INDEMNITY AGREEMENT

EXHIBIT 10.4

Form of

INDEMNITY AGREEMENT

      THIS INDEMNITY AGREEMENT (this “ Agreement ”), dated as of April 4, 2008, made by CALLON PETROLEUM COMPANY, a Delaware corporation (“ Indemnitor ”), 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, Indemnitor is required to execute and deliver this Agreement; and

     WHEREAS, it is in the best interests of the Indemnitor to execute this Agreement inasmuch as Indemnitor 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, Indemnitor agrees, for the benefit of Lender, as follows:

     1.  Indemnity . Indemnitor hereby assumes liability for, and hereby agrees to pay, protect, defend and save Lender harmless from and against, and hereby indemnifies Lender from and against any and all liabilities, obligations, losses, damages, costs and expenses (including, without limitation, attorneys’ fees), causes of action, suits, claims, demands and judgments of any nature or description whatsoever (collectively, “ Costs ”) which may at any time be imposed upon, incurred by or awarded against Lender as a result of:

     a. The failure of any representation or warranty set forth in the Credit Agreement or any other Loan Document to be correct in any material respect when made by Borrower, Callon Operating or the Indemnitor, including, without limitation, any and all representations (i) regarding the Subject Interests and title thereto, and (ii) made under this Agreement;

     b. The breach by the Borrower or any of its Subsidiaries of any covenant set forth in the Credit Agreement or any other Loan Document which is applicable to the Borrower or any of its Subsidiaries (other than any covenant to repay any principal of or accrued interest on the Loans) so long as (i) either Callon Operating or the Indemnitor had reasonable control over the performance of such covenant and (ii) the Borrower had, or should have had but for such breach, the financial means available to it at the time performance of such breach of such covenant was required to avoid such breach;

     c. The breach by Callon Operating of any covenant set forth in any Loan Document which is applicable to Callon Operating so long as the Indemnitor had reasonable control over the performance of such covenant;

     d. The breach by Indemnitor of any covenant set forth in any Loan Document which is applicable to the Indemnitor, including, without limitation, any covenant under this Agreement;

     e. The breach by Callon Operating of any obligations set forth in the Operating Services Contract;

     f. Proceeds paid under any insurance policies (or paid as a result of any other claim or cause of action against any person or entity) by reason of damage, loss or destruction to all or any portion of the Subject Interests, to the full extent of such proceeds not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender;

     g. Proceeds or awards resulting from the condemnation or other taking in lieu of condemnation of all or any portion of the Subject Interests, or any of them, to the full extent of such proceeds or awards not previously delivered to Lender, but which, under the terms of the Loan Documents, should have been delivered to Lender;

     h. All joint interest owner security deposits or other refundable deposits paid to or held by Borrower or any other Affiliate of Indemnitor in connection with the Subject Interests, which are not applied in accordance with the terms of the applicable Oil and Gas Lease, joint operating agreement or other agreement;

     i. Damage to the Subject Interests as a result of the intentional misconduct or negligence of Borrower or any of its principals, officers or partners, any guarantor, any indemnitor, or any agent or employee of such persons (or of Indemnitor or any of its Subsidiaries acting on behalf of the Borrower under any arrangement, contractual or otherwise) or the failure of any such Persons to act as a prudent operator (to the extent that such standard is applicable), or any removal of all or any portion of the Subject Interests in violation of the terms of the Loan Documents, to the full extent of the losses or damages incurred by Lender on account of such damage or removal;

     j. Failure by Borrower (or of Indemnitor or any of its Subsidiaries acting on behalf of the Borrower under any arrangement, contractual or otherwise) to pay any valid taxes, assessments, mechanic’s liens, materialmen’s liens or other liens which could create liens on any portion of the Subject Interests which would be superior to the lien or security title of the Mortgage or the other Loan Documents;

