DALLAS–(BUSINESS WIRE)–Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today reported financial and operating results for the first quarter of 2018. A short slide presentation summarizing the highlights of Matador’s first quarter 2018 earnings release is also included on the Company’s website at www.matadorresources.com on the Presentations & Webcasts page under the Investors tab.
First Quarter 2018 Financial and Operational Highlights
- Q1 2018 average daily oil equivalent production increased 4% sequentially to a record quarterly high of 45,300 BOE per day (58% oil) as compared to Q4 2017. Average daily oil production increased 7% sequentially to 26,500 barrels per day and average daily natural gas production decreased 1% sequentially to 112.9 million cubic feet of natural gas per day as compared to Q4 2017.
- Q1 2018 Delaware Basin average daily oil equivalent production increased 7% sequentially to a record quarterly high of 37,200 BOE per day (63% oil) as compared to Q4 2017. Delaware Basin average daily oil production increased 11% to 23,400 barrels per day and Delaware Basin average daily natural gas production remained essentially flat at 82.8 million cubic feet per day as compared to Q4 2017.
- Q1 2018 net income (GAAP basis) was $59.9 million, or $0.55 per diluted common share.
- Q1 2018 adjusted net income (a non-GAAP financial measure) was $39.1 million, or $0.36 per diluted common share.
- Q1 2018 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) were $117.3 million.
- The Leo Thorsness 13-24S-33E AR #211H (Leo Thorsness #211H) well, Matador’s first Wolfcamp A-Lower completion in its Antelope Ridge asset area, flowed 2,906 BOE per day (72% oil), consisting of 2,087 barrels of oil per day and 4.9 million cubic feet of natural gas per day, during a 24-hour initial potential test. The Leo Thorsness #211H well had the highest 24-hour initial potential test rate of any well Matador has drilled to date in the Delaware Basin.
Note: All references to net income, adjusted net income and Adjusted EBITDA reported throughout this earnings release are those values attributable to Matador Resources Company shareholders after giving effect to any net income, net loss or Adjusted EBITDA, respectively, attributable to third-party non-controlling interests, including in Matador’s midstream affiliate, San Mateo Midstream, LLC (“San Mateo” or the “Joint Venture”). For a definition of adjusted net income, adjusted earnings per diluted common share and Adjusted EBITDA and reconciliations of such non-GAAP financial metrics to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.
Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “The first quarter of 2018 was another strong quarter for Matador marked by steadily improving financial and operational execution and by the 15th consecutive quarter in which Matador has met or exceeded consensus estimates. We continue to be pleased with the consistently strong well results our asset teams are achieving throughout our acreage position in the Delaware Basin and are especially excited by the initial results from our first three wells in the Antelope Ridge asset area, which confirm our previous expectations that Antelope Ridge would soon become another key operating area for Matador in the northern Delaware Basin.
“Our midstream team, San Mateo, completed the planned expansion of the Black River Processing Plant on time and on budget and entered into a strategic relationship with Plains for oil gathering, both of which should deliver significant value to San Mateo customers, including Matador. With the completion of the Black River Processing Plant expansion, the strategic relationship with Plains and San Mateo’s increasing salt water disposal capacity, San Mateo has begun to attract business from producers with operations in Eddy County, New Mexico and Loving County, Texas. Further, our operational, marketing and midstream teams have worked together to ensure takeaway at favorable rates for our oil, natural gas and NGLs throughout our various asset areas. We believe our first quarter results confirm Matador’s commitment to delivering consistent results while staying nimble and opportunistic in our ongoing efforts to increase shareholder value.”
