Energy Prospectus

RBC Capital has raised their price target on CEP by $4 to $12 at rate it as Outpreform.

"CPE shares provide exposure to small cap energy with continued organic improvement in operational and financial metrics. The self-help strategy should whittle down financial leverage to peer averages over the next 12-18 months. Management likely remains just above maintenance production levels until a path to financial leverage nears 2.0x occurs. We estimate the Break-Even Point at a top quartile $36-37/bbl."

Key points:
A good value. CPE shares currently imply a 4.7x multiple of EBITDA
(2021E), slightly below peers. We think there is value potential in CPE's
ability to improve its leverage metrics within cash flow due to its ultra
competitive low cost structure. We expect modest growth of low to mid
single digits that should allow CPE to balance its strategic goals.
Top-tier cost structure sets up meaningful FCF. CPE's well costs are leading
edge that includes below $500/foot in the Midland Basin and near $800/
foot in the Delaware Basin. We think total D&C spending of below $400
million should maintain 2021 production relatively flat and generate $125
million of organic FCF. In the near term, we expect CPE to remain near
production maintenance activity levels but this could increase slightly with
better well performance and at our $50+/bbl oil price outlook.
Improving the balance sheet remains the top priority. Given its
above average leverage profile management continues to reiterate debt
reduction as its top priority for FCF for the foreseeable future. Currently,
CPE's net debt-to-EBITDA sits at 4.6x, well above the 2.9x peer average
estimate in 2021. Using our $52/57 (WTI) price outlook for 2021/2022 and
assuming CPE stays at maintenance levels, we model leveraging declining
to sub 3x and putting CPE more inline with its peers.
Self-help opportunities on the horizon. We think financial leverage and
debt maturities through 2025 are prominent to the investment decision.
We expect management to actively manage this organically with FCF but
also strategically with select asset sales and debt refinancing. We think
the most likely sales includes its Permian water assets where a strategic
JV partner could infuse capital while allowing CPE to maintain operational
control. CPE has a large footprint and deep inventory so we also expect
that non-core assets in the Eagleford and Permian could also occur.
Assuming coverage with an Outperform rating. We increased our price
target by $4/share to $20/share to reflect our increased commodity price
outlook. Our $20/share price target is derived from a 6x EV-to-EBITDA
multiple on our 2021 estimate, in line with the average peer multiples
Commodity price update. Our new 2021/2022 WTI oil estimates are $52/
$57 per barrel, up from $46/$50. Our new 2021/2022 HH natural gas
estimates are $2.75/$2.55 per Mcf, up from $2.60/$2.55. Our full updated
estimates can be found at Return of the Energy Bull Market.

What are we supposed to think of an analyst who raises a price target and it is still below the current trading price? I know they don't set their firm's oil price targets, but their info is not really very insightful.

I focus on the direction of the price target updates. If they are moving toward my valuation it gives me confidence that I'm at least on the right track. During a period (like this) when we have lots of volatility in commodity prices, First Call's price targets are almost meaningless. However, the direction they're moving is worth watching.

RBC Capital is one of the best. Their $4 increase is a big move and encouraging. The "Overweight" tag is more important than the price target.

Callon is finally getting out of the "Penalty Box" caused by several of the Wall Street Gang's comments about the merger with Carrizo.

The last two sentences are also significant. Since Goldman Sachs (one of the "Leaders of the Herd") has raised their Brent forecast to $65/bbl, the rest of the Wall Street Herd have started to raise their oil & gas price forecasts as well. Less FEAR is what is needed for all of our model portfolio companies to move a lot higher.