In a report released today, Jeff Grampp from Northland Securities maintained a Buy rating on Callon (CPE), with a price target of $10. The company’s shares closed yesterday at $5.38, close to its 52-week low of $5.31.
Grampp noted:
“We agree with the strategic rationale given CPE/CRZO’s discounted valuations for perceived sub-scale operations but the 25% CRZO premium largely eats up accretion with CPE at 4.2x vs CRZO at 4.0x 2020 EV/EBITDA. We think this deal hinges on achievement of the $850MM of identified synergies. Reiterate OP but decrease PT from $11 to $10 with increased risk during integration of CRZO’s multi-basin assets. Overview: CPE is acquiring CRZO in an all-stock transaction valuing CRZO at $3.2 billion. CRZO shareholders will receive 2.05 CPE shares for each CRZO share, implying a takeout price of $13.12 for CRZO (Based on CPE’s closing price last week), representing a 25% premium to Friday’s close. CPE shareholders will own 54% and CRZO shareholders will own 46%, of the pro forma company. The CPE leadership team will stay intact and CRZO will receive three Board seats.”
According to TipRanks.com, Grampp is currently ranked with no stars on a 0-5 star ranking scale, with an average return of -13.5% and a 23.9% success rate. Grampp covers the Basic Materials sector, focusing on stocks such as Penn Virginia Corporation, Sundance Energy Australia, and SilverBow Resources Inc.
Currently, the analyst consensus on Callon is a Strong Buy with an average price target of $10.90, which is a 102.6% upside from current levels. In a report issued on July 1, Barclays also upgraded the stock to Buy with a $9 price target.
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Based on Callon’s latest earnings release for the quarter ending March 31, the company reported a quarterly GAAP net loss of $19.54 million. In comparison, last year the company had a net profit of $50.47 million.
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Callon Petroleum Co. engages in the exploration, development, acquisition, and production of oil and natural gas properties. It focuses on unconventional oil and natural gas reserves in the Permian Basin. The company was founded by Sim C. Callon and John S. Callon in 1950 and is headquartered in Houston, TX.
