Houston, TX-based Memorial Production Partners L.P. (MEMP) has announced the closure of its previously declared public offering – with a fully-exercised over-allotment option – of 14,950,000 common units priced at $22.29 a piece.
The energy explorer used the net proceeds from this offering – approximately $321.9 million after the underwriting discount – to pay back part of the outstanding borrowings under its revolving credit facility.
Memorial Production Partners, which went public in Dec 2011, is a publicly traded exploration and production master limited partnership (MLP) engaged in the acquisition, finding and development of oil and gas properties in the U.S. The partnership’s operations are concentrated primarily in the East Texas / North Louisiana, Rockies, Permian, Eagle Ford/South Texas and California.
Memorial Production Partners has done a stellar job at raising volumes and cash distribution, while it continues to leverage its relationship with parent Memorial Resource Development Corp. (MRD) to make ‘drop-down’ transactions (or asset buys from the partnership's sponsor company).
However, the partnership has been witnessing downward estimate revisions since missing the Zacks Consensus Estimate in second-quarter 2014. Worryingly, the upstream player has delivered negative earnings surprises in each of the last four quarters with an average of negative 41.5%.
Moreover, as is the case with other exploration and production firms, Memorial Production Partners’ results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. Realized prices could differ significantly from our estimates, thereby affecting the company’s revenues, earnings and cash flow.
As a result, Memorial Production Partners currently retains a Zacks Rank #5 (Strong Sell), implying that it is expected to significantly underperform the broader U.S. equity market over the next one to three months.
However, some better-ranked domestic upstream energy stocks include WPX Energy Inc. (WPX) and Whiting Petroleum Corp. (WLL). While WPX Energy holds a Zacks Rank #1 (Strong Buy), Whiting Petroleum carries a Zacks Rank #2 (Buy).
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