Natchez, MS-based Callon Petroleum Co. (CPE) has priced an underwritten secondary public offering of 12,500,000 common shares at $9.00 a piece, with a 30-day over-allotment option for an additional 1,875,000 shares. The offering, announced Sep 8, is expected to close on Sep 15.
The energy explorer’s net proceeds from this offering is likely to be approximately $106 million after accounting for underwriting discount and estimated offering costs (or about $122 million if the underwriters fully exercise their option to purchase additional common shares). Callon Petroleum plans to use the proceeds, plus those from a planned secured term loan, to finance the recently announced $213 million purchase of assets in Texas’ Midland Basin. Any remaining amount will be utilized toward capital expenditure and general corporate purposes.
Callon Petroleum is an independent exploration and production company engaged in the acquisition, finding and development of oil and gas properties. The company’s operations are concentrated primarily in the Permian Basin in West Texas.
With a proven exploration strategy, expanded liquidity position, and a robust hedging program that minimizes commodity price exposure, Callon Petroleum is primed for attractive returns. Moreover, a track record of best-in-class shareholder returns, together with a business model focused on operational efficiencies and attractive acquisitions/growth projects, makes the oil and gas finder a good choice for investors looking for substantial value.
However, as is the case with other independent exploration and production companies, Callon Petroleum’s results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the company’s revenues, earnings and cash flow.
As a result, Callon Petroleum currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.
However, some better-ranked domestic upstream energy stocks include WPX Energy Inc. (WPX), Black Ridge Oil & Gas Inc. (ANFC) and Whiting Petroleum Corp. (WLL). While WPX Energy sports a Zacks Rank #1 (Strong Buy), Black Ridge and Whiting Petroleum both carry a Zacks Rank #2 (Buy).
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