Callon Petroleum Company (NYSE:CPE) has priced 9 million new shares of common stock for a total estimated gross proceeds of $59 million, which may not be a big deal for many oil companies but means a lot to a small oil company like this. If the underwriters prefer to exercise all their options, they may buy another 1.35 million shares from the company. Obviously, this dilutes the shareholding of the current investors to a great extent with the number of shares increasing by 18% now.
Callon Petroleum Company (NYSE:CPE) wants to pay some amount of the $315 million debt with some left for liquidity purpose. Even with the price of oil stabilizing a bit over the last few weeks, the anxiety over the future course of action remains, and drives most of the companies to boost their balance sheet and liquidity.
This same action could have really strengthened the company up if it was not at this lower level in respect to the 52 week range. The current price is nearly 50% off from the 52-week high of $12.09 and now more downside can be expected as the charts indicate.
Technically the picture is highly bearish. The entire month of February was spent in a very narrow range and now that has resolved to the downside with a sharp gap, accompanied by a huge spike in volume. Though some short term support can be expected near $6, generally a price action like this erases all the gains made prior to the top. That means in this case, a retesting of the band of $4.00-50 will not be surprising. The supply pressure should overcome any bottom fishing effort and any entry would look good only around $3 levels, if the price comes there in the next few weeks.