PXD - RBC raises Callon and CDEV cuts four energy names as valuation plays

Callon Petroleum ( NYSE: CPE ) +2.8% and Centennial Resource Development ( NASDAQ: CDEV ) +1.7% in Wednesday's trading as RBC Capital upgraded both names to Outperform from Sector Perform with respective $75 and $11 price targets, citing relative valuation vs. peers and confidence in their operational and financial profile.

RBC also downgraded Continental Resources ( CLR ), EOG Resources ( EOG ), Earthstone Energy ( ESTE ) and Pioneer Natural Resources ( PXD ) to Sector Perform from Outperform, also based on relative valuation after their recent outperformance.

RBC's overall outlook for oil and gas E&Ps is optimistic, as valuations generally look more attractive, with many companies ready to lean into stock buybacks, and current tight commodity markets should hold up absent a deep recession.

Callon ( CPE ) and Matador Resources ( NYSE: MTDR ) are RBC's preferred small- and mid-cap names due to strong organic growth opportunities, depth and quality of inventory, and attractive valuations.

The firm's favorite large-cap names remain ConocoPhillips ( COP ) and Diamondback Energy ( FANG ).

Callon Petroleum ( CPE ) "may be able to generate $2B in positive free cash flow by the end of 2023," Elephant Analytics writes in a bullish analysis posted recently on Seeking Alpha .

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