KLR Group Raises Price Target on Callon Petroleum (CPE) Following Announced Acquisition
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KLR Group reiterated a Buy rating on Callon Petroleum (NYSE: CPE), and raised the price target to $21.00 (from $18.00), following the company's announced agreement to acquire ~5,667 and an overriding royalty interest in three 480 acre units offsetting the acreage net acres in Howard County for ~$327 million.
Analyst Gail Nicholson commented, "Callon announced it agreed to acquire ~5,667 net acres (75%+ offsetting current position in NW Howard County) and an overriding royalty interest in three 480 acre units offsetting the acreage (one unit operated by CPE) in Howard County for ~$327 million. Estimated current net production is ~2,300 Boepd (~86% oil). Assuming $40k per flowing Boe on production, the transaction equates to ~ $41.5k per acre or an incremental ~$2.1 million per drilling location. To fund the acquisition, CPE priced an upsized offering of 29.9 million shares (including overallotment), representing ~23% of shares outstanding, at ~$14.60 for total gross proceeds of ~$436.5 million. The transaction is expected to close on or before October 20, 2016."
Shares of Callon Petroleum closed at $15.54 yesterday.
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