Callon Petroleum is working with Evercore to shore up its balance sheet after taking a hit during the COVID-19 pandemic, according to two sources familiar with the situation.

The company could be well positioned to follow Antero Resources’s playbook of selling royalty interests to firm up liquidity, one of the sources added. Management has stated that the company could also pursue divestitures of noncore assets, mineral interests or water assets.

Callon is one of the many E&P companies that have stumbled on their opportunistic exchange offers of late, as investors have taken a harder stance amid the double whammy of the coronavirus pandemic and depressed commodity market. Holders of the company’s unsecured bonds tapped Rothschild as banker and Paul Weiss as counsel to contend Callon’s now-terminated exchange offer, as Debtwire reported.

Callon’s USD 650m 6.25% senior unsecured notes due 2023 have sold off over the last month. The notes last traded yesterday (30 June) at 38.106 compared to trades at 47.5 in early June, according to MarketAxess.

Following the this past spring’s redetermination, Callon’s borrowing base was cut to USD 1.7bn, from USD 2bn. Revolver lenders agreed to provide certain relief, such as suspending the total leverage test until end of March 2022, waiving the current ratio test until 30 September this year, and allowing up to USD 400m of new second lien notes. The borrower is also bound by a total secured leverage test of 3x between 1Q20 and YE21, per the first amendment.

As of 31 March, the company had USD 347m of liquidity through USD 332m of revolver availability and USD 15m of cash.  The decline in liquidity from 4Q19 of USD 711m was primarily a result of the borrowing base being reduced to USD 1.7bn from USD 2.0bn, negative cashflow of USD 112m, and revolver borrowing of USD 65m, according to a 12 June Debtwire credit report.

Evercore declined to comment. Callon did not respond to a request for comment.

2020 Debtwire