     k. All obligations and indemnities of Borrower or Callon Operating (or of Indemnitor or any of its Subsidiaries acting on behalf of the Borrower or Callon Operating under any arrangement, contractual or otherwise) under the Loan Documents relating to hazardous or toxic substances or compliance with environmental laws and regulations, to the full extent of any losses or damages (including those resulting from diminution in value of any Subject Property)

incurred by Lender as a result of the existence of such hazardous or toxic substances or failure to comply with environmental laws or regulations; and

     l. Fraud or material misrepresentation by Borrower (or of Indemnitor or any of its Subsidiaries acting on behalf of the Borrower under any arrangement, contractual or otherwise) or any of its principals or officers, any indemnitor or any agent, employee or other person authorized or apparently authorized to make statements or representations on behalf of Borrower, any principal or officer of Borrower, or any indemnitor, to the full extent of any losses, damages and expenses of Lender on account thereof.

     The liability of Indemnitor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower or any other person (including, without limitation, other guarantors or indeminitors, if any), nor against the collateral for the Loan. Indemnitor waives any right to require that an action be brought against Borrower or any other person or to require that resort be made to any collateral for the Loan or to any balance of any deposit account or credit on the books of Lender in favor of Borrower or any other person. In the event of a default under the Loan Documents which is not cured within any applicable grace or cure period, Lender shall have the right to enforce its rights, powers and remedies (including, without limitation, foreclosure of all or any portion of the collateral for the Loan) thereunder or hereunder, in any order, and all rights, powers and remedies available to Lender in such event shall be non-exclusive and cumulative of all other rights, powers and remedies provided thereunder or hereunder or by law or in equity. If the Costs indemnified by Indemnitor hereby are partially paid or discharged by reason of the exercise of any of the remedies available to Lender, this Agreement shall nevertheless remain in full force and effect, and Indemnitor shall remain liable for all remaining Costs indemnified hereby, even though any rights which Indemnitor may have against Borrower may be destroyed or diminished by the exercise of any such remedy.

     2.  Indemnification Procedures .

     a. If any action shall be brought against Lender based upon any of the matters for which Lender is indemnified hereunder, Lender shall notify Indemnitor in writing thereof and Indemnitor shall promptly assume the defense thereof, including, without limitation, the employment of counsel acceptable to Lender and the negotiation of any settlement; provided , however , that any failure of Lender to notify Indemnitor of such matter shall not impair or reduce the obligations of Indemnitor hereunder. Lender shall have the right, at the expense of Indemnitor (which expense shall be included in Costs), to employ separate counsel in any such action and to participate in the defense thereof. In the event Indemnitor shall fail to discharge or undertake to defend Lender against any claim, loss or liability for which Lender is indemnified hereunder, Lender may, at its sole option and election, defend or settle such claim, loss or liability. The liability of Indemnitor to Lender hereunder shall be conclusively established by such settlement, provided such settlement is made in good faith, the amount of such liability to include both the settlement consideration and the costs and expenses, including, without limitation, attorneys’ fees and disbursements, incurred by Lender in effecting such settlement. In such event, such settlement consideration, costs and expenses shall be included in Costs and Indemnitor shall pay the same as hereinafter provided.

     b. Indemnitor shall not, without the prior written consent of Lender: (i) settle or compromise any action, suit, proceeding or claim or consent to the entry of any judgment that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to Lender of a full and complete written release of Lender (in form, scope and substance satisfactory to Lender in its sole discretion) from all liability in respect of such action, suit, proceeding or claim and a dismissal with prejudice of such action, suit, proceeding or claim; or (ii) settle or compromise any action, suit, proceeding or claim in any manner that may adversely affect Lender or obligate Lender to pay any sum or perform any obligation as determined by Lender in its sole discretion.

     c. All Costs shall be immediately reimbursable to Lender when and as incurred and, in the event of any litigation, claim or other proceeding, without any requirement of waiting for the ultimate outcome of such litigation, claim or other proceeding, and Indemnitor shall pay to Lender any and all Costs within ten (10) days after written notice from Lender itemizing the amounts thereof incurred to the date of such notice. In addition to any other remedy available for the failure of Indemnitor to periodically pay such Costs, such Costs, if not paid within said ten-day period, shall bear interest at the Default Rate (as defined in the Credit Agreement).

