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Callon (CPE) Up 41.5% Since Last Earnings Report: Can It Continue?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for Callon Petroleum (CPE). Shares have added about 41.5% 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 Q4 Earnings Top Estimates

Callon Petroleum reported fourth-quarter 2020 adjusted earnings of $1 per share, beating the Zacks Consensus Estimate of 41 cents. However, the bottom line fell from earnings of $2.30 per share a year ago.

Operating revenues of $296 million beat the Zacks Consensus Estimate of $262 million. Also, the top line increased from the year-ago quarter’s $196 million.

The better-than-expected results can be attributed to higher oil equivalent production volumes as well as decreased per unit lease operating expenses, partially offset by lower oil price realization.

Production

For the quarter, net production volumes averaged 94,914 barrels of oil equivalent per day (Boe/d), significantly up from the year-ago period’s 46,641 Boe/d. The improved volumes were supported by operations in the Permian and Eagle Ford. Of the total fourth-quarter production, 62% was oil.

Oil production for the quarter was 5,425 thousand barrels (MBbls), higher than the year-ago level of 3,234 MBbls. Natural gas production rose to 9,738 million cubic feet (MMcf) from 5,530 MMcf in fourth-quarter 2019. Also, NGLs production for the quarter under review was recorded at 1,684 MBbls, up from the year-ago 135 MBbls.

Price Realizations (Without the Impact of Cash-Settled Derivatives)

The average realized price per barrel of oil equivalent was $30.57. The figure declined from the year-ago quarter’s $45.70 a barrel. Average realized price for oil was $41.06 per barrel compared with $56.61 a year ago. Meanwhile, average realized price for natural gas came in at $1.91 per thousand cubic feet, down from $1.98 in the prior-year quarter. Notably, average realized price per barrel for NGLs was $15.24.

Total Expenses

Total operating expenses of $809.3 million surged from the year-ago level of $177.7 million. Gathering, transportation and processing costs were recorded at $20.7 million versus no charges in the year-ago period.

However, per unit lease operating expenses decreased to $5.15 per Boe for the reported quarter from $5.90 a year ago.

Capital Expenditure & Balance Sheet

Capital expenditure for the reported quarter was $109.4 million. It generated adjusted free cash flow of $24.4 million.

As of Dec 31, 2020, the company’s total cash and cash equivalents amounted to $20.2 million while long-term debt totaled $2.9 billion. It had a total debt to capitalization of 80.7%.

Proved Reserves Decline

The company reported proved reserves as of Dec 31, 2020, at 475,879 MBoe. This represents a decline from 540,012 MBoe as of Dec 31, 2019.

Guidance for 2021

For 2021, Callon Petroleum expects total production in the range of 90-92 MBoe/d. The company projects total operational capital expenditure for this year at $430 million. Moreover, the upstream firm expects gross operated completed wells for this year in the band of 90 to 100.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 24.44% due to these changes.

VGM Scores

Currently, Callon has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Callon has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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