DALLAS--(BUSINESS WIRE)--Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today reported financial and operating results for the third quarter of 2022. A short slide presentation summarizing the highlights of Matador’s third quarter 2022 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.

Management Summary Comments

Joseph Wm. Foran, Matador’s Founder, Chairman and CEO, commented, “On both our website and the webcast planned for tomorrow’s earnings conference call is a set of six slides identified as ‘Chairman’s Remarks’ (Slides A through F) to add color and detail to my remarks. We invite you to review these slides in conjunction with my comments below, which are intended to provide context for the third quarter 2022 results compared to Matador’s stated goals for the year.

Third Quarter 2022 Results Above Expectations

“The third quarter of 2022 was another outstanding quarter for Matador highlighted by production and operating results above our expectations (see Slide A). We are on path to achieve our primary aims for the year to increase shareholder value by the following efforts:

• Growing the fixed dividend and returns to shareholders;
• Reducing debt; and
• Increasing production, reserves and midstream assets.

“Notably, Matador’s growing midstream business, including our 51%-owned joint venture San Mateo Midstream and our new acquisition Pronto Midstream, which is now fully integrated, has delivered strong results in the third quarter highlighted by all-time quarterly highs for third-party midstream revenues and water handling volumes (see Slide B). The team’s strong execution continues to help us deliver wells both on time and on budget across approximately 450 miles of pipeline in our midstream business.

Debt Reduced, Credit Ratings Upgraded and Quarterly Dividend Doubled

“In the last two years, Matador has reduced its outstanding debt by $775 million or over half of our then total revolving debt and bond debt outstanding of $1.525 billion. Now, Matador’s reserves-based revolving credit facility has been completely repaid, and Matador has repurchased $300 million of its outstanding bond debt in a series of open market transactions, reducing its outstanding bond debt from $1.05 billion at December 31, 2021 to $750 million at October 25, 2022 (see Slide C). Matador is a stronger company than it was two years ago. Matador’s leverage ratio has declined from 2.9x at year-end 2020 to 0.2x at the end of the third quarter of 2022, marking Matador’s lowest leverage ratio in over ten years as a public company. Matador expects to continue using a portion of its free cash flow to continue opportunistically reducing its bond debt. At September 30, 2022, Matador has over $400 million of cash in the bank and has available the optionality to pursue a number of opportunities and strategic options going forward.

“In September and October, we were also pleased to announce that all three of Matador’s credit rating agencies—Moody’s, S&P and Fitch—upgraded Matador’s corporate credit rating (see Slide D). Matador has now transitioned from being a ‘single B’ company to a ‘double B’ company across the board. These upgrades reflect our commitment to repaying debt, improving capital efficiency, adding to our production profile and increasing Matador’s cash returns to our shareholders. The rating agencies specifically noted the increasing strength of our balance sheet and our strong operational execution in their decisions to upgrade Matador’s credit rating.

“As a result of our confidence in Matador’s growing operational and financial strength and our execution this year, we were very pleased to announce at our Annual Meeting of Shareholders in June the doubling of our fixed cash dividend from $0.20 per share to $0.40 per share on an annualized basis. This higher dividend was first paid in September. Shareholders of record as of November 10, 2022 can expect our next quarterly cash dividend set again at $0.10 per share, or $0.40 per share on an annualized basis, to be paid on December 1, 2022.

Stronger than Expected Production Results in Third Quarter 2022

“During the third quarter of 2022, Matador achieved better than expected average oil and natural gas equivalent production of over 105,000 barrels of oil and natural gas equivalent (“BOE”) per day (see Slide E), which was 4% better than our expectations of approximately 101,000 BOE per day. In addition, Matador’s production has increased by nearly 50% from 73,000 BOE per day in the third quarter of 2020 to over 105,000 BOE per day in the third quarter of 2022.

