MTDR – Traded Base Case iCDS 133bps, Negative Case iCDS 189bps, 2026 5.875% Bond YTW of 5.223%, iYTW of 4.043%, B1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
August 5, 2022
- Credit markets are overstating MTDR’s credit risk with a YTW of 5.223% relative to an Intrinsic YTW of 4.043% and an Intrinsic CDS of 133bps. Furthermore, Moody’s is materially overstating MTDR’s fundamental credit risk with its B1 credit rating six notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights favorable signals for credit holders. MTDR’s metrics should focus management on all three value drivers: margin expansion, asset efficiency, and revenue growth, which should lead to higher Uniform ROA and more cash flow available to service debt obligations.
- Earnings Call Forensics™ of the firm’s Q2 2022 earnings call (7/27) highlights that management is confident they prioritize dividends and that production improvements are due to better rock locations and improved capital efficiency.
