Oct. 24, 2023– Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today reported financial and operating results for the third quarter of 2023. A short slide presentation summarizing the highlights of Matador’s third quarter 2023 earnings release is also included on the Company’s website at www.matadorresources.com on the Events and Presentations page under the Investor Relations tab.
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Management Summary Comments
Joseph Wm. Foran, Matador’s Founder, Chairman and CEO, commented, “Matador achieved record results for the third quarter of 2023 due to the continued execution and teamwork by Matador’s staff, management team, Board of Directors, vendors, contractors and partners, among others. These results reflect our long-term approach to managing Matador’s business allowing for profitable growth at a measured pace, maintaining a strong balance sheet and returning value to our shareholders. We are pleased that this long-term approach is being increasingly recognized as Matador’s stock has been a top performer among our peer group over the last five years (see Slide A). In fact, Matador has significantly outperformed both the price of oil and the S&P Oil and Gas Exploration & Production Select Industry Index, or XOP Index, since our initial public offering in February 2012 and the acquisition of the Boros, Voni and Rodney Robinson leases from the Bureau of Land Management in 2018 (see Slide B).
Record Production and Better-Than-Expected Cost Savings in Third Quarter 2023
“The third quarter of 2023 was the best quarter of total production in Matador’s history, as we averaged more than 135,000 barrels of oil and natural gas equivalent (‘BOE’) per day. This record total production for the third quarter of 2023 was 3% better sequentially than our former total production record of 130,683 BOE per day in the second quarter of 2023. Notably, we also achieved record oil production during the third quarter of 2023 of 77,529 barrels per day, which was 2% better sequentially than our previous oil production record of 76,345 barrels per day in the second quarter of 2023. Matador also achieved record natural gas production during the third quarter of 2023 of 345.4 million cubic feet per day, which was 6% better sequentially than our prior natural gas production record of 326.0 million cubic feet per day in the second quarter of 2023. We achieved these record production results despite the challenges of bringing on the largest batch of wells in Matador’s history as well as challenges associated with maintenance, weather and potential midstream takeaway constraints.
“A portion of the natural gas from Matador’s wells in northern Lea County, New Mexico is being delivered to and processed by Pronto Midstream, LLC (“Pronto”), our wholly-owned midstream subsidiary, at its cryogenic natural gas processing plant named the ‘Marlan Plant’ in honor of our former director and advisor Marlan Downey. The Marlan Plant provides flow assurance for much of our acreage in northern Lea County, New Mexico as well as other producers and midstream companies in the area. Due in part to the natural gas production from Matador’s wells in northern Lea County, we are pleased to report that the Marlan Plant is now processing natural gas volumes up to its designed inlet capacity of 60 million cubic feet per day.
“In addition to record production during the third quarter, we also achieved better-than-expected drilling, completing and equipping (“D/C/E”) capital expenditures and midstream capital expenditures. Matador’s D/C/E capital expenditures for the third quarter of 2023 were approximately $4 million lower than expected. Midstream capital expenditures were approximately $48 million lower than expected for the third quarter of 2023. We currently expect full-year 2023 midstream capital expenditures of $135 million to $165 million as compared to our prior expectation of $150 million to $200 million. Approximately $10 million of this decrease is due to cost savings with the remainder due to the timing of our planned projects.
“Our record production and lower costs led to better-than-expected Net Cash Provided by Operating Activities of $461.0 million for the third quarter of 2023 and Adjusted Free Cash Flow of $144.6 million for the third quarter of 2023. We used a portion of this free cash flow to continue our long tradition of paying down debt and various brick-by-brick acquisitions, which have been instrumental in building our acreage position to over 150,000 net acres in the Delaware Basin (see Slide C). The Board and I thank and congratulate all the Matador staff that have worked on these transactions, which continue to provide significant value to Matador and its shareholders.
Increased Dividend and Continued Debt Repayment
“Matador was pleased to announce last week that our Board of Directors increased our fixed quarterly cash dividend from $0.15 per share, or $0.60 per share on an annual basis, to $0.20 per share, or $0.80 per share on an annual basis (see Slide D). This is the fourth increase in our fixed dividend since our Board initiated the dividend in the first quarter of 2021. Our ability to raise our dividend again evidences our increasing financial and operational strength.
“Matador was also pleased to announce last week that our bank group amended our credit agreement to increase the borrowing base by $250 million to $2.5 billion and increase the elected commitment by $75 million to $1.325 billion (see Slide E). In connection with the amendment, we welcomed JPMorgan Chase Bank, N.A. as the newest member to our bank group. We value our lending relationships and are grateful for the support of each of our banks.
“The support of our banks was critical in connection with our Advance acquisition as we borrowed $700 million under Matador’s credit agreement. Since then, we have repaid $200 million of these borrowings leaving only $500 million outstanding under Matador’s credit agreement today. As of September 30, 2023, our leverage ratio was just under 1.0x. We expect our leverage ratio to remain 1.0x or less for the remainder of 2023 and anticipate being able to fully repay the borrowings under Matador’s credit agreement in 2024 at current commodity prices.
