Callon Petroleum Company

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1 Management Fred L. Callon, CEO and Chairman Joseph C. Gatto Jr., President, CFO and Treasurer Gary A. Newberry, SVP and COO Jerry A. Weant, VP Land Mitzi P. Conn, VP and CAO Michael O Connor, VP Permian Operations EPG Commentary by Dan Steffens Callon Petroleum Company (NYSE: CPE) is one of our Small-Cap Growth Portfolio companies. It is a pure play on the Permian Basin that is well positioned to deliver many years of double digit production and proven reserve growth. Callon generated 70% production growth in 2015 and they are ontrack to increase production another 60% in My valuation is based on a 2016 exit rate of ~20,000 Boe per day and 55% YOY production growth in Note that my current valuation is based on 15X operating cash flow per share for 2016 & 2017; a much lower multiple than where its Permian Basin peers are trading today. Thanks to improving commodity prices, Callon s 2016 capital program is now covered by cash flow from operations. For 2016, Callon is committed to live within cash flow from operations. They dropped back to one active drilling rig at the beginning of the year, but have since added a second rig in the WildHorse area in Howard, County. They ve added a second rig, but lower completed well costs allow them to stay within their capital budget of $140 million.

2 Callon operates in the Midland Basin, one of the few areas in the United States where well level economic are very good at $50/bbl WTI. Completed well costs have come down more than 30% and lease operating expenses are falling. Callon estimates ultimate recoveries ( EUR ) per their horizontal wells in the Midland Basin now range from 540,000 to 1,200,000 boe. Callon has over 1,700 low-risk horizontal drilling locations in the Midland Basin, a subbasin of the Permian Basin. For those of you seeking high yield, I recommend Callon s 10% Series A Cumulative Preferred Stock ($50 par), which is in our High Yield Income Portfolio. It pays dividends of $1.25/Qtr. My Fair Value Estimate is $20.00/share Compared to First Call s Price Target of $18.73/share Disclosure: I do not have a position in CPE and I do not intend on buying or selling it in the next 72 hours. I wrote this profile myself, and it expresses my own opinions. I am not receiving compensation for it from the company. I have no business relationship with any company whose stock is mentioned in this article.

3 Company Overview Callon Petroleum Company has been engaged in the exploration, development, acquisition and production of oil and natural gas properties since The Company was incorporated under the laws of the state of Delaware in 1994 and succeeded to the business of a publicly traded limited partnership, a joint venture with a consortium of European investors and an independent energy company partially owned by a member of current management. Callon is now a pure-play Permian Basin company, becoming one of the leading horizontal operators in the Midland Basin. As part of that process, they have continued to add to their team across all disciplines which has positioned the company to capitalize on a solid asset base in West Texas. The company operates nearly 100% of their Permian acreage, which provides additional flexibility to modify their development plans based on a continuously changing environment and commodity prices. Callon s current acreage position in the Basin provides visible multi-year growth potential from their more than 1,700 horizontal drilling locations from nine distinct zones (or over 900 horizontal drilling locations limited only to the five currently producing zones). Callon s net daily production during 2015 averaged 9,610 Boepd, a 70% increase over Based on the company s latest production guidance, net production should be up another 60% in 2016, with a projected exit rate of ~20,000 Boepd. 2 nd quarter production was hampered by frac interference caused by an offset operator and a power outage. Those problems were resolved and production increased over 3,000 Boepd from Q2 to Q3. Production is expected to increase another 2,500 to 3,000 Boepd from Q3 to Q4.

