Callon Petroleum (CPE) Valuation Update - May 6

Post Reply
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Callon Petroleum (CPE) Valuation Update - May 6

Post by dan_s »

At the time of this post CPE was trading at $50.46
I have updated my forecast/valuation model for CPE's solid Q1 results and their detailed guidances for full-year 2022.
My valuation increases by $12 to $120/share.
Why?
> Based on the Company's guidance, production should be up ~9% year-over-year, with growth accelerating in 2H 2022 to an exit rate of ~110,000 Boepd.
> Callon is on-track to generate over $1.8 billion of operating cash flow ($29.75/share) and approximately $1.1 billion of FCF in 2022.
> Nothing that I see can justify this stock trading at less than 2X CFPS.
> FCF should enable them to reach their goal of reducing their leverage ratio to 1.0X by year-end.
> My valuation multiple is just 4.5 X annualized operating cash flow per share. If they continue to reduce debt a multiple of 6X should be justified.

TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for CPE. The average price target among the analysts is $88.25. The 8 price targets range from $71 to $140 (Stifel Nicolaus)."
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Callon Petroleum (CPE) Valuation Update - May 6

Post by dan_s »

We will be posting an updated profile for Callon to the EPG website late today and sending it out via email tomorrow (5/11) morning. There is nothing that I can see to justify CPE trading for less than 2X operating cash flow per share. They are on-track to generate approximately $1.1 billion of free cash flow from operations this year, allowing them to reach their goal of less than 1.25X Net Debt / EBITDA leverage by year-end.

My current valuation is $120/share.
Dan Steffens
Energy Prospectus Group
Post Reply