Sequential and year-over-year quarterly comparisons of selected financial and operating items are shown in the following table:
|Three Months Ended|
|March 31, 2018||December 31, 2017||March 31, 2017|
|Net Production Volumes:(1)|
|Natural gas (Bcf)(3)||10.2||10.5||7.9|
|Total oil equivalent (MBOE)(4)||4,075||4,022||2,970|
|Average Daily Production Volumes:(1)|
|Natural gas (MMcf/d)(5)||112.9||114.3||88.1|
|Total oil equivalent (BOE/d)(6)||45,273||43,718||32,999|
|Average Sales Prices:|
|Oil, without realized derivatives (per Bbl)||$||62.20||$||53.66||$||50.72|
|Oil, with realized derivatives (per Bbl)||$||60.40||$||52.30||$||49.73|
|Natural gas, without realized derivatives (per Mcf)||$||3.33||$||4.12||$||3.94|
|Natural gas, with realized derivatives (per Mcf)||$||3.33||$||4.12||$||3.86|
|Oil and natural gas revenues||$||182.0||$||165.1||$||114.8|
|Third-party midstream services revenues||$||3.1||$||3.3||$||1.6|
|Realized loss on derivatives||$||(4.3||)||$||(3.1||)||$||(2.2||)|
|Operating Expenses (per BOE):|
|Production taxes, transportation and processing||$||4.37||$||4.46||$||3.98|
|Plant and other midstream services operating||$||1.04||$||1.16||$||0.79|
|Depletion, depreciation and amortization||$||13.59||$||13.53||$||11.45|
|General and administrative(7)||$||4.40||$||4.06||$||5.50|
|Net income (millions)(9)||$||59.9||$||38.3||$||44.0|
|Earnings per common share (diluted)(9)||$||0.55||$||0.35||$||0.44|
|Adjusted net income (millions)(9)(10)||$||39.1||$||27.2||$||17.4|
|Adjusted earnings per common share (diluted)(9)(11)||$||0.36||$||0.25||$||0.17|
|Adjusted EBITDA (millions)(9)(12)||$||117.3||$||108.6||$||70.0|
(1) Production volumes reported in two streams: oil and natural gas, including both dry and liquids-rich natural gas.
(2) One thousand barrels of oil.
(3) One billion cubic feet of natural gas.
(4) One thousand barrels of oil equivalent, estimated using a conversion ratio of one barrel of oil per six thousand cubic feet of natural gas.
(5) Millions of cubic feet of natural gas per day.
(6) Barrels of oil equivalent per day, estimated using a conversion ratio of one barrel of oil per six thousand cubic feet of natural gas.
(7) Includes approximately $1.03, $1.04 and $1.40 per BOE of non-cash, stock-based compensation expense in the first quarter of 2018, the fourth quarter of 2017 and the first quarter of 2017, respectively.
(8) Total does not include the impact of full-cost ceiling impairment charges or immaterial accretion expenses.
(9) Attributable to Matador Resources Company shareholders.
(10) Adjusted net income is a non-GAAP financial measure. For a definition of adjusted net income and a reconciliation of adjusted net income (non-GAAP) to net income (loss) (GAAP), please see “Supplemental Non-GAAP Financial Measures.”
(11) Adjusted earnings per diluted common share is a non-GAAP financial measure. For a definition of adjusted earnings per diluted common share and a reconciliation of adjusted earnings (loss) per diluted common share (non-GAAP) to earnings per diluted common share (GAAP), please see “Supplemental Non-GAAP Financial Measures.”
(12) Adjusted EBITDA is a non-GAAP financial measure. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA (non-GAAP) to net income (GAAP) and net cash provided by operating activities (GAAP), please see “Supplemental Non-GAAP Financial Measures.”
Significant Well Results
The following table highlights the 24-hour initial potential (“IP”) test results from certain of Matador’s operated wells completed and turned to sales in the Delaware Basin during the first quarter of 2018.
|Asset Area/Well Name||Interval||(BOE/d)||(%)||Comments|
|Antelope Ridge, Lea County, NM|
|Florence State 23-23S-34E AR #202H||Wolfcamp A-XY||1,947||81%||First operated well drilled in Antelope Ridge|
|Marlan Downey 9-23S-35E AR #111H||First Bone Spring||1,491||82%||First test of First Bone Spring in Antelope Ridge|
|Leo Thorsness 13-24S-33E AR #211H||Wolfcamp A-Lower||2,906||72%||Matador’s best 24-hr IP in the Delaware Basin|
|Rustler Breaks, Eddy County, NM|
|Garrett 32-24S-29E RB Com #201H||Wolfcamp A-XY||1,454||70%||The three Garrett wells were drilled and completed from a single pad in three stacked intervals of the Wolfcamp formation.|
|Garrett 32-24S-29E RB Com #215H||Wolfcamp A-Lower||1,480||73%|
|Garrett 32-24S-29E RB Com #221H||Wolfcamp B-Blair||2,240||45%|
|Jackson Trust, Loving County, TX|
|Totum 18-TTT-C24 NL #212H||Wolfcamp A-Lower||1,775||75%||Confirms Wolfcamp A-Lower potential|
|Ranger, Lea County, NM|
|Airstrip 31-18-35 RN State Com #133H||Third Bone Spring||1,008||92%||On pump; strong Third Bone Spring test|
Twin Lakes Asset Area, Lea County, New Mexico
- Cimarex Energy Co. reported that its State LF 32 5 #2H well, a Wolfcamp D completion, tested 977 BOE per day (84% oil) on pump, consisting of 821 barrels of oil per day and 0.9 million cubic feet of natural gas per day, from a completed lateral length of approximately 6,300 feet. Matador has a 25% working interest in this well. Matador is encouraged by the results of this latest Wolfcamp D test in its exploratory Twin Lakes asset area and looks forward to spudding and operating its upcoming Wolfcamp D test in the western portion of its Twin Lakes acreage during the second quarter of 2018.