4 Callon s early transition to a horizontal development program, which was expanded from three productive zones in 2013 to five zones in 2015, adding the Lower and Middle Spraberry zones to the already producing Wolfcamp A and two producing zones from the Wolfcamp B, continues to improve their overall capital efficiency and is driving substantial increases in their proven reserve base. Proved Reserves As of December 31, 2015, Callon s net proved reserve volumes increased 65% as compared to year-end 2014 to 54.3 MMBOE, comprised of 80% crude oil including 43.3 MMBbls with the remaining 20% natural gas of 65.5 Bcf. Approximately 53% of Callon s net proved year-end 2015 reserves were proved developed on a BOE basis. Improving well results and higher commodity prices should cause a BIG BOOST in proven reserves at

5 Business Strategy Maintain fiscal discipline, financial liquidity and capacity to capitalize on inorganic growth opportunities. Callon recognizes that it takes fiscal discipline and a keen focus on controlling capital allocation and operating costs to operate in a commodity price environment where prices have fallen significantly over the past two years. To that end, Callon intends to continue to work with its service partners to reduce drilling, completion and operating costs while also working internally to reduce its overhead costs. For example, in early 2016, Callon announced plans to moderate its development pace and preserve liquidity by transitioning to a one-rig drilling program that allows it to reduce its 2016 operational capital budget by nearly 35%, but which it believes will still provide for year-over-year production growth. Drive production and reserve growth through horizontal development of its resource base. Callon entered the Midland Basin in 2009 focused on a vertical development program that allowed it to amass a comprehensive database of subsurface geologic and other technical data. This internally derived data in conjunction with its analysis of offsetting and nearby industry activity and best practices, positioned it in 2012 to transition to efficient, multi-pad horizontal development. The success of Callon s horizontal development is reflected in its significant year-over-year production growth, which increased 70% in 2015 to 3,508 MBOE (9,610 BOE/d) compared to 2,062 MBOE (5,649 BOE/d) in Additionally, Callon grew reserves 65% in 2015 to 54.3 MMBOE from 32.8 MMBOE at year-end 2014, including reserve extensions and discoveries in 2015 of 22.4 MMBOE. Callon intends to continue to grow the contribution of horizontal production volumes, both from its existing properties and from properties acquired in recent acquisitions, as it continues to execute a resource development program almost exclusively focused on horizontal development. Expand Callon s drilling portfolio through evaluation of existing acreage. Given the challenging commodity price environment, capital allocation decisions have become increasingly important. Callon has shifted almost all of its near-term development focus to the Lower Spraberry given its potential for strong capital efficiency and returns on capital. However, Callon intends to continue its efforts to expand its drilling inventory through selective delineation of additional zones. During 2015, Callon successfully added the Middle Spraberry to its list of producing zones within its acreage, increasing its producing zone count to five distinct zones including the Lower Spraberry, Wolfcamp A and the Upper and Lower Wolfcamp B zones. Callon believes incremental opportunities exist to selectively target other prospective zones across various positions of its acreage, including the Clearfork, Jo Mill, Wolfcamp C and Cline (also called the Wolfcamp D) formations (in order of relative depth). In addition, Callon will continue to monitor the efficiency of its horizontal wells related to reservoir drainage over time, and will pursue down-spacing initiatives within target zones if it believes overall returns would be enhanced. For example, based on an analysis of Callon s own producing wells coupled with its assessment of peer activity, Callon recently increased its Lower Spraberry wells per section from seven wells-per-section to ten wells-per-section. Callon will continue to evaluate its well spacing with an eye towards maximizing resource recovery. Pursue selective acquisitions in the Permian Basin. During 2015, Callon continued to acquire and trade acreage in the Midland Basin despite a volatile commodity price environment which is typically characterized by divergent views of asset valuation. In 2015, Callon acquired nearly 628 net acres located in its existing Carpe Diem and CaBo area (Cassleman - Bohannon fields) located primarily in Midland and Andrews Counties for approximately $29.8 million. Callon also recently acquired 305 net acres located in its CaBo area for approximately $9.3 million. Together, the acquisitions added production of 530 BOE/d (81% oil) and added 56 net potential horizontal drilling locations across all prospective zones, including 42 net potential horizontal drilling locations in currently producing Middle Spraberry, Lower Spraberry, Wolfcamp A and Wolfcamp B zones. Importantly, since the acquired acreage was located within Callon s existing Central Midland Basin area where it has focused its near term development

