NYSE : CPE

Date: 14/01/2011

Symbol: CPE

Exchange: NYSE

Industry: INDEPENDENT OIL&GAS

Sector: BASIC MATERIALS

Recommendation:

Target Price: 12.00

Current Price: 6.97

Summary

• Strong Revenue Growth

• Increased Trading Volume

• Guidance for 2011 increased

• Oil and Gas Prices to Rally in 2011

• Low PE considering growth rate

• Good management

• Very Strong Margins

Fundamental Data

Market Cap ($M): 201.76

Avg.Vol (10Day): 444,022

52 Week High/Low: 8.80-1.81

P/E ratio (TTM): 3.17

P/B ratio: 12.72

Dividend yield (%): N.A.

ROA (%): 23.06

ROE (%): N.A.

Profit Margin (%): 45.12

Operating Margin (%): 52.05

Snapshot by Bloomberg

Snapshot SUMMARY

INTRA-DAY INTERACTIVE CHART

Change 0.320 (4.812%)

Bid N.A.

Ask N.A.

Open 6.670

High 6.990

Low 6.560

Volume N.A.

52-Week Range 8.80 - 1.81

1-Yr Return 266.842%

Earnings EARNINGS

FUNDAMENTALS

Earnings Past 12 Months 2.590 Shares (Millions) 28.948

Quarter Est. EPS (12/10) 0.06 Market Cap (Millions) 201.766

Quarter Est. EPS (03/11) 0.05 Float (Millions) 27.973

Year Est. EPS (12/10) 0.30 Return on Equity N.A.

Price/Earnings (Trailing) 2.691 Short Interest 894,991.000

Relative P/E 0.168 Last Dividend Reported N.A.

Earnings Growth Rate N.A. Dividend Yield (ttm) N.A.

Estimated P/E 19.000 Relative Dividend Yield N.A.

Callon Petroleum Company Profile

We are an independent oil and natural gas company focused on growing reserves and production through efficient operations and low finding and development costs. We have been operating successfully since 1950, both offshore and onshore in several oil and natural gas basins. In 2009 we initiated a focused strategy to reinvest the significant cash flow generated by our offshore producing properties into lower risk, longer life onshore oil and natural gas fields. In response to this shift in strategy we have added new team members with extensive experience in our new areas of operations to lead our technical and operational efforts. We have initiated the first steps in this strategy with acquisitions in the Permian Basin of West Texas and the Haynesville Shale of northern Louisiana. These acquisitions have added acreage for the drilling of over 300 wells in the Permian Basin Wolfberry Trend and seven wells in the Haynesville Shale. We view these acquisitions as initial entry positions into two of the most attractive oil and gas plays in the onshore U.S. We replaced 127% of our production in 2009 and our current proved, probable and possible un-risked reserves are estimated to be 27.8 million barrels of oil equivalent. Over 70% of our anticipated revenue for 2010 will be from oil and natural gas liquids. Shares of Callon Petroleum Company common stock are traded on the New York Stock Exchange under the symbol “CPE.” The Company's objective is to enhance stockholder value through sustained growth in its reserve base, production levels and resulting cash flows from operations.

http://www.callon.com

Latest news

Callon Petroleum Company Stock Buying Resumed Amid Higher Production Guidance – NYSE:CPE

Friday December31, 2010

Callon Petroleum Company NYSE:CPE stock price remained volatile for past three consecutive months. Traders rushed towards CPE after company announced during end of September that its third quarter production would be around 24 to 27 million cubic feet of natural gas equivalent per day. Backed up with the higher production guidelines more buying trend resumed which surged the demand and price exponentially rose near to $5.00 which just before the announcement was near $3.50. since then the growth continued and the current market price successfully makes its place in the range of $5.50 to $6.00.

Operations Overview

Our diversified operations provide stable production and cash flow from our long-lived offshore producing fields for reinvesting into our multi-year onshore drilling program targeting low risk, high-impact plays.

Our three major areas of operation are in the Permian Basin of West Texas, the Haynesville Shale play in northern Louisiana and offshore in the U.S. Gulf of Mexico.

Since 1950, we have operated onshore and offshore primarily in the Gulf Coast region.

Quick Facts:

• Our total net proved reserves as of December 31, 2009 were estimated at 58.0 billion cubic feet of natural gas equivalent (Bcfe).

• Proved reserves in the Gulf of Mexico deepwater, shelf and the Permian Basin accounted for 67%, 14% and 17% of total proved reserves, respectively.

• Oil consisted of 67% of total proved reserves. • Proven undeveloped (PUD) reserves made up 34% of our total proved reserves. • We estimated at year-end 2009 that we had 109 Bcfe of probable (66 Bcfe) and possible (43 Bcfe)

reserves, representing multi-year visible growth potential for both production and reserves.

