Dear Callon,

Please, don’t stop reading. I know our relationship didn’t get off on the right foot and even though it’s entirely your fault, I’m going to do the right thing and take the blame, because that’s what you do when you are trying to make amends. Also, congratulations on your purchase of Carrizo, I didn’t think you would get that done. I stand corrected.

I do this thing called “Technical Tuesday” and…

You know what, it doesn’t matter what I do. Just know that I’ve come around to your point of view. The combination of CRZO and CPE on a SMOG basis looks good and maybe I was too quick to judge. I even own your shares again, but before I compliment you, can I just start by saying how much I hate your balance sheet? I know this is a love letter, but in the long run, you will thank me for my tough love.

Let’s pivot to your post merger IR presentation. All my friends tell me not to trust those things because of the “everything in here is forward looking blah blah blah so don’t believe it” statement, but I think you are different! If you say you can get leverage down to <2.0x by the end of THIS YEAR, I’m going with it and I say “Well done!”

With thanks to ShaleProfile Analytics, I was having a look at the combined company and … well, I noticed some things. Let’s talk about them.

1. The premise of your merger is what I have coined as the “sugar daddy effect”: you keep paying for me (Eagleford), and I’ll keep loving you (Delaware). This has worked since the beginning of time and I think you are spot on. Keep it up!!!
2. You may have noticed I added a company to your graphic- don’t be mad. BD team, I’m talking to you directly right now… I own shares in CDEV and so should you…all of them. There are too many benefits to name but the executive summary is “More Delaware, better balance sheet, contiguous fit, great SMOG relative value combined and they are selling water system for cash.” I know, it makes me excited too!
3. Finally, run less rigs. You have a good amount of DUCs inventory and half cycle economics are SO much better. Focus on the balance sheet and the rest will take care of itself.

I know that what I’m saying is drastic- but drastic times call for drastic measures. Harness your inner Vicki and go all in on the “Callon as an acquirer” strategy! It might even work out.

Love and hugs,

#hottakeoftheday

PS. Not investment advice, I am long both CDEV and CPE.