MRD is on the short list for Sweet 16 additions

[dan_s]

We will publish a profile on MRD after they release Q3 results. It has been on my To Do List since EnerCom.

NEW YORK -- Amid the gloom permeating the oil and gas industry these days, it's nice to find a bright spot now and again, and one the brightest at the moment seems to be Memorial Resource Development (MRD) .

While a lot of companies in the sector are cutting production and employees and shedding assets, the Houston oil and gas explorer is actually expanding. Last month it announced that it had agreed to acquire or lease 132,859 net acres next to its operating areas in North Louisiana from Quantum Energy Partners-backed Rockcliff Energy LLC and others for $373.8 million. It paid for the deal by selling $243 million in new shares to the markets-an equity offering unheard of in the industry right now.

Tudor, Pickering, Holt & Co. Securities wrote in a note that the deal was won at an attractive $6,000 per acre, versus its own valuation estimate of $40,000 per acre once the properties are fully developed. The firm thinks the stock is undervalued, with 46% upside compared with its peer average of 29%; the company's balance sheet strength and operational momentum make it Tudor's top pick.

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In June the KLR Group counted Memorial Resource as one of the lowest-risk plays in the oil patch, which it measures as those with the highest combined cash recycle ratios and the lowest financial leverage. Earlier this month it said Memorial Resource was among a group of companies with the highest capital yields over two years, outperforming the EPX, which tracks exploration and production stocks, by 20%.

Others on the list included Cabot Oil & Gas (COG) , Denbury Resources (DNR) , Energen (EGN) , EOG Resources (EOG) , Diamondback Energy (FANG) , Oasis Petroleum (OAS) , Parsley Energy (PE) , Range Resources (RRC) , Rice Energy (RICE) , RSP Permian (RSPP) , Synergy Resources (SYRG) and Ultra Petroleum (UTL) .

Memorial Resource is headed by CEO John Weinzierl, a 47-year-old petroleum engineer who previously worked at Conoco, Enron and private equity firm NGP Energy Capital Management

NGP backed Memorial before it went public in June 2014 at $19 per share (an affiliate still owned almost 40% of the stock as of June 30). The company owns properties in northern Louisiana's Terryville field, which is thought to hold some of the best gas assets in North America and is close to the Mont Belvieu, Texas, storage hub.

The company expects to see at least 30% growth next year if its capital expenditures resemble this year's levels ($475 million to $525 million), all the while living within cash flow.