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Here's Why You Should Hold on to Callon Petroleum Stock Now
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Callon Petroleum Company has witnessed upward estimate revisions for 2020 earnings in the past 60 days. In fact, four out of eight analysts have revised their estimates upward. However, weakness in commodity prices has been casting a pall over the upstream energy firm’s near-term outlook.
Callon Petroleum Company Price, Consensus and EPS Surprise
The company, carrying a Zacks Rank #3 (Hold), entered Permian, the most prolific basin in the United States, in 2009. It had spent $16 million to acquire 8,800 net acres. Over time, with the execution of acquisitions and rationalization strategies, the company boosted its footprint in the Midland and Delaware Basins (sub-basins of the larger Permian) to roughly 75,000 net acres.
In 2019, with the completion of merger with Carrizo Oil & Gas firm, Callon Petroleum again expanded its footprint to roughly 200,000 net acres in the Permian Basin and Eagle Ford shale plays. Importantly, the merger has boosted core Delaware basin footprint two times with significant inventory of low-risk premium oil drilling wells in the Permian that could provide production for more than 17 years.
The company’s strong portfolio of assets in the shale plays is likely to boost production in 2020. In, fact, for 2020, Callon Petroleum’s total production is expected in the range of 99-101 MBoe/D, suggesting an improvement from 2019 production of 41.3 MBoe/D.
Risks
Although the company is expecting its total production to increase, a weak crude pricing scenario owing to the coronavirus pandemic has been denting its upstream business. Notably, although crude price has improved in the past few months, the commodity has witnessed a steep decline in price since early 2020 when crude was trading above $60 per barrel.
Moreover, the company is unlikely to combat the energy market downturn by leaning on its debt-laden balance sheet. As of Jun 30, 2020, the company’s total cash and cash equivalents amounted to $7.5 million, down from the first quarter’s $14.8 million. Moreover, long-term debt totaled $3.4 billion, up from $3.2 billion in the first quarter, suggesting a debt to capitalization of 64%.
In fact, the company’s debt-to-capitalization ratio is significantly higher than 45.6 of the composite stocks belonging to the industry. Also, given the unfavorable business scenario, the company’s ability to pay off a portion of its debt load in the near term is in question.
Concho is likely to see earnings growth of 21.6% in 2020.
Noble Energy has witnessed upward estimate revisions for its 2020 bottom line in the past 30 days.
EOG Resources’ 2020 bottom-line estimates have risen more than 200% over the past 30 days.
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Here's Why You Should Hold on to Callon Petroleum Stock Now
Callon Petroleum Company has witnessed upward estimate revisions for 2020 earnings in the past 60 days. In fact, four out of eight analysts have revised their estimates upward. However, weakness in commodity prices has been casting a pall over the upstream energy firm’s near-term outlook.
Callon Petroleum Company Price, Consensus and EPS Surprise
Callon Petroleum Company price-consensus-eps-surprise-chart | Callon Petroleum Company Quote
Factors in Favor
The company, carrying a Zacks Rank #3 (Hold), entered Permian, the most prolific basin in the United States, in 2009. It had spent $16 million to acquire 8,800 net acres. Over time, with the execution of acquisitions and rationalization strategies, the company boosted its footprint in the Midland and Delaware Basins (sub-basins of the larger Permian) to roughly 75,000 net acres.
In 2019, with the completion of merger with Carrizo Oil & Gas firm, Callon Petroleum again expanded its footprint to roughly 200,000 net acres in the Permian Basin and Eagle Ford shale plays. Importantly, the merger has boosted core Delaware basin footprint two times with significant inventory of low-risk premium oil drilling wells in the Permian that could provide production for more than 17 years.
The company’s strong portfolio of assets in the shale plays is likely to boost production in 2020. In, fact, for 2020, Callon Petroleum’s total production is expected in the range of 99-101 MBoe/D, suggesting an improvement from 2019 production of 41.3 MBoe/D.
Risks
Although the company is expecting its total production to increase, a weak crude pricing scenario owing to the coronavirus pandemic has been denting its upstream business. Notably, although crude price has improved in the past few months, the commodity has witnessed a steep decline in price since early 2020 when crude was trading above $60 per barrel.
Moreover, the company is unlikely to combat the energy market downturn by leaning on its debt-laden balance sheet. As of Jun 30, 2020, the company’s total cash and cash equivalents amounted to $7.5 million, down from the first quarter’s $14.8 million. Moreover, long-term debt totaled $3.4 billion, up from $3.2 billion in the first quarter, suggesting a debt to capitalization of 64%.
In fact, the company’s debt-to-capitalization ratio is significantly higher than 45.6 of the composite stocks belonging to the industry. Also, given the unfavorable business scenario, the company’s ability to pay off a portion of its debt load in the near term is in question.
Stocks to Consider
Meanwhile, a few better-ranked players in the energy space include Concho Resources Inc. , Noble Energy Inc. and EOG Resources, Inc. (EOG - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Concho is likely to see earnings growth of 21.6% in 2020.
Noble Energy has witnessed upward estimate revisions for its 2020 bottom line in the past 30 days.
EOG Resources’ 2020 bottom-line estimates have risen more than 200% over the past 30 days.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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