Callon Petroleum Company Reports First Quarter 2005 Record Results of Operations.

NATCHEZ, Miss. -- Callon Petroleum Company (NYSE: CPE) (NYSE:CPE.PrA) today reported its results of operations for the three-month period ended March 31, 2005, including record levels for revenues, discretionary cash flow and pre-tax earnings.

First Quarter 2005 Net Income. For the three-month period ended March 31, 2005, Callon reported net income of $9.5 million, or $0.46 per diluted share. For the first quarter of 2004, the company reported net income of $2.1 million, or $0.12 per share on a diluted basis after charges of $2.5 million, or $0.17 per diluted share, attributable to early extinguishment of debt and $2.6 million, or $0.18 per diluted share, resulting from the retirement of two executive officers of the company.

First Quarter 2005 Operating Results. Oil and gas sales totaled $43 million from average production of 73.3 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $32 million from average production of 63.1 MMcfe/d during the same period in 2004. During the first quarter of 2005, natural gas represented approximately 42 percent of the company's total production. The average price realized per thousand cubic feet of natural gas in the first quarter of 2005 increased by 16 percent to $6.92 compared to $5.94 during the first quarter of 2004, while the average price realized per barrel of oil in the first quarter of 2005 increased by 22 percent to $37.46 compared to $30.67 during the same period a year earlier.

First Quarter 2005 Discretionary Cash Flow. For the quarter ended March 31, 2005, discretionary cash flow increased by 75% to $31.4 million compared to $17.9 million during the three months of the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled $21.3 million and $17.9 million during the quarter ended March 31, 2005 and 2004, respectively. (See "Non-GAAP Financial Measure" that follows and the accompanying financial information for a reconciliation of discretionary cash flow, a non-GAAP measure, 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 this measure is a financial indicator of the company's ability to fund capital expenditures and service debt. Callon also believes this non-GAAP financial measure of cash flow is useful information to investors because it is widely used by professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and gas exploration and production industry. Many investors use the published research of these analysts in making their investment decisions. Discretionary cash flow should not be considered an alternative to net cash provided by operating activities or net income as defined by GAAP.

Reconciliation Non-GAAP Financial Measure:
------------------------------------------          Three Months Ended
(In thousands)                                           March 31,
----------------------------------------------------------------------
                                                      2005     2004
                                                    --------- --------
Discretionary cash flow                              $31,414  $17,899
Net working capital changes and other changes        (10,083)       4
                                                    --------- --------
Net cash flow provided by operating activities       $21,331  $17,903
                                                    ========= ========


Consolidated Condensed Balance Sheets:
--------------------------------------        March 31,   December 31,
(In thousands)                                  2005         2004
                                             ------------ ------------
                                             (Unaudited)
Cash and cash equivalents                         $2,895       $3,266
Oil and gas properties, net                      405,949      406,690
All other assets                                  52,593       47,567
                                             ------------ ------------
      Total assets                              $461,437     $457,523
                                             ============ ============

Long-term debt including current maturities      188,130     $192,927
All other liabilities                             70,293       66,284
Stockholders' equity                             203,014      198,312
                                             ------------ ------------
      Total liabilities and stockholders'
       equity                                   $461,437     $457,523
                                             ============ ============


Production and Price Information:
---------------------------------                  Three Months Ended
                                                       March 31,
                                                  --------------------
                                                     2005       2004
                                                  ---------- ---------
Production:
   Oil (MBbls)                                          641       439
   Gas (MMcf)                                         2,748     3,108
   Total Production (MMcfe)                           6,593     5,743
   Average daily (MMcfe)                               73.3      63.1

Average prices:
   Oil ($/Bbl)  (a)                                  $37.46    $30.67
   Gas ($/Mcf)                                        $6.92     $5.94
   Gas equivalent ($/Mcfe)                            $6.52     $5.56

(a) Below is a reconciliation of the average NYMEX price to the
    average realized sales price per barrel of oil:

Average NYMEX oil price                              $49.85    $35.14
     Basis differentials and quality adjustments      (6.33)    (1.71)
     Transportation                                   (1.31)    (1.25)
     Hedging                                          (4.75)    (1.51)
                                                  ---------- ---------
Average realized oil price                           $37.46    $30.67
                                                  ========== =========


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

                                                   Three Months Ended
                                                       March 31,
                                                  --------------------
                                                    2005       2004
                                                  ---------- ---------
Operating revenues:
  Oil and gas sales                                 $43,012   $31,919
                                                  ---------- ---------

Operating expenses:
  Lease operating expenses                            6,536     5,168
  Depreciation, depletion and amortization           15,408    11,835
  General and administrative                          1,694     3,793
  Accretion expense                                     861       816
  Derivative expense                                    379        76
                                                  ---------- ---------
     Total operating expenses                        24,878    21,688
                                                  ---------- ---------

  Income from operations                             18,134    10,231
                                                  ---------- ---------
  Other (income) expenses:
    Interest expense                                  4,569     5,891
    Other income                                       (202)      (86)
    Loss on early extinguishment of debt                 --     2,472
                                                  ---------- ---------
      Total other (income) expenses                   4,367     8,277
                                                  ---------- ---------

   Income before income taxes                        13,767     1,954
   Income tax expense                                 4,818        --
                                                  ---------- ---------

   Income before Medusa Spar LLC                      8,949     1,954
   Income from Medusa Spar LLC, net of tax              526       148
                                                  ---------- ---------

  Net income                                          9,475     2,102
  Preferred stock dividends                             318       319
                                                  ---------- ---------
  Net income available to common shares              $9,157    $1,783
                                                  ========== =========

  Net income per common share:
    Basic                                             $0.52     $0.13
                                                  ========== =========
    Diluted                                           $0.46     $0.12
                                                  ========== =========

 Shares used in computing net income:
    Basic                                            17,671    13,819
                                                  ========== =========
    Diluted                                          20,678    14,646
                                                  ========== =========

Callon Petroleum Company has been engaged in the exploration, development, acquisition and operation of oil and gas properties in the Gulf Coast region since 1950.

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 include:

--general economic conditions;

--volatility of oil and natural gas prices;

--uncertainty of estimates of oil and natural gas reserves;

--impact of competition;

--availability and cost of seismic, drilling and other equipment;

--operating hazards inherent in the exploration for and production of oil and natural gas;

--difficulties encountered during the exploration for and production of oil and natural gas;

--difficulties encountered in delivering oil and natural gas to commercial markets;

--changes in customer demand and producers' supply;

--uncertainty of our ability to attract capital;

--compliance with, or the effect of changes in, the extensive governmental regulations regarding the oil and natural gas business;

--actions of operators of our oil and gas properties;

--weather conditions; and

--the risk factors discussed in our filings with the Securities and Exchange Commission, including those in our Annual Report for the year ended December 31, 2004 on Form 10-K.

The preceding estimates reflect our review of continuing operations only. These estimates do not take into account any material transactions such as sales of debt and equity securities, acquisitions or divestitures of assets, and formations of joint ventures. We continually review these types of transactions and may engage in one or more of these types of transactions without prior notice.