Callon Petroleum (CPE) Update - May 18
Posted: Mon May 18, 2020 10:26 am
I spent four hours looking at Callon on Sunday afternoon and we sent out an updated profile on the company this morning.
The only major concern that I had was that Callon's bankers would cut the Company's credit facility. That risk has passed since the banks extended the line of credit and confirmed the credit limit of $1.7 billion. Callon has drawn $1.35 billion against the credit facility, so they have plenty of liquidity to survive 2020. Plus, Callon is now generating free cash flow from operations.
Read the profile carefully. There is no reason that I can see for CPE to be trading below book value, but that statement is true for most of the Sweet 16 companies.
Take a hard look at Callon's hedges.
The only major concern that I had was that Callon's bankers would cut the Company's credit facility. That risk has passed since the banks extended the line of credit and confirmed the credit limit of $1.7 billion. Callon has drawn $1.35 billion against the credit facility, so they have plenty of liquidity to survive 2020. Plus, Callon is now generating free cash flow from operations.
Read the profile carefully. There is no reason that I can see for CPE to be trading below book value, but that statement is true for most of the Sweet 16 companies.
Take a hard look at Callon's hedges.