A month has gone by since the last earnings report for Callon Petroleum (CPE). Shares have lost about 0.9% 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 catalysts.
Callon Petroleum's Q4 Earnings Lags Estimate, Increases Y/Y
Callon Petroleum Company posted fourth-quarter 2018 adjusted earnings of 17 cents per share, missing the Zacks Consensus Estimate by 5 cents. The weaker-than-expected earnings can be attributed to increased expenses. However, the bottom line improved from the year-ago figure of 15 cents.
Operating revenues of $161.9 million missed the Zacks Consensus Estimate of $164.5 million due to lower commodity price realizations. However, the figure surged from $118.2 million in the year-ago quarter, on the back of higher production.
Production Rises
In the quarter, net production volumes averaged almost 41.1 thousand barrels of oil equivalent per day (MBoe/d), reflecting an increase of 55% from the year-ago period. Of the total production in the fourth quarter, 81% 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 $42.83. The figure was lower than the year-ago quarter’s $48.47 per barrel. Average realized price for oil was $48.89 per barrel compared with $53.79 in the year-ago quarter. Moreover, average realized price for natural gas came in at $2.72 per thousand cubic feet, lower than $4.67 in the prior-year quarter.
Expenses Increase
Total operating expenses in the quarter amounted to $103.6 million, higher than the year-ago level of $64.2 million. General and administrative expenses marginally increased to $8.5 million from $8.2 million in the fourth quarter of 2017. Depreciation, depletion and amortization expenses jumped to $59.5 million in the quarter from $36.5 million in the year-ago period.
Moreover, lease operating costs per barrel of oil equivalent increased to $6.47 from $4.84 in the year-ago quarter.
Capital Expenditure & Balance Sheet
Capital expenditure in the reported quarter was $155.8 million, higher than the year-ago quarter’s $152.6 million.
As of Dec 31, 2018, the company had total cash and cash equivalents of $16.1 million, as well as debt of $1,189.5 million, with a debt-to-capitalization ratio of 32.7%.
Guidance
For 2019, the company’s production is estimated in the range of 39.5-41.5 MBoe/d, 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.
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 an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 looks promising. Notably, Callon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Callon Petroleum Company (CPE): Free Stock Analysis Report
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