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Callon Petroleum Company’s shares have tumbled 20.3% since Aug 3, when it announced strong quarterly results. The primary reason behind the drastic fall is the acquisition of Primexx Energy assets. While the move can boost the upstream company’s Delaware Basin footprint, investors are worried that it is paying too much premium through the $788-million cash-and-stock bid.
Callon reported second-quarter 2021 adjusted earnings of $1.49 per share, beating the Zacks Consensus Estimate of $1.42. Further, the bottom line significantly rose from earnings of 5 cents per share a year ago.
Operating revenues of $440.4 million beat the Zacks Consensus Estimate of $340 million. Also, the top line increased from the year-ago quarter’s $157.2 million.
The strong quarterly results can be attributed to increased commodity price realizations and decreased operating expenses.
Callon Petroleum Company Price, Consensus and EPS Surprise
For the quarter, net production volumes averaged 88,981 Boe/d, significantly down from the year-ago period’s 108,664 Boe/d. Production volumes decreased in both Permian Basin and Eagle Ford. Of the total second-quarter production, 63% was oil.
Oil production for the quarter was 5,102 thousand barrels (MBbls), lower than the year-ago level of 6,396 MBbls. Natural gas production declined to 8,883 million cubic feet (MMcf) from 11,009 MMcf in second-quarter 2020. Also, natural gas liquids (NGLs) production for the quarter under review was recorded at 1,515 MBbls, down from the year-ago figure of 1,657 MBbls.
Price Realizations (Without the Impact of Cash-Settled Derivatives)
The average realized price per barrel of oil equivalent was $48.68. The figure increased from the year-ago quarter’s $15.90 a barrel. Average realized price for oil was $65.36 per barrel compared with $20.41 a year ago. Meanwhile, average realized price for natural gas came in at $2.71 per thousand cubic feet, up from $1.11 in the prior-year quarter. Average realized price per barrel for NGLs was $24.17, higher than the year-ago level of $8.74.
Total Expenses
Total operating expenses of $234.3 million declined from the year-ago level of $1,518.9 million. The year-ago figure includes an impairment charge of $1,276.5 million.
Total lease operating costs declined to $46.5 million from the year-ago level of $50.8 million. Yet, per unit lease operating expenses increased to $5.74 per Boe for the reported quarter from $5.14 a year ago.
Capital Expenditure & Balance Sheet
Capital expenditure for the reported quarter was $149.7 million. It generated adjusted free cash flow of $6.9 million, down from $18 million a year ago.
As of Jun 30, 2021, the company’s total cash and cash equivalents amounted to $3.8 million, significantly down from $24.4 million at first quarter-end. Long-term debt totaled $2,865.2 million, down from $2,937.2 million in the previous quarter. It had a total debt to capitalization of 79.1%.
Guidance
For the third quarter, it expects production within 95.5-97.5 MBoe/d, of which 64% will likely be crude oil. Operational capital spending will likely be in the range of $120-$130 million.
Earlier, Callon reduced its 2021 production guidance to the range of 89-91 MBoe/d due to Delaware assets divestment. The company’s total operational capital expenditure view for this year was expected at $430 million. Also, the upstream firm previously anticipated gross operated completed wells for this year in the band of 90-100. However, the acquisition of Primexx Energy assets might change some of the full-year expectations. The acquiree’s second-quarter net production was 18,000 barrels of oil equivalent per day (Boe/d). Investors are worried that the deal can put further pressure on Callon Petroleum’s already debt-laden balance sheet. The deal is expected to close in the beginning of the fourth quarter.
The Zacks Consensus Estimate for Range Resources’ earnings for 2021 is pegged at $1.53 per share, indicating a massive improvement from the year-ago loss of 9 cents.
Hess’ profits for 2021 are expected to jump 177.1% year over year.
Summit Midstream’s bottom line for the third quarter has witnessed two upward estimate revisions and no downward movement in the past 30 days.
