Callon Petroleum (CPE) Update - July 12

[dan_s]

John White sent out an updated profile/ forecast for CPE while I was travelling. It is dated July 11, 2017. His comments are below with my thoughts in BLUE.

Primarily due to the higher actual commodity prices, our estimates for EPS/CFPS/EBITDA move higher, from $0.19/$0.43/$89.6 million to $0.25/$0.45/$92.9 million. < John's updates compare to my forecast of $0.19 EPS and $0.42 operating CFPS.

We have updated our 2Q 2018 commodity prices for actual prices during the quarter. Actual Henry Hub natural gas averaged $2.83/MMBtu, in line with our projected $2.75/MMBtu. Actual WTI crude oil averaged $67.91/bbl, higher than our estimate of $64.00/bbl. Our production estimate for 2Q 2018 of 28,692 BOE per day is essentially unchanged from our previous figure of 27,115 BOE per day. < My forecast is based on Q2 production of 30,000 Boepd, but I am using much lower commodity prices, which is why my EPS and CFPS forecast for Q2 is lower than John's.

Previously, CPE announced a bolt-on acquisition from Cimarex Energy’s (XEC-NC) 28,657 net surface acres together with current net production of approximately 6,831 BOE per day (73% oil). The acreage and production generally offsets CPE’s Spur operating area in the Delaware Basin and over 90% is held by production. CPE estimates a delineated base inventory of 212 net identified horizontal drilling locations targeting the Third Bone Spring, Wolfcamp A and Wolfcamp B formations. CPE will be the operator of approximately 86% of the identified locations. Over 60% of the inventory is comprised of well locations with laterals of 7,500 feet or more. The pending acquisition is expected to close on or before September 10, 2018, subject to the completion of customary closing conditions. < My forecast/valuation model assumes the deal closes September 30. An earlier close will increase Q3 production in my model.

Our valuation is based on a net asset value (NAV) analysis which produced $16.65 per share which we rounded
lower to $16.50, which is our target price. < My valuation is currently $16.00/share.

Factors that may impede the shares from achieving our price target include significant decrease in oil and
natural gas prices difficulties encountered in the drilling and completion program, any changes enacted by
federal, state or local governments that materially affect the profitability of oil and gas production and changes
in the key management executives.