Memorial Production Partners LP (MEMP) is a limited partnership formed by Memorial Resource to own and acquire oil and natural gas properties in North America. The Initial public offering ("IPO") closed on December 14, 2011; a total of 9,600,000 common units issued to the public for net proceeds of $157.1 million (including the exercise of underwriters' over-allotment option on December 22, 2011 of 600,000 units). MEMP's IPO price was $18.75, and it is currently trading at $18.00. MEMP has a current market cap of $302 million.
MEMP has been actively executing on their strategy to acquire assets that meet the criteria of mature, long-life producing properties. MEMP announced that it entered into a definitive purchase agreement with their sponsor, Memorial Resource Development LLC, to acquire assets in East Texas. MEMP has long-lived reserves with predictable production decline rates and low-risk development opportunities.
MEMP has estimated proved reserves of 324.1 Bcfe as of December 31, 2011 of which 79.5% were classified as proved developed; 87% natural gas, 9% natural gas liquids and 4% oil; proved reserve life of 18 years; and standardized measure (2) of $378.3 million. The standardized measure increased approximately $19.1 million from the pro forma proved reserves at December 31, 2010. Realized prices excluding commodity derivatives of $95.14 per Bbl of oil, $3.54 per Mcf of natural gas and $1.18 per gallon of NGL resulted in $18.6 million of oil and natural gas revenue.
MEMP has a projected revenue growth of 21.3% in 2012 and 42.6% in 2013. MEMP's interest coverage (number of times interest payments are covered by EBIT) of 2.7 is substantially above the Oil & Gas Exploring & Production Industry average of 0.5. MEMP's net margin (trailing 4 quarters) of 9.0% is substantially above the Oil & Gas Exploring & Prod Industry average of 0.3%.
MEMP announced on January 27, 2012, that the board of directors of MEMP's general partner approved a cash distribution of $0.0929 per unit for the fourth quarter of 2011. This represented a prorated amount that, on an equivalent full-quarter basis, corresponded to its minimum quarterly cash distribution of $0.4750 per unit, or $1.90 per unit on an annualized basis. This results in an annual dividend yield of 10.56% in 2012.
On January 21, 2012, Raymond James initiated coverage for MEMP with an Outperform recommendation. On January 26, 2012 Zacks Investment Research, Inc. initiated coverage for MEMP with a Hold recommendation. On April 17 2012 MEMP coverage was initiated by Global Hunter Securities with an initial Buy rating. The First Call Consensus is a Buy rating.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.