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MTDR – No Traded CDS, Base Case iCDS 190bps, Negative Case iCDS 388bps, 2026 5.875% Bond YTW of 5.873%, iYTW of 2.683%, B2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

August 26, 2021

  • Credit markets are grossly overstating MTDR’s credit risk with a YTW of 5.873%, relative to an Intrinsic YTW of 2.683% and an Intrinsic CDS of 190bps. Meanwhile, Moody’s is materially overstating the firm’s fundamental credit risk, with its B2 credit rating seven notches lower than Valens’ IG4+ (Baa1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights mostly favorable signals for credit holders. Management’s compensation framework should drive them to focus on all three value drivers: asset efficiency, margin expansion, and revenue growth, which should lead to Uniform ROA improvement and higher cash flows available for servicing obligations. Additionally, although most management members are not material owners of MTDR’s equity relative to their annual compensation, CEO Foran’s significant holdings indicate he may influence other NEOs to align their actions with shareholders’ interest. Finally, most management members are not well-compensated in a change in control, indicating they are not incentivized to pursue a sale or accept a buyout of the firm, reducing event risk.