Callon (CPE) Stock Dips 7% Since Q2 Earnings Miss Estimates

Callon Petroleum Company’s CPE shares have declined almost 7% since it reported lower-than-expected earnings for the second quarter of 2022.

The downward stock movement can be attributed to a huge debt burden and second-quarter earnings missing the Zacks Consensus Estimate.

Q2 Results

Callon reported second-quarter adjusted earnings of $3.68 per share, missing the Zacks Consensus Estimate of $4. However, the bottom line surged from the earnings of $1.49 per share reported a year ago.

Operating revenues of $913.6 million beat the Zacks Consensus Estimate of $687 million. The top line increased from the year-ago quarter’s $440.4 million.

Lower-than-expected quarterly earnings were driven by higher lease operating expenses. The negatives were partially offset by higher production and commodity price realizations.

Callon Petroleum Company Price, Consensus and EPS Surprise

Callon Petroleum Company Price, Consensus and EPS Surprise

Callon Petroleum Company price-consensus-eps-surprise-chart | Callon Petroleum Company Quote

Production

In the second quarter, CPE’s net production volumes averaged 100,685 barrels of oil equivalent per day (Boe/d), up from the year-ago period’s 88,981 Boe/d. Production volumes increased in the Permian Basin, while the same in Eagle Ford declined from the year-ago quarter. Of the total second-quarter production, 61% was oil.

Callon’s oil production for the quarter was 5,589 thousand barrels (MBbls), up from the year-ago level of 5,102 MBbls. Natural gas production increased to 10,312 million cubic feet (MMcf) from 8,883 MMcf in the second quarter of 2021. Also, natural gas liquids (NGLs) production for the quarter under review was recorded at 1,854 MBbls, up from the year-ago figure of 1,515 MBbls.

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

The average realized price per barrel of oil equivalent was $82.98. The figure increased from the year-ago quarter’s $48.68 a barrel. The average realized price for oil was $110.90 per barrel compared with $65.36 a year ago. Meanwhile, the average realized price for natural gas was $6.29 per thousand cubic feet, up from $2.71 in the prior-year quarter. The average realized price per barrel for NGLs was $40.74, higher than the year-ago level of $24.17.

Total Expenses

Callon’s total operating expenses of $416.8 million increased from the year-ago level of $231.9 million.

Total lease operating costs increased to $72.9 million from the year-ago level of $46.5 million. Also, the company’s per-unit lease operating expenses increased to $7.96 per barrel of oil equivalent (Boe) for the reported quarter from $5.74 a year ago.

Capital Expenditure & Balance Sheet

The capital expenditure for the reported quarter was $212.5 million. Callon generated adjusted free cash flow of $125.6 million, up from $6.9 million a year ago.

As of Jun 30, 2022, the company’s total cash and cash equivalents amounted to $6.1 million, increasing from $4.2 million at the first-quarter end. The long-term debt totaled $2,516.3 million, down from $2,623.3 million in the previous quarter. It had a total debt to capitalization of 52.7%.

Outlook

For 2022, CPE revised its total production guidance upward to the 102-105 thousand barrels of oil equivalent per day (MBoe/d) range from the prior stated 101-105 MBoe/d range. Of the total, 63% will likely be crude oil. The company stated its operational capital budget for the year in the band of $790-$810 million.

For the third quarter, the company expects to produce 102 to 105 MBoe/d, of which 63% is likely to be oil. Callon projects the operational capital spending in the band of $245-$255 million on an accrual basis.

Moreover, this Zacks Rank #3 (Hold) company expects to generate adjusted free cash flow of more than $450 million in the second half of this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Releases

The higher crude price aided the exploration and production business, as revealed in the second-quarter 2022 earnings report of three upstream energy players.

APA Corporation APA reported second-quarter 2022 adjusted earnings of $2.37 per share, meeting the Zacks Consensus Estimate.  Strong quarterly results were supported by the higher realization of commodity prices.

As promised, APA is using the excess cash from a supportive environment to reward investors with dividends and buybacks. The company bought back 7 million shares at $41.59 apiece during the second quarter. Since APA started the program last October, 52.3 million shares have been repurchased in total up to Jul 31 at an average price of $31.19. It also shelled out $43 million in dividend payouts.

Marathon Oil Corporation MRO reported a second-quarter 2022 adjusted net income of $1.32 per share, beating the Zacks Consensus Estimate of $1.23. MRO’s bottom line was favorably impacted by stronger liquid realizations and solid domestic production.

Marathon Oil is using the excess cash from a supportive environment to reward investors with dividends and buybacks. As part of that, MRO executed $2.3 billion of share repurchases since October and hiked its dividend five times in the past six quarters.

Pioneer Natural Resources Company PXD reported second-quarter 2022 earnings of $9.36 per share (excluding one-time items), beating the Zacks Consensus Estimate of $8.81. Strong quarterly earnings were driven by higher oil-equivalent production volumes and commodity price realizations.

Pioneer Natural announced a dividend payout of $8.57 per share of the common stock, which includes a variable dividend of $7.47 per share and a base dividend of $1.10. This suggests a 16.1% increase from the prior dividend of $7.38 per share.

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