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Callon (CPE) Down 23.3% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Callon Petroleum (CPE - Free Report) . Shares have lost about 23.3% in that time frame, underperforming the S&P 500.

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

Callon Petroleum Beats on Q3 Earnings and Revenues

Callon Petroleum Company posted third-quarter 2018 adjusted earnings of 21 cents per share, beating the Zacks Consensus Estimate by a penny. Moreover, the bottom line improved from the year-ago quarter’s tally of 9 cents.

Operating revenues of $161 million beat the Zacks Consensus Estimate of $145 million. Also, the figure surged from $85 million in the year-ago quarter.

Higher oil-equivalent production and increased realized oil price supported the company’s strong third-quarter results.

Production

In the quarter, net production volumes averaged almost 34.9 thousand barrels of oil equivalent per day (MBoe/d) compared with 22.5MBoe/d in the year-ago quarter. Of the total production in the third quarter, 78% was oil and the rest comprised natural gas.

Price Realizations (Without the Impact of Cash-Settled Derivatives)

The average realized price received per barrel of oil equivalent was $50.19. The figure was higher than the year-ago quarter’s tally of $40.80 per barrel. Average realized price for oil was $56.57 per barrel compared with $46.10 in the year-ago quarter. The figure beat the Zacks Consensus Estimate of $49.87. Moreover, average realized price for natural gas came in at $4.49 per thousand cubic feet (Mcf), higher than $3.88 per Mcf in the prior-year quarter. The figure beat the Zacks Consensus Estimate of $3.32.

Expenses

Total operating expenses in the quarter amounted to $88.4 million, higher than the year-ago quarter’s tally of $53.2 million. General and administrative expenses increased to $9.7 million from $7.3 million in the third quarter of 2017.

However, lease operating costs per barrel of oil equivalent increased to $5.77 from $5.08 in the year-ago quarter.

Capital Expenditure & Balance Sheet

Capital expenditure in the reported quarter was $157 million, higher than the year-ago quarter’s tally of $121 million.

As of Sep 30, 2018, the company had total cash and cash equivalents of $12.1 million as well as debt of $989.528 million with a debt-to-capitalization ratio of 30.2%.

Guidance

For 2018, the company estimates production in the range of 32-33MBoe/d, of which 77-78% is expected to be oil.

Operation capital expenditures for 2018 are expected at $560 million, of which $442 million were used in the first nine months of the year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Callon has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Callon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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