GPOR and MTDR

[dan_s]

Comments below are from TPH daily updates.

GPOR Q1'18 Ops Update

Production beats by 2%; Watching for potentially higher Q1 capex spend, incremental buyback commentary

Sector: NAm E&P | Ticker: GPOR | Recommendation: HOLD | Target: $16 | Close: $9.07

Release yesterday morning highlights Q1'18 prod'n is +2% q/q at 1,288.6mmcfe/d, above both TPHe/Street 1,273/1,261 and management's previously messaged ~flat q/q cadence. Activity on the TIL front included 3 net Utica wells on 3/31 and 6.3 net SCOOP wells throughout Q1, but we're watchful for a higher than expected capex number in Q1'18 (TPHe $263MM vs. Street $223MM) given heavy Utica activity, with the brunt of that production impact hitting in the Q2/Q3 time frame. Gas realizations at $2.44/mcf vs. TPHe $2.40/mcf, while NGLs priced at $29.92/bbl vs. TPHe $30.82/bbl. We're looking for additional commentary on the ccall around buybacks ($100MM program announced in Jan'18) given management's aggression in doing so at these equity levels and catalysts of monetizing Strike Force (TPHe ~$200-250MM net to GPOR) and TUSK shares (TPHe ~$325-350MM) which combined represent ~1/3 of GPOR's market cap.


MTDR Update

Black River Processing Plant expansion adds +200mmcfd processing capacity, but realizations still at risk

Sector: NAm E&P | Ticker: MTDR | Recommendation: BUY | Target: $36 | Close: $33.08

Completion of Black River Processing Plant expansion brings San Mateo processing capacity to 260mmcfd. This will support MTDR's northern Delaware development and allows additional processing opportunities for 3rd party producers in the area. Plant also provides optionality on ethane recovery, which is a positive given our negative outlook on Waha basis. Additionally, San Mateo has connected the processing plant to the EPIC NGL pipeline, providing FT out of the basin. Positive to see project complete on time and on budget; we continue to look to 2019 as a potential timeline for realizing additional midstream value (TPHe ~$500MM net to MTDR). However, we continue to be concerned by the company's takeaway position which we would rank middle of the pack, as gas will be exposed to Waha pricing and oil will be exposed to Midland pricing (beyond TPHe ~52% of 2018 oil basis hedged at $1.02/bbl). We're listening for additional midstream / takeaway color on the Q1 conference call along with an update on Antelope Ridge / Twin Lakes.