RBC Capital upgraded Callon Petroleum Company (NYSE:CPE) to outperform from sector perform given the current low relative valuation to its peers (significantly underperforming over the last year) and confidence in the company’s operational and financial plans.

According to the analysts, the company’s performance from Primexx acquisition has outperformed their expectations and de-leveraging continues to occur faster than anticipated.

The analysts believe investors were primarily focused on shareholder returns and low balance sheet leverage. The analysts anticipate the company to move into a shareholder return position by 2022 with leverage dropping to 1.0x from 4.2x in 2020.

The analysts raised their EPS/CFPS estimates by 8%/6% in 2022 and 30%/21% in 2023 given their new commodity price forecast. The analysts now expect WTI oil price to be $107/bbl from (vs. $100/bbl prior) in 2022, and $114/bbl (vs. $96/bbl prior) in 2023. Their natural gas price forecast increased to $5.65/ Mcf in 2022 and to $4.65/Mcf in 2023, from $5.00 and $4.25, respectively.