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Midstates Petroleum (MPO) - IPO analysis

posted Apr 26, 2012, 1:22 PM by Jeff Davies   [ updated Apr 26, 2012, 1:31 PM ]
Midstates Petroleum - a First Reserve portfolio company - priced its IPO last week at $13, below the expected range of $16-18.  They are focusing on exploring and exploiting the Wilcox trend in Louisiana.  Without meeting them, management looks solid, with good pedigrees and it appears all employees have skin in the game via equity.  Production slipped a bit in 1Q12 vs 4Q11 due to increased water cut at a couple wells, but the company appears to be poised to achieve 50% growth in 2012.  With 65-70% liquids production (59% crude, 11% NGLs in '11) and premium LLS crude pricing, MPO fits the bill of current investor favor.  They will likely need to tap the credit markets to fund a roughly $175 million funding shortfall this year, but based on some simple forward modeling, the stock looks relatively cheap at 3.5x 2014E EBITDAX.  There are certainly no obvious red flags, so could be a good new name to keep an eye on.

Attached pdf file gives a breakdown of the s-1, along with some simple fwd modeling.
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MPO.pdf
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Jeff Davies,
Apr 26, 2012, 1:31 PM
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