HOUSTON (Reuters) – U.S. shale producer Callon Petroleum (CPE.N) on Thursday sharply cut its offer for rival Carrizo Oil & Gas (CRZO.O) postponed a shareholder vote in a last ditch effort to win support for the deal.

The new terms value Carrizo at about $723 million down from $1.2 billion in July, when Callon first made the offer. Callon shares tumbled after the bid, reducing the value of the all stock deal.

It was the first major shale proposal since Occidental Petroleum Corp bid for Anadarko in April. That deal closed in August even though it was opposed by some major Occidental shareholders, and the Callon bid was seen as a test of whether investors would be willing to go along with shale mergers designed to boost production volumes.

Callon said the new terms represent a 7% premium to the trading price before the deal was disclosed, down from the original 25% premium offered. It would leave Callon shareholders with 58% of the combined company, up from the original 54%.

The companies rescheduled the shareholder vote to Dec. 20 from Thursday.

The original merger bid was opposed by Paulson & Co, Callon’s third-largest shareholder, while proxy advisory firms Glass Lewis & Co and Institutional Shareholder Services urged a “no” vote.

“In light of today’s market environment, the revised terms offer compelling near- and long-term value for Carrizo shareholders,” Chip Johnson, Carrizo chief executive, said in a statement.

Terms of the new deal provide Carrizo shareholders 1.75 Callon shares for each share held, down about 15% from the previous offer of 2.05 Callon shares. Callon also agreed to pay up to $10 million of Carrizo’s expenses if Callon shareholders reject the deal.

In September, Paulson called on Callon to abandon the offer and consider selling itself, arguing the 25% premium was too steep and would increase Callon’s debt. Paulson recently held a 9.5% stake.

The proposed combination would have Callon relinquish its status as a Permian Basin pure-play, Paulson said, making it less attractive to potential acquirers. The Permian Basin is the top U.S. shale field.

Paulson partner James Hoffman on Thursday declined to comment whether it would support the new terms. Those terms include no payment to Callon for its expenses if Carrizo shareholders reject the merger and a smaller increase in Callon’s authorized shares.

Callon’s shares have fallen about 29% from $6.40 on the day before the bid became public. They traded at $4.46 on Wednesday, but dipped to $4.40 in morning trade on Thursday. Carrizo shares were off 1% at $7.61.

A shareholder rejection could put both companies in play. Carrizo had held discussions at least seven other companies and had received three non-binding proposals before accepting Callon’s bid, according to a regulatory filing.

Callon’s offer was the first Permian takeover proposal since Occidental closed its $38 billion purchase of Anadarko Petroleum without a vote by its own holders. That deal that has knocked Occidental shares down more than 40%.

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