Callon Petroleum (CPE) Update - June 28

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Stifel Update June 28, 2019: Callon Petroleum Company (CPE, $6.37, Buy; Target $12.00)
by Derrick Whitfield

Callon is well positioned to outperform on capital- efficient growth in 2020
This week, we hosted Joseph Gatto (President, CEO and Director) in Dallas for a day of investor meetings. The reception was positive as management outlined its plan to remain capital disciplined, its important operational catalysts for 2019, and its receptiveness to more progressive long-term, shareholder-friendly initiatives. In short, we believe CPE has been one of the more successful transformation stories in our sector. In many respects, 2019 is the final year in the company's transformation to a capital-disciplined growth stock. In 2020, we project CPE to offer differentiated- capital efficient growth (DAPPS) based on the company's past investments in Midstream and minerals and its advantaged base decline. Further, CPE’s advantaged product mix and cost structure enable peer-leading cash margins. We believe these drivers are critically important in an environment where the investor ask is free cash flow from operations ("FCF").