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Why Callon (CPE) Declines 20.3% Despite Q2 Earnings Beat
Callon Petroleum Company’s shares have tumbled 20.3% since Aug 3, when it announced strong quarterly results. The primary reason behind the drastic fall is the acquisition of Primexx Energy assets. While the move can boost the upstream company’s Delaware Basin footprint, investors are worried that it is paying too much premium through the $788-million cash-and-stock bid.
Callon reported second-quarter 2021 adjusted earnings of $1.49 per share, beating the Zacks Consensus Estimate of $1.42. Further, the bottom line significantly rose from earnings of 5 cents per share a year ago.
Operating revenues of $440.4 million beat the Zacks Consensus Estimate of $340 million. Also, the top line increased from the year-ago quarter’s $157.2 million.
The strong quarterly results can be attributed to increased commodity price realizations and decreased operating expenses.
Callon Petroleum Company Price, Consensus and EPS Surprise
Callon Petroleum Company price-consensus-eps-surprise-chart | Callon Petroleum Company Quote
Production
For the quarter, net production volumes averaged 88,981 Boe/d, significantly down from the year-ago period’s 108,664 Boe/d. Production volumes decreased in both Permian Basin and Eagle Ford. Of the total second-quarter production, 63% was oil.
Oil production for the quarter was 5,102 thousand barrels (MBbls), lower than the year-ago level of 6,396 MBbls. Natural gas production declined to 8,883 million cubic feet (MMcf) from 11,009 MMcf in second-quarter 2020. Also, natural gas liquids (NGLs) production for the quarter under review was recorded at 1,515 MBbls, down from the year-ago figure of 1,657 MBbls.
Price Realizations (Without the Impact of Cash-Settled Derivatives)
The average realized price per barrel of oil equivalent was $48.68. The figure increased from the year-ago quarter’s $15.90 a barrel. Average realized price for oil was $65.36 per barrel compared with $20.41 a year ago. Meanwhile, average realized price for natural gas came in at $2.71 per thousand cubic feet, up from $1.11 in the prior-year quarter. Average realized price per barrel for NGLs was $24.17, higher than the year-ago level of $8.74.
Total Expenses
Total operating expenses of $234.3 million declined from the year-ago level of $1,518.9 million. The year-ago figure includes an impairment charge of $1,276.5 million.
Total lease operating costs declined to $46.5 million from the year-ago level of $50.8 million. Yet, per unit lease operating expenses increased to $5.74 per Boe for the reported quarter from $5.14 a year ago.
Capital Expenditure & Balance Sheet
Capital expenditure for the reported quarter was $149.7 million. It generated adjusted free cash flow of $6.9 million, down from $18 million a year ago.
As of Jun 30, 2021, the company’s total cash and cash equivalents amounted to $3.8 million, significantly down from $24.4 million at first quarter-end. Long-term debt totaled $2,865.2 million, down from $2,937.2 million in the previous quarter. It had a total debt to capitalization of 79.1%.
Guidance
For the third quarter, it expects production within 95.5-97.5 MBoe/d, of which 64% will likely be crude oil. Operational capital spending will likely be in the range of $120-$130 million.
Earlier, Callon reduced its 2021 production guidance to the range of 89-91 MBoe/d due to Delaware assets divestment. The company’s total operational capital expenditure view for this year was expected at $430 million. Also, the upstream firm previously anticipated gross operated completed wells for this year in the band of 90-100. However, the acquisition of Primexx Energy assets might change some of the full-year expectations. The acquiree’s second-quarter net production was 18,000 barrels of oil equivalent per day (Boe/d). Investors are worried that the deal can put further pressure on Callon Petroleum’s already debt-laden balance sheet. The deal is expected to close in the beginning of the fourth quarter.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the energy space include Range Resources Corporation (RRC - Free Report) , Hess Corporation (HES - Free Report) and Summit Midstream Partners, LP (SMLP - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Range Resources’ earnings for 2021 is pegged at $1.53 per share, indicating a massive improvement from the year-ago loss of 9 cents.
Hess’ profits for 2021 are expected to jump 177.1% year over year.
Summit Midstream’s bottom line for the third quarter has witnessed two upward estimate revisions and no downward movement in the past 30 days.