6 effort, Callon is able to immediately earn returns on these incremental investments. Callon remains committed to its bolt-on strategy of expanding its asset base by identifying and pursuing smaller blocks of offsetting acreage that are potentially inefficient for the current owners to develop but have value to Callon based on their location relative to its acreage. These smaller scale acquisitions generally provide acreage at costs below the value assigned to larger blocks of acreage. While remaining focused on preserving a high level of liquidity, Callon plans to continue to pursue leasehold acquisitions in the Permian Basin with horizontal resource potential that can also be further expanded by bolt-on acreage acquisitions and acreage trades over time Third Quarter Financial and Operating Results Net daily production of 16,598 barrels of oil equivalent per day, an increase of 23% compared to the second quarter of 2016 GAAP income per diluted common share of $0.14 and Adjusted Income per fully diluted common share, a non-gaap financial measure, of $0.09 Closed the Plymouth Acquisition and related common stock financing, expanding its WildHorse area footprint to over 20,000 net acres and total Midland Basin acreage to over 40,000 net acres Continued strong performance from its initial Wolfcamp A completion in Howard County (Silver City Unit A 01H), with cumulative production of over 192,000 BOE (89% oil) in the first 110 days on production Commenced program development of the WildHorse area with a two-well pad targeting both the Wolfcamp A and Lower Spraberry zones in northwest Howard County Refinanced its Term Loan with the issuance of Senior Notes, reducing its cost of capital and establishing a benchmark, publicly-traded security for future financing opportunities Raised 2016 full year production guidance to a range of 15,250 15,550 BOE/d and reaffirmed operational capital guidance for 2016 of $140 million Our strong recent well results combined with the longer term performance of our production base enable us to continue our track record of sustained production growth within a restrained capital program Given our expanded portfolio of drilling opportunities that deliver solid returns on investment at less than $50 per barrel of oil, combined with low leverage metrics and liquidity of almost $500 million, we currently anticipate adding a third horizontal drilling rig in early 2017 and are preparing for a fourth rig in the second half of We forecast that this program will deliver approximately 30,000 BOE/d of annual average production in 2018, while generating free cash flow by mid-year 2018 based on our 2018 planning case assumptions of $50 per barrel and a theoretical increase of 15% in completed well costs to address the impact of evolving completion designs and potential upward pressure on service costs from anticipated increases in core Permian Basin activity. - Fred Callon, Chairman and Chief Executive Officer

7 Operations Update At September 30, 2016, Callon had 124 gross (98.0 net) horizontal wells producing from six established flow units. Net daily production for the three months ended September 30, 2016 grew approximately 70% to 16,598 BOE/d (approximately 76% oil) as compared to the same period of Sequentially, Callon grew production more than 23% compared to the second quarter of For the three months ended September 30, 2016, Callon operated 1.6 horizontal drilling rigs, drilled 8 gross (5.4 net) horizontal wells, completed 11 gross (6.8 net) horizontal wells, and placed 7 gross (5.2 net) horizontal wells on production. As of September 30, 2016, Callon had 3 gross (2.8 net) horizontal wells awaiting completion. Monarch In early October, Callon s first Wolfcamp A well in the Monarch area was placed on production in the Pecan Acres field in close proximity to recent offsetting industry activity in this zone. The Wolfcamp A represents Callon s fifth producing flow unit in the Monarch area, inclusive of the upper and lower benches of the Lower Spraberry, the Middle Spraberry and the Wolfcamp B. This well was drilled from a stacked two-well pad with a Lower Spraberry (upper bench) well. Both wells are cleaning up and have not reached peak rates.

