MEI announced Q3/12 results last night, beating on both production and cash flow.

1) Q3 production was ahead of our forecast and, more importantly, the liquids contribution was 49% (we were expecting 44%). Current production is 3,450 BOE/d and we believe that MEI is on track to beating its target annual guidance of 2,430 BOE/d.

2) CFPS was
.11, ahead of our
.09 forecast and consensus of
.073 (Bloomberg, four estimates). The operating cost structure was generally better than expectations.

3) MEI provided soft guidance of $65mm-70mm in capex to drill up to 16 gross (11.8 net) wells in 2013.

Although MEI did not release any new drill results or operational news, we believe that the market will react positively to last night’s Q3 beat.

In our view, the company is in solid shape to beat its production targets, provided a directionally positive 2013 budget, and we look for updated production results some time before year-end which may increase price target again.

Very nice