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Why Is Callon (CPE) Up 12.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Callon Petroleum (CPE - Free Report) . Shares have added about 12.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Callon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Callon Q1 Earnings & Revenues Beat Estimates

Callon reported first-quarter adjusted earnings of $3.43 per share, beating the Zacks Consensus Estimate of $3.28. The bottom line significantly rose from earnings of $1.49 per share a year ago.

Operating revenues of $777.2 million beat the Zacks Consensus Estimate of $578 million. The top line also increased from the year-ago quarter’s $359.9 million.

The strong quarterly results were backed by increased production volumes and higher commodity price realizations.

Production

In the first quarter, Callon’s net production volumes averaged 102,655 barrels of oil equivalent per day (Boe/d), up from the year-ago period’s 80,957 Boe/d. Production volumes increased in the Permian Basin, while the same in Eagle Ford declined from the year-ago quarter. Of the total first-quarter production, 63% was oil.

Callon’s oil production for the quarter was 5,846 thousand barrels (MBbls), up from the year-ago level of 4,681 MBbls. Natural gas production increased to 10,115 million cubic feet (MMcf) from 7,835 MMcf in first-quarter 2021. Also, natural gas liquids (NGLs) production for the quarter under review was recorded at 1,707 MBbls, up from the year-ago figure of 1,299 MBbls.

Price Realizations (Without Impacts of Cash-Settled Derivatives)

The average realized price per barrel of oil equivalent was $71.97. The figure increased from the year-ago quarter’s $44.01 a barrel. The average realized price for oil was $94.64 per barrel compared with $57.05 a year ago. Meanwhile, the average realized price for natural gas was $4.35 per thousand cubic feet, up from $3.09 in the prior-year quarter. The average realized price per barrel for NGLs was $39.61, higher than the year-ago level of $22.60.

Total Expenses

Callon’s total operating expenses of $357.9 million increased from the year-ago level of $205.6 million.

Total lease operating costs increased to $67.3 million from the year-ago level of $40.5 million. Also, the company’s per-unit lease operating expenses increased to $7.29 per Boe for the reported quarter from $5.55 a year ago.

Capital Expenditure & Balance Sheet

Capital expenditure for the reported quarter was $201.5 million. Callon generated an adjusted free cash flow of $183.3 million, up from $24.2 million a year ago.

As of Mar 31, 2022, the company’s total cash and cash equivalents amounted to $4.2 million, declining from $9.9 million at the fourth-quarter end. Long-term debt totaled $2,623.3 million, down from $2,694.1 million in the previous quarter. It had a total debt to capitalization of 57.8%.

Outlook

For 2022, Callon reiterated its total production guidance at 101-105 thousand barrels of oil equivalent per day (MBoe/d). Of the total, 64% will likely be crude oil.

The company projects the operational capital budget for the year at $725 million, of which 85% will be allocated to the Permian Basin.

For the second quarter, the company expects to produce 100-102 MBoe/d, of which 64% will likely be oil. Callon projects an operational capital spending of $225-$240 million on an accrual basis. Moreover, it expects to generate an adjusted free cash flow of more than $150 million in the second quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 9.04% due to these changes.

VGM Scores

Currently, Callon has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Callon has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Callon is part of the Zacks Oil and Gas - Exploration and Production - United States industry. Over the past month, W&T Offshore (WTI - Free Report) , a stock from the same industry, has gained 26.9%. The company reported its results for the quarter ended March 2022 more than a month ago.

W&T reported revenues of $191 million in the last reported quarter, representing a year-over-year change of +52%. EPS of $0.21 for the same period compares with $0.11 a year ago.

For the current quarter, W&T is expected to post earnings of $0.33 per share, indicating a change of +1550% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for W&T. Also, the stock has a VGM Score of A.


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