Where Is Callon Petroleum Focusing in 2017?



Callon’s key focus

As we discussed in the preceding part of this series, Callon Petroleum (CPE) has been focusing on strengthening its Permian position—specifically, on ramping up its rig count in 2016 and 2017. Its average rig count for 2016 was forecast to be one to two rigs. For 2017, it’s expected to be three to four rigs.

In its 3Q16 earnings release, CPE Chief Executive Officer Fred Callon stated: “Given our expanded portfolio of drilling opportunities that deliver solid returns on investment at less than $50 per barrel of oil, combined with low leverage metrics and liquidity of almost $500 million, we currently anticipate adding a third horizontal drilling rig in early 2017 and are preparing for a fourth rig in the second half of 2017.”

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For this reason, the company expects to see ~30,000 Boepd (barrels of oil equivalent per day) in annual average production in 2018, along with generating free cash flow by mid-2018. The company’s management noted that these expectations are “based on our 2018 planning case assumptions of $50 per barrel and a theoretical increase of 15% in completed well costs.”

Other key focus points

Other key focus points for Callon in 2017 include cost reduction, shortened cycle times, infrastructure build-out, and firm transport agreements.

Notably, other key operators in the Permian Basin include Apache (APA), Concho Resources (CXO), and Cimarex Energy (XEC). These companies make up 3.2% of the iShares North American Natural Resources ETF (IGE).

We’ll talk about Callon’s cost reduction efforts later in this series. But first, let’s look at Callon’s most recent Permian acquisition.


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