Callon (CPE) Down 12.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Callon Petroleum (CPE). Shares have lost about 12.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Callon due for a breakout? 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 Q3 Earnings & Revenues Beat Estimates
Callon reported third-quarter adjusted earnings of $4.04 per share, beating the Zacks Consensus Estimate of $4. The bottom line surged from earnings of $2.93 per share reported a year ago.
Operating revenues of $835.9 million beat the Zacks Consensus Estimate of $700 million. The top line increased from the year-ago quarter’s $552.6 million.
Stronger-than-expected quarterly earnings were driven by higher production and commodity price realizations.
Production
In the third quarter, CPE’s net production volumes averaged 107,316 barrels of oil equivalent per day (Boe/d), up from the year-ago period’s 99,703 Boe/d. Production volumes increased in the Permian Basin, while the same in Eagle Ford declined from the year-ago quarter. Of the total third-quarter production, 62% was oil.
Callon’s oil production for the quarter was 6,112 thousand barrels (MBbls), up from the year-ago level of 5,875 MBbls. Natural gas production increased to 10,657 million cubic feet (MMcf) from 9,395 MMcf in the third quarter of 2021. Also, natural gas liquids (NGLs) production for the quarter under review was 1,985 MBbls, up from the year-ago figure of 1,732 MBbls.
Price Realizations (Without the Impacts of Cash-Settled Derivatives)
The average realized price per barrel of oil equivalent was $73.37. The figure increased from the year-ago quarter’s $54.93 a barrel. The average realized price for oil was $94.22 per barrel compared with $69.67 a year ago. Meanwhile, the average realized price for natural gas was $7.60 per thousand cubic feet, up from $3.89 in the prior-year quarter. The average realized price per barrel for NGLs was $34.03, higher than the year-ago level of $33.54.
Total Expenses
Callon’s total operating expenses of $395.3 million increased from the year-ago level of $241.5 million.
Total lease operating costs increased to $76.1 million from the year-ago level of $42.7 million. Also, the company’s per-unit lease operating expenses increased to $7.71 per barrel of oil equivalent (Boe) for the reported quarter from $4.66 a year ago.
Capital Expenditure & Balance Sheet
The capital expenditure for the reported quarter was $340.3 million. Callon generated an adjusted free cash flow of $148.4 million, up from $119.5 million a year ago.
As of Sept 30, 2022, the company’s total cash and cash equivalents amounted to $4.4 million, declining from $6.1 million at the second-quarter end. The long-term debt totaled $2,373.4 million, down from $2,516.3 million in the previous quarter. It had a total debt to capitalization of 45.8%.
Outlook
For 2022, CPE revised its total production guidance upward to 103-105 thousand barrels of oil equivalent per day (MBoe/d) from the prior stated 102-105 MBoe/d. Of the total, 62.5% will likely be crude oil. The company stated its operational capital budget of $830-$845 million for the year.
For the fourth quarter, the company expects to produce 105 to 108 MBoe/d, of which 63% is likely to be oil. Callon projects operational capital spending of $180-$195 million on an accrual basis. Also, it expects to generate an adjusted free cash flow of more than $200 million in the fourth quarter of this year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Callon has a great Growth Score of A, 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 A. 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, Magnolia Oil & Gas Corp (MGY), a stock from the same industry, has gained 1%. The company reported its results for the quarter ended September 2022 more than a month ago.
Magnolia Oil & Gas Corp reported revenues of $482.96 million in the last reported quarter, representing a year-over-year change of +70.3%. EPS of $1.29 for the same period compares with $0.67 a year ago.
For the current quarter, Magnolia Oil & Gas Corp is expected to post earnings of $1.14 per share, indicating a change of +39% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.9% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Magnolia Oil & Gas Corp. Also, the stock has a VGM Score of A.
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