Callon’s Great Natural Gas Hedges

Callon Petroleum Co. has hedged an additional 2.5 billion cubic feet of its natural gas production during the six-month period from November 2002 through April 2003. The hedges were implemented through a combination of derivative transactions, in the form of no-cost collars, and commitments for physical deliveries at applicable index prices, with floors and ceilings specified for the monthly index prices.

The new hedges cover 500 million cubic feet per month for November 2002 through February 2003, providing for a floor price of $3.75 per thousand cubic feet and an average ceiling price of $5.00 per thousand cubic feet. In addition, hedges covering 250 million cubic feet per month for March and April 2003 provide for a floor price of $3.75 per thousand cubic feet and a ceiling price of $4.60 per thousand cubic feet.

Previous hedging transactions by the company cover 2 billion cubic feet of its natural gas production for the eight-month period March through October 2003. These hedges, in the form of no-cost collars, apply to 250 million cubic feet per month and provide for a floor price of $3.50 per thousand cubic feet and an average ceiling price of $4.76 per thousand cubic feet. ©

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