Callon Petroleum (CPE) Update - Oct 5

[dan_s]

I have updated my forecast model for CPE. Now that the Primexx Acquisition has closed and they've increased their production forecast for 2021, I am raising the multiple of operating cash flow that I use to value this stock to 4X annualized operating cash flow per share. My valuation increases by $10 to $79/share. If their 2022 guidance confirms my forecast assumptions, there is SIGNIFICANT UPSIDE for CPE.

CPE is currently trading for $55.88; up 325% YTD.

> Callon is now on track to exit 2021 with production of ~115,000 Boepd. 64% crude oil, 18% natural gas and 18% NGLs.
> Their year-end reserve report should be very impressive and the balance sheet will be in good shape.
> They should generate over $450 million of free cash flow from operations in 2021
> Operating cash flow should increase by 50% in 2022 to approximately $1.4 Billion as some very "Bad Hedges" expire on 12/31/2021.
> My 2022 forecast of $13.27 earnings per share compares to First Call's current EPS forecast of $11.60. < So the forward PE ratio is 4.2

I often wonder what a young member of the Wall Street Gang thinks when he looks at a profitable upstream company trading for a PE ratio under 5 when he is has been recommending tech companies with PE ratios over 100.