Matador Resources (NYSE:MTDR) announced their quarterly earnings last Wednesday. The company has been doing so well that analysts were expecting them to announce earnings of $0.26 per share. As it turned out, the company reported $0.23 per share, marginally short of expectations. The last two quarters though have seen the company beating estimates by over 50%. We are talking about a stock that has tripled during the last year and is looking good for more!
It is interesting to see what is driving the success of Matador Resources.
Good Due Diligence
Matador resources has been known to invest a lot of time and money in identifying an area before taking it on lease or starting drilling on it. A lot of additional research is carried out like micro spectrometry, which is studying the cores using microscopes to identify channels that will allow the oil to flow.
There are many small firms that end up investing in too many different plays which does not make sense in terms of scale. Matador has been wise in this regard, focusing on two or three areas and making the most of them.
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- MTDR 15-Year Financial Data
- The intrinsic value of MTDR
- Peter Lynch Chart of MTDR
It is currently drilling in the Eagle Ford and the Delaware Basin portion of the Permian Basin.
The Haynesville Trump Card
While the price of oil is now on the lower side and expected to stay around $95 to $100 levels, the increase would likely benefit Matador more than the rest. It has a lot of gas in Haynesville waiting to be drilled as the gas prices rise.
Matador Resources has a one year low of $7.96 and a one year high of $25.25. The stock has a 50-day moving average of $21.49 and a 200-day moving average of $19.53. The company has a market cap of $1.455 billion and a price-to-earnings ratio of 143.84.
Zacks analysts have recently upgraded Matador Resources to an “outperform” rating. Even Northland Capital Partners now has an “outperform” rating on the stock.
A dozen equities research analysts have rated the stock with either a hold rating or a buy rating.
Few Other Junior Stocks to Watch Out for
EPL Oil & Gas Inc. (EPL) is conducting studies and making acquisitions in the shallow basin area. In 2012, EPL bought Hilcorp assets for $550 million and since then has spent over a year in studying the area. It is expected to spend over $100 million this year in further exploration and drilling.
Comstock Resources Inc. (NYSE:CRK) is another company poised for bigger things as it sets foot East Texas Eagle Ford, spending $100 million for exploration. It plans to drill 10 wells there this year on 21,000 net acres. It also bought 51,000 net acres in the Tuscaloosa Marine Shale where it plans to drill a couple of wells that will add to its assets.
It is advisable though to play smart with these stocks. Buy small and sell if prices increase suddenly over a short span. However, keeping a horizon of three to four years on these stocks will surely be worthwhile.
Disclosure: I do not hold any position in the stocks mentioned in the article.