Permian Basin

Callon's entry into the oil prone Permian Basin was accomplished in October 2009 with the acquisition of various assets from ExL Petroleum. In early 2010 we began an aggressive development of those assets, concentrating on Wolfberry potential in three core areas at Kayleigh, Carpe Diem and East Bloxom. The Wolfberry play is characterized by low permeability reservoir, which requires multi-stage fracture stimulation of vertical wells, which ultimately produce oil for decades.

• Our Kayleigh project consists of a single section which we control with 100% working interest. At the time of the acquisition there were five producing Wolfberry wells and 11 undrilled 40 acre locations.

• The Carpe Diem project includes four sections which we operate with 85% working interest. At the time of the acquisition there were six producing Wolfberry wells and 58 undrilled 40 acre locations.

• At East Bloxom, which covers six sections, there was only a single producing Wolfberry well at the time of acquisition, and 95 undrilled locations. Our working interest in this area varies from 30% to 100%.

• All project areas have been actively drilled since the acquisition, and all have the potential for 20 acre down spacing, which will more than double the available undrilled locations.

• At December 31, 2009, 17% of our proved reserves were attributed to our Permian Basin assets with 78% consisting of oil. Of our 66.4 billion cubic feet equivalent (Bcfe) of probable reserves, 50% were associated with our Permian Basin properties.

Haynesville Shale

We entered the Haynesville Shale natural gas play in late 2009. Our position is located in the heart of the play, with nearby wells demonstrating strong initial rates of production ranging between 16 and 20 million cubic feet per day. Our existing undeveloped assets in this play give us the ability to rapidly increase production and reserves while achieving our strategic goal of balancing our production stream between oil and natural gas.

• Acreage. We control a 70% working interest in a 577-acre section in Bossier Parish, Louisiana. Our high working interest gives us operational control over the pace of development.

• Drilling locations. We have identified seven high-potential drilling locations. The current plan of development calls for drilling seven horizontal wells from two drilling pad locations.

• Reserves. As of December 31, 2009, no proved reserves were attributed to our Haynesville Shale assets. Of our 66.4 billion cubic feet equivalent (Bcfe) of probable reserves, 29% were associated with our Haynesville Shale position.

Gulf Of Mexico - Deepwater

We have minority working interests in two deepwater offshore fields, Medusa and Habanero, having long-lived reserves in the deepwater region of the U.S. Gulf of Mexico. Both fields have shallow declines, require minimal capital investment and have low per-unit operating costs. Production from these fields has generated the majority of our operating cash flow and proved reserves at year-end 2009. These offshore fields provide a relatively steady source of cash for reinvesting into our onshore growth assets and we anticipate stable cash flow from them for the next 10 years.

• Medusa. We own a 15% working interest in the Medusa field operated by Murphy Oil Corporation. Most of the existing eight producing wells are still in their primary completion. We and the operator believe that significant upside potential exists from behind pipe reserves that are not currently categorized as proved.

• Habanero. We own an 11.25% working interest in the Habanero Field operated by Shell Deepwater Development, Inc.

• Reserves. As of December 31, 2009, 51% and 16% of our net proved reserves were attributed to Medusa and Habanero, respectively. Oil made up 89% and 48% of Medusa’s and Habanero’s proved reserves, respectively.

Gulf Of Mexico - Shelf

Our Gulf of Mexico (GOM) producing properties located in the shallower waters of the shelf region are important contributors to our total production stream. We have operated successfully on the GOM shelf for 20 years. We are currently evaluating the market for a potential strategic exit from this region to focus on our onshore growth plan.

• Drilling locations. We have identified eight drill-ready prospects, which we have estimated hold up to 100 Bcfe of unrisked net reserve potential.

• Reserves. Two fields, East Cameron Block 109 and West Cameron Block 295 accounted for 2% and 3% of our total proved reserves at December 31, 2009, respectively.

REVENUE & EARNINGS PER SHARE CONSENSUS ESTIMATES ANALYSIS

# of Estimates Mean High Low 1 Year Ago

SALES (in millions)

Quarter Ending Mar-11 2 26.53 26.60 26.46 --

Quarter Ending Jun-11 2 26.05 26.30 25.80 --

Year Ending Dec-11 4 108.44 116.54 104.89 --

EARNINGS (per share)

