Energy Prospectus

HOUSTON, Nov. 4, 2019 /PRNewswire/ -- Callon Petroleum Company (CPE) ("Callon" or the "Company") today reported results of operations for the three and nine months ended September 30, 2019.

Presentation slides accompanying this earnings release are available on the Company's website at www.callon.com located on the "Presentations" page within the Investors section of the site.

Third Quarter and Recent Highlights with my comments in blue.

Increased production by 8% year-over-year to 37,837 Mboe/d (78% oil) < My forecast was 37,700 Mboe/d (78% oil).

Generated an operating margin of $35.58 per Boe

Realized fully diluted earnings per share of $0.21, adjusted earnings per share of $0.19, net income of $55.8 million, and adjusted EBITDA of $117.4 million < My EPS forecast was $0.19.

Reduced operational capital spending by 13% during the third quarter to $116.4 million, maintaining full year operational capital targets within the previously lowered guidance range

Achieved lease operating expense ("LOE") per Boe of $5.65, an improvement of nearly 9% over the prior period < My forecast assumed LOE of $5.80/boe.

Completed and placed on production large multi-interval, multi-pad projects in both the Midland and Delaware Basins with strong initial performance from both projects

"The hard work by our team throughout this quarter has continued to produce exceptional results with production ahead of expectations, operating expenses moving lower, and discretionary cash flow in line with operational capital spending. Our successful mega-pad development projects are not only generating significant and durable cost savings but have exhibited solid productivity. In addition, the continued efforts to optimize previously acquired assets have resulted in incremental value to shareholders as our team has made noteworthy progress on well productivity and operational costs across our expanded asset base," commented Joe Gatto, Callon's President and Chief Executive Officer. He continued, "We remain focused on preparing to integrate the Callon and Carrizo teams and operations upon closing and will strive to exceed our own expectations for capital efficiency and targeted synergy capture. In the current commodity environment, we recognize the need to be a low cost producer and are prepared to execute a program that will drive free cash flow generation, optimize asset development, accelerate deleveraging efforts, and deliver improved returns on invested capital to our shareholders in the near term."

I have updated my forecast/valuation model for CPE and it will be posted to the EPG website shortly.

My valuation model is based on CPE as a stand alone company.

Carrizo Oil & Gas (CRZO) also announced Q3 results that were slightly better than my forecast. I will circle back this weekend and update by Pro Forma forecast/valuation model for CPE that assumes that the CPE+CRZO merger does close by year-end.

Update from John White at Roth Capital received 11/5/2019

Our valuation of CPE is based on a net asset value (NAV) analysis which produced $7.63 per share which we rounded higher to $7.75, which is our target price.

CPE: In-Line Quarter; Good Results at Rag Run Mega-pad

Full year 2019 production guide was nudged slightly higher, from a range of 38,000 BOE per day to 39,500 BOE per day to a range of 39,200 BOE per day to 39,600 BOE per day. CPE reported actual 3Q production of 37,837 BOE per day, in line with our estimate of 37,609 BOE per day and the consensus estimate of 37,659 BOE per day.

Adjusted EPS/CFPS of $0.19/$0.49 were also in line with our estimates of $0.16/$0.47 and consensus of $0.18/$0.49. CPE’s EBITDA of $117.3 million was slightly higher than our figure of $107.2 million and consensus of $112.9 million.

Operations:

The Rag Run mega-pad, CPE’s initial large-scale development project in the Delaware Basin, was placed on production near the end of July and includes co-development of two Wolfcamp A flow units and the Wolfcamp B with simultaneous operations of two completion crews. Through the first 90 days of production, these wells have averaged approximately 1,000 BOE per day (~80% oil). This project was placed on production using a more conservative choke management strategy than previous wells, which CPE expects to employ on future developments of this nature to optimize long-term well performance. CPE cited significant drilling and completion cost savings realized on this initial Delaware Basin mega-pad, which resulted in an average total well cost of less than $1,100 per lateral foot. This is comparable to FANG’s (Buy) Delaware Basin well costs of $1,131 as disclosed in the FANG 2Q 2019 earnings presentation. We note FANG reports today after the close and may very well post better Delaware Basin well costs that it reported in 2Q 2019. Nonetheless, the CPE Rag Run mega-pad results are impressive, in our view.

We will participate in the conference call, further evaluate these results and revise our estimates accordingly.