     3.  Reinstatement of Obligations; Acceleration .

     a. If at any time all or any part of any payment made by Indemnitor or received by Lender from Indemnitor under or with respect to this Agreement is or must be rescinded or returned for any reason whatsoever (including, but not limited to, the insolvency, bankruptcy or reorganization of Indemnitor or Borrower), then the obligations of Indemnitor hereunder shall, to the extent of the payment rescinded or returned, be deemed to have continued in existence, notwithstanding such previous payment made by Indemnitor, or receipt of payment by Lender, and the obligations of Indemnitor hereunder shall continue to be effective or be reinstated, as the case may be, as to such payment, all as though such previous payment by Indemnitor had never been made.

     b. Indemnitor agrees that upon the dissolution or insolvency of Indemnitor, or an assignment by Indemnitor for the benefit of creditors, or the commencement of any case or proceeding in respect of Indemnitor under any bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the rights to seek indemnification under Section 1 hereto (the “ Indemnified Obligations ”) may not then be due and payable, Indemnitor will pay to Lender forthwith the full amount which would be payable hereunder by Indemnitor if all such Indemnified Obligations were then due and payable.

     4.  Waivers by Indemnitor . To the extent permitted by law, Indemnitor hereby waives and agrees not to assert or take advantage of:

     a. Any right to require Lender to proceed against Borrower or any other person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender’s power or under any other agreement before proceeding against Indemnitor hereunder;

     b. Any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons or the failure of Lender to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other person or persons;

     c. Demand, presentment for payment, notice of nonpayment, protest, notice of protest and all other notices of any kind, or the lack of any thereof, including, without limiting the generality of the foregoing, notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Borrower, Lender, any endorser or creditor of Borrower or of Indemnitor or on the part of any other person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Lender;

     d. Any defense based upon an election of remedies by Lender;

     e. Any right or claim or right to cause a marshalling of the assets of Indemnitor;

     f. Any principle or provision of law, statutory or otherwise, which is or might be in conflict with the terms and provisions of this Agreement;

     g. Any duty on the part of Lender to disclose to Indemnitor any facts Lender may now or hereafter know about Borrower or the Property, regardless of whether Lender has reason to believe that any such facts materially increase the risk beyond that which Indemnitor intends to assume or has reason to believe that such facts are unknown to Indemnitor or has a reasonable opportunity to communicate such facts to Indemnitor, it being understood and agreed that Indemnitor is fully responsible for being and keeping informed of the financial condition of Borrower, of the condition of the Property and of any and all circumstances bearing on the risk that liability may be incurred by Indemnitor hereunder;

     h. Any lack of notice of disposition or of manner of disposition of any collateral under the Loan Documents;

     i. Any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the Loan Documents;

     j. Any lack of commercial reasonableness in dealing with the collateral for the Loan;

     k. Any deficiencies in the collateral under the Loan Documents or any deficiency in the ability of Lender to collect or to obtain performance from any persons or entities now or hereafter liable for the payment and performance of any obligation hereby guaranteed;

     l. An assertion or claim that the automatic stay provided by 11 U.S.C. §362 (arising upon the voluntary or involuntary bankruptcy proceeding of Borrower) or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, interdict, condition, reduce or inhibit the ability of Lender to enforce any of its rights, whether now or hereafter required, which Lender may have against the collateral for the Loan;

     m. Any modifications of the Loan Documents or any obligation of Borrower relating to the Loan by operation of law or by action of any court, whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, or otherwise; and

     n. Any action, occurrence, event or matter consented to by Indemnitor under Section 7(f ) hereof, under any other provision hereof, or otherwise.

     5.  Representations and Warranties . Indemnitor hereby represents and warrants unto Lender as set forth in this Section (i) as of the date of this Agreement, (ii) on the date, and both before and after giving effect to the making of any Loan, and (iii) on th