Seventh Drilling Rig Added in Third Quarter 2022

“During the third quarter of 2022, Matador added a seventh drilling rig, which allowed us to drill the Jim Pat SWD well before the injection permit authorizing the disposal of produced water into this well expired. As a result, Matador was able to boost San Mateo’s salt water disposal capacity and accelerate the timing of the next phase of drilling on its Rodney Robinson leasehold in the western portion of the Antelope Ridge asset area. The next eight high volume Rodney Robinson wells are expected to be turned to sales late in the first quarter or early in the second quarter of 2023. We continue to be very pleased with the well performance and strong economic results across multiple completion intervals throughout the Rodney Robinson leasehold. The arrival of the state-of-the-art seventh rig provides us with additional operational flexibility on drilling deeper wells and longer laterals.

“Matador is pleased with the early performance of the seventh rig, which has enhanced technical specifications highly sought after by the industry. This rig’s increased set-back capabilities, for example, allow for an approximate 10% increase in drill-pipe to be racked in the derrick, while other unique features allow faster walk times on multi-well pads. As Matador continues its push for longer lateral lengths and multi-well pads across its Delaware Basin assets, these advantages should continue to help to minimize drilling days and further improve operational and capital efficiency.

Looking Ahead and Increasing Full Year 2022 Guidance

“Due to the better-than-expected well performance across our Delaware Basin asset areas in the third quarter of 2022, we are increasing the midpoints of our 2022 total oil and natural gas production guidance from 21.7 million barrels to 21.85 million barrels for oil and from 95.5 billion cubic feet to 97.0 billion cubic feet for natural gas (see Slide F).

“The midpoint of our 2022 capital expenditures guidance for drilling, completing and equipping wells remains unchanged at $800 million. Operating efficiencies, which include faster drill times and use of existing facilities, continue to improve and help to mitigate service cost inflationary pressures realized in 2022. Sustainable efficiencies such as improved completion procedures, simultaneous and remote fracturing operations and 100% implementation of dual-fuel fracturing fleets constitute primary drivers against cost inflation by reducing days spent on wells and eliminating the need for certain materials such as diesel fuel.”

Third Quarter 2022 Financial and Operational Highlights

Net Cash Provided by Operating Activities and Adjusted Free Cash Flow

• Third quarter 2022 net cash provided by operating activities was $557.0 million (GAAP basis), leading to third quarter 2022 adjusted free cash flow (a non-GAAP financial measure) of $269.1 million.

Net Income, Earnings Per Share and Adjusted EBITDA

• Third quarter 2022 net income (GAAP basis) was $337.6 million, or $2.82 per diluted common share, a 19% sequential decrease from net income of $415.7 million in the second quarter of 2022, but a 66% year-over-year increase from net income of $203.6 million in the third quarter of 2021. The sequential decrease in net income was primarily attributable to the sequential decline in commodity prices in the third quarter of 2022. Matador’s realized oil price was $94.36 per barrel in the third quarter of 2022, a 15% sequential decrease as compared to $111.06 per barrel realized in the second quarter of 2022.
• Third quarter 2022 adjusted net income (a non-GAAP financial measure) was $321.7 million, or adjusted earnings of $2.68 per diluted common share, a 23% sequential decrease from adjusted net income of $415.6 million in the second quarter of 2022, but a 116% year-over-year increase from adjusted net income of $148.6 million in the third quarter of 2021.
• Third quarter 2022 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) were $539.7 million, a 19% sequential decrease from $663.8 million in the second quarter of 2022, but an 84% year-over-year increase from $293.8 million in the third quarter of 2021.

Oil, Natural Gas and Total Production Above Expectations

• As summarized in the table below, Matador’s third quarter 2022 average daily oil, natural gas and total production were all above the Company’s expectations. The primary driver behind this outperformance was better-than-expected production from the 15 most recent Stateline and nine most recent Rodney Robinson wells turned to sales this year and increased working interests from several trades completed earlier than anticipated during the third quarter. In addition, several anticipated incremental shut-ins in the Stateline asset area due to offset operator completions were deferred from the third quarter to the fourth quarter of 2022.

