Callon Petroleum (CPE)

[dan_s]

I got the following note from John White at Roth Capital this morning (1/8/2018). He rates CPE a BUY. My comments are in blue.
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Due primarily to higher actual 4Q 2017 WTI crude oil prices than we estimated our 4Q 2017 estimates for EPS/CFPS/EBITDA improve from $0.09/$0.29/$60.2 million to $0.18/$0.32/$69.4 million. < This compares to my forecast of $0.17/$0.33/$75.6 million.

The actual 4Q 2017 WTI crude oil price was significantly higher than our previous estimate while the Henry Hub natural gas price was in line with our previous estimate. WTI crude oil averaged $55.30/bbl against our $42.50/bbl and Henry Hub natural gas averaged $2.92/MMBtu versus our $3.00/MMBtu.

Accordingly, our 4Q 2017 estimates for EPS/CFPS/EBITDA improve from $0.09/$0.29/$60.2 million to $0.18/$0.32/$69.4 million.

We have also updated our 2018 oil and natural gas price estimates to be more in line with the recent futures markets. Our 2018 WTI crude price estimate moves from $46.25/bbl to $56.25/bbl. Our 2018 Henry Hub natural gas estimate moves from $3.13/MMBtu to $3.00/MMBtu. We have also lowered our estimate for lease operating expense, based on recent results and guidance, and also significantly lowered our interest incurred to reflect CPE’s practice during 2017 of capitalizing a large portion of interest expense.

Accordingly our 2018 estimates for CPE’s EPS/CFPS/EBITDA improve significantly from $0.44/$1.48/$305.9 million to $0.81/$2.07/$432.7 million. < Compares to my forecast of $0.75/$1.73/$387.6 million. Keep in mind that my forecasts still assume an average WTI price of $50 for 2018. This shows you how significant the higher oil price will be for small-caps like this.