Callon Petroleum (CPE) Update - August 23
Posted: Mon Aug 23, 2021 3:24 pm
I finished my review of the updated profile for Callon Petroleum, which was prepared by one of out Top Notch MBAs. Steven did a great job laying out the importance of the Primexx Acquisition that was announced by Callon on August 4th. The deal has several moving parts, including one of Callon's major shareholders agreeing to exchange debt for equity. The team running Kimmeridge Energy would not have exchanged debt for equity unless they saw significant share price upside.
CPE closed today at $29.54, which is less than 2X my 2021 operating cash flow forecast of $17.48/share. If WTI settles in at $70/bbl in 2022, CPE should generate over $1.3 Billion of cash flow from operations next year (over $21/share). A reasonable 12-month price target is $80.
Since Callon announced Q2 results four energy sector analysts have published fresh reports on CPE with price targets of $54, $64, $37 and $38. The last three are dated after the Primexx Acquisition was announced. Whenever a significant acquisition is announced about half of the Wall Street Gang will slash their price targets choosing to wait and see what the first full quarter of actual results after the deal closes to adjust their valuations.
The updated profile will be posted to the EPG website this afternoon.
CPE closed today at $29.54, which is less than 2X my 2021 operating cash flow forecast of $17.48/share. If WTI settles in at $70/bbl in 2022, CPE should generate over $1.3 Billion of cash flow from operations next year (over $21/share). A reasonable 12-month price target is $80.
Since Callon announced Q2 results four energy sector analysts have published fresh reports on CPE with price targets of $54, $64, $37 and $38. The last three are dated after the Primexx Acquisition was announced. Whenever a significant acquisition is announced about half of the Wall Street Gang will slash their price targets choosing to wait and see what the first full quarter of actual results after the deal closes to adjust their valuations.
The updated profile will be posted to the EPG website this afternoon.