In the last 3 months, 8 ranked analysts set 12-month price targets for CPE that range from $5 to $30 per share. The average price target among the analysts is $12.19.
The $30 target is from RBC Capital on July 12, 2020 when (IMO) the outlook for oil and especially gas prices were not as good as they are today. The next highest price target is $18.50 from Stifel on August 21, 2020. The price targets under $10 only make sense if the analysts are using $40 WTI and $2.00 HH gas prices for all future periods.
CPE is trading for $6.38 at the time of this post, which compares to book value of over $47/share based on their June 30, 2020 balance sheet. Keep in mind that 6/30 book value includes an impairment charge of $1.3 Billion in Q2. If the auditors did their job, 6/30 book value should be conservative.
I have tweaked my forecast/valuation model and reduced my 2021 production forecast assuming the Company stays in "maintenance mode" for the entire year. In my opinion, that will only happen if WTI stays in the low $40s. That will only happen if we stay in "Pandemic World" for the entire year and even then I doubt oil prices can stay that low.
Callon is on-track to generate FCF from operations of $150 million in 2H 2020 and it is locked in by hedges.
I have posted my updated forecast/valuation model to the EPG Website and we will be sending out an updated profile on the Company tomorrow morning. If you see anything that justifies the current share price, please share it with us.
Callon Petroleum (CPE) Update - Sept 3
Callon Petroleum (CPE) Update - Sept 3
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Callon Petroleum (CPE) Update - Sept 3
Dan Thank you for this:
"Callon is FCF positive today, on track to generate over 140% year-over-year productin growth and should generate more than $ 14.00 per share operating cash flow. 1 Half 2020 operating cash flow was $ 7.42 per share."
$ 14.00 per share operating cash flow for the year !!!!!!!!
Have you ever seen anything so mispriced as this????
I do not get it.
Their Debentures are way mispriced also.
"Callon is FCF positive today, on track to generate over 140% year-over-year productin growth and should generate more than $ 14.00 per share operating cash flow. 1 Half 2020 operating cash flow was $ 7.42 per share."
$ 14.00 per share operating cash flow for the year !!!!!!!!
Have you ever seen anything so mispriced as this????
I do not get it.
Their Debentures are way mispriced also.
Re: Callon Petroleum (CPE) Update - Sept 3
RBC Capital and Stifel seems to be the only firms that sees the upside in CPE that I do. Their price targets are $30.00 and $18.50.
TipRanks as of 9-28-2020: "In the last 3 months, 9 ranked analysts set 12-month price targets for CPE. The average price target among the analysts is $11.28."
I've seen this stuff before. One or two of the Wall Street Gang badmouths a merger and it puts the company in "the herds' penalty box" for a year. CPE did book a very large impairment charge in the 2nd quarter that validates some of the critics, but quarter-after-quarter of strong cash flow from operations should eventually get CPE out of the penalty box.
If ngas firms up over $3.00 and WTI gets back to $50, CPE should triple. If WTI is over $60 a year from now, RBC Capital's price target might look too low.
Devon's merger with WPX Energy is drawing a lot of much needed attention to this grossly oversold sector.
TipRanks as of 9-28-2020: "In the last 3 months, 9 ranked analysts set 12-month price targets for CPE. The average price target among the analysts is $11.28."
I've seen this stuff before. One or two of the Wall Street Gang badmouths a merger and it puts the company in "the herds' penalty box" for a year. CPE did book a very large impairment charge in the 2nd quarter that validates some of the critics, but quarter-after-quarter of strong cash flow from operations should eventually get CPE out of the penalty box.
If ngas firms up over $3.00 and WTI gets back to $50, CPE should triple. If WTI is over $60 a year from now, RBC Capital's price target might look too low.
Devon's merger with WPX Energy is drawing a lot of much needed attention to this grossly oversold sector.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Callon Petroleum (CPE) Update - Sept 3
How does your $47/share for book value compare with their debt of over $3 bn? Is $47/share net of debt? Might some analysts have concluded that their merger turned out to be ill-timed (not their fault) due to the pandemic, and that, regardless, there is concern over their ability to refinance their debt when it comes due?book value of over $47/share based on their June 30, 2020 balance sheet.
Re: Callon Petroleum (CPE) Update - Sept 3
Book value is net of debt. It is just (Assets - Liabilities) / # of shares. Book value for each company can be found under Tab 1 on the main Sweet 16 spreadsheet.
As of 6-30-2020 Callon had Net Book Value of $1,881 million and 39.8 million shares of common stock. $1,881 / 39.8 = $47.26
Book value is net of the $1,277 million impairment charge taken in Q2.
The merger with Carrizo was a stock for stock merger, so you can say they paid too much based on pre-pandemic share prices but the share prices of both companies would have gone down anyway. My valuation is based on 2020 & 2021 operating cash flow.
First Call's operating cash flow forecasts are $12.73 for 2020 and $15.52 for 2021.
As of 6-30-2020 Callon had Net Book Value of $1,881 million and 39.8 million shares of common stock. $1,881 / 39.8 = $47.26
Book value is net of the $1,277 million impairment charge taken in Q2.
The merger with Carrizo was a stock for stock merger, so you can say they paid too much based on pre-pandemic share prices but the share prices of both companies would have gone down anyway. My valuation is based on 2020 & 2021 operating cash flow.
First Call's operating cash flow forecasts are $12.73 for 2020 and $15.52 for 2021.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group