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Callon (CPE) Down 12.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Callon Petroleum (CPE - Free Report) . Shares have lost about 12.8% 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 its most recent earnings report in order to get a better handle on the important drivers.

Callon Petroleum Beats Q1 Earnings & Revenue Estimates

Callon Petroleum Company reported first-quarter 2019 adjusted earnings of 16 cents per share, beating the Zacks Consensus Estimate by a penny. However, the bottom line declined from the year-ago figure of 20 cents.

Operating revenues of $153.1 million beat the Zacks Consensus Estimate of $146 million. Also, the figure surged from $127.4 million in the year-ago quarter.

The better-than-expected results were supported by higher production volumes, partially offset by lower commodity price realizations and increased operating expenses.

Production Surges

In the quarter, net production volumes averaged nearly 40,311 barrels of oil equivalent per day (Boe/d), reflecting a huge increase from the year-ago period’s 26,567 Boe/d. Of the total production in the first quarter, 79% was oil and the rest comprised natural gas.

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

The average realized price per barrel of oil equivalent was $42.18. The figure was significantly lower than the year-ago quarter’s $53.30 per barrel. Average realized price for oil was $49.37 per barrel compared with $62.28 in the year-ago quarter. Moreover, average realized price for natural gas came in at $2.59 per thousand cubic feet, lower than $3.75 in the prior-year quarter.

Expenses Increase

Total operating expenses in the quarter amounted to $109.8 million, higher than the year-ago level of $66.5 million. General and administrative expenses increased to $11.8 million from $8.8 million in the first quarter of 2019. Depreciation, depletion and amortization expenses jumped to $59.8 million in the quarter from $35.4 million a year ago.

Moreover, lease operating costs per barrel of oil equivalent increased to $6.63 from $5.45 in the year-ago quarter.

Capital Expenditure & Balance Sheet

Capital expenditure in the reported quarter was $155.2 million, higher than the year-ago figure of $116.8 million.

As of Mar 31, 2019, the company’s total cash and cash equivalents amounted to $10.5 million, and debt was $1,319.9 million, with a debt-to-capitalization ratio of 35.2%.

Guidance

For 2019, Callon Petroleum’s production is estimated in the range of 39.5-41.5 thousand barrels of oil equivalent per day, of which 77-78% is expected to be oil.

Operation capital expenditures for 2019 are expected in the range of $500-$525 million.

Net operated horizontal wells to be placed on production in 2019 are expected between 47 and 49, lower than the 2018 level of 54.

The guidance for operational capital expenditure is expected to remain unchanged through the year, while the same for some other metrics might change with the closing of the company’s non-core asset divestments.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Callon has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 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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