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Callon Petroleum Company recently announced that it has completed the acquisition of some assets from Primexx Energy Partners. Also, Callon has agreed to divest some non-core assets. The company provided an updated guidance for the full year and third-quarter 2021 that incorporates the acquisition as well as the divestment.
Acquisition Closed
Callon announced the deal in early August, which closed before the scheduled time in the fourth quarter. The move boosted the company’s already strong foothold in the prolific Permian Basin. The acquiree’s second-quarter net production was 18,000 barrels of oil equivalent per day (Boe/d). Callon also received related infrastructure assets in leaseholds. At the time of the deal announcement, investors were worried that it was paying too much premium through the $788-million cash-and-stock bid. Despite concerns from investors, management expects the move to increase its free cash flows.
Streamlining Assets
The company is divesting $100 million worth of non-core acreage in the Eagle Ford Shale. The assets include around 22,000 net acres in Frio and Northern LaSalle counties. Net output from the divested assets was around 1,900 Boe/d in the third quarter through August-end. The deal is expected to be completed in November. The move is expected to remove $50 million from the company’s capital spending plan. It will allow the firm to focus on more profitable resources. The deal is in line with the company’s intention of generating $125-$225 million from divesting assets. So far, it has divested more than $140 million this year.
The divestment is expected to provide its balance sheet with some breathing room. As of Jun 30, 2021, total cash and cash equivalents amounted to only $3.8 million, while long-term debt totaled $2,865.2 million.
The recovery in commodity prices has made divestments of oil and gas assets more profitable for upstream companies. Another shale player, Pioneer Natural Resources Company (PXD - Free Report) recently agreed to divest some assets in Texas to Laredo Petroleum for $230 million. Energy giant Royal Dutch Shell plc made use of the current situation to divest $9.5 billion worth of Permian assets to ConocoPhillips (COP - Free Report) .
Updated Guidance
Strong well performance in the Permian Basin is expected to have aided the company’s third-quarter production. From the previous guidance of 95.5-97.5 MBoe/d, Callon increased the range to 98.5-99.5 MBoe/d, of which 64% is likely to be oil. It expects operational capital for the September quarter at $120-$125 million. Fourth-quarter production is expected within 110-112.5 MBoe/d, of which 63% will be oil. Operational capital for the quarter will likely be within $150-$160 million.
For full-year 2021, the company expects production in the range of 94.5-95.5 Mboe/d, up from the previous guidance of 89-91 Mboe/d. Of the total output, 64% is expected to be oil. Total operational capital for the full year is now estimated at $515 million, higher than the previous guidance of $430 million.
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Callon (CPE) Closes Buyout, Streamlines Portfolio, Ups Guidance
Callon Petroleum Company recently announced that it has completed the acquisition of some assets from Primexx Energy Partners. Also, Callon has agreed to divest some non-core assets. The company provided an updated guidance for the full year and third-quarter 2021 that incorporates the acquisition as well as the divestment.
Acquisition Closed
Callon announced the deal in early August, which closed before the scheduled time in the fourth quarter. The move boosted the company’s already strong foothold in the prolific Permian Basin. The acquiree’s second-quarter net production was 18,000 barrels of oil equivalent per day (Boe/d). Callon also received related infrastructure assets in leaseholds. At the time of the deal announcement, investors were worried that it was paying too much premium through the $788-million cash-and-stock bid. Despite concerns from investors, management expects the move to increase its free cash flows.
Streamlining Assets
The company is divesting $100 million worth of non-core acreage in the Eagle Ford Shale. The assets include around 22,000 net acres in Frio and Northern LaSalle counties. Net output from the divested assets was around 1,900 Boe/d in the third quarter through August-end. The deal is expected to be completed in November. The move is expected to remove $50 million from the company’s capital spending plan. It will allow the firm to focus on more profitable resources. The deal is in line with the company’s intention of generating $125-$225 million from divesting assets. So far, it has divested more than $140 million this year.
The divestment is expected to provide its balance sheet with some breathing room. As of Jun 30, 2021, total cash and cash equivalents amounted to only $3.8 million, while long-term debt totaled $2,865.2 million.
The recovery in commodity prices has made divestments of oil and gas assets more profitable for upstream companies. Another shale player, Pioneer Natural Resources Company (PXD - Free Report) recently agreed to divest some assets in Texas to Laredo Petroleum for $230 million. Energy giant Royal Dutch Shell plc made use of the current situation to divest $9.5 billion worth of Permian assets to ConocoPhillips (COP - Free Report) .
Updated Guidance
Strong well performance in the Permian Basin is expected to have aided the company’s third-quarter production. From the previous guidance of 95.5-97.5 MBoe/d, Callon increased the range to 98.5-99.5 MBoe/d, of which 64% is likely to be oil. It expects operational capital for the September quarter at $120-$125 million. Fourth-quarter production is expected within 110-112.5 MBoe/d, of which 63% will be oil. Operational capital for the quarter will likely be within $150-$160 million.
For full-year 2021, the company expects production in the range of 94.5-95.5 Mboe/d, up from the previous guidance of 89-91 Mboe/d. Of the total output, 64% is expected to be oil. Total operational capital for the full year is now estimated at $515 million, higher than the previous guidance of $430 million.