Callon Petroleum (CPE) Price Target Increase - Oct 2

[dan_s]

Note this morning from Neal Dingmann at Truist Financial

"Updating Estimates and Increasing Price Target to $50 from $48: We have modestly adjusted our estimates to account for lower than previously expected 2024 costs along with a notable ramp in 2024 activity though the later could be subject to change depending on various factors next year. We increase our price target to $50 from $48 with our new price target derived from two equally weighted methodologies with the first being our ’24 EV/EBITDAX multiple of 4.0x (4.0x prior and 3.7x peer group average) applied to our 2024E EBITDAX estimate of $1,572MM ($1,556MM prior and $1,470MM consensus) and the second being a FCF/EV Yield assumption of 13.0%."

Read more: https://truist.bluematrix.com/docs/html/5acf9e1d-ceaf-43b7-87c0-d10a99f4be1a.html

On September 18th Nitin Kumar at Mizuho Securities raised his price target for CPE by $4 to $63.

Neal Dingmann and Nitim Kumar are both rated as 5-Star energy sector analysts by TipRanks.

[dan_s]

Callon only had 62 million shares of common stock outstanding at 6/30/2023 that increased to ~68.4 million with new shares they issued to acquire the Percussion Petroleum asset package in July. An aggressive stock buyback could significantly increase Callon's per share results.

2023 Adjusted Net Income should be close to my forecast of $12.43 EPS and $18.48 operating cash flow per share.
Free cash flow should be over $125 million per quarter starting in Q4 2023.

[Cliff_N]

Dan, investor's relations told me that CPE started buy backs in July but are not reporting how many shares they are buying. They are supposed to use 50% of the cash flow in the effort.

[dan_s]

Callon also produces a lot of NGLs (22,474 bpd in Q2). In Q2 their realized NGL price was $19.87/bbl, compared to $34.48/bbl in 2022.
Rising NGL prices could be a significant revenue boost in 2024.