Horseshoe Well Update
“In October 2023, Matador turned to sales its first two ‘horseshoe’ wells in our Wolf asset area in Loving County, Texas (see Slide F). We are pleased to announce that these two horseshoe wells have 24-hour initial production test results of 2,477 BOE per day (51% oil) and 2,166 BOE per day (53% oil), respectively, and have high initial flowing casing pressures between 3,650 and 4,100 pounds per square inch. We are encouraged by the early initial production from the horseshoe wells, which is comparable to or better than traditional two-mile lateral wells drilled in the Wolf asset area. We estimate that we achieved approximately $10 million in cost savings by drilling two horseshoe two-mile lateral wells as compared to four one-mile lateral wells in this section.
Looking Forward to the Remainder of 2023 and Into 2024
“Matador expects to finish the year strong with continued production increases, cost efficiencies and debt repayment. We anticipate achieving the mid-to-high end of our full-year 2023 guidance range for total oil and natural gas equivalent production, oil production and natural gas production. We also expect lower capital expenditures for full-year 2023, primarily due to lower midstream capital expenditures of $25 million.
“For the fourth quarter of 2023, we now expect to produce an average of approximately 145,000 BOE per day, which is a 2% increase from our previous expectation of 143,000 BOE per day (see Slide G). In addition, we anticipate our oil production to average 86,750 barrels of oil per day at the midpoint of our guidance during the fourth quarter, which is a 1% increase from our previous expectation of 86,000 barrels of oil per day. In addition to the increased production during the fourth quarter of 2023, we also anticipate having 47 net wells in some stage of drilling or completion on December 31, 2023.
“We are currently operating seven drilling rigs and anticipate adding an eighth drilling rig in the first quarter of 2024. This additional drilling rig is expected to be a ‘super-spec’ drilling rig similar to our other seven drilling rigs. We are pleased with our extensive well inventory and continued capital and operating efficiencies that allow us to add this drilling rig. Special thanks go to our vendors and operational teams for helping achieve these efficiencies.
“Matador also continues to make progress with its midstream assets to increase the ‘flow assurance’ essential for its growing production volumes and third-party relationships in the Delaware Basin. We expect to connect Pronto’s natural gas system with the natural gas system owned by San Mateo Midstream, LLC (“San Mateo”), our midstream joint venture, in the first quarter of 2024. We also expect to connect Pronto’s natural gas system to our Advance acreage in the first quarter of 2024, which will allow us to directly deliver natural gas volumes from the Advance acreage to the Marlan Plant. In addition to these connections, we continue to move forward with our plans to expand our processing capacity by adding an additional cryogenic natural gas processing plant with a designed inlet capacity of 200 million cubic feet of natural gas per day and are evaluating whether to include a partner in building the processing plant. Matador has a history of successfully building midstream assets. We formed San Mateo in 2017 and have grown our midstream assets since then, both at San Mateo and Pronto, to include approximately 525 miles of oil, natural gas and water pipelines, 520 million cubic feet per day of designed natural gas processing capacity and over 475,000 barrels per day of designed water disposal capacity (see Slide H).
“Thanks again for your interest and support and thanks to the Board, the staff and our stakeholders for their extra efforts and teamwork to keep Matador growing.”
Third Quarter 2023 Matador Operational and Financial Highlights
(for comparisons to last year, please see the remainder of this press release)
- Average production of 135,096 BOE per day (77,529 barrels of oil per day)
- Net cash provided by operating activities of $461.0 million
- Adjusted Free Cash Flow of $144.6 million
- Net income of $263.7 million, or $2.20 per diluted common share
- Adjusted net income of $223.4 million, or adjusted earnings of $1.86 per diluted common share
- Adjusted EBITDA of $508.3 million
- San Mateo net income of $29.9 million
- San Mateo Adjusted EBITDA of $47.1 million
- D/C/E capital expenditures of $296.0 million
- Midstream capital expenditures of $41.7 million
All references to Matador’s net income, adjusted net income, Adjusted EBITDA and adjusted free cash flow reported throughout this earnings release are those values attributable to Matador Resources Company shareholders after giving effect to any net income, adjusted net income, Adjusted EBITDA or adjusted free cash flow, respectively, attributable to third-party non-controlling interests, including in San Mateo Midstream, LLC (“San Mateo”). Matador owns 51% of San Mateo. For a definition of adjusted net income, adjusted earnings per diluted common share, Adjusted EBITDA and adjusted free cash flow and reconciliations of such non-GAAP financial metrics to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.
Full-Year 2023 Guidance Update
Effective October 24, 2023, Matador anticipates achieving the mid-to-high end of its full-year 2023 guidance range for total oil and natural gas equivalent production, oil production and natural gas production. Matador also expects lower capital expenditures for full-year 2023, primarily due to lower midstream capital expenditures of $25 million.
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