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No 'Ole' For This Matador

posted Jan 31, 2012, 2:32 AM by Jeff Davies   [ updated Jan 31, 2012, 9:13 AM ]
If 'ole' means bravo, the valuation of the Matador IPO (ticker: MTDR) seems very ironic for there is nothing to cheer.  One of two deal this week, I'm not sure I understand why there are buyers of a gassy Haynesville/EFS start-up at these kinds of valuation multiples.  Haven't met management, but I'm not impressed by running up $123 million on the revolver out of a $125 million borrowing base.  Nothing like showing potential buyers of your stock the gun to your head and then bringing a rich deal (my opinion only of course).  I wouldn't be surprised to see this price below talk.    The S-1 already tells you they are going to need to tap the revolver again soon and it will be reduced to only $100 million.  Best thing I can say about the company is it looks like they picked off CHK with the Haynesville sale in '08, but then again CHK turned around and picked off PXP.  They also have EFS acreage in some good counties and are partners with operators like EOG, but even using lofty 'acreage math' MTDR valuation looks stretched.  Don't be fooled by the cape, run away from this Matador.

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