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Callon (CPE) Updates '18 Guidance on Ward County Acquisition

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Callon Petroleum Company (CPE - Free Report) recently closed the Ward County acquisition deal with Cimarex Energy Co. (XEC - Free Report) — to expand its footprint in the Delaware Basin — for a cash payment of around $538.6 million. Callon Petroleum updated its full-year 2018 guidance to incorporate the Delaware Basin acquisition.

Here are the details of the updated guidance:

Production: Callon Petroleum expects its full-year output in the band of 31.5-33 thousand barrels of oil equivalent per day (MBoe/d), higher than the prior guided range of 29.5-32 MBoe/d. Moreover, the estimated production is pegged much higher than 2017 actual figure of 22.9 MBoe/d. Per the company, 76% of the total output is expected to be oil.

Apart from the impact of the acquisition, Callon Petroleum’s expected surge in output can also be attributed to a strong performance from its Spur area assets. This has helped the company to increase its midpoint of the output guidance by 1,500 barrels of oil equivalent per day (Boe/d).

The company has reiterated its output target for the fourth quarter of 2018 at more than 40 MBoe/d.

Lease Operating Expense: Callon Petroleum expects its lease operating expense (LOE) in the range of $5.00-$6.00 per barrel, down from the previous guidance of $5.25-$6.25. The company lowered the guidance by 4%, keeping in mind the incremental advantage from its investments in strategic initiatives.

Wells on Production: The net operated horizontal wells placed into production for full-year 2018 is expected in the range of 47-50, up from the prior guided level of 43-46, and much higher than 2017 figure of 37.

Capital Expenditure: Following the acquisition, — which added 28,000 net surface acres — full-year capital expenditure for operational purposes has been revised upward to a new range of $530-$560 million from $500-$540 million expected earlier.

Price Performance

Callon Petroleum has gained 7.3% over the past year compared with 19.4% collective growth of the industry it belongs to.

 

 

Zacks Rank & Stocks to Consider

Currently, Callon Petroleum has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks like McDermott International, Inc. (MDR - Free Report) and Subsea 7 S.A. (SUBCY - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based McDermott is an equipment provider for energy companies. The company’s top line for 2018 is likely to improve 145% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 101.7%.

Luxembourg-based Subsea is an oilfield service providing company. In the last four reported quarters, the company delivered an average positive earnings surprise of 318.6%.

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