FBR Capital Downgrades Memorial Production Partners (MEMP) to Market Perform
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FBR Capital downgraded Memorial Production Partners (NASDAQ: MEMP) from Outperform to Market Perform with a price target of $1.00 (from $3.50).
Analyst Chad Mabry commented, "On Friday, October 28, after the close, Memorial Production Partners announced that it is suspending its quarterly distribution on its common units. The partnership’s lending group appears to be the culprit as it seems to be ensuring that every penny of future cash flow goes toward paydown of its credit facility. The draconian decision comes as a surprise as MEMP’s previously reduced distribution had 2016E and 2017E coverage of over 10x, supported by a hedge book valued at more than $500 million (or over $6/unit). In our view, yield is the primary reason to own MLPs, so we can no longer recommend units of MEMP in the absence of a distribution. As such, we are downgrading units of MEMP to Market Perform (from Outperform) and lowering our price target to $1.00 (from $3.50), which is based on a 2017E EVto-EBITDA multiple of 6.5x."
Shares of Memorial Production Partners closed at $1.09 yesterday.
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