Callon Petroleum (CPE) Pfd Stock

[dan_s]

I just updated my Net Income & Cash Flow Forecast for CPE and posted it under the Watch List Tab.

Again, being very conservative and assuming oil prices stay low all year, there is a chance CPE may have to suspend dividends on their pfd stock later this year. They are well hedged for the first two quarters this year, so I see only minor risk until later this year if oil prices stay low. My forecast is based on the low end of their production guidance.

My Fair Value Estimate for the common stock is now $9.00, compared to First Call's Price Target of $9.14.

[letitfly]

Yikes, a month ago you stated that they were rock solid and could pay the dividend! I realize you stated the information above was 'conservative based', but ouch.

[dan_s]

There is no near-term risk of CPE not paying their dividends. All I am saying is that if oil prices remain around $50/bbl for an extended period (all year) they might be at risk. I DO NOT BELIEVE OIL PRICES CAN STAY THIS LOW FOR LONG.

ALL OF THE UPSTREAM COMPANIES WILL BE IN TROUBLE IF OIL PRICES STAY DOWN FOR OVER A YEAR.

Fred Callon is a "seasoned" oilman. He has survived much worse than this dip in the oil price cycle.

My posts about the three pfd stocks were in response to an e-mail I got from a member asking for my thoughts on each company (CPE, GST and ENRJ) that had pfd stock in our High Yield Income Portfolio. ENRJ has the most risk just because of its size.

Note to all members: PLEASE ASK ME QUESTIONS HERE. If you have a question, chances are other members have the same question.

[letitfly]

OK, thanks, but just to be clear for all concerned. Even in the case of worse scenario and the dividends have to be suspended, can CPE survive as an entity and withstand the low pricing scenario going forward? Of course, no one knows how long prices will remain in this range, and we have put forth the position that prices can't stay this low as low prices cure low prices and supply will begin to fall as rigs are idled.

[dan_s]

CPE has a solid base of production and they should survive even an extended period of low oil prices. See the forecast model.