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Callon's Q3 Production Volumes to Jump Amid Weaker Prices

Zacks Equity Research

Callon Petroleum Company CPE recently provided third-quarter 2019 operational update. The company estimates higher production and lower realized prices than the year-ago respective figures, while capital spending is expected to be in line with the guidance.

In-Depth Analysis:

Higher Production and Lower Prices

Callon expects third-quarter 2019 production in the range of 37.5-37.9 thousand barrels of oil equivalent per day (MBoed), of which around 78% is anticipated to be oil. This indicates an increase from the year-ago period’s 34.9 MBoed.

However, Callon estimates pre-hedge realized price of oil for the third quarter to be $54 per barrel, suggesting a decline from the year-ago quarter’s $56.57. Moreover, the same for natural gas is estimated at $1.55 per thousand cubic feet, implying fall from the year-ago level of $4.49.

Higher production level is expected to partially offset the negative effects of lower commodity prices in the quarter. As such, the Zacks Consensus Estimate for third-quarter revenues stands at $151.3 million, pointing to 6.2% fall from the year-ago reported figure.

Lease Operating Expenses

Callon’s third-quarter 2019 lease operating expenses (LOE) are estimated within $5.60-$5.80 per Boe compared with $5.77 in the year-ago period. This indicates an increase in efficiency from the first and second quarters of 2019, wherein the company reported LOE of $6.63 and $6.18 per Boe, respectively.

Capital Spending

Callon’s capital spending for operational purposes for the to-be-reported quarter is estimated in the range of $114-$118 million, suggesting a decrease from the year-ago level of $159 million. Given the fact that the company reported capital spending of only $289 million in first-half 2019, the estimated figure is expected to add up to its full-year projection of $495-$520 million.

Price Performance

Callon has lost 41.3% year to date compared with 27.7% decline of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Callon has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Matrix Service Company MTRX, Exterran Corporation EXTN and Pembina Pipeline Corp. PBA. While Matrix Service and Pembina sport a Zacks Rank #1 (Strong Buy), Exterran holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Matrix Service’s 2019 earnings per share are expected to rise 58.4% year over year.

Pembina’s 2019 earnings per share are expected to rise 21.5% year over year.

Exterran’s 2019 top line is expected to rise around 5% year over year.

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