Legacy Reserves, LP (NASDAQ:LGCY)’s Shares on the Rise After Disclosure of ‘Not Cheap But Needed’ Second Lien Term Loan

Oil and natural gas properties developer, Legacy Reserves, LP (NASDAQ:LGCY), discloses second lien term loan of $300 million.

A day after Legacy Reserves LP (NASDAQ: LGCY) disclosed second lien term loan of a maximum of $300 million, Stifel termed it as “not cheap.” However, the firm thinks the company needed it badly.

Following the move, analyst Brian Brungardt upgraded the stock from Sell to Hold and boosted the target price from $0.50 to $1.7. On Wednesday, the stock traded between $1.53 and $1.95 after the credit facility announcement. The analyst thinks the transaction is incrementally positive for Legacy Reserves.

In a note, the brokerage said, “We view that risk as largely removed with new access to liquidity. Additionally, we anticipate the partnership’s previous disclosure that its hedge counterparties were reluctant to add incremental commodity hedges has been resolved given the requirement the partnership must hedge at least 75% of its PDP production through FY18.”

Stifel noted that the company would use $60 million to repay its outstanding debt and transaction charges. The credit facility comes at a price of 12 percent yearly interest rate apart from two percent upfront fee.

As the company would announce its results on November 3, the brokerage indicated it would update the outlook based on the management and the operational results of the third quarter.

At last check, the stock gained 33.54 percent to $1.82.

Latest Ratings for LGCY

About Legacy:

Legacy Reserves LP acquires and develops oil and natural gas properties primarily in the Permian Basin, East Texas, Rocky Mountain, and Mid-Continent regions of the United States. As of December 31, 2015, the company owned interests in producing oil and natural gas properties in 723 fields comprising 12,201 gross productive wells, including 4,545 operated and 7,656 non-operated well located in the Permian Basin, East Texas, Piceance Basin of Colorado, Texas Panhandle, Wyoming, North Dakota, Montana, Oklahoma, and other states. It had proved reserves of approximately 164.2 million barrels of crude oil equivalent. Legacy Reserves LP was founded in 2005 and is headquartered in Midland, Texas.

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Legacy Reserves, LP (NASDAQ:LGCY) shares have moved +27.21% on the news thus far today and have traded in the range of $1.53 – 1.95 during the current session. In order to take a look at where the stock might be headed longer term, investors often look to research firms that cover the stock. Sell-side research firms currently have a consensus one-year price target of $1.21 on the stock.  This is according to brokerage analysts polled by Thomson Reuters First Call.  The sell-side analysts are projecting earnings per share of $-0.20 for the next fiscal quarter.  For the current year, analysts are predicting earnings of $0.17 per share according to First Call.

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In looking at where the stock is trading on a technical level, the stock is trading +20.58% away from its 50-day moving average of $1.43.  Based on the most recent available data, the equity is -63.03% off of its 52-week high of $4.68 and +183.61% away from its 52-week low which is $0.61.  This is a crucial indicator investors watch as higher ratios compared to peers, would suggest higher future earnings growth potential for the stock.  The price to current year EPS estimates from research analysts currently stands at 10.18.

Today, the stock opened at $1.63 and the last bid at the time of writing stood at $1.73.  During the session thus far, the equity dipped down to $1.53 and touched $1.95 as the high point.  Legacy Reserves, LP (NASDAQ:LGCY) has a market cap of $125.27M and has seen an average daily volume of 465,569 over the past three months.

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