Quarter Ending Mar-11 2 0.05 0.07 0.04 --

Quarter Ending Jun-11 2 0.06 0.08 0.05 --

Year Ending Dec-11 6 0.36 0.50 0.20 --

Sales and Earnings Figures in U.S. Dollars (USD) VALUATION RATIOS

Company Industry Sector S&P 500

P/E Ratio (TTM) 2.63 24.26 14.02 18.16

P/E High - Last 5 Yrs. 23.05 18.39 24.36 49.43

P/E Low - Last 5 Yrs. 0.61 6.88 13.28 12.86

Beta 2.31 0.87 0.84 1.33

Price to Sales (TTM) 1.41 9.40 4.52 2.22

Price to Book (MRQ) 12.13 1.27 1.51 2.92

Price to Tangible Book (MRQ) 12.12 1.65 2.79 7.66

Price to Cash Flow (TTM) 2.12 17.68 9.62 11.18

Price to Free Cash Flow (TTM) 3.80 9.15 13.18 52.46

% Owned Institutions -- -- -- --

DIVIDENDS

Company Industry Sector S&P 500

Dividend Yield -- 2.14 1.66 1.55

Dividend Yield - 5 Year Avg. 0.00 0.93 1.60 2.54

Dividend 5 Year Growth Rate -- 12.77 8.26 -8.00

Payout Ratio(TTM) 0.00 20.80 13.32 37.50

GROWTH RATES

Company Industry Sector S&P 500

Sales (MRQ) vs Qtr. 1 Yr. Ago -3.92 47.44 21.04 9.34

Sales (TTM) vs TTM 1 Yr. Ago 57.35 41.11 21.69 9.14

Sales - 5 Yr. Growth Rate 3.48 11.98 14.60 9.94

EPS (MRQ) vs Qtr. 1 Yr. Ago 223.45 484.37 134.53 4.60

EPS (TTM) vs TTM 1 Yr. Ago 111.77 -- -- --

EPS - 5 Yr. Growth Rate 15.05 13.56 9.99 6.88

Capital Spending - 5 Yr. Growth Rate -11.15 15.17 18.09 4.61

FINANCIAL STRENGTH

Company Industry Sector S&P 500

Quick Ratio (MRQ) -- 1.29 0.65 0.65

Current Ratio (MRQ) 2.38 1.42 0.83 0.96

LT Debt to Equity (MRQ) 1,047.98 15.41 17.57 121.93

Total Debt to Equity (MRQ) 1,047.98 16.35 23.23 179.71

Interest Coverage (TTM) -17.84 -0.71 2.74 16.19

PROFITABILITY RATIOS

Company Industry Sector S&P 500

Gross Margin (TTM) 81.37 62.57 24.68 31.39

Gross Margin - 5 Yr. Avg. 83.89 43.57 27.36 28.23

EBITD Margin (TTM) 72.70 -- -- --

EBITD - 5 Yr. Avg 10.85 26.99 19.83 17.88

Operating Margin (TTM) 50.73 31.62 7.55 --

Operating Margin - 5 Yr. Avg. -25.21 21.55 14.69 16.24

Pre-Tax Margin (TTM) 44.74 32.38 8.02 14.37

Pre-Tax Margin - 5 Yr. Avg. -39.02 23.29 15.53 15.86

Net Profit Margin (TTM) 44.74 21.48 4.77 10.66

Net Profit Margin - 5 Yr. Avg. -39.37 11.13 10.20 11.63

Effective Tax Rate (TTM) 0.00 31.19 16.67 54.18

Effecitve Tax Rate - 5 Yr. Avg. -- 31.97 23.76 25.16

EFFICIENCY

Company Industry Sector S&P 500

Revenue/Employee (TTM) 1,948,914 94,058,442 43,754,224 661,389

Net Income/Employee (TTM) 871,857 13,576,692 2,741,659 81,807

Receivable Turnover (TTM) 5.78 22.82 7.52 9.51

Inventory Turnover (TTM) -- 4.09 3.35 6.55

Asset Turnover (TTM) 0.71 0.18 0.33 0.54

MANAGEMENT EFFECTIVENESS

Company Industry Sector S&P 500

Return on Assets (TTM) 31.70 5.22 2.73 5.79

Return on Assets - 5 Yr. Avg. -11.96 8.60 8.80 5.56

Return on Investment (TTM) 46.19 6.86 3.51 7.43

Return on Investment - 5 Yr. Avg. -13.80 12.20 11.43 7.17

Return on Equity (TTM) -- 6.90 4.57 17.05

Return on Equity - 5 Yr. Avg. -41.67 16.01 16.60 8.54

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Contact Detail:

Chutinush Taksinapinunt

Business Development Director

Heffernan Capital Management

Email: chutinush@heffernan-inc.com

Chutinush Taksinapinunt holds a Bachelor of Business Administrators degree Majoring in Finance and Banking. Chutinush Taksinapinunt is an experienced market maker and Portfolio Manager, having worked with some of Thailand’s largest Securities Company and Financial Institutions.

Price Estimate by Shayne Heffernan PhD

Shayne Heffernan of Ebeling Heffernan holds a PhD in Economics serves as CEO of Heffernan Holdings Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com Bangkok Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND Tel: +66 2 126 8000 Fax: +66 2 126 8080 New York 347 5th Avenue, Suite 1402-508 Ny, NY 10016 Tel: +1 646-403-9881 Fax: +1 646-403-8014 Singapore 3 Raffles Place #07-01 Bharat Building Singapore 048617 Tel: +65 6329 6408Fax: +65 6329 9699

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