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Takeaway Deals to Aid Callon's (CPE) Rising Output, LOE Ails
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We issued an updated research report on Callon Petroleum Company on Aug 23, 2018. The exploration and production company’s operation is solely focused on the Permian Basin, which is among the country’s most prolific oil and gas plays.
However, over the past few years, Callon’s free cash flow remained negative, even though oil price recovered significantly from the 2016 lows, reflecting lack of efficiency in the company’s operations. Therefore, a cautious stance should be maintained on the stock.
Currently, Callon Petroleum has a Zacks Rank #3 (Hold).
Strong Takeaway Capacity & Oilier Volume Mix
Callon Petroleum boasts an impressive footprint (86,000 net acres) throughout the Permian Basin, which is the highest-producing shale play in the United States. The company entered the basin in 2009 with around 8,800 net acres and has been strengthening its hold in the region ever since then.
The upstream company has a significant takeaway capacity agreement in the basin, enabling it to steer clear of the current bottleneck situation, unlike most of the explorers in the region. This is because the company has already reserved Permian pipeline networks to transport roughly 90% of its produced liquid volumes to the local refineries.
At the end of 2017, Callon Petroleum had 137 million barrels of oil equivalent (MMBoe) in net proved reserves, of which 78% is oil. Moreover, 76% of the company’s second-quarter 2018 production comprised crude. Also, for the full year of 2018, it expects production in the range of 29.5-32 MBoe/d, of which 77% is expected to be oil. The ‘oilier’ nature of Callon Petroleum’s volume mix positions it to benefit from strengthening oil prices.
Increasing Operating Cost
Callon Petroleum’s total operating expenses are on the rise. Even during second-quarter 2018, the company’s total operating expenses rose more than 19% year over year to $69.7 million. In fact, lease operating expenses (LOE) per barrel (including workovers) for 2018 is expected in the $5.25-$6.25 range. The upper limit of the range lies much above the 2017’s figure of $5.46 LOE per barrel. The rising expenses will likely hamper the profit margin of the company in the coming quarters.
Price Performance
Callon Petroleum has gained 9.7% over the past year compared with 22.1% collective growth of the industry it belongs to.
McDermott’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average positive surprise being 101.7%.
Petrobras beat the Zacks Consensus Estimate in three of the past four quarters, recording an average positive earnings surprise of 10.4%.
Helix Energy’s bottom line surpassed the consensus mark in three of the last four quarters, with the average positive earnings surprise being 66.7%.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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Takeaway Deals to Aid Callon's (CPE) Rising Output, LOE Ails
We issued an updated research report on Callon Petroleum Company on Aug 23, 2018. The exploration and production company’s operation is solely focused on the Permian Basin, which is among the country’s most prolific oil and gas plays.
However, over the past few years, Callon’s free cash flow remained negative, even though oil price recovered significantly from the 2016 lows, reflecting lack of efficiency in the company’s operations. Therefore, a cautious stance should be maintained on the stock.
Currently, Callon Petroleum has a Zacks Rank #3 (Hold).
Strong Takeaway Capacity & Oilier Volume Mix
Callon Petroleum boasts an impressive footprint (86,000 net acres) throughout the Permian Basin, which is the highest-producing shale play in the United States. The company entered the basin in 2009 with around 8,800 net acres and has been strengthening its hold in the region ever since then.
The upstream company has a significant takeaway capacity agreement in the basin, enabling it to steer clear of the current bottleneck situation, unlike most of the explorers in the region. This is because the company has already reserved Permian pipeline networks to transport roughly 90% of its produced liquid volumes to the local refineries.
At the end of 2017, Callon Petroleum had 137 million barrels of oil equivalent (MMBoe) in net proved reserves, of which 78% is oil. Moreover, 76% of the company’s second-quarter 2018 production comprised crude. Also, for the full year of 2018, it expects production in the range of 29.5-32 MBoe/d, of which 77% is expected to be oil. The ‘oilier’ nature of Callon Petroleum’s volume mix positions it to benefit from strengthening oil prices.
Increasing Operating Cost
Callon Petroleum’s total operating expenses are on the rise. Even during second-quarter 2018, the company’s total operating expenses rose more than 19% year over year to $69.7 million. In fact, lease operating expenses (LOE) per barrel (including workovers) for 2018 is expected in the $5.25-$6.25 range. The upper limit of the range lies much above the 2017’s figure of $5.46 LOE per barrel. The rising expenses will likely hamper the profit margin of the company in the coming quarters.
Price Performance
Callon Petroleum has gained 9.7% over the past year compared with 22.1% collective growth of the industry it belongs to.
Stocks to Consider
Some better-ranked players in the energy space are McDermott International, Inc. , Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) and Helix Energy Solutions Group, Inc. (HLX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
McDermott’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average positive surprise being 101.7%.
Petrobras beat the Zacks Consensus Estimate in three of the past four quarters, recording an average positive earnings surprise of 10.4%.
Helix Energy’s bottom line surpassed the consensus mark in three of the last four quarters, with the average positive earnings surprise being 66.7%.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>