NON-RECOURSE GUARANTY

EXHIBIT 10.5

Form of

NON-RECOURSE GUARANTY

     THIS NON-RECOURSE GUARANTY (this “ Guaranty ”), dated as of April 4, 2008, made by CALLON PETROLEUM OPERATING COMPANY , a Delaware corporation (“ Guarantor ”), in favor of CIECO ENERGY (ENTRADA) LLC , a Delaware limited liability company (“ Lender ”).

WITNESSETH :

     WHEREAS, pursuant to a Credit Agreement, dated as of April 4, 2008 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the “ Credit Agreement ”), between Callon Entrada Company, a Delaware corporation (“ Borrower ”) and Lender, Lender has agreed to make Loans to Borrower in accordance with the Credit Agreement; and

     WHEREAS, as a condition precedent to the making of the initial Loan under the Credit Agreement, Guarantor is required to execute and deliver this Guaranty; and

     WHEREAS, it is in the best interests of Guarantor to execute this Guaranty inasmuch as Guarantor will derive substantial direct and indirect benefits from the Loans made to Borrower by Lender pursuant to the Credit Agreement;

     NOW THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, and in order to induce Lender to make the Loans to Borrower pursuant to the Credit Agreement, Guarantor agrees, for the benefit of Lender, as follows:

ARTICLE I
DEFINITIONS

     Section 1.1. Certain Terms . The following terms (whether or not underscored) when used in this Guaranty, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):

     “ Borrower ” is defined in the first recital .

     “ Credit Agreement ” is defined in the first recital .

     “ Guaranteed Obligations ” is defined in Section 2.1 .

     “ Guarantor ” is defined in the preamble .

     “ Guaranty ” is defined in the preamble .

     “ Lender ” is defined in the preamble .

     “ Solvent ” means, with respect to any Person at any time, a condition under which (a) the fair saleable value of such Person’s assets is, on the date of determination, greater than the total

amount of such Person’s liabilities (including contingent and unliquidated liabilities) at such time; (b) such Person is able to pay all of its liabilities as such liabilities mature; and (c) such Person does not have unreasonably small capital with which to conduct its business. For purposes of this definition (i) the amount of a Person’s contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability; (ii) the “fair saleable value” of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such asset at its regular market value; and (iii) the “regular market value” of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an interested buyer who is willing to purchase such asset under ordinary selling conditions.

     “ Taxes ” is defined in clause (a) of Section 2.8 .

     “ U.C.C. ” means the Uniform Commercial Code as in effect in the State of Texas.

     Section 1.2. Credit Agreement Definitions . Unless otherwise defined herein or the context otherwise requires, terms used in this Guaranty, including its preamble and recitals, have the meanings provided in the Credit Agreement.

     Section 1.3. U.C.C. Definitions . Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Guaranty, including its preamble and recitals, with such meanings.

ARTICLE II
GUARANTY PROVISIONS

     Section 2.1. Guaranty . Guarantor hereby absolutely, unconditionally and irrevocably (all of the following guaranteed and indemnified obligations being collectively called the “ Guaranteed Obligations ”)

     (a) guarantees the full and punctual payment when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of Borrower now or hereafter existing under the Credit Agreement, the Note, and each other Loan Document, whether for principal, interest, fees, expenses or otherwise, and all other obligations of Borrower to Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent or now or hereafter existing or due or to become due (including in all cases all such amounts which would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. §362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. §502(b) and §506(b)); and

     (b) indemnifies and holds harmless Lender and any holder of the Note for any and all costs and expenses (including reasonable attorney’s fees and expenses) incurred by Lender or such holder, as the case may be, in enforcing any rights under this Guaranty; PROVIDED THAT IT IS THE INTENTION OF GUARANTOR THAT THIS INDEMNIFICATION APPLY IN THE CASE OF THE ORDINARY NEGLIGENCE OF LENDER OR ANY HOLDER OF THE NOTE BUT GUARANTOR SHALL HAVE

NO OBLIGATION HEREUNDER TO THE EXTENT THAT SUCH COSTS AND EXPENSES ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER OR ANY HOLDER OF THE NOTE;

This Guaranty constitutes a guaranty of payment when due and not of collection, and Guarantor specifically agrees that it shall not be necessary or required that Lender or any holder of the Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against Borrower (or any other Person) before or as a condition to the obligations of Guarantor hereunder.

