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Here's Why Callon (CPE) is an Attractive Investment Bet Now

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Callon Petroleum Company (CPE - Free Report) has witnessed upward earnings estimate revisions for 2021 and 2022 in the past 30 days. Also, this independent oil and natural gas company’s stock price has surged 198.3% year to date versus the industry’s rise of 55.9%.



Factors Favoring the Stock

The price of West Texas Intermediate crude, which is trading above $66 per barrel (at pre-pandemic levels), has improved significantly from the negative territory touched in April 2020. The momentum is likely to continue as the coronavirus vaccine rollout will likely help the economy recover strongly this year, thereby, aiding fuel demand.

The recent rally in oil price has mostly been supported by OPEC+ (OPEC and its non-OPEC partners) since the cartel and its allies extend production cut in April. Under the agreement reached on Mar 4, following a meeting through videoconferencing between OPEC led by Saudi Arabia and Russia-led non-OPEC producers, it has been decided by the majority of OPEC+ members to keep their output unchanged.

Overall, the massive improvement in the oil price is a boon for oil explorers and producers. Thus, Callon Petroleum, involved in operating unconventional resources in the prolific resources like Permian Basin and Eagle Ford shale play, is well-placed to capitalize on the favorable pricing scenario.

The company, currently carrying a Zacks Rank #2 (Buy), added that if oil price declines to $50 per barrel, it will be able to generate adjusted free cashflow of roughly $150 million.  Moreover, to lower the debt load, it has set a target for asset monetization of roughly $125-$225 million this year.

Other Stocks to Consider

Some other top-ranked players in the energy space are EOG Resources, Inc. (EOG - Free Report) , Pioneer Natural Resources Company (PXD - Free Report) and Diamondback Energy, Inc. (FANG - Free Report) . While EOG Resources and Pioneer Natural currently carry a Zacks Rank #2, Diamondback sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources is likely to see earnings growth of 206% in 2021.

Pioneer Natural has seen upward estimate revisions for 2021 earnings in the past 30 days.

Diamondback is likely to see earnings growth of 55% in 2021.

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