Energy Prospectus

I took a hard look at CPE yesterday and updated my forecast/valuation for the company. It is sitting on the EPG website home page.

Keep this in mind.
> Callon has some very good hedges. 70% of Q1 oil is hedged at an average of ~$55/bbl and 60% for Q2 to Q4. Some is with 3-way collars which I take into consideration for the realized oil price.
> Despite reducing their capex by 25%, they have not adjusted their production guidance of 115,000 to 120,000 Boepd, but I am lowering it to 107,000 to 110,000 Boepd.
> I've lowered the multiple of operating cash flow per share to value the stock and I've increased the "cushions" built into each quarter's forecast.
> Last week, four analysts issued new reports on the company with price targets of $0.75 to $1.00 per share.
> Analysts hate forecasting companies right after big mergers, because they are harder to model.
> Callon's Q1 results should be good and clarify a lot to expect going forward.

FWIW: Here are First Call's estimates:
2020: $1.46 Billion of Revenues, $0.74 EPS and $2.62 operating cash flow per share
2021: $1.62 Billion of Revenues, $0.83 EPS and $2.69 of operating cash flow per share

Other than FEAR that WTI oil will remain under $25/bbl forever, I see no reason CPE closed at $0.44 on March 20.

Thank Dan for keeping up to date on Callon. As a CPA I agree with your comment about analysts not getting merged companies. This was a stock for stock merger.....

Not sure I have ever seen a similar situation to Callon. Cash Flow per Share for 2020 $ 2.62 Market Price $ .48 Go Figure !

As I posted the Chief Accounting Officer has added again:

Insider Gregory Conaway Vice President & Chief Accounting Officer Insider Purchase

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%

This merger was easy for me because I have followed and modeled both companies for over ten years. It took me less than an hour to add the models together.

Yes, analyst always seem to discount companies for several quarters after a merger. They always assume that the buyer paid too much. Plus, the merger created a strong team.

As you point out, this was a stock for stock merger of almost equals, so Callon did not over-pay.

I've also noticed that the Wall Street Gang is missing the fact that some of these companies have a lot of oil production hedged at very good prices.

Parsley Energy that merged with Jagged Peak is now at the top of my list for Tuesday. After Parsley, I will update Talos Energy.

Dan

With first debt due in 2023 and 2020 hedges what do you make of this?

https://whbl.com/news/articles/2020/apr ... n=business 

Exclusive: Callon Petroleum taps advisers for debt restructuring - sourcesWednesday, April 01, 2020 11:19 a.m. CDT by Thomson ReutersBy David French, Jessica DiNapoli and Kate Duguid(Reuters)

- Oil and gas explorer Callon Petroleum Co has hired advisers to restructure its more than $3 billion in debt after a plunge in energy prices soured its acquisition of a rival, people familiar with the matter said on Wednesday.Callon paid $740 million in stock to acquire Carrizo Oil & Gas Inc almost four months ago and assumed its $1.7 billion in debt obligations.

While Callon's debt does not come due until 2023, it is seeking to avoid a cash crunch amid falling revenue and dwindling financing options for energy producers.Callon is working with debt restructuring attorneys and is also retaining the services of an investment bank, the sources said, adding that a decision on a specific course of debt restructuring was not imminent.The sources requested anonymity because the matter is confidential. Callon did not respond to a request for comment.

The advisers might represent some "deep pockets" that want to take out frightened debt holders at deep discounts. Callon shouldn't need a bailout unless we are stuck in Crazy Coronavirus World forever. If so, the entire world will need a bailout.