Midstream and Marketing Highlights
- In late March 2018, San Mateo completed on time and on budget the expansion of its Black River cryogenic natural gas processing plant in Eddy County, New Mexico (the “Black River Processing Plant”), adding an incremental designed inlet capacity of 200 million cubic feet of natural gas per day and bringing the total designed inlet capacity of the Black River Processing Plant to 260 million cubic feet of natural gas per day. The expanded Black River Processing Plant supports Matador’s exploration and development activities in the Delaware Basin and, with the expanded capacity, San Mateo can now offer natural gas processing services to other producers as well.
- In March 2018, San Mateo completed a natural gas liquids (“NGL”) pipeline connection at the tailgate of the Black River Processing Plant to the NGL pipeline owned by EPIC Y Grade Pipeline, LP. The NGL connection ensures Matador and other San Mateo customers firm NGL takeaway out of the Delaware Basin. As compared to trucking the NGLs out of the area, this NGL connection should also allow Matador and other San Mateo customers to achieve increased NGL recoveries and improved pricing realizations through lower transportation and fractionation costs, among other benefits.
- On January 22, 2018, San Mateo and Matador announced a strategic relationship between a subsidiary of San Mateo and a subsidiary of Plains All American Pipeline, L.P. (NYSE: PAA) (“Plains”) to gather and transport crude oil for Matador and additional customers in Eddy County, New Mexico. Subsidiaries of San Mateo and Plains have agreed to work together through a joint tariff arrangement and related transactions to offer producers located within a joint development area of approximately 400,000 acres in Eddy County, New Mexico crude oil transportation services from the wellhead to Midland, Texas with access to other end markets. Please see San Mateo’s and Matador’s January 22, 2018 press releases for additional details regarding this strategic relationship.
- During the first quarter and early in the second quarter of 2018, Matador entered into agreements with third-party natural gas transmission companies, including most recently with El Paso Natural Gas Company, L.L.C., to secure firm takeaway capacity for all of its anticipated natural gas volumes in both the Wolf and Rustler Breaks asset areas.
- From January 1 through April 30, 2018, Matador acquired approximately 3,500 net leasehold and mineral acres in and around its existing acreage positions in the Delaware Basin.
Borrowing Base Increase
- On March 5, 2018, Matador’s lenders completed their review of the Company’s oil and natural gas reserves at December 31, 2017, and as a result, the borrowing base under the Company’s revolving credit facility was increased to $725 million. Matador elected to keep the lenders’ borrowing commitment at $400 million and the maximum facility amount remained at $500 million.
Corporate Credit Upgrade
- On March 20, 2018, Moody’s Investors Service (“Moody’s”) upgraded Matador’s Corporate Family Rating to B1 from B2 and its senior unsecured notes to B2 from B3. In increasing the Company’s credit rating, Moody’s noted Matador’s (i) growing production and reserves, large and repeatable drilling inventory and growth potential, particularly in the Delaware Basin, (ii) fiscal discipline through commodity price cycles and (iii) management’s track record.
Drilling and Completion Activities
During the first quarter of 2018, Matador continued to focus on the exploration, delineation and development of the Company’s Delaware Basin acreage position in Loving County, Texas and Lea and Eddy Counties, New Mexico. Matador began 2018 operating six drilling rigs in the Delaware Basin and continued to operate six drilling rigs throughout the first quarter and as of May 2, 2018. Matador currently expects to continue operating six drilling rigs in the Delaware Basin throughout 2018, including three rigs in the Rustler Breaks asset area, one rig in the Wolf and Jackson Trust asset areas, one rig in the Arrowhead, Ranger and Twin Lakes asset areas and one rig in the Antelope Ridge asset area. Depending on commodity prices, costs, opportunities in new asset areas like Antelope Ridge, liquidity and other factors, Matador may consider adding a seventh rig towards the end of the year.
