Callon Petroleum (CPE) Update - April 22
Posted: Mon Apr 22, 2019 8:38 am
From Roth Capital: "Our valuation is based on a net asset value (NAV) analysis which produced $13.55 per share which we rounded lower to $13.50, which is our target price."
We have adjusted our 1Q 2019 estimates for actual WTI oil and Henry Hub natural gas prices of $54.90/bbl and $2.87/MMBtu versus our estimates of $50.00/bbl and $3.00/MMBtu. Our 1Q 2019 EPS/CFPS/EBITDA estimates increase to $0.16/$0.45/$105.2 million from our previous of $0.14/$0.43/$100.9 million. < This compares to my forecast (dated 4/8/2019) of $0.16/$0.46/$104.4.
Balance Sheet Strengthens:
CPE recently announced the sale of certain non-core assets in the Midland Basin for initial cash proceeds of $260 million, subject to customary purchase price adjustments. The agreement also provides for potential incremental cash payments of up to $60 million based upon future commodity prices with upside participation starting at the $60/Bbl WTI.
The proceeds from the divestiture will accelerate debt reduction and also provide the opportunity to retire the preferred stock, thus reducing cash interest and dividends. < Alert for any of you that own CPE's preferred stock. They can retire it at par, which is $50/share.
The divestiture encompasses the Ranger operating area in the southern Midland Basin which includes approximately 9,850 net acres with a 66% working interest, over 80 currently producing horizontal wells and 70 net delineated locations. Production from these assets averaged approximately 4,000 BOE per day.
CPE advised its capital plans for the year are unchanged as there was no planned activity in the Ranger area for 2019. Updated full year guidance will be provided upon closing of the sale.
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Note that my forecast/valuation model for CPE already includes the impact of the asset sale above. Even with the sale of 4,000 Boepd, Callon's production should increase year-over-year by 16% to 18% in 2019. - Dan
We have adjusted our 1Q 2019 estimates for actual WTI oil and Henry Hub natural gas prices of $54.90/bbl and $2.87/MMBtu versus our estimates of $50.00/bbl and $3.00/MMBtu. Our 1Q 2019 EPS/CFPS/EBITDA estimates increase to $0.16/$0.45/$105.2 million from our previous of $0.14/$0.43/$100.9 million. < This compares to my forecast (dated 4/8/2019) of $0.16/$0.46/$104.4.
Balance Sheet Strengthens:
CPE recently announced the sale of certain non-core assets in the Midland Basin for initial cash proceeds of $260 million, subject to customary purchase price adjustments. The agreement also provides for potential incremental cash payments of up to $60 million based upon future commodity prices with upside participation starting at the $60/Bbl WTI.
The proceeds from the divestiture will accelerate debt reduction and also provide the opportunity to retire the preferred stock, thus reducing cash interest and dividends. < Alert for any of you that own CPE's preferred stock. They can retire it at par, which is $50/share.
The divestiture encompasses the Ranger operating area in the southern Midland Basin which includes approximately 9,850 net acres with a 66% working interest, over 80 currently producing horizontal wells and 70 net delineated locations. Production from these assets averaged approximately 4,000 BOE per day.
CPE advised its capital plans for the year are unchanged as there was no planned activity in the Ranger area for 2019. Updated full year guidance will be provided upon closing of the sale.
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Note that my forecast/valuation model for CPE already includes the impact of the asset sale above. Even with the sale of 4,000 Boepd, Callon's production should increase year-over-year by 16% to 18% in 2019. - Dan