Canaccord Genuity Raises Price Target on Callon Petroleum (CPE) Following Acquisition
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Canaccord Genuity reiterated a Buy rating on Callon Petroleum (NYSE: CPE), and raised the price target to $18.00 (from $15.00), following the company's acquisition of 5.7K net acres in northwest Howard.
Analyst Sam Burwell commented, "CPE is acquiring 5.7K net acres in northwest Howard, thus far the most prolific area of the county and near the company's first Howard Wolfcamp A well, which posted highly impressive initial results. The company's Howard County footprint is now a rather sizable ~17K net acres, and we calculate ~80 net incremental Wolfcamp A and Lower Spraberry locations associated with the acquisition. While the purchase was by no means a steal, we view the transaction as NAV accretive given the expected quality of the inventory and the high likelihood of activity there near term. We assume CPE runs one rig on its Howard acreage next year and increases that to two in 2018. Importantly, CPE has traded at a higher multiple as of late, thus making acquisitions (like this one) more easily accretive. We expect shares to trade essentially in line with smid-cap Permian peers as inventory depth is less of an issue."
Shares of Callon Petroleum closed at $15.46 yesterday.
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