One of the three rigs operating in the Rustler Breaks asset area is also expected to drill at least two salt water disposal wells in the area for San Mateo during 2018. As a result, the Company expects this rig will spend only approximately three-quarters of the year drilling oil and natural gas wells. Matador anticipates that it will begin drilling these two salt water disposal wells during the second quarter of 2018.
Average daily oil equivalent production increased 4% sequentially from 43,700 BOE per day (56% oil) in the fourth quarter of 2017 to 45,300 BOE per day (58% oil) in the first quarter of 2018, a record quarterly high for Matador.
Average daily oil production increased 7% sequentially from 24,700 barrels per day in the fourth quarter of 2017 to 26,500 barrels per day in the first quarter of 2018, also a record quarterly high, and well above the Company’s expectations that oil production would remain essentially flat between the two quarters. The better-than-expected oil production was attributable, in part, to strong initial well results from all three wells completed and turned to sales in the Antelope Ridge asset area, as well as to the excellent well results achieved from the three-well Garrett pad in the Rustler Breaks asset area. In addition, a key acreage trade and other land-related improvements increased Matador’s working interests and, therefore, its share of production in several wells in the Rustler Breaks and Wolf asset areas.
Average daily natural gas production decreased 1% sequentially from 114.3 million cubic feet per day in the fourth quarter of 2017 to 112.9 million cubic feet per day in the first quarter of 2018, better than the Company’s expectations for a 3 to 5% decline between the two quarters. The small decline in natural gas production in the first quarter of 2018 was primarily attributable to fewer Wolfcamp B-Blair completions in the Rustler Breaks asset area in the first quarter as compared to previous quarters, as well as to the continued decline in natural gas production from the Haynesville shale.
Realized Commodity Prices
Matador’s weighted average realized oil price, excluding derivatives, increased 16% sequentially from $53.66 per barrel in the fourth quarter of 2017 to $62.20 per barrel in the first quarter of 2018. Average oil price differentials improved from ($1.65) per barrel in the fourth quarter of 2017 to ($0.66) per barrel in the first quarter of 2018.
Matador’s weighted average realized natural gas price, excluding derivatives, decreased 19% sequentially from $4.12 per thousand cubic feet in the fourth quarter of 2017 to $3.33 per thousand cubic feet in the first quarter of 2018. Matador realized an NGL-related uplift of $0.48 per thousand cubic feet above the average NYMEX Henry Hub natural gas price in the first quarter of 2018, as compared to $1.20 per thousand cubic feet in the fourth quarter of 2017. Matador is a two-stream reporter, and the revenues associated with its NGLs are included in the weighted average realized natural gas price.
On a unit-of-production basis, production taxes, transportation and processing expenses decreased 2% sequentially from $4.46 per BOE in the fourth quarter of 2017 to $4.37 per BOE in the first quarter of 2018, despite higher production taxes attributable to the 10% sequential increase in oil and natural gas revenues. General and administrative expenses per BOE increased 8% sequentially from $4.06 per BOE (which was a post-IPO low for general and administrative expenses on a unit-of-production basis) to $4.40 per BOE, on target with the Company’s expectations. Lease operating expenses per BOE increased 16% from $4.68 per BOE in the fourth quarter of 2017 to $5.44 per BOE in the first quarter of 2018; however, compared to the first quarter of 2017, lease operating expenses per BOE increased by only 2%. Lease operating expenses are typically higher in the first quarter of each year, and the Company expects lease operating expenses in subsequent quarters to return to the $4.50 to $5.00 per BOE range achieved last year during all but the first quarter. Depletion, depreciation and amortization expenses per BOE remained essentially flat sequentially at $13.59 per BOE in the first quarter of 2018, as compared to $13.53 per BOE in the fourth quarter of 2017.
