| Legacy reported Q3/13 results that where in line on production but light on cash flow. Production came in at 19,489 Boe/d, relatively in line with our 19,598 Boe/d estimate, with liquids volumes coming in ahead at 17,893 Bbl/d versus our 17,650 Bbl/d estimate. That said, cash flow of $81.0 MM ($0.51/share) was below our $86.9 MM ($0.55/share) estimate and consensus of $0.52/share. The drivers of the variance were lower realized pricing and operating costs coming in 6% higher than expected. The company was quite active in the quarter, spending $90.3 MM, leaving only ~$50 MM of the 2013 budget to be invested in Q4. Given the strong level of spending, the company has recently achieved its exit guidance of 21,500 Boe/d, a month and a half ahead of schedule. LEG offers good relative value, offering PPSG of 13.4% next year compared to the domestic oil producer average PPSG plus yield of 14.5% but with a 0.3x improvement to D/CF in 2014, while the group average leverage remains flat at 1.7x Y/Y, all while trading at a discount |