Why Callon Petroleum (CPE) Stock Is Up Today

NEW YORK (TheStreet) -- Callon Petroleum (CPE) was gaining 2.5% to $9.37 Wednesday after pricing the 12.5 million shares of common stock in its public offering.

The oil and gas company priced the 12.5 million share public offering at $9 a share. The underwriters of the offering have a 30-day option to buy up to an additional 1.875 million shares.

Callon expects net proceeds of about $106 million from the offering, or about $122 million if the underwriters exercise their option. The company plans to use the net proceed, along with funds from a new secured second lien term loan, to fund its acquisition of oil and gas properties in the Permian Basin.

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TheStreet Ratings team rates CALLON PETROLEUM CO/DE as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CALLON PETROLEUM CO/DE (CPE) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CPE's very impressive revenue growth greatly exceeded the industry average of 3.5%. Since the same quarter one year prior, revenues leaped by 78.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The gross profit margin for CALLON PETROLEUM CO/DE is currently very high, coming in at 83.64%. It has increased significantly from the same period last year. Along with this, the net profit margin of 11.70% is above that of the industry average.
  • The current debt-to-equity ratio, 0.59, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.37 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • This stock has managed to rise its share value by 120.30% over the past twelve months. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CALLON PETROLEUM CO/DE's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: CPE Ratings Report

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