It has been about a month since the last earnings report for Callon Petroleum (CPE). Shares have added about 137.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Callon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Callon Petroleum's Q1 Earnings and Revenues Miss Estimates
Callon Petroleum Company’s first-quarter 2020 adjusted earnings of 12 cents per share missed the Zacks Consensus Estimate of 15 cents. Moreover, the bottom line fell from 16 cents a year ago.
Operating revenues of $289.9 million also lagged the Zacks Consensus Estimate of $345 million. However, the top line improved from the year-ago quarter’s $153 million.
The weaker-than-expected earnings can be attributed to lower natural gas and oil price realizations coupled with higher operating expenses. This was, however, offset partially by expanded production volumes.
Although the company’s earnings fell short of estimates, there are some other industry players, namely Cabot Oil & Gas Corporation (COG), Comstock Resources Inc (CRK) and Range Resources Corporation (RRC) that beat on first-quarter earnings. While Cabot Oil & Gas sports a Zacks Rank #1 (Strong Buy), Comstock Resources and Range Resources carry a Zacks Rank #2 (Buy).
In the quarter, net production volumes averaged 100,955 barrels of oil equivalent per day (Boe/d), up from the year-ago period’s 40,311 Boe/d. Improved volumes were supported by operations in the Permian Basin and Eagle Ford Shale. Of the total first-quarter production, 64% was oil.
Oil production in the quarter was 5,847 thousand barrels (MBbls), higher than the year-ago level of 2,858 MBbls. Natural gas production rose to 9,793 MMcf from 4,619 MMcf in first-quarter 2019. Also, NGLs production in the period under review was recorded at 1,707 MBbls.
Price Realizations (Without the Impact of Cash-Settled Derivatives)
The average realized price per barrel of oil equivalent was $31.56. The figure declined from the year-ago quarter’s $42.18 a barrel. Average realized price for oil was $45.45 per barrel compared with $49.37 a year ago. Meanwhile, average realized price for natural gas came in at 62 cents per thousand cubic feet, down from $2.59 in the prior-year quarter. Notably, average realized price per barrel for NGLs came in at $10.62.
Total operating expenses of $242.1 million rose from the year-ago level of $109.9 million. However, lease operating expenses declined to $5.70 per Boe in the reported quarter from $6.63 a year ago.
Capital Expenditure & Balance Sheet
Capital expenditure in the reported quarter was $224.5 million, higher than the year-ago figure of $193.2 million.
As of Mar 31, 2020, the company’s total cash and cash equivalents amounted to $14.8 million, and long-term debt totaled $3.2 billion, with total debt to total capital ratio of 0.49.
Callon refrained from providing the full-year guidance in the wake of the COVID-19 pandemic. However, it did issue some projections to lend investors certain insights.
Production in the June quarter is currently estimated to be more than 105 Mboe/d. For 2020, Callon’s oil production is expected to be flat or more than its volumes registered in the March quarter.
Operational capex view for the remaining nine months of the ongoing year is expected to be in the range of $250-$235 million.
The company expects to have an inventory of approximately 70 drilled, uncompleted wellsby the end of the second quarter, which will boost capital-efficient additional production in the upcoming months.
The company expects to generate free cash flow in the $25-$100 million band through the remainder of this year. However, the company’s forecast is dependent on the average WTI oil price, which is assumed to lie within $25-$30 per Bbl during the period.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted -61.25% due to these changes.
At this time, Callon has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Callon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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