Callon Petroleum (CPE) Valuation Update - Dec 15

[dan_s]

Today and tomorrow I will be updating all of the Sweet 16 forecast/valuation models based on my updated oil & gas price deck.

Prices for Q4: $75 for WTI and $3.00 for HH ngas
Prices for 2024: $80 for WTI and $3.25 for HH ngas

My updated valuation for CPE is lowered by $4.00 to $66.00 per share, which is 3.5 X annualized operating cash flow per share.
> CPE is generating free cash flow and it has a lot of Running Room in the Permian Basin.
> FCF will be used to pay down debt until they reach their debt target (See profile)
> Q4 production is estimated at 101,500 Boepd, the mid-point of the Company's guidance.
> 2024 production is estimated at 105,000 Boepd (56.7% crude oil, 21.4% natural gas and 21.9% NGLs)

[dan_s]

Note from an EPG member in NYC: "Callon Petroleum mulling options amid takeover interest, Bloomberg says."

Heavy trading volume on CPE this morning.

[dan_s]

Market Chatter: Callon Petroleum Considering Sale After Getting Takeover Interest
11:40 AM EST, 12/15/2023 (MT Newswires) -- Callon Petroleum (CPE) is mulling options, including a sale, after getting takeover interest from rivals, Bloomberg reported Friday, quoting people familiar with the matter.

Callon, which has operations in the Permian Basin, is working with an adviser on options, the people said, Bloomberg reported.

A decision hasn't been finalized, and a deal may not materialize, Bloomberg reported.

Callon couldn't immediately be reached for comment, Bloomberg said.

Callon shares rose 2.9% in recent Friday trading, paring earlier gains.

Callon didn't immediately respond to a request for comment by MT Newswires.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)

[Fraser921]

I hope they sent the buyer your target price.

[dan_s]

Diamondback might be interested because they have plenty of liquidity and CPE's 105,000 Boepd in 2024 would be a decent step change for FANG. I'd like a tax-free stock-for-stock deal.

An all-cash offer will need to be over $40/share to get the Callon BOD to take it seriously.

Callon is free cash flow positive, and they don't have a near-term debt problem, so this should not be a fire sale.

[dan_s]

CPE's trading volume today was 4.9 X higher than normal. This indicates that the rumors are real.