Please ensure Javascript is enabled for purposes of website accessibility

Why Callon Petroleum Stock Cratered Nearly 42% in August

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.