Callon + Carrizo merger update - Oct 22

[dan_s]

Looks like the meeting to approve the merger on November 14 in Houston should be very interesting.

Read these press releases and you'll see that the meeting could get "heated":

CPE's view: https://finance.yahoo.com/news/callon-f ... 00563.html

Paulson's view: https://finance.yahoo.com/news/paulson- ... 00571.html

A few things to remember:
1. When deals of this size close a lot of people / advisers get paid a lot. The "Golden Parachute" payments to CRZO management are not uncommon.
2. As stand alone companies, CPE and CRZO are on-track to generate close to $1.2 Billion of cash flow from operations this year.
3. Size does matter in this business and post merger, CPE will have ~110,000 Boepd of production and should generate $1.3 to $1.4 Billion in 2020 (assuming WTI averages $60/bbl).

Since the merger was announced on July 15th, 8 ranked analysts have submitted details forecast on CPE and set 12-month price targets for CPE of $4.80 to $12.00. The average price target among the analysts is $7.91. The $4.80 valuation is from Drew Venker at Morgan Stanley who is using a very low oil price deck. He has the lowest valuations on almost every company that I look at. The next lowest valuation is $6.00 from Barclays, who is also using a rather low oil price.
The two most recent valuations are from:
> Gabriele Sorbara at Williams Capital on 10/21/2019 who rates CPE a BUY with an $8.00 price target.
> Jeff Grampp at Northland Securities on 10/21/2019 who rates CPE a BUY with a $7.00 price target.

In a detailed report that I get from Stifel dated 9/16/2019 they show net asset valuations of $11.16/share for CPE and $19.51/share for CRZO.

[bobs]

It was reported some outfit just bought 4.5m shares of CRZO.
I would assume there is no reason the merger won't go through??

[dan_s]

There is always a chance a merger won't close, but the boards of both companies usually have a high level of confidence that they have the necessary votes. CPE + CRZO makes a lot of sense to me.