     Section 2.2. Acceleration of Guaranty . Guarantor agrees that in the event of the death, incompetency, or dissolution or insolvency of Guarantor, or an assignment by Guarantor for the benefit of creditors, or the commencement of any case or proceeding in respect of Guarantor under any bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the Guaranteed Obligations may not then be due and payable, Guarantor will pay to Lender forthwith the full amount which would be payable hereunder by Guarantor if all such Guaranteed Obligations were then due and payable.

     Section 2.3. Guaranty Absolute, etc . Except as otherwise provided for in this Guaranty, this Guaranty shall in all respects be a continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full force and effect until all Guaranteed Obligations have been paid in full, all obligations of Guarantor hereunder shall have been paid in full and all the obligations of Borrower pursuant to the Credit Agreement, the Note and the other Loan Documents shall have been paid in full and terminated. Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Credit Agreement and each other Loan Document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of Lender or any holder of the Note with respect thereto. The liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable irrespective of: (a) any lack of validity, legality or enforceability of the Credit Agreement, the Note or any other Loan Document; (b) the failure of Lender or any holder of the Note (i) to assert any claim or demand or to enforce any right or remedy against Borrower or any other Person (including any other guarantor) under the provisions of the Credit Agreement, the Note, any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Guaranteed Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other extension, compromise or renewal of any Guaranteed Obligation; (d) any reduction, limitation, impairment or termination of any Guaranteed Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Guarantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Guaranteed Obligations; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Credit Agreement, the Note or any other Loan Document; (f) any addition, exchange, release, surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition of, or consent to departure from, any other guaranty, held by Lender or any holder of the Note securing any of the Guaranteed Obligations; or (g) any other

circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, Borrower, any surety or any guarantor.

     Section 2.4. Reinstatement, etc . Guarantor agrees that this Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part) of any of the Guaranteed Obligations is rescinded or must otherwise be restored by Lender or any holder of the Note, upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, as though such payment had not been made.

     Section 2.5. Waiver, etc . Guarantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Lender or any holder of the Note protect, secure, perfect or insure any security interest or Lien, or any property subject thereto, or exhaust any right or take any action against Borrower or any other Person (including any other guarantor) or entity or any collateral securing any Guaranteed Obligations.

     Section 2.6. Waiver of Subrogation . Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against Borrower that arise from the existence, payment, performance or enforcement of Guarantor’s obligations under this Guaranty or any other Loan Document, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of Lender against Borrower or any collateral which Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from Borrower, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to Guarantor in violation of the preceding sentence and the Guaranteed Obligations shall not have been paid in cash in full and all the obligations of Borrower pursuant to the Credit Agreement, the Note and the other Loan Documents shall not have been terminated, such amount shall be deemed to have been paid to Guarantor for the benefit of, and held in trust for, Lender, and shall forthwith be paid to Lender to be credited and applied upon the Guaranteed Obligations, whether matured or unmatured. Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section is knowingly made in contemplation of such benefits.

     Section 2.7. Successors, Transferees and Assigns; Transfers of Note, etc . This Guaranty shall: (a) be binding upon Guarantor, and its successors, transferees and assigns; and (b) inure to the benefit of and be enforceable by Lender, any holder of the Note and each of their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (b), Lender may assign or otherwise transfer (in whole or in part) the Note held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all rights and benefits in respect thereof granted to Lender under any Loan Document (including this Guaranty) or otherwise.

     Section 2.8. Payments Free and Clear of Taxes, etc . Guarantor hereby agrees that:

     (a) All payments by Guarantor hereunder shall be made in accordance with the Credit Agreement free and clear of and without deduction for any present or future

income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by Lender’s net income or receipts (such non-excluded items being called “ Taxes ”).