Callon Petroleum (CPE) Update - Sept 3
Posted: Thu Sep 03, 2020 11:38 am
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.
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.