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Callon (CPE) Tops Q2 Earnings Estimates, Keeps FY19 View

Zacks Equity Research

Callon Petroleum Company CPE reported second-quarter 2019 adjusted earnings of 23 cents per share, beating the Zacks Consensus Estimate of 18 cents. The bottom line was flat year over year.

Operating revenues of $167 million surpassed the Zacks Consensus Estimate of $162 million and improved from the year-ago quarter’s $137 million.

The strong quarterly results were driven by a surge in oil equivalent volumes, partially offset by lower price realizations of commodities.

Production Surges

In the quarter, net production volumes averaged 40,516 barrels of oil equivalent per day (Boe/d), reflecting a surge from the year-ago period’s 28,954 Boe/d. Of the total second-quarter production, 77% was oil and the rest comprised natural gas.  

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

The average realized price per barrel of oil equivalent was $45.31. The figure was significantly lower than the year-ago quarter’s $52.02 a barrel. Average realized price for oil was $56.44 per barrel compared with $61.46 a year ago. Moreover, average realized price for natural gas came in at $1.26 per thousand cubic feet, down from $3.77 in the prior-year quarter.

Expenses Increase

Total operating expenses in the quarter amounted to $108.5 million, higher than the year-ago level of $69.7 million. Lease operating expenses jumped more than 73%, primarily leading to the surge in total operating costs.

Capital Expenditure & Balance Sheet

Capital expenditure in the reported quarter was $166.2 million, lower than the year-ago figure of $187 million.

As of Jun 30, 2019, the company’s total cash and cash equivalents amounted to $16.1 million, and debt was $1.1 billion, with a debt-to-capitalization ratio of 30.6%.

Guidance Maintained

For 2019, Callon Petroleum’s production is estimated in the range of 38-39.5 thousand barrels of oil equivalent per day, of which 78-79% is expected to be oil.

Operational capital expenditures for 2019 are projected in the range of $495-$520 million.

Net operated horizontal wells to be placed on production in 2019 are expected between 47 and 49, lower than the 2018 level of 54.

Notably, the company has maintained its 2019 outlook.

Zacks Rank & Stocks to Consider

Callon Petroleum currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include World Fuel Services Corporation INT, Delek Logistics Partners, L.P. DKL and TC PipeLines, LP TCP. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.     

World Fuel beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 16.4%.

Delek Logistics is likely to see earnings growth of 4.9% through 2019.

TC PipeLines has an average positive earnings surprise of 12.6% for the past four quarters.

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