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Callon (CPE) Rallies 11.1% YTD: More Room for Upside Left?
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Callon Petroleum Company’s shares have jumped 11.1% year to date (YTD) compared with 8.3% growth of the composite stocks belonging to the industry. The Zacks Consensus Estimates for Callon’s earnings per share for 2021 and 2022 signifies year-over-year growth of 217.5% and 51.3%, respectively.
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Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
The price of West Texas Intermediate crude is trading at more than $77 per barrel, marking an improvement of more than 51% over the past year. With coronavirus vaccines being rolled out on a massive scale and the announcement that booster doses and antiviral pills are effective against Omicron, the economy will possibly overcome the recent spike in coronavirus cases. This is making the fuel demand outlook bright.
The latest decision by OPEC+ to continue to pump more oil further reassured that the effect that Omicron could have on fuel demand would possibly be mild. OPEC+ has decided to collectively increase output by another 400,000 barrels a day in February. The decision of OPEC+ has induced fresh momentum to the crude price rally.
The oil price positive trajectory is definitely a boon for Callon’s upstream operations. This is because CPE has a strong presence in Permian, the most prolific basin in the United States. Last year, Callon acquired assets in the Delaware Basin — a sub-basin of broader Permian — from Primexx, thereby securing additional cash flows.
Callon is also committed to get rid of non-core assets. So far this year, Callon has estimated gross proceeds of $210 million from the divestment of assets that are unlikely to align with the long-term goal of cash flow generation. Since the third quarter of 2020, CPE has generated more than $250 million in organic adjusted free cash flows.
CPE is also focusing on reducing the debt load. Callon boasts of lowering $690 million of long-term debt load since second-quarter 2020.
On the environmental, social and governance (ESG) front, Callon has been undertaking new initiatives to reduce emissions. CPE’s 2020 achievements on the ESG front include reducing greenhouse gas emissions by 28%. The achievements also include cutting methane intensity by 25%. Callon is also investing in the electrification program.
Numerous factors are aiding the stock price surge of Callon, which is currently carrying a Zacks Rank #3 (Hold), creating more room for upside. One factor that could offset the positives to some extent is the fact that CPE has significantly more debt exposure than the composite stocks belonging to the industry.
Being a prominent retailer of gasoline and convenience merchandise, Murphy USA is well positioned to gain from the improving gasoline demand in the coming months. Having a network of retail gasoline and convenience stores in 27 states, Murphy USA is able to serve an estimated 2 million customers every day.
Over the past 30 days, Murphy USA has witnessed upward earnings estimate revisions for 2021 and 2022.
Sunoco generates stable cash flows since it is a leading independent fuel distributor in the United States. With a growing energy infrastructure platform, Sunoco secures roughly 2,500 commercial customers.
Over the past 60 days, Sunoco has witnessed upward earnings estimate revisions for 2021 and 2022. Overall, with the demand for traditional motor fuels expected to remain in place, Sunoco is well placed to continue generating stable cash flows.
Being an operator of midstream energy infrastructure and logistics assets, MPLX generates stable cash flows and has lower exposure to commodity price volatility. MPLX also generates cash flows from the fuels distribution business.
Over the past 60 days, MPLX has witnessed upward earnings estimate revisions for 2021 and 2022.
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Callon (CPE) Rallies 11.1% YTD: More Room for Upside Left?
Callon Petroleum Company’s shares have jumped 11.1% year to date (YTD) compared with 8.3% growth of the composite stocks belonging to the industry. The Zacks Consensus Estimates for Callon’s earnings per share for 2021 and 2022 signifies year-over-year growth of 217.5% and 51.3%, respectively.
Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
The price of West Texas Intermediate crude is trading at more than $77 per barrel, marking an improvement of more than 51% over the past year. With coronavirus vaccines being rolled out on a massive scale and the announcement that booster doses and antiviral pills are effective against Omicron, the economy will possibly overcome the recent spike in coronavirus cases. This is making the fuel demand outlook bright.
The latest decision by OPEC+ to continue to pump more oil further reassured that the effect that Omicron could have on fuel demand would possibly be mild. OPEC+ has decided to collectively increase output by another 400,000 barrels a day in February. The decision of OPEC+ has induced fresh momentum to the crude price rally.
The oil price positive trajectory is definitely a boon for Callon’s upstream operations. This is because CPE has a strong presence in Permian, the most prolific basin in the United States. Last year, Callon acquired assets in the Delaware Basin — a sub-basin of broader Permian — from Primexx, thereby securing additional cash flows.
Callon is also committed to get rid of non-core assets. So far this year, Callon has estimated gross proceeds of $210 million from the divestment of assets that are unlikely to align with the long-term goal of cash flow generation. Since the third quarter of 2020, CPE has generated more than $250 million in organic adjusted free cash flows.
CPE is also focusing on reducing the debt load. Callon boasts of lowering $690 million of long-term debt load since second-quarter 2020.
On the environmental, social and governance (ESG) front, Callon has been undertaking new initiatives to reduce emissions. CPE’s 2020 achievements on the ESG front include reducing greenhouse gas emissions by 28%. The achievements also include cutting methane intensity by 25%. Callon is also investing in the electrification program.
Numerous factors are aiding the stock price surge of Callon, which is currently carrying a Zacks Rank #3 (Hold), creating more room for upside. One factor that could offset the positives to some extent is the fact that CPE has significantly more debt exposure than the composite stocks belonging to the industry.
Stocks to Consider
Some better-ranked players in the energy space include Murphy USA Inc. (MUSA - Free Report) , Sunoco LP (SUN - Free Report) and MPLX LP (MPLX - Free Report) . While Murphy USA and Sunoco LP sport a Zacks Rank #1 (Strong Buy), MPLX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Being a prominent retailer of gasoline and convenience merchandise, Murphy USA is well positioned to gain from the improving gasoline demand in the coming months. Having a network of retail gasoline and convenience stores in 27 states, Murphy USA is able to serve an estimated 2 million customers every day.
Over the past 30 days, Murphy USA has witnessed upward earnings estimate revisions for 2021 and 2022.
Sunoco generates stable cash flows since it is a leading independent fuel distributor in the United States. With a growing energy infrastructure platform, Sunoco secures roughly 2,500 commercial customers.
Over the past 60 days, Sunoco has witnessed upward earnings estimate revisions for 2021 and 2022. Overall, with the demand for traditional motor fuels expected to remain in place, Sunoco is well placed to continue generating stable cash flows.
Being an operator of midstream energy infrastructure and logistics assets, MPLX generates stable cash flows and has lower exposure to commodity price volatility. MPLX also generates cash flows from the fuels distribution business.
Over the past 60 days, MPLX has witnessed upward earnings estimate revisions for 2021 and 2022.