10-K: Matador Resources Company Reports Record Production and Reserves in 2023, Fueled by Delaware Basin Growth

Matador Resources Company achieved record oil, natural gas, and oil equivalent production in 2023, driven by the Advance Acquisition and strong performance in the Delaware Basin.

Summary

• Matador Resources Company reported record oil, natural gas, and oil equivalent production for the year ended December 31, 2023.
• Oil production increased by 26% to 27.5 million barrels, while natural gas production rose by 24% to 123.4 billion cubic feet.
• Average daily oil equivalent production reached 131,813 BOE per day, a 25% increase compared to 2022.
• The company's estimated total proved oil and natural gas reserves increased by 29% to 460.1 million BOE.
• The Standardized Measure of total proved reserves decreased by 12% to $6.11 billion, and the PV-10 decreased by 16% to $7.70 billion, primarily due to lower commodity prices.
• The Advance Acquisition, completed in April and December 2023, significantly contributed to the increased production and reserves.
• The company completed and began producing from 222 gross horizontal wells in the Delaware Basin during 2023.
• Capital expenditures for drilling, completing, and equipping wells totaled $1.16 billion, below the initial estimate.
• The company generated free cash flow in all four quarters of 2023 and increased its quarterly cash dividend from $0.15 to $0.20 per share.
• San Mateo Midstream achieved strong operating results, including increased midstream services revenues and volumes.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While the company achieved record production and reserves, the financial results were negatively impacted by lower commodity prices. The company's focus on operational efficiency and ESG initiatives is positive, but the overall sentiment is tempered by the financial challenges.

Positives

• The Advance Acquisition significantly boosted production and reserves.
• The company successfully achieved all five operational milestones set for the Delaware Basin in 2023.
• The company generated free cash flow in all four quarters of 2023.
• The company increased its quarterly cash dividend.
• San Mateo Midstream achieved strong operating results and secured new customer contracts.
• The company has made significant progress in reducing its environmental impact, including greenhouse gas and methane emissions.
• The company has a strong balance sheet and liquidity position.

Negatives

• The Standardized Measure and PV-10 of total proved reserves decreased due to lower commodity prices.
• The company experienced a 49% decrease in natural gas revenues due to lower prices.
• The company experienced a 12% decrease in total oil and natural gas revenues.
• The company experienced a 32% decrease in net income attributable to Matador shareholders.
• The company experienced a 13% decrease in Adjusted EBITDA.

Risks

• The company's success is dependent on volatile oil, natural gas, and NGL prices.
• The company's operations are subject to operational hazards and risks.
• The company's reserves and production are concentrated in a few core areas.
• The company faces intense competition in the oil and natural gas industry.
• The company is subject to complex environmental laws and regulations.
• The company may incur significant costs and liabilities resulting from compliance with pipeline safety regulations.
• The company's operations on federal lands are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.
• The company may be unable to generate sufficient cash to fund its capital expenditures, service its indebtedness and pay dividends to its shareholders.
• The company's borrowing base under its Credit Agreement is subject to periodic redetermination.
• The company's hedging transactions may limit potential gains and could result in financial losses.
• The company may incur losses or costs as a result of title deficiencies in the properties in which it invests.
• The company may have difficulty managing growth in its business.
• The company may experience a cyber incident that could result in information theft, data corruption, operational disruption or financial loss.

Future Outlook

The company expects its Delaware Basin production to increase in 2024 as it continues the delineation and development of its asset areas. The company plans to focus its 2024 capital expenditures on the Delaware Basin, with a continued emphasis on drilling and completing longer horizontal wells.

Management Comments

• The successful execution of our business strategies, including the Advance Acquisition, led to increases in our oil and natural gas production and proved oil and natural gas reserves in 2023.
• We also improved the capital efficiency of our drilling and completion operations and achieved several key operational milestones throughout the year.
• These actions increased our operational flexibility and opportunities while preserving the strