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UNLOCKING VALUE IN THE PERMIAN: IDENTIFYING HIGH-UPSIDE COMPANIES

Garrett Baldwin

 

I wanted to share some exciting updates about the energy sector, specifically
the high-upside companies amid the ongoing merger and acquisition frenzy in the
Permian.

 

As you likely know, the Piotroski F score is a powerful tool for identifying
well-disciplined companies focused on shareholder interests. With giants like
Exxon driving a merger and acquisition boom, the shale industry is on the verge
of a massive consolidation. Now is the perfect time for you to explore companies
with an F score of seven or higher.

 

A prime example is Callon Petroleum (CPE), which recently acquired Permian
basin-based Percussion Petroleum Operating II Llc for $475 million,
significantly enhancing its portfolio in the highly profitable U.S. shale patch.
This strategic acquisition added a remarkable 18,000 net acres and approximately
70 high-return well locations in the sought-after Permian region.

 



Callon also agreed to sell its Eagle Ford assets to Ridgemar Energy Operating
Llc for $655 million, joining a growing list of companies strategically exiting
the area. These combined transactions are set to solidify Callon's capital
structure, improve margins, and establish it as a top-tier Permian contender,
according to Callon CEO Joe Gatto.

 

Unlock Hidden Potential: Here’s How Retail Investors Can Thrive in the Energy
Sector

 

Investors should focus on businesses with strong F and Z scores, low debt, and
affordable buyout multiples. Mergers and acquisitions in the oil sector often
lead to consolidation, and climate compliance costs make smaller firms more
appealing acquisition targets for industry giants like Exxon and Chevron.

 

My focus in Flashpoint Trader is on identifying potential takeover targets in
the Permian Basin amid the anticipated M&A boom. Last week I featured my top 5
companies in the Permian that are likely to be acquired in the Great American
Land Rush, which has already started to see some M&A within the shale industry. 

 

Companies like Exxon must innovate, acquire land, reduce production costs, and
manage oil reserves. This M&A boom could consolidate dozens of shale players
into eight to ten major contenders in areas like the Permian, Bakken, and Utica.
That’s why we must have an idea of the best-valued companies in the region.

 



Despite fluctuating oil prices, these companies have demonstrated resilience by
maintaining capital discipline. Smaller players exhibit minimal debt,
cost-effective production at $40 to $50 per barrel, prime acreage, and lower
enterprise value to EBITDA multiples. Callon Petroleum (CPE), which we did not
feature in the Great American Land Rush,is a great example with a $2 billion
market cap trading at 63 times its book value, showcasing the potential value in
smaller energy sector players.

 



Retail investors possess a unique edge over institutional investors, who often
shy away from smaller companies due to allocation constraints. By zeroing in on
smaller energy firms with robust balance sheet management and profitability at
$45 per barrel or more, retail investors can uncover exceptional value.


Callon exemplifies the potential in smaller players, set to benefit from
industry consolidation and climate compliance costs that burden their less
competitive counterparts. Companies like Callon struggle to compete at scale
against giants like Exxon and Chevron, making them prime targets for investment.


FLASHPOINT TRADER: IDENTIFYING PERMIAN BASIN'S TOP TAKEOVER TARGETS


Some of these companies are trading below their book value and are undervalued,
offering retail investors the chance to capitalize on smaller energy firms with
strong financials and growth potential.


Although these companies may experience fluctuations with oil prices, their
strong F and Z scores, low debt, and low buyout multiples make them excellent
investment choices. By selecting the most affordable companies with no debt,
solid balance sheets, and exceptional management, you can hold onto assets that
outshine cash in terms of value at a time when inflation is eroding the value of
our money. 


Imagine a stock worth the sum of its parts, trading sideways like cash in a
low-interest account. Now, envision that same stock becoming an attractive
buyout target, with its price surging from $10 to $15  within days. Embrace
these incredible opportunities in the Permian, and harness the power of
intelligent options strategies to maximize your probability of profit and
achieve remarkable growth. 

 

 



What You Missed

 

A few weeks back, while filming in Baltimore with Kenny Glick, he shared the
story of Ray, a police officer who, prior to meeting Kenny, had no experience in
trading.

 

When Ray first came across the Private Bull Run, his account had less than $500
in it. However, after spending some time with Kenny and learning the ropes, he
managed to find his own trades.

 

And guess what? In just 8 months, Ray turned that $500 into an impressive
$15,000!

 

Sounds unbelievable, right? Well, you can hear it directly from Ray himself.
Gabe Oropollo, our Director of Customer Service, actually interviewed Ray – so
make sure to check out that conversation! First, it was Andi, and now Ray. These
ordinary individuals are making extraordinary profits trading Kenny's Private
Bull Market.

 

Don't miss out on this opportunity to see what the Private Bull Run is all
about.

 


 

Talk Soon,


Garrett

 





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