Memorial Production Partners (NASDAQ:MEMP) vs. Legacy Reserves (LGCY) Financial Analysis

Memorial Production Partners (NASDAQ: MEMP) and Legacy Reserves (NASDAQ:LGCY) are both energy companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, dividends, institutional ownership, profitability, valuation, analyst recommendations and risk.

Profitability

This table compares Memorial Production Partners and Legacy Reserves’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Memorial Production Partners -395.31% -496.55% -58.07%
Legacy Reserves -28.19% N/A -1.59%

Dividends

Memorial Production Partners pays an annual dividend of $0.06 per share and has a dividend yield of 48.0%. Legacy Reserves does not pay a dividend. Memorial Production Partners pays out -3.4% of its earnings in the form of a dividend.

Institutional & Insider Ownership

5.5% of Memorial Production Partners shares are held by institutional investors. Comparatively, 20.8% of Legacy Reserves shares are held by institutional investors. 1.5% of Memorial Production Partners shares are held by company insiders. Comparatively, 10.2% of Legacy Reserves shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Memorial Production Partners and Legacy Reserves, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Memorial Production Partners 3 2 0 0 1.40
Legacy Reserves 1 2 0 0 1.67

Memorial Production Partners presently has a consensus price target of $1.40, indicating a potential upside of 1,020.00%. Legacy Reserves has a consensus price target of $1.88, indicating a potential upside of 54.37%. Given Memorial Production Partners’ higher probable upside, research analysts plainly believe Memorial Production Partners is more favorable than Legacy Reserves.

Risk and Volatility

Memorial Production Partners has a beta of 1.3, meaning that its share price is 30% more volatile than the S&P 500. Comparatively, Legacy Reserves has a beta of 2.46, meaning that its share price is 146% more volatile than the S&P 500.

Earnings and Valuation

This table compares Memorial Production Partners and Legacy Reserves’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Memorial Production Partners N/A N/A N/A ($1.75) -0.07
Legacy Reserves N/A N/A N/A ($1.72) -0.71

Legacy Reserves is trading at a lower price-to-earnings ratio than Memorial Production Partners, indicating that it is currently the more affordable of the two stocks.

Summary

Legacy Reserves beats Memorial Production Partners on 8 of the 11 factors compared between the two stocks.

About Memorial Production Partners

Memorial Production Partners LP (the Partnership) owns, acquires and exploits oil and natural gas properties in North America. The Partnership is owned by its limited partners and general partner. Its general partner is responsible for managing all of the Partnership’s operations and activities. The Partnership operates in the acquisition, exploitation, development and production of oil and natural gas properties segment. Its business activities are conducted through Memorial Production Operating LLC (OLLC) and its wholly owned subsidiaries. Its assets consist primarily of producing oil and natural gas properties, and are located in East Texas/Louisiana, Rockies, Offshore Southern California, Permian Basin and South Texas. Most of its oil and natural gas properties are located in oil and natural gas reservoirs with geologic characteristics and production profiles and capital requirements.

About Legacy Reserves

Legacy Reserves LP (Legacy) is a master limited partnership company. The Company focuses on the acquisition and development of oil and natural gas properties located in the Permian Basin, East Texas, Rocky Mountain and Mid-Continent regions of the United States. As of December 31, 2016, the Company had proved reserves of approximately 144.8 million barrels of crude oil equivalent (MMBoe), of which 72% were natural gas, 28% were oil and natural gas liquids (NGLs) and 94% were classified as proved developed producing. As of December 31, 2016, the Company owned interests in producing oil and natural gas properties in 627 fields in the Permian Basin, East Texas, Piceance Basin of Colorado, Texas Panhandle, Wyoming, North Dakota, Montana, Oklahoma and various other states, from 10,775 gross productive wells, of which 3,799 were operated and 6,976 were non-operated. The Company’s fields and regions include East Texas, Piceance Basin, Spraberry/War San, Lea, Texas Panhandle and Deep Rock.

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