MTDR’s operating sustainability, capex flexibility, and robust recovery rate indicate that credit markets and rating agencies are overstating credit risk

• Credit markets are materially overstating MTDR’s credit risk with a YTW of 5.200% relative to an Intrinsic YTW of 3.070% and an Intrinsic CDS of 138bps. Similarly, Moody’s is materially overstating the firm’s fundamental credit risk, with its B1 credit rating six 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, 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.
  
• Earnings Call Forensics™ of the firm’s Q3 2021 earnings call highlights that management is confident investors will appreciate their capital allocation plans. They are also confident their teams are in the process of submitting more permits at Rodney Robinson for additional zones in the 3rd Bone carbonate, where they have done an excellent job removing the water on pipes.