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

EXHIBIT 99.1

For further information contact
Rodger W. Smith, 1-800-451-1294

FOR IMMEDIATE RELEASE

     Callon Petroleum Company Reports Results

     For Fourth Quarter, Full Year 2006

     Natchez, MS (March 9, 2007)—Callon Petroleum Company (NYSE: CPE) today reported results of operations for both the quarter and the year ended December 31, 2006. The Company reported record revenues, earnings and cash flow provided by operating activities for the full year of 2006.

     Fourth Quarter and Full Year 2006 Net Income.For the year ended December 31, 2006, the company reported record net income of $40.6 million, or $1.90 per diluted share. This compares to net income of $26.8 million, or $1.28 per share on a diluted basis, for the same period in 2005. For the three months ended December 31, 2006, Callon reported net income of $5.9 million, or $0.27 per diluted share. This compares with net income of $4.3 million, or $0.20 per diluted share during the fourth quarter of 2005, which included production downtime because of tropical storms and hurricane activity (“inclement weather”).

     Fourth Quarter and Full Year 2006 Operating Results.Operating results for the year ended December 31, 2006 include record oil and gas sales of $182.3 million from average production of 56.9 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $141.3 million from average daily production of 51.5 MMcfe/d during 2005 which was impacted by inclement weather. The average price, after the impact of hedging, received per thousand cubic feet of natural gas for the year ended December 31, 2006 decreased to $8.07, compared to $8.35 for the year ended December 31, 2005, while the average price, after the impact of hedging, received per barrel of oil in 2006 increased to $57.33, compared to $41.61 during 2005. Fourth quarter of 2006 oil and gas sales totaled $44.8 million from production of 59.8 MMcfe/d. This corresponds to sales of $24.9 million from production of 27.6 MMcfe/d during the same period in 2005, which was impacted by inclement weather. The average price, after the impact of hedging, received per thousand cubic feet of natural gas in the fourth quarter of 2006 decreased to $7.82, compared to $12.20 during the fourth quarter of 2005, while the average price, after the impact of hedging, received per barrel of oil in the fourth quarter of 2006 increased to $52.77, compared to $45.93 during the same period in 2005.

     Fourth Quarter and Full Year 2006 Discretionary Cash Flow. Discretionary cash flow for the year ended December 31, 2006 totaled $133.0 million compared to $93.5 million during the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled a record $135.5 million and $74.0 million during the years ended December 31, 2006 and 2005, respectively. Fourth quarter of 2006 discretionary cash flow totaled $32.9 million compared to $11.6 million during the same period in 2005. Net cash flow provided (used) by operating activities, as defined by GAAP, totaled $28.8 million and $(12.1) million during the three-month periods ended December 31, 2006 and 2005, 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 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. 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:

(In thousands)

	Three Months Ended						Full Year Ended
	December 31,						December 31,
	2006			2005			2006		2005
Discretionary cash flow	$	32,913		$	11,579		$	133,023	$	93,452
Net working capital changes and other changes		(4,152	)		(23,660	)		2,461		(19,442	)
Net cash flow provided (used) by operating activities	$	28,761		$	(12,081	)	$	135,484	$	74,010

Production and Price Information:

	Three Months						Full Year
	Ended						Ended
	December 31,						December 31,
	2006			2005			2006			2005
Production:
Oil (MBbls)		294			224			1,634			1,837
Gas (MMcf)		3,736			1,198			10,977			7,768
Gas equivalent (MMcfe)		5,500			2,541			20,780			18,787
Average daily (MMcfe)		59.8			27.6			56.9			51.5
Average prices:
Oil ($/Bbl) (a)	$	52.77		$	45.93		$	57.33		$	41.61
Gas ($/Mcf)	$	7.82		$	12.20		$	8.07		$	8.35
Gas equivalent ($/Mcfe)	$	8.14		$	9.79		$	8.77		$	7.52
Additional per Mcfe data:
Sales price	$	8.14		$	9.79		$	8.77		$	7.52
Lease operating expenses		1.37			2.36			1.39			1.30
Operating margin	$	6.77		$	7.43		$	7.38		$	6.22
Depletion	$	3.94		$	2.58		$	3.14		$	2.39
General and administrative (net of management fees)	$	0.37		$	0.78		$	0.41		$	0.43
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil:
Average NYMEX oil price	$	60.19		$	60.02		$	66.22		$	56.57
Basis differentials and quality adjustments		( 6.56	)		( 6.44	)		( 7.03	)		( 8.45	)
Transportation		( 1.16	)		( 1.08	)		( 1.25	)		( 1.26	)
Hedging		0.30			( 6.57	)		( 0.61	)		( 5.25	)
Averaged realized oil price	$	52.77		$	45.93		$	57.33		$	41.61

