Guru Steven Cohen added 3,311,000 shares of Callon Petroleum Co. (CPE, Financial) to his portfolio in the first quarter.
Callon Petroleum is an independent oil and natural gas company focused on exploration, development, acquisition and production of oil and natural gas. In 2013, the company completed its onshore strategic repositioning that began in 2009, shifting its operations from the offshore waters in the Gulf of Mexico to the onshore Permian Basin in Texas. The company implemented these strategic changes to improve flexibility and modify production plans based on the continuously changing environment and commodity prices. Callon Petroleum believes these new strategies will be advantageous in the future because of its extensive experience in the Permian Basin.
Callon Petroleum has a market cap of $466.91 million, an enterprise value of $864.02 million, a P/B ratio of 1.07 and a quick ratio of 0.65.
According to the company's investor presentation report, Callon Petroleum saw 140% growth in oil production since the first quarter of 2014. The company has also been able to reduce its cost for drilling by 40% during the same time frame, both good signs.
According to the company’s SEC reports, Callon Petroleum is working on paying down its current debt which consists of $300 million to its term loan and $99 million related to its credit facility. Callon Petroleum is currently paying 8.5% interest on its term loan and 2.21% interest on its credit facility loan. There is a high degree of variance and stress for the company given the current amount of debt that it is in. As of Sept. 15, 2015, the company has $399 million of outstanding debt issued within these two loans. If the interest rates increase or decrease by 1% the company’s annual net income will also increase or decrease by $4 million, affecting the company’s potential profits.
Cohen is a multibillionaire and the founder of Point72 Asset Management LP. The firm is headquartered in Stamford, Connecticut, and maintains affiliated offices in New York, London, Hong Kong, Tokyo and Singapore. Point72 Asset Management currently has approximately 1,000 employees, including more than 250 investment professionals. Point72 Asset Management owns 666 stocks with a total value of $12.124 billion
Below is a Peter Lynch chart for Callon Petroleum.
Callon Petroleum is a risky long-term investment because of the company's current debt situation as well as the risk of massive fluctuations in commodity and oil prices that are outside of the company's control.
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