Barclays Sees Production Growth Possibilities For Memorial Resources Development
Barclays analyst Jeffrey W. Robertson initiated coverage on Memorial Resource Development (NASDAQ: MRD) with an Overweight rating and a price target of $33 (a 30 percent increase from the current price).
A key catalyst discussed in Robertson's note is Memorial’s core, Terryville Field, allows for production growth to generate considerable excess cash flow. Additional future drilling may serve as potential catalysts for the shares.
Memorial’s key asset is 96,000 net acres in the Terryville Field, which includes 52,000 net acres in the core of the field, where it’s focused on horizontal development of the Lower Cotton Valley. Memorial has identified 1,146 gross drilling locations in four distinct intervals in the Cotton Valley; the company has also completed 27 horizontal wells with average return rates above 200 percent and investment payback periods of less than one year. Management predicts that its production growth rates will be 90 percent in 2014 and 50 percent in 2015.
Robertson commented, “Short payback periods could allow Memorial to maintain a robust growth profile while generating excess cash flow.”
Barclays expects excess cash of $25 million in 2014 and $135 million in 2015 and its net debt to LTM to decrease to 1.4x by 2014 and 0.7x by 2015.
Shares are up 2.5 percent at $26.00 in Tuesday's session.
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