Callon Petroleum Company Reports Fourth Quarter, Year-End Results for 2003.

Energy Editors/Business Editors

NATCHEZ, Miss.--(BUSINESS WIRE)--March 9, 2004

Callon Petroleum Company (NYSE:CPE) (NYSE:CPE.PrA) today reported its results of operations for both the three-month period and year ended December 31, 2003.

Fourth Quarter 2003 Net Loss. For the three-month period ended December 31, 2003, Callon reported a net loss of $16.7 million, or $1.24 per diluted share after charges of $5.6 million attributable to early extinguishment of debt and $11.5 million resulting from a valuation allowance against Callon's deferred tax asset. These charges had an impact on net loss per diluted share of $1.10. The company reported a net loss of $258,000, or $0.04 per share on a diluted basis, for the same period in 2002.

Fourth Quarter 2003 Charges. During the fourth quarter of 2003, Callon charged $11.5 million to income tax expense as the result of establishing a valuation allowance against its deferred tax asset as required by SFAS 109 "Accounting for Income Taxes." This charge was taken as a result of aggregate losses incurred for the three-year period ending December 31, 2003. Despite the expectations of future earnings, relevant accounting guidance suggests that positive future expectations about income are diminished by such losses. On December 30, 2003, Callon announced the borrowing of $185 million pursuant to a senior unsecured credit facility. The borrowings bear interest at 9.75 percent and mature in seven years. Proceeds of the borrowing were used to restructure a major portion of the company's long-term debt, including the early extinguishment of $85 million of its outstanding 12% multiple advance term loan which resulted in a $5.6 million charge for pre-payment premium and unamortized debt issuance costs.

Fourth Quarter 2003 Operating Results. Oil and gas sales totaled $18.9 million from average production of 40.4 million cubic feet of natural gas equivalent per day (MMcfe/d). This corresponds to sales of $19.1 million from average daily production of 45.5 MMcfe/d during the same period in 2002. During the fourth quarter of 2003, natural gas represented approximately 79 percent of the company's total production. The average price received per thousand cubic feet of natural gas in the fourth quarter of 2003 increased by 13 percent to $5.15 compared to $4.57 during the fourth quarter of 2002, while the average price received per barrel of oil in the fourth quarter of 2003 increased by 15 percent to $29.28 compared to $25.57 during the same period a year earlier.

2003 Net Loss. For the 12 months ended December 31, 2003, the company reported a net loss of $18.0 million, or $1.41 per diluted share after charges of $5.6 million for the early extinguishment of debt and an $11.5 million valuation allowance against Callon's deferred tax asset. These charges had an impact on net loss per diluted share of $1.11. This compares to a net loss of $1.7 million, or $0.22 per share on a diluted basis for the same period in 2002.

2003 Operating Results. For the year ended December 31, 2003, oil and gas sales totaled $73.7 million from average production of 38.1 MMcfe/d. This corresponds to sales of $61.2 million from average daily production of 42.7 MMcfe/d during the same period in 2002. The average price received per thousand cubic feet of natural gas for the year ended December 31, 2003 increased by 36 percent to $5.36 compared to $3.94 during the same period in 2002, while the average price received per barrel of oil increased by 24 percent to $28.72 compared to $23.11 during the same period a year earlier.

2003 Discretionary Cash Flow. For the year ended December 31, 2003, discretionary cash flow totaled $34.7 million compared to $18.7 million during the 12 months of the previous year. Net cash flow provided by operating activities, as defined by GAAP, totaled $34.6 million and $12.2 million during the year ended December 31, 2003 and 2002, 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     Three Months    Twelve Months
 Measure:                                 Ended            Ended
----------------------------------    December 31,      December 31,
(In thousands)                       --------------- -----------------
                                      2003    2002    2003     2002
                                     ------- ------- -------- --------
   Discretionary cash flow           $7,466  $8,067  $34,744  $18,653
   Net working capital changes and
    other changes                    (4,034)   (334)    (115)  (6,486)
                                     ------- ------- -------- --------
   Net cash flow provided by
    operating activities             $3,432  $7,733  $34,629  $12,167
                                     ======= ======= ======== ========


Consolidated Condensed Balance Sheets:    December 31,   December 31,
----------------------------------------      2003           2002
(In thousands)                            -------------  -------------

Cash and cash equivalents                       $8,700         $5,807
Restricted cash (b)                             63,345           ----
Oil and gas properties, net (a)                390,163        377,661
All other assets                                33,824         27,145
                                          -------------  -------------
      Total assets                            $496,032       $410,613
                                          =============  =============

Long-term debt including current
 maturities (b)                               $308,108       $249,589
All other liabilities (a)                       54,663         20,064
Stockholders' equity                           133,261        140,960
                                          -------------  -------------
      Total liabilities and
       stockholders' equity                   $496,032       $410,613
                                          =============  =============

(a) Impacted by the adoption of SFAS No. 143 on January 1, 2003
(b) Restricted cash was used to payoff 2004 Senior Subordinated Notes
    on January 8, 2004 which are included in long-term debt including
    current maturities above.