Callon Petroleum Company
Consolidated Balance Sheets
(In thousands, except share data)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	1,896		$	2,565
Accounts receivable		32,166			33,195
Deferred tax asset		—			26,770
Restricted investments		4,306			4,110
Fair market value of derivatives		13,311			889
Other current assets		5,973			1,998
Total current assets		57,652			69,527
Oil and gas properties, full-cost accounting method:
Evaluated properties		1,096,907			937,698
Less accumulated depreciation, depletion and amortization		(604,682	)		(539,399	)
		492,225			398,299
Unevaluated properties excluded from amortization		54,802			49,065
Total oil and gas properties		547,027			447,364
Other property and equipment, net		1,996			1,605
Long-term gas balancing receivable		714			403
Restricted investments		1,935			1,858
Investment in Medusa Spar LLC		12,580			11,389
Other assets, net		3,623			1,630
Total assets	$	625,527		$	533,776
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	43,086		$	39,323
Fair market value of derivatives		—			1,247
Undistributed oil and gas revenues		3,525			721
Asset retirement obligations		14,355			21,660
Current maturities of long-term debt		213			263
Total current liabilities		61,179			63,214
Long-term debt		225,521			188,813
Asset retirement obligations		26,824			16,613
Deferred tax liability		30,054			31,633
Accrued liabilities to be refinanced		—			5,000
Other long-term liabilities		586			455
Total liabilities		344,164			305,728
Stockholders’ equity:
Preferred Stock, $.01 par value; 2,500,000 shares authorized;		—			—
Common Stock, $.01 par value; 30,000,000 shares authorized; 20,747,773 shares and 19,357,138 shares issued and outstanding at December 31, 2006 and 2005, respectively		207			194
Unearned compensation-restricted stock		—			(3,334	)
Capital in excess of par value		220,785			220,360
Other comprehensive income (loss)		8,652			(331	)
Retained earnings		51,719			11,159
Total stockholders’ equity		281,363			228,048
Total liabilities and stockholders’ equity	$	625,527		$	533,776

Callon Petroleum Company
Consolidated Statements of Operations
(In thousands, except per share amounts)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Operating revenues:
Oil Sales	$	15,532		$	10,283		$	93,665		$	76,425
Gas Sales		29,220			14,605			88,603			64,865
Total operating revenues		44,752			24,888			182,268			141,290
Operating expenses:
Lease operating expenses		7,541			5,995			28,881			24,377
Depreciation, depletion and amortization		21,683			6,554			65,283			44,946
General and administrative		2,033			1,992			8,591			8,085
Accretion expense		1,128			1,054			4,960			3,549
Derivative expense		—			(490	)		150			6,028
Total operating expenses		32,385			15,105			107,865			86,985
Income from operations		12,367			9,783			74,403			54,305
Other (income) expenses:
Interest expense		4,177			3,776			16,480			16,660
Other (income)		(515	)		(348	)		(1,869	)		(998	)
Total other (income) expenses		3,662			3,428			14,611			15,662
Income before income taxes		8,705			6,355			59,792			38,643
Income tax expense (benefit)		3,007			2,098			20,707			13,209
Income before equity in earnings of Medusa Spar LLC		5,698			4,257			39,085			25,434
Equity in earnings of Medusa Spar LLC, net of tax		162			50			1,475			1,342
Net income		5,860			4,307			40,560			26,776
Preferred stock dividends		—			—			—			318
Net income available to common shares	$	5,860		$	4,307		$	40,560		$	26,458
Net income per common share:
Basic	$	0.28		$	0.22		$	2.00		$	1.43
Diluted	$	0.27		$	0.20		$	1.90		$	1.28
Shares used in computing net income per share amounts:
Basic		20,719			19,272			20,270			18,453
Diluted		21,350			21,276			21,363			20,883

Callon Petroleum Company
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2006, 2005 and 2004
(In thousands)

	2006			2005			2004
Cash flows from operating activities:
Net income	$	40,560		$	26,776		$	21,501
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization		65,929			45,657			48,164
Accretion expense		4,960			3,549			3,400
Amortization of deferred financing costs		2,221			2,062			1,929
Non-cash loss on extinguishment of debt		—			—			2,910
Equity earnings of Medusa Spar, LLC		(1,475	)		(1,342	)		(1,076	)
Non-cash derivative expense		150			1,635			(135	)
Deferred income tax expense (benefit)		20,707			13,209			(6,697	)
Non-cash charge related to compensation plans		1,420			1,906			1,225
Excess tax benefits from share-based payment arrangements		(1,449	)		—			—
Changes in current assets and liabilities:
Accounts receivable, trade		(2,107	)		(11,169	)		(4,495	)
Other current assets		(3,975	)		670			971
Current liabilities		11,311			(8,666	)		2,903
Change in gas balancing receivable		(311	)		322			376
Change in gas balancing payable		133			(289	)		400
Change in other long-term liabilities		(2	)		(18	)		(20	)
Change in other assets, net		(2,588	)		(292	)		(448	)
Cash provided by operating activities		135,484			74,010			70,908
Cash flows from investing activities:
Capital expenditures		(167,979	)		(73,072	)		(64,649	)
Distribution from Medusa Spar, LLC		1,078			463			339
Cash used by investing activities		(166,901	)		(72,609	)		(64,310	)
Cash flows from financing activities:
Change in accrued liabilities to be refinanced		(5,000	)		5,000			—
Increase in debt		88,000			7,000			90,000
Payments on debt		(53,000	)		(12,000	)		(205,915	)
Restricted cash		—			—			63,345
Debt issuance cost		—			—			(984	)
Issuance of common stock		—			2			44,047
Buyout of preferred stock		—			(637	)		—
Equity issued related to employee stock plans		(438	)		(573	)		199
Excess tax benefits from share-based payment arrangements		1,449			—			—
Capital leases		(263	)		(576	)		(1,452	)
Cash dividends on preferred stock		—			(318	)		(1,272	)
Cash provided (used) by financing activities		30,748			(2,102	)		(12,032	)
Net decrease in cash and cash equivalents		(669	)		(701	)		(5,434	)
Cash and cash equivalents:
Balance, beginning of period		2,565			3,266			8,700
Balance, end of period	$	1,896		$	2,565		$	3,266

     Callon Petroleum Company is engaged in the exploration, development, acquisition and operation of oil and gas properties in the Gulf Coast region. The majority of Callon’s properties and operations are concentrated in Louisiana, Alabama and 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.

     It should be noted 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 are discussed in our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K, available on our website or the SEC’s website at www.sec.gov.

#