On Nov 13, 2013, Zacks Investment Research upgraded Matador Resources Company to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Matador Resources generated positive earnings surprise in 2 out of the last 3 quarters. In the third quarter of 2013, the company reported earnings of 45 cents, beating the Zacks Consensus Estimate of 30 cents by 50% and year-ago figure of a loss of 17 cents. The robust performance was primarily driven by a 151.4% jump in quarterly revenues on the back of a rise in oil and natural gas sales.
In third-quarter 2013, the company’s oil production volume increased 104% year over year to 617,000 barrel (“Bbl”), primarily on the back of positive impacts from ongoing drilling activities in the Eagle Ford shale.
Matador Resources continues to strengthen its acreage position. At the beginning of 2013, the company had 15,900 gross and 7,600 net acres in Southeast New Mexico and West Texas. Year to date, the company has added 49,000 gross and 32,800 net acres in this liquid rich region. At the end of the quarter, the company’s total acreage position was approximately 64,900 gross and 40,400 net acres in the aforesaid region.
We appreciate the company’s steady effort towards expanding its operations though organic as well as inorganic route. It is evident from the company’s future capital spending plan that it continues to follow this plan in the near term.
Matador Resources intends to invest $425 - $450 million under its full-year 2014 capital expenditure program. The company plans to allocate a major part of the fund for drilling, exploration and development activities.
The present valuation also makes Matador Resources attractive. As of Nov 13, 2013, the company’s forward P/E multiple was 18.5%, a discount of 41.8% to the peer group average of 31.8%. ROE of the company was 11.5%, higher than the peer group average of 4.0%.
In the last 7 days, the Zacks Consensus Estimate for 2013 has increased 6.7% to $1.12 per share, reflecting year-over-year growth of 431.8%.
Other Stocks to Consider
Other stocks in the oil and gas industry that are presently performing well include Abraxas Petroleum Corporation , Bonanza Creek Energy, Inc. and SM Energy Company , each with a Zacks Rank #1 (Strong Buy).