Production and Price Information:      Three Months   Twelve Months
-------------------------------------     Ended           Ended
                                       December 31,    December 31,
                                      --------------- ---------------
                                       2003    2002    2003    2002
                                      ------- ------- ------- -------
Production:
   Oil (MBbls)                           128      56     268     226
   Gas (MMcf)                          2,950   3,853  12,315  14,215
   Total Production (MMcfe)            3,718   4,187  13,923  15,571
   Average daily (MMcfe)                40.4    45.5    38.1    42.7

Average prices:
   Oil ($/Bbl)                        $29.28  $25.57  $28.72  $23.11
   Gas ($/Mcf)                         $5.15   $4.57   $5.36   $3.94
   Gas equivalent ($/Mcfe)             $5.09   $4.55   $5.29   $3.93


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

                               Three Months Ended  Twelve Months Ended
                                  December 31,        December 31,
                              -------------------- -------------------
                                 2003      2002      2003      2002
                              ----------- -------- ---------- --------
Operating revenues:
  Oil and gas sales              $18,938  $19,050    $73,697  $61,171
                              ----------- -------- ---------- --------

Operating expenses:
  Lease operating expenses         3,298    2,829     11,301   11,030
  Depreciation, depletion and
   amortization                    7,484    8,256     28,253   27,096
  General and administrative       1,009    1,197      4,713    4,705
  Accretion expense                  670       --      2,884       --
  Loss on mark-to-market
   commodity derivative
   contracts                         200      (80)       535      708
                              ----------- -------- ---------- --------
     Total operating expenses     12,661   12,202     47,686   43,539
                              ----------- -------- ---------- --------

  Income from operations           6,277    6,848     26,011   17,632
                              ----------- -------- ---------- --------
  Other (income) expenses:
    Interest expense               8,389    7,404     30,614   26,140
    Other income                    (218)    (159)      (444)  (1,004)
    Loss on early
     extinguishment of debt        5,573       --      5,573       --
    Gain on sale of pipeline          --       --         --   (2,454)
    Gain on sale of Enron
     derivatives                      --       --         --   (2,479)
                              ----------- -------- ---------- --------
      Total other (income)
       expenses                   13,744    7,245     35,743   20,203
                              ----------- -------- ---------- --------

   Loss before income taxes       (7,467)    (397)    (9,732)  (2,571)
   Income tax expense
    (benefit)                      9,225     (139)     8,432     (900)
                              ----------- -------- ---------- --------
       Net loss before Medusa
        Spar LLC and cumulative
        effect of change in
        accounting principle     (16,692)    (258)   (18,164)  (1,671)
   Loss from Medusa Spar LLC,
    net of tax                        (8)      --         (8)      --
                              ----------- -------- ---------- --------
      Loss before cumulative
       effect of change in
       accounting principle      (16,700)    (258)   (18,172)  (1,671)
  Cumulative effect of change
   in accounting principle,
   net of tax                         --       --        181       --
                              ----------- -------- ---------- --------

  Net loss                       (16,700)    (258)   (17,991)  (1,671)
  Preferred stock dividends          319      319      1,277    1,277
                              ----------- -------- ---------- --------
  Net loss available to
   common shares                $(17,019)   $(577)  $(19,268) $(2,948)
                              =========== ======== ========== ========

  Net loss per common share:
  Basic
      Net loss available to
       common before cumulative
       effect of change in
       accounting principle       $(1.24)  $(0.04)    $(1.42)  $(0.22)
     Cumulative effect of
      change in accounting
      principle, net of tax           --       --       0.01       --
                              ----------- -------- ---------- --------
    Net loss available to
     common                       $(1.24)  $(0.04)    $(1.41)  $(0.22)
                              =========== ======== ========== ========

  Diluted
        Net loss available to
         common before cumulative
         effect of change in
         accounting principle     $(1.24)  $(0.04)   $( 1.42)  $(0.22)
       Cumulative effect of
         change in accounting
         principle, net of tax        --       --       0.01       --
                              ----------- -------- ---------- --------
    Net loss available to
     common                       $(1.24)  $(0.04)    $(1.41)  $(0.22)
                              =========== ======== ========== ========

 Shares used in computing net income (loss):
    Basic                         13,729   13,518     13,662   13,387
                              =========== ======== ========== ========
    Diluted                       13,729   13,518     13,662   13,387
                              =========== ======== ========== ========

Callon Petroleum Company is engaged in the exploration, development, acquisition and operation of oil and gas properties primarily in the Gulf Coast region.

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, 2002 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 transaction and may engage in one or more of these types of transactions without prior notice.