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Why Callon Petroleum Stock Cratered Nearly 42% in August

By Matthew DiLallo – Sep 2, 2020 at 4:02PM

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Investors remain very worried about this oil stock's future.

What happened

Shares of Callon Petroleum (CPE -5.49%) plummeted 41.8% in August, according to data provided by S&P Global Market Intelligence. Several factors weighed on the oil stock, including its lackluster second-quarter results. 

So what

Callon Petroleum reported a loss of $1.6 billion, or $3.94 per share, during the second quarter, primarily driven by the writedown of oil and gas properties. One factor causing the impairment charge -- other than this year's slump in oil prices -- was its controversial acquisition of Carrizo Oil & Gas. That deal hasn't paid dividends for the company as it saddled it with more debt right as crude prices crashed. 

An oil pump jack with an orange sky in the background.

Image source: Getty Images.

While the company doesn't have any debt maturing until April 2023, its liquidity is running dry. It ended the second quarter with just $7.5 million of cash on hand and only $250 million available on its credit facility, as it has borrowed $1.45 billion of its $1.7 billion capacity.

That tightening financial situation has put a lot of pressure on Callon's stock market value. Its share price has fallen so far that the company enacted a 1-for-10 reverse stock split last month in hopes of attracting more institutional investors. That move didn't seem to work, as the stock continued to fall following the split. 

Now what

Callon Petroleum is one of several oil stocks in deep financial distress these days because of low oil prices. While the company has cut costs and expects to generate free cash to pay down debt later this year, it needs a significant improvement in oil prices to stay afloat. If that doesn't happen, then shares could fall all the way to zero

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Callon Petroleum Company Stock Quote
Callon Petroleum Company
$31.36 (-5.49%) $-1.82

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