Callon Petroleum (CPE) 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

For further information contact

Rodger W. Smith, 1-800-451-1294

FOR IMMEDIATE RELEASE

Callon Petroleum Company Reports 25% Increase in Net Income

Natchez, MS (May 7, 2008)—Callon Petroleum Company (NYSE: CPE) today reported results of operations for the quarter ended March 31, 2008.

 First Quarter 2008 Net Income.  For the quarter ended March 31, 2008, the company reported net income of $7.6 million, or $0.35 per share, a 25% increase over net income of $5.8 million, or $0.27 per share, for the same period in 2007.

           First Quarter 2008 Operating Results.  First quarter 2008 oil and gas sales totaled $45.0 million from production of 42.1 million cubic feet of natural gas equivalent per day (MMcfe/d).  This corresponds to sales of $45.5 million from production of 60.3 MMcfe/d during the same period in 2007.  The average price received per thousand cubic feet of natural gas in the first quarter of 2008 increased to $9.50, compared to $7.97 during the first quarter of 2007, while the average price received per barrel of oil in the first quarter of 2008 increased to $86.66, compared to $55.53 during the same period in 2007.  All average realized price amounts are after the impact of hedging.

First Quarter 2008 Discretionary Cash Flow. Discretionary cash flow for the quarter ended March 31, 2008 totaled $29.0 million compared to $33.5 million during the previous year.  Net cash flow provided by operating activities, as defined by GAAP, totaled $35.1 million and $32.9 million during the quarters ended March 31, 2008 and 2007, 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.

Production and Price Information:	Three Months Ended
	March 31,
	2008			2007
Production:
Oil (MBbls)		290			288
Gas (MMcf)		2,090			3,702
Gas equivalent (MMcfe)		3,828			5,427
Average daily (MMcfe)		42.1			60.3
Average prices:
Oil ($/Bbl) (a)	$	86.66		$	55.53
Gas ($/Mcf)	$	9.50		$	7.97
Gas equivalent ($/Mcfe)	$	11.75		$	8.38
Additional per Mcfe data:
Sales price	$	11.75		$	8.38
Lease operating expenses		1.35			1.22
Operating margin	$	10.40		$	7.16
Depletion	$	3.93		$	4.03
General and administrative (net of management fees)	$	0.69		$	0.41
(a) Below is a reconciliation of the average NYMEX price to the average realized sales price per barrel of oil:
Average NYMEX oil price	$	97.90		$	58.27
Basis differentials and quality adjustments		( 3.65	)		( 5.11	)
Transportation		( 1.25	)		( 1.14	)
Hedging		( 6.34	)		3.51
Averaged realized oil price	$	86.66		$	55.53

Reconciliation of Non-GAAP Financial Measure: (In thousands)	Three Months Ended
	March 31,
	2008		2007
Discretionary cash flow	$	29,043	$	33,506
Net working capital changes and other changes		6,088		( 637	)
Net cash flow provided by operating activities	$	35,131	$	32,869

Callon Petroleum Company

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

	March 31,			December 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	42,312		$	53,250
Accounts receivable		22,899			22,073
Restricted investments		141			100
Other current assets		1,890			6,592
Total current assets		67,242			82,015
Oil and gas properties, full-cost accounting method:
Evaluated properties		1,391,964			1,349,904
Less accumulated depreciation, depletion and amortization		(753,403	)		(738,374	)
		638,561			611,530
Unevaluated properties excluded from amortization		61,347			70,176
Total oil and gas properties		699,908			681,706
Other property and equipment, net		2,137			1,986
Restricted investments		4,525			4,525
Investment in Medusa Spar LLC		12,740			12,673
Other assets, net		7,473			9,577
Total assets	$	794,025		$	792,482
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	25,096		$	37,698
Asset retirement obligations		9,470			9,810
Fair market value of derivatives		8,613			5,205
Total current liabilities		43,179			52,713
Long-term debt		392,589			392,012
Asset retirement obligations		27,849			27,027
Deferred tax liability		35,094			32,190
Other long-term liabilities		2,018			1,465
Total liabilities		500,729			505,407
Stockholders' equity:
Preferred Stock, $.01 par value, 2,500,000 shares authorized;		--			--
Common Stock, $.01 par value, 30,000,000 shares authorized; 20,941,779 and 20,891,145 shares outstanding at March 31, 2008 and December 31, 2007, respectively		209			209
Capital in excess of par value		224,140			223,336
Other comprehensive income		(5,598	)		(3,383	)
Retained earnings		74,545			66,913
Total stockholders' equity		293,296			287,075
Total liabilities and stockholders' equity	$	794,025		$	792,482

Callon Petroleum Company

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2008			2007
Operating revenues:
Oil sales	$	25,096		$	15,968
Gas sales		19,864			29,516
Total operating revenues		44,960			45,484
Operating expenses:
Lease operating expenses		5,178			6,599
Depreciation, depletion and amortization		15,029			21,847
General and administrative		2,652			2,221
Accretion expense		1,032			1,112
Total operating expenses		23,891			31,779
Income from operations		21,069			13,705
Other (income) expenses:
Interest expense		9,940			4,585
Other income		(472	)		(325	)
Total other (income) expenses		9,468			4,260
Income before income taxes		11,601			9,445
Income tax expense		4,082			3,803
Income before equity in earnings of Medusa Spar LLC		7,519			5,642
Equity in earnings of Medusa Spar LLC, net of tax		113			161
Net income	$	7,632		$	5,803
Net income per share:
Basic	$	0.37		$	0.28
Diluted	$	0.35		$	0.27
Shares used in computing net income per share:
Basic		20,871			20,722
Diluted		21,644			21,193

Callon Petroleum Company

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,			March 31,
	2008			2007
Cash flows from operating activities:
Net income	$	7,632		$	5,803
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization		15,213			22,039
Accretion expense		1,032			1,112
Amortization of deferred financing costs		873			569
Equity in earnings of Medusa Spar LLC		(113	)		(161	)
Deferred income tax expense		4,082			3,803
Non-cash charge related to compensation plans		371			341
Excess tax benefits from share-based payment arrangements		(47	)		--
Changes in current assets and liabilities:
Accounts receivable		(648	)		3,407
Other current assets		4,702			917
Current liabilities		(252	)		(5,554	)
Change in gas balancing receivable		923			12
Change in gas balancing payable		557			122
Change in other long-term liabilities		(4	)		(3	)
Change in other assets, net		810			462
Cash provided by operating activities		35,131			32,869
Cash flows from investing activities:
Capital expenditures		(46,208	)		(24,332	)
Entrada acquisition		--			(7,500	)
Distribution from Medusa Spar LLC		108			186
Cash used by investing activities		(46,100	)		(31,646	)
Cash flows from financing activities:
Increases in debt		--			11,000
Payments on debt		--			(11,000	)
Equity issued related to employee stock plans		(16	)		--
Excess tax benefits from share-based payment arrangements		47			--
Capital leases		--			(55	)
Cash provided (used) by financing activities		31			(55	)
Net decrease in cash and cash equivalents		(10,938	)		1,168
Cash and cash equivalents:
Balance, beginning of period		53,250			1,896
Balance, end of period	$	42,312		$	3,064

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 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.