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Callon Petroleum Strengthens Balance Sheet, Boosts Liquidity

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Callon Petroleum Company (CPE - Free Report) recently announced several transactions to boost its liquidity position and strengthen the balance sheet. It has also agreed to divest essentially all non-operated assets.

Callon Petroleum made an overriding royalty interest transaction with Kimmeridge Energy, a private equity firm. The transaction generated proceedings of $140 million. Moreover, the company sold $300 million of principal value second lien secured notes to the energy-focused equity firm. Proceeds from these transactions will likely decrease the upstream company's borrowing on a credit facility by almost 33.3%.

It reaffirmed its borrowing base at $1.7 billion. Considering the adjustments, the base was decreased to $1.6 billion. The increased short-term liquidity was well ahead of debt maturities. Strengthening of the balance sheet was an important move, given the negative impact of low oil and natural gas prices in the upstream energy market.

At second quarter-end, 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 total debt to capitalization of 64%. In fact, its debt to capitalization was significantly higher than 37.3% of the composite stocks belonging to the industry.

For $30 million of gross cash proceeds, the company intends to divest non-operated assets. The transaction is expected to close in early November. Production from the assets is estimated at 1,600 barrels of oil equivalent per day (Boe/d), of which 55% is expected to be crude oil. The move will further boost its liquidity.

Price Performance

The stock has gained 1.5% in the past six months compared with 17.8% rise of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Callon Petroleum has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Equinor ASA (EQNR - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Matador Resources Company (MTDR - Free Report) . While Equinor sports a Zacks Rank #1 (Strong Buy), Pioneer Natural and Matador Resources hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinor’s bottom line for 2021 is expected to skyrocket 118.2% year over year.

Pioneer Natural’s bottom line for 2021 is expected to surge 191.3% year over year.

Matador Resources’ sales for 2021 are expected to rise 12.2% year over year.

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