8 WildHorse Callon s first operated completion in the WildHorse area yielded encouraging results with the Silver City Unit A 01H well achieving 24-Hour and 30-Day IP rates of 334 (91% oil) and 292 (89% oil) BOE/d per 1,000 feet of completed lateral, respectively. This Wolfcamp A well has produced over 192 MBOE in the first 110 days since first production. As part of Callon s newly initiated program development of WildHorse, Callon recently finished drilling two wells in offsetting acreage targeting both the Wolfcamp A and Lower Spraberry zones from a two-well pad. The rig remains active on this acreage, currently drilling two additional wells targeting both the Wolfcamp A and Lower Spraberry zones from a stacked two-well pad.

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10 Ranger Callon also completed two drilled, uncompleted wells in the Ranger area that were acquired earlier this year as part of its AMI transaction in western Reagan County. Callon s development activity in the Ranger area had previously been focused on Lower Wolfcamp B, and these wells expand its efforts to the Upper Wolfcamp B and Wolfcamp A. Importantly, Callon utilized a new generation completion design on these latest wells, with proppant loading of approximating 2,000 pounds per foot combined with tighter stage spacing. Both wells were placed online in late September and have not reached peak rates. Recent Developments Management Changes Gary A. Newberry was appointed Senior Vice President and Chief Operating Officer and will continue to lead all aspects of operations managed by direct reports Jerry Weant, Vice President of Land and Michael O'Connor, Vice President of Permian Operations Joseph C. Gatto, Jr. was appointed President, in addition to his current role as Chief Financial Officer and Treasurer Mitzi P. Conn was appointed to the newly created position of Vice President and Chief Accounting Officer and will report to Mr. Gatto. Mr. Newberry and Mr. Gatto will continue to report to Fred Callon, Chief Executive Officer and Chairman of the Board of Directors. Mr. Callon commented, "I am proud to announce the promotion of these individuals that have guided our company through one of the most turbulent times we've experienced in the global oil markets. We have emerged as a leading operator in the Permian Basin with a proven track record of sustained asset growth combined with leading-edge capital efficiency and operating costs. The strong partnership they have built between our operational and financial organizations has fostered a culture of teamwork and respect that exemplifies Callon's core values. I am confident that this leadership team will continue to drive shareholder value in the years ahead while maintaining our valued reputation amongst all of our business partners." Acquisition Activity On October 20, 2016, the Company completed the acquisition of 6,904 gross (5,952 net) acres primarily located in Howard County, Texas from Plymouth Petroleum, LLC and additional sellers that exercised their tag-along sales

11 rights, for total cash consideration of $340,686, excluding customary purchase price adjustments. The Company funded the cash purchase price with the net proceeds of an equity offering. The Company acquired an 82% average working interest (62% average net revenue interest) in the properties acquired in the Plymouth Transaction. In September 2016, in connection with the execution of the purchase and sale agreement for the Plymouth Transaction, the Company paid a deposit in the amount of $32,700 to a third party escrow agent, which was recorded as Acquisition deposit on the balance sheet as of September 30, Key attributes of the acquisition include: Over 75% of acreage offsetting Callon's position in northwest Howard County, providing opportunities for shared infrastructure and extended laterals across Callon's pro forma footprint in this area; 167 gross (112 net) identified horizontal drilling locations targeting the Wolfcamp A, Lower Spraberry and Wolfcamp B zones, increasing Callon's existing inventory of drilling locations in these delineated zones in its WildHorse operating region by over 90%, assuming current development spacing of six to eight wells per section; Additional potential horizontal drilling locations from emerging prospective zones and increased well density being evaluated; Current net production of approximately 2,300 barrels of oil equivalent per day ("Boe/d") (86% oil) from 9 horizontal (gross) and 16 vertical wells (gross) based on information provided by the seller; Estimated 12.2 million barrels of oil equivalent ("MMBoe") (87% oil) of net proved reserves as of September 1, 2016 based on Callon's evaluation and interpretation of reserve and production information provided by the seller, as well as Callon's analysis of available geologic and other data. The Company cannot assure you that this estimate is accurate. Callon's estimate of proved reserves has not been reviewed by Callon's independent reserve engineers, and Callon may revise these estimates following ownership and operation of these properties; Overriding royalty interests in three 480 acre units offsetting the acreage, one of which is operated by Callon; and Upon closing of the pending acquisition, Callon will assume operatorship of over 90% of the acquired acreage and own an estimated 82% average working interest (62% average net revenue interest). The Company's Midland Basin position is now approximately 40,000 net surface acres, including approximately 20,000 net surface acres in northwest and central Howard County and immediately adjacent areas comprising Callon's WildHorse operating region. Fred Callon, Chairman and Chief Executive Officer commented, "Our strong financial position, combined with an operational model proven to deliver capital efficient growth and strong cash margins, has positioned us to capture value-creating acquisitions. We are driven to identify opportunities that are underpinned by solid geology and proven well results, and also offer meaningful upside potential through application of new generation completion designs, increased well density and incremental prospective zones. We believe this acquisition has all of these attributes and its value proposition is further enhanced due to its immediately offsetting footprint within our WildHorse area, which will allow us to extend laterals within the combined well inventory and leverage infrastructure investments for future program development."