Capital Expenditures Below Expectations

• Drilling and completion costs for the 20 gross (18.5 net) operated horizontal wells turned to sales in the third quarter of 2022 averaged $948 per completed lateral foot. Drilling and completion costs year to date averaged $820 per completed lateral foot. Matador continues to expect service cost inflation to continue into the fourth quarter of 2022 but still expects drilling and completion costs to average $890 per completed lateral foot for full-year 2022.

Note: 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. References to Pronto Midstream refer to Pronto Midstream, LLC, which was acquired by a subsidiary of Matador on June 30, 2022. 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.

Sequential and year-over-year quarterly comparisons of selected financial and operating items are shown in the following table:

Full-Year 2022 Guidance Update

As shown in the table below, effective October 25, 2022, Matador raised the midpoint of its full year 2022 guidance estimates for oil, natural gas and total oil equivalent production, which were originally provided on February 22, 2022 and affirmed or updated on July 26, 2022. In addition, Matador affirmed its estimates for D/C/E and midstream capital expenditures.

Matador now expects to turn to sales 81 gross (64.3 net) operated horizontal wells during 2022, an increase of one gross (0.6 net) wells from the Company’s prior expectations, primarily as a result of completion schedule changes and additional working interests from anticipated acreage trades.

Fourth Quarter 2022 Completions and Production Cadence Update

Fourth Quarter 2022 Estimated Wells Turned to Sales

At October 25, 2022, Matador expects to turn to sales 24 gross (15.2 net) operated horizontal wells in the Delaware Basin during the fourth quarter of 2022, consisting of 12 gross (8.7 net) wells in the Ranger asset area, six gross (3.8 net) wells in the Rustler Breaks asset area, four gross (1.7 net) wells in the Antelope Ridge asset area and two gross (1.0 net) wells in the Arrowhead asset area. The Company expects the average completed lateral length of these wells to be approximately 9,500 feet.

Fourth Quarter 2022 Estimated Oil, Natural Gas and Total Oil Equivalent Production

The table below provides Matador’s estimates, as of October 25, 2022, for the anticipated average daily total oil equivalent, oil and natural gas production for the fourth quarter of 2022.

As noted in the table above, Matador expects its average daily total oil and natural gas equivalent production to increase 1% sequentially from 105,214 BOE per day in the third quarter of 2022 to approximately 106,500 BOE per day in the fourth quarter of 2022. As noted above, Matador expects to turn to sales one additional gross well in its Ranger asset area in 2022, as compared to its previous expectations. Because this additional well was added to the Company’s drill schedule as part of a larger batch, the initial production from several other wells in this batch is expected to be later in the fourth quarter, as compared to Matador’s previous expectations. In addition, several anticipated incremental shut-ins in the Stateline asset area due to offset operator completions were deferred from the third quarter to the fourth quarter of 2022.

Third Quarter Horizontal Wells Completed and Turned to Sales

Note: WC = Wolfcamp; BS = Bone Spring; HSVL = Haynesville. For example, 2-2BS indicates two Second Bone Spring completions and 2-WC A indicates two Wolfcamp A completions.

Realized Commodity Prices

Oil Prices

For the fourth quarter of 2022, Matador’s weighted average oil price differential relative to the WTI benchmark price, inclusive of the monthly roll and transportation costs, is anticipated to be in the range of +$0.50 to +$1.50 per barrel, which is lower than the differential of +$2.93 per barrel of oil realized in the third quarter of 2022. This compression of the oil price differential in the fourth quarter is primarily attributable to a reduction in the contribution of the monthly roll in the fourth quarter, as compared to the third quarter.

At October 25, 2022, Matador had approximately 2.7 million barrels of oil hedged for the fourth quarter of 2022 using costless collars with a weighted average floor price of approximately $65 per barrel and a weighted average ceiling price of approximately $110 per barrel.

Mac Schmitz
Vice President - Investor Relations
(972) 371-5225
This email address is being protected from spambots. You need JavaScript enabled to view it.