Callon Petroleum (CPE) Q2 Results

[dan_s]

Callon's Q2 results beat my forecast. Cash flow from operation per share increased from $0.27 to $0.28. Production growth is now expected to accelerate into yearend. - Dan

Comments from John White at Roth Capital 8/3/2017

It was, by our estimates, an in-line quarter for CPE on production, EPS, CFPS, and EBITDA. We note the lease operating expense guidance per BOE ($/BOE) for 2017 has been lowered from a mid-point of $6.25/BOE to $6.00/BOE, as efficiency in the field improved. We also note the operated completed well count guidance has been increased nicely, from 34.5 wells to 42 wells, or 22%, while capex is unchanged. Production guidance is unchanged.

It was a quarter of delineation drilling and well density testing for CPE. CPE completed delineation of the Wolfcamp A zone across the aerial extent of the Howard County acreage position. Successful Lower Spraberry well density testing led to a 15% increase in Monarch location inventory. Also, CPE deployed a 4th rig, which will work in the Delaware Basin at the Spur asset. CPE reiterated its intention to add a fifth rig in early 2018.

[dan_s]

I have updated my forecast model for Callon Petroleum. It will be posted to the EPG website later today.

My valuation adjusts to $19.00, which compares to First Call's price target of $17.81. If Callon's production moves over 30,000 Boepd by year-end, my valuation will be increasing.

This company has a strong balance sheet with no near-term debt issues. It also has a lot of running room in the Permian Basin.