Callon Petroleum Climbs 4% As 3Q Sales Surge 74%; Street Sticks To Hold

Shares of Callon Petroleum are rising 4.4% in Tuesday’s pre-market trading after the natural gas company saw 3Q revenues jump 73.6% to $269.7 million year-on-year, exceeding the Street consensus of $248.9 million. The crude petroleum extraction company’s third-quarter earnings of $0.64 per share crushed analysts’ estimates of $0.09. EPS declined by 66.8%.

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Callon (CPE) delivered higher-than-expected average production of approximately 102.0 Mboe [million barrels of oil equivalent]/day in 3Q.

Callon’s CEO Joe Gatto said that “our focus on cost control and operational efficiency through scaled development is pushing us towards even lower cost thresholds that should generate improved cash flow and lower break-even pricing over time.”

For 2020, the company expects total production in the range of 100.0 – 101.0 Mboe/day. As for 2021, the company lowered the guidance for average daily production in the range of 90.0 – 92.0 Mboe/day from its August 2021 forecast of 90.0 – 95.0 Mboe/day.

The lower guidance reflected “the combined effect of the recent ORRI [overriding royalty interest] transaction and non-operated properties sale, offset partly by improved well performance and operational efficiency gains,” the company said. (See CPE stock analysis on TipRanks).

On Oct. 2, RBC Capital analyst Brad Heffern lowered the stock’s price target to $18 (230.9% upside potential) from $30. However, Heffern maintained a Buy rating, as he believes that the asset monetization measures have “effectively tripled” its available liquidity. The analyst added that the assets sold received a “reasonable price.”

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 3 Holds, 2 Buys and 3 Sells. The average price target of $7.88 implies upside potential of about 45% to current levels. Shares have declined by about 89% year-to-date.