Callon Petroleum (CPE)
Posted: Thu Dec 28, 2017 5:12 pm
I have rolled forward the forecast/valuation model for CPE and it will be posted to the EPG later today. My valuation is $15.80, compared to where it closed today at $12.36.
In the last 3 months, 6 ranked analysts set 12-month price targets for CPE. The average price target among the analysts is $15.42. Their valuations range from $12.00 to $18.00.
John White at Roth Capital follows this one closely and he talks to CPE management on a regular schedule, so I value his opinion. Plus, John is a conservative guy. His valuation of CPE is $16.50.
CPE is the smallest company in the Sweet 16 and I will probably move it back to our Small-Cap Growth Portfolio. I think it has a lot of upside for us, but I want to see Q4 production before I raise my valuation. Production was fairly flat from Q2 to Q3, partly due to Hurricane Harvey's impact on the Midland Basin producers.
A few things to keep in mind:
> CPE is a pure play on the Permian Basin and the Wall Street Gang loves the Permian.
> Fred Callon, the company's founder and CEO died earlier in 2017, which may be the reason that it trades at a discount to the peer group.
> Joe Gatto, the new CEO has been with the company for a long time and he has a strong team.
> YOY production growth in 2017 will be 45% to 50%. If their 2018 guidance is close to that rate of growth, it will draw a lot more attention.
> They include NGLs in their natural gas production volumes, which is why the gas price used in the forecast may seem a bit high.
Look at how the numbers in the RED BOX match up with my CFPS forecast.
Having an accurate view of the future is how you beat the market: All of you should take the time to understand the forecast/valuation models house on the EPG website. I am a "bean counter", so I value accurate financial models. The forecasts on our website are my unbiased opinion, based on decades for financial modeling experience. The Excel spreadsheets are "macro driven", so you just need to change the production and commodity price assumptions at the bottom and they will automatically update. Download one now and see what happens when you take the 2018 oil price to $70/bbl.
You can find our updated profile on CPE under the Sweet 16 tab at www.energyprospectus.com
In the last 3 months, 6 ranked analysts set 12-month price targets for CPE. The average price target among the analysts is $15.42. Their valuations range from $12.00 to $18.00.
John White at Roth Capital follows this one closely and he talks to CPE management on a regular schedule, so I value his opinion. Plus, John is a conservative guy. His valuation of CPE is $16.50.
CPE is the smallest company in the Sweet 16 and I will probably move it back to our Small-Cap Growth Portfolio. I think it has a lot of upside for us, but I want to see Q4 production before I raise my valuation. Production was fairly flat from Q2 to Q3, partly due to Hurricane Harvey's impact on the Midland Basin producers.
A few things to keep in mind:
> CPE is a pure play on the Permian Basin and the Wall Street Gang loves the Permian.
> Fred Callon, the company's founder and CEO died earlier in 2017, which may be the reason that it trades at a discount to the peer group.
> Joe Gatto, the new CEO has been with the company for a long time and he has a strong team.
> YOY production growth in 2017 will be 45% to 50%. If their 2018 guidance is close to that rate of growth, it will draw a lot more attention.
> They include NGLs in their natural gas production volumes, which is why the gas price used in the forecast may seem a bit high.
Look at how the numbers in the RED BOX match up with my CFPS forecast.
Having an accurate view of the future is how you beat the market: All of you should take the time to understand the forecast/valuation models house on the EPG website. I am a "bean counter", so I value accurate financial models. The forecasts on our website are my unbiased opinion, based on decades for financial modeling experience. The Excel spreadsheets are "macro driven", so you just need to change the production and commodity price assumptions at the bottom and they will automatically update. Download one now and see what happens when you take the 2018 oil price to $70/bbl.
You can find our updated profile on CPE under the Sweet 16 tab at www.energyprospectus.com