Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

As previously reported, in late November 2008, our wholly owned subsidiary, Callon Entrada Company ("Callon Entrada") and its joint working interest owner, CIECO Energy (US) Limited (with its related entities, "CIECO"), decided to abandon the Entrada project. As part of the purchase price of an interest in the Entrada project, CIECO agreed to loan up to $150 million plus $12 million to pay interest, to Callon Entrada to finance Callon Entrada's share of the costs to develop the Entrada project (the "Entrada Credit Facility"). As of December 31, 2008, $78.4 million of principal and $2.7 million of accrued interest was outstanding under this facility.

Principal and interest outstanding under the Entrada Credit Facility is an obligation of Callon Entrada and is not guaranteed by Callon Petroleum Company or any of our subsidiaries. The principal and interest under the Entrada Credit Facility is secured by a lien on substantially all of Callon Entrada's assets. Included in these assets are the Entrada leases and equipment purchased for the development project. At December 31, 2008 there was no value included on the balance sheet for these assets.

On April 2, 2009, Callon Entrada received a notice from CIECO advising Callon Entrada that certain events of default occurred under the non-recourse credit agreement relating to failure to pay interest when due and the breach of various other covenants related to the decision to abandon the Entrada project.

A default under the Entrada Credit Facility is not a default under our senior secured revolving credit facility. In addition, Callon Entrada is an Unrestricted Subsidiary as defined in the indenture for our senior notes due 2010, so a default by Callon Entrada under the terms of the Entrada Credit Facility is not a default under the indenture for the senior notes.

Because of the foregoing, we do not believe that notice of default under the Entrada Credit Facility will have a material negative impact on our financial position, results of operations or cash flows.

---