12 Senior Unsecured Notes On October 3, 2016, Callon announced the closing of its offering of $400 million aggregate principal amount of 6.125% senior unsecured notes due 2024 at an issue price of 100% of the aggregate principal amount of the Notes. The Notes will mature on October 1, 2024, unless redeemed in accordance with their terms prior to such date. The Notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and to certain non-u.s. persons in accordance with Regulations S under the Securities Act. The net proceeds of the offering, after deducting initial purchasers' discounts and estimated offering expenses, were approximately $391 million. The Company intends to use the net proceeds of the offering to repay amounts borrowed under its second lien term loan and for general corporate purposes, including for a potential increase in drilling activity. The Notes are guaranteed on a senior unsecured basis by the Company's wholly owned subsidiary, Callon Petroleum Operating Company, and may be guaranteed by certain future subsidiaries. Interest on the Notes is payable semi-annually. Stock Offering On September 12, 2016, Callon announced the closing of its previously announced underwritten public offering of 29,900,000 shares of its common stock, including 3,900,000 shares sold to the underwriters pursuant to their option to purchase additional shares, which the underwriters exercised on September 7, Following this issuance, Callon now has 161,036,233 shares of common stock issued and outstanding. Total net proceeds of the offering, after underwriters' discounts and commissions and estimated offering expenses, will be approximately $422.1 million. Proceeds from the offering are expected to be used to fund the pending Plymouth Acquisition as described in the Company's Report on Form 8-K previously filed on September 6, 2016, and the balance for general corporate purposes which may include repayment of debt. Capital Budget Update In early August 2016, Callon announced an increase of its operational capital guidance to $140 million. The increased guidance reflects expenditures related to the reactivation of Callon s idled second drilling rig that will be primarily in the WildHorse operating area, and increased infrastructure investments to accommodate future program development plans in this area. Operational capital expenditures on an accrual basis were $99.3 million for the nine months ended September 30, In addition to the operational capital expenditures, $15.1 million of capitalized general and administrative and $13.2 million of capitalized interest expenses were accrued in the nine months ended September 30, Based upon current commodity price expectations for 2016, Callon believes that its cash flow from operations and available borrowings under its Credit Facility will be sufficient to fund its remaining 2016 capital program, including working capital requirements.

13 Financial Profile & Liquidity

14 Updated Guidance:

15 Hedging Portfolio:

16 Net Income and Cash Flow Forecast Model Publishing, LLC) and is intended for informational purposes only. Readers are encouraged to do their own research and due diligence before making any investment decisions. The publishers will not be held liable for any actions taken by the reader. Although the information in the newsletters and company profiles has been obtained from resources that the publishers believe to reliable, DMS Publishing, LLC dba Energy Prospectus Group does not guarantee its