Callon (CPE) Up 9.3% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Callon Petroleum (CPE). Shares have added about 9.3% 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 its most recent earnings report in order to get a better handle on the important drivers.
Callon Beats on Q2 Earnings Estimates
Callon Petroleum Company reported second-quarter 2023 adjusted earnings of $1.99 per share, beating the Zacks Consensus Estimate of $1.78. The bottom line significantly declined from the $3.11 reported a year ago.
Operating revenues of $562.3 million beat the Zacks Consensus Estimate of $542 million. However, the top line declined from the year-ago quarter’s $913.6 million.
Better-than-expected quarterly results were driven by higher oil-equivalent production volumes. The positives were partially offset by lower realized oil-equivalent prices and higher expenses.
Production
In the second quarter, CPE’s net production volumes averaged 106,948 barrels of oil-equivalent per day (Boe/d), up from the year-ago period’s 100,685 Boe/d. The metric is almost in line with our projection figure. Production volumes increased in the Permian Basin, while the same in Eagle Ford declined from the year-ago quarter. Of the total second-quarter production, 59% was oil.
Callon’s oil production in the quarter was 5,737 thousand barrels (MBbls), up from the year-ago level of 5,589 MBbls.
Natural gas production increased to 11,701 million cubic feet (MMcf) from 10,312 MMcf and also beat out estimate of 11,171 MMcf.
Also, natural gas liquids (NGLs) production in the quarter under review was 2,045 MBbls, up from the year-ago figure of 1,854 MBbls. The metric is also above our projection of 2,005 MBbls.
Price Realizations (Without Cash-Settled Derivative Impacts)
The average realized price per barrel of oil-equivalent was $49. The figure declined from the year-ago quarter’s $82.98. The average realized price for oil was $73.52 per barrel compared with $110.90 a year ago. The average realized price per barrel for NGLs was $19.87, lower than the year-ago level of $40.74.
The average realized price for natural gas was $1.23 per thousand cubic feet, down from $6.29. The metric is also below our projection of $1.86 per thousand cubic feet.
Total Expenses
Callon’s total operating expenses of $785 million significantly increased from the year-ago level of $435 million. The metric is also above our projection of $413.6 million.
Total lease operating costs increased to $76.8 million from the year-ago level of $73 million. The company’s per-unit lease operating expenses declined to $7.89 per barrel of oil equivalent in the reported quarter from $7.96 a year ago.
Capital Expenditure & Balance Sheet
The capital expenditure in the reported quarter was $293.7 million. Callon generated an adjusted free cash flow of $12.3 million, significantly down from $125.2 million a year ago.
As of Jun 30, 2023, the company’s total cash and cash equivalents amounted to $3.7 million. The long-term debt totaled $2,268.1 million.
Guidance
For the third quarter, Callon expects to produce 100-103 thousand barrels of oil-equivalent per day (MBoe/d), including oil volumes of 60-62 MBbls/d. The company gave an operational capital budget of $250-$275 million for the third quarter.
For 2023, the company’s production and capital expenditure guidance is unchanged.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -8.98% due to these changes.
VGM Scores
Currently, Callon has an average Growth Score of C, 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 20% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Callon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Callon is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, Matador Resources (MTDR), a stock from the same industry, has gained 10.6%. The company reported its results for the quarter ended June 2023 more than a month ago.
Matador reported revenues of $638.08 million in the last reported quarter, representing a year-over-year change of -32.4%. EPS of $1.42 for the same period compares with $3.47 a year ago.
For the current quarter, Matador is expected to post earnings of $1.52 per share, indicating a change of -43.3% from the year-ago quarter. The Zacks Consensus Estimate has changed +7.8% over the last 30 days.
Matador has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Callon Petroleum Company (CPE) : Free Stock Analysis Report
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