Callon Petroleum (CPE)

[Timothy Smith]

$CPE is initiated with a Sector Perform rating and a $9 price target at RBC Capital, which likes the company's strong oil production growth and numerous possible paths to NAV accretion but believes the current valuation already bakes in some success for its upcoming catalysts and a limited acreage position caps upside potential.

CPE is a “pure-play Permian story” with prospective catalysts - such as plans to drill its first Middle Spraberry and Wolfcamp development wells and initiate a Lower Spraberry sownspacing pilot before year-end 2015 - that could help it grow grow its core inventory and add an upside of $1.50-$3/share, the firm says.

Although CPE holds high-quality core Permian acreage, it may be tough for the company to add scale in an “accretive manner," RBC says.