natural gas in the second quarter of 2005 increased to $7.43 compared to $6.28 during the same period a year earlier.

     Six Months 2005 Net Income.Net income increased to $18.8 million, or $0.92 per diluted share, compared to net income of $11.8 million, or $0.75 per share on a diluted basis, for the same period in 2004.

     Six Months 2005 Operating Results.Oil and gas sales totaled $84.7 million from average production of 69 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $69.5 million from average daily production of 68 MMcfe/d during the same period in 2004. Crude oil represented 59% of total production. The average price received per barrel of oil increased to $39.41 compared to $30.32 during the same period in 2004, while the average price realized per thousand cubic feet of natural gas for the six-month period ended June 30, 2005 increased to $7.15 compared to $6.11 during the same period a year earlier.

     Second Quarter 2005 Discretionary Cash Flow. Discretionary cash flow increased by 19% to $30.4 million compared to $25.6 million during the second three months of the previous year. Net cash flow provided by

operating activities, as defined by GAAP, totaled $32.2 million and $21.9 million during the three-month period ended June 30, 2005 and 2004, respectively. (See“Non-GAAP Financial Measure” that follows and the accompanying reconciliation of discretionary cash flow to net cash flow provided by operating activities.)

     Six Months 2005 Discretionary Cash Flow.Discretionary cash flow totaled $61.8 million compared to $43.5 million during the first six months of the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled $53.6 million and $39.8 million during the six-month period ended June 30, 2005 and 2004, respectively. (See“Non-GAAP Financial Measure”that follows and the accompanying reconciliation of discretionary cash flow to net cash flow provided by operating activities.)

     Non-GAAP Financial Measure- This news release refers to a non-GAAP financial measure as “discretionary cash flow.” Callon believes this measure is a financial indicator of the company’s ability to fund capital expenditures and service debt. Callon also believes this non-GAAP financial measure of cash flow is useful information to investors because it is widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and gas exploration and production industry. Many investors use the published research of these analysts in making their investment decisions. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.

Reconciliation of Non-GAAP Financial Measure:

	Three Months Ended					Six Months Ended
(In thousands)	June 30,					June 30,
	2005		2004			2005			2004
Discretionary cash flow	$	30,424	$	25,625		$	61,838		$	43,524
Net working capital changes and other changes		1,798		(3,764	)		(8,285	)		(3,760	)
Net cash flow provided by operating activities	$	32,222	$	21,861		$	53,553		$	39,764

Consolidated Condensed Balance Sheets:

(In thousands)

	June 30,		December 31,
	2005		2004
	(Unaudited)
Cash and cash equivalents	$	18,723	$	3,266
Oil and gas properties, net		407,526		406,690
All other assets		56,194		47,567
Total assets	$	482,443	$	457,523
Long-term debt including current maturities	$	188,435	$	192,927
All other liabilities		78,583		66,284
Stockholders’ equity		215,425		198,312
Total liabilities and stockholders’ equity	$	482,443	$	457,523

Production and Price Information:

	Three Months						Six Months
	Ended						Ended
	June 30,						June 30,
	2005			2004			2005			2004
Production:
Oil (MBbls)		590			539			1,230			978
Gas (MMcf)		2,313			3,412			5,060			6,520
Gas equivalent (MMcfe)		5,850			6,648			12,443			12,390
Average daily (MMcfe)		64.3			73.1			68.7			68.1
Average prices:
Oil ($/Bbl) (a)	$	41.53		$	30.03		$	39.41		$	30.32
Gas ($/Mcf)	$	7.43		$	6.28		$	7.15		$	6.11
Gas equivalent ($/Mcfe)	$	7.12		$	5.66		$	6.81		$	5.61
(a) Below is a reconciliation of the average NYMEX price to the Average realized sales price per barrel of oil:
Average NYMEX oil price	$	53.17		$	38.31		$	51.51		$	36.73
Basis differentials and quality adjustments		(7.37	)		(3.09	)		(6.89	)		(2.31	)
Transportation		(1.28	)		(1.30	)		(1.30	)		(1.28	)
Hedging		(2.99	)		(3.89	)		(3.91	)		(2.82	)
Averaged realized oil price	$	41.53		$	30.03		$	39.41		$	30.32

Callon Petroleum Company

Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Operating revenues:
Oil and gas sales	$	41,668		$	37,606		$	84,680		$	69,525
Operating expenses:
Lease operating expenses		6,197			6,123			12,733			11,291
Depreciation, depletion and amortization		13,671			14,476			29,079			26,311
General and administrative		2,801			1,537			4,495			5,330
Accretion expense		770			914			1,631			1,730
Derivative expense		533			13			912			89
Total operating expenses		23,972			23,063			48,850			44,751
Income from operations		17,696			14,543			35,830			24,774
Other (income) expenses:
Interest expense		4,265			5,436			8,834			11,327
Other income		(96	)		(290	)		(298	)		(376	)
Loss on early extinguishment of debt		—			—			—			2,472
Total other (income) expenses		4,169			5,146			8,536			13,423
Income before income taxes		13,527			9,397			27,294			11,351
Income tax expense		4,735			—			9,553			—
Income before Medusa Spar LLC		8,792			9,397			17,741			11,351
Income from Medusa Spar LLC net of tax		519			333			1,045			481
Net income		9,311			9,730			18,786			11,832
Preferred stock dividends		—			319			318			638
Net income available to common shares	$	9,311		$	9,411		$	18,468		$	11,194
Net income per common share:
Basic	$	0.52		$	0.66		$	1.04		$	0.80
Diluted	$	0.46		$	0.58		$	0.92		$	0.75
Shares used in computing net income:
Basic		17,736			14,251			17,703			14,035
Diluted		20,345			16,877			20,511			15,761

     Callon Petroleum Company is engaged in the exploration, development, acquisition and operation of oil and gas properties primarily in the Gulf Coast region. Callon’s properties and operations are geographically concentrated in the offshore waters of the Gulf of Mexico.

     This news release is posted on the company’s website at www.callon.com and will be archived there for subsequent review. It can be accessed from the “News Releases” link on the left side of the homepage.

     The company would like to point out that this news release contains projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These projections and statements reflect the company’s current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be achieved and actual results could differ materially from those projected as a result of certain factors. Some of the factors which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements include:

•	general economic conditions;
•	volatility of oil and natural gas prices;
•	uncertainty of estimates of oil and natural gas reserves;
•	impact of competition;
•	availability and cost of seismic, drilling and other equipment;
•	operating hazards inherent in the exploration for and production of oil and natural gas;
•	difficulties encountered during the exploration for and production of oil and natural gas;
•	difficulties encountered in delivering oil and natural gas to commercial markets;
•	changes in customer demand and producers’ supply;
•	uncertainty of our ability to attract capital;
•	compliance with, or the effect of changes in, the extensive governmental regulations regarding the oil and natural gas business;
•	actions of operators of our oil and gas properties;
•	weather conditions; and
•	the risk factors discussed in our filings with the Securities and Exchange Commission, including those in our Annual Report for the year ended December 31, 2004 on
	Form 10-K.

     The preceding estimates reflect our review of continuing operations only. These estimates do not take into account any material transactions such as sales of debt and equity securities, acquisitions or divestitures of assets, and formations of joint ventures. We continually review these types of transaction and may engage in one or more of these types of transactions without prior notice.

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