Energy Prospectus

Callon at $ .489 cents per share


Steven A Webster---


Co-Founder of Carrizo Steve Webster was appointed to the Callon Board in December 2019 in conjunction with the merger of Callon and Carrizo.

 Mr Webster was a co-founder of Carrizo for which he served as a director since 1993 and as its Chairman of the Board since June 1997. Since 2016, Mr Webster has served as Managing Partner of AEC Partners, a private equity firm engaged in energy investment which was the successor to Avista Capital Partners, a private equity firm he co-founded in July 2005 and for which he served as Co-Managing Partner. Mr Webster earned an MBA degree from Harvard Business School, where he was a Baker Scholar, and a BSIM degree and Honorary Doctorate from Purdue University. 

Callon Shares owned prior to purchases: 

Direct 5,094,924
Wife 245,000San
Felipe Resources Company 43,750 

Recent Insider purchases of Callon Shares: 

February 28, 2020 200,000 Shares AT $ 2.12
March 2, 2020 50,000 Shares AT $ 2.13
March 2, 2020 250,000 Shares AT $ 2.10
March 3, 2020 100,000 Shares AT $ 2.05 
March 4 , 2020 200,000 Shares AT $ 1.959
March 5, 2020 100,000 Shares AT $ 1.787
March 6, 2020 50,000 Shares AT $ 1.2995
March 6, 2020  300,000 Shares AT $ 1.4814
March 9, 2020 250,000 Shares AT $ .4236 

Total 1,500,000 Shares of Callon

Total $ Purchases $ 2,446,295 
Average Cost per Share $ 1.63  

https://finance.yahoo.com/quote/CPE/key ... tics?p=CPE 

Audited Book Value $8.13 
Market Price $ $.485 

% Market Price to Book 5.9%

Projected Cash Flow 2020 = $ 3.03 Per Share

Callon has ~70% of Q1 oil hedged at $55.45 and ~60% of full year oil hedged at that price.

So Dan as a CPA if the Chief Accounting Officer of Callon bought 200,000 shares to add to his 122,908 shares he owned previously would that be bullish?


Mr Webster has added every single day.

Webster Callon Shares owned prior to purchases:

Direct 5,094,924
Wife 245,000
San Felipe Resources Company 43,750

Recent Insider purchases of Callon Shares by Webster:

February 28, 2020 200,000 Shares AT $ 2.12
March 2, 2020 50,000 Shares AT $ 2.13
March 2, 2020 250,000 Shares AT $ 2.10
March 3, 2020 100,000 Shares AT $ 2.05

March 4 , 2020 200,000 Shares AT $ 1.959
March 5, 2020 100,000 Shares AT $ 1.787
March 6, 2020 50,000 Shares AT $ 1.2995
March 6, 2020 300,000 Shares AT $ 1.4814
March 9, 2020 250,000 Shares AT $ .4236

March 10, 2020 200,000 Shares AT $ .512
March 11, 2020 300,000 Shares At $ .4793
March 12, 2020 100,000 Shares At .5161


Total 2,100,000 Shares of Callon Purchased
% Increase in Position 39%
Total $ Purchases $ 2,741,345

Average Cost per Share $ 1.31

Insider Gregory Conaway Vice President & Chief Accounting Officer Purchase

Owned prior to Purchase 122,908

March 11, 2020 200,000 shares AT $ .4845

Total owned 322,908 Increase in Position 163%

I have updated my forecast/valuation model for CPE. It will be posted to the EPG website this afternoon.

I have taken 2020 production down to the bottom of the company's production forecast and I have lowered commodity prices for 2020 and 2021, taking into consideration CPE's hedges. Plus, I'm only using 3X operating cash flow per share to value the common stock. Keep in mind that Callon has 60% of their 2020 production (per guidance) hedged at $55/bbl.

I'm expecting CPE to reduce their 2020 drilling program and lower their production guidance a bit.

My valuation of $7.30 compares to First Call's price target of $5.45.

CPE closed at $0.66 on Friday, March 13.

Dan,

Do you agree with Morgan Stanley's reported view (pasted below) about CPE potentially breaching its debt covenants next year, expressed in the Reuters article you posted this morning (re EOG)? What are the specifics of that provision?

"Morgan Stanley also expects Chesapeake Energy Corp and Whiting Petroleum Corp to potentially breach debt covenants this year, and Oasis Petroleum Inc and Callon Petroleum Co next year."

What do yo think is the likelihood that, if they do, CPE would be able to get a waiver of same from its lender(s)?

Thanks.

I don't agree, unless oil price don't rebound. A lot is going to happen over the course of this year.

Thanks for the update on Callon in the March news letter. If oil goes to $20 per barrel which would be a worst case senerio, how long do you think Callon could last at that price? Any comments for others regarding Callon would be appreciated.

If oil goes to $20 and stays there FOREVER, none of the upstream companies will survive for long.

This goes for all commodities: If the selling price of ANY commodity goes below the finding & development cost to get it out of the ground and to market, supplies will drop FAST.

BTW the economies of every OPEC country and Russia will crater at $20 oil.

DO THIS: Download the Callon forecast model from our website to your computer. Once you have it in Excel, go to the bottom and put in different oil prices for future periods. The spreadsheets are designed to answer the question that you asked. They are macro driven and automatically update when you change the assumptions.

Insider Gregory Conaway Vice President & Chief Accounting Officer Insider Purchases

Owned prior to Purchases 122,908 Callon Shares

Purchases
March 11, 2020 200,000 shares AT $ .4845 Share
March 19, 2020 100,000 shares AT $ .48 Share

Total owned 422,908 Callon shares after purchases--- Increase in Position 244%