Wells Completed and Turned to Sales
During the first quarter of 2018, Matador completed and turned to sales a total of 32 gross (16.2 net) wells in its various operating areas, including 31 gross (15.2 net) horizontal wells and one gross (1.0 net) vertical well deepening. The 31 gross (15.2 net) horizontal wells included 16 gross (13.4 net) operated wells and 15 gross (1.8 net) non-operated wells. Essentially all of the Company’s operated and non-operated drilling and completions activity in the first quarter of 2018 was undertaken in the Delaware Basin, as summarized in the table below.
|Asset/Operating Area||Gross||Net||Gross||Net||Gross||Net||Well Completion Intervals|
|Rustler Breaks||9||7.8||7||1.3||16||9.1||4-WC A-XY, 2-WC A-Lower,
2-WC B-Blair, 1-Morrow (vertical)
|Wolf/Jackson Trust||2||1.0||–||–||2||1.0||1-WC A-XY, 1-WC A-Lower|
|Antelope Ridge||3||3.0||2||0.1||5||3.1||1-WC A-XY, 1-WC A-Lower, 1-1BS|
|Delaware Basin||17||14.4||12||1.7||29||16.1||Seven separate intervals tested in Q1 2018|
|Eagle Ford Shale||–||–||–||–||–||–||No Eagle Ford activity in Q1 2018|
Note: WC = Wolfcamp; BS = Bone Spring. For example, 1-2BS indicates one Second Bone Spring completion and 4-WC A-XY indicates four Wolfcamp A-XY completions in the first quarter of 2018.
Delaware Basin Acreage Acquisitions
From January 1 through April 30, 2018, Matador acquired approximately 3,500 net leasehold and mineral acres, mostly in and around its existing acreage in the Delaware Basin. Matador has incurred capital expenditures of approximately $30 million since January 1, 2018 to acquire these leasehold and mineral interests.
Matador continues to improve and block up its acreage position in its various asset areas throughout the Delaware Basin. As a result of these efforts, during the first quarter of 2018, Matador closed a key acreage trade and concluded other land-related improvements to its operating position that resulted in significant increases to both the working and net revenue interests in a number of recently drilled wells in both its Rustler Breaks and Wolf asset areas, including almost doubling its interests (to approximately a 97% working interest) in the three recently drilled and better-than-expected Garrett wells in the Rustler Breaks asset area. Matador believes that these improvements to the Company’s working and net revenue interests not only enhance Matador’s operating position in the existing producing units, but should also lead to multiple, high-value locations for future drilling in and around these recently drilled wells. Matador incurred approximately $14.5 million in additional drilling and completion expenditures in the first quarter of 2018 directly attributable to the increased working interests resulting from these land-related efforts.
During the first quarter of 2018, Matador’s capital expenditures for drilling, completing and equipping operated and non-operated wells totaled approximately $170.5 million, of which $14.5 million was directly attributable to the increased working interests in several recently drilled wells as a result of the acreage trade and other land-related efforts noted above under “Delaware Basin Acreage Acquisitions.” The remaining $156.0 million in capital expenditures for drilling, completing and equipping wells compared to Matador’s estimates of approximately $130.0 million for the first quarter of 2018.
Other than the capital expenditures attributable to the positive land efforts previously noted, the majority of the capital expenditures above Matador’s first quarter estimates was attributable to the timing of operations, including the following:
(1) One more operated well was completed and turned to sales than originally estimated in the first quarter of 2018, and completion operations for three operated wells that were scheduled to be concluded in the second quarter of 2018 were substantially completed by the end of the first quarter as a result of completion operations proceeding ahead of schedule. Although some of these costs were already included in the Company’s first quarter 2018 estimates, incremental costs associated with these operations in the first quarter were approximately $8.0 million;
(2) Operations on the two additional salt water disposal wells scheduled to be drilled for San Mateo in the Rustler Breaks asset area in 2018, and accounted for in the Company’s estimated 2018 midstream capital expenditures, were deferred and did not begin during the first quarter of 2018 as originally planned, and, as a result, the rig Matador expected to drill the salt water disposal wells continued drilling oil and natural gas wells. Incremental costs associated with these additional drilling operations in the first quarter were approximately $3.5 million; and
(3) An additional five gross (0.7 net) non-operated wells were completed and turned to sales in the first quarter of 2018 as compared to the Company’s expectations as a result of operations on those wells being concluded faster than the Company had projected.
Matador Resources Company
Mac Schmitz, 972-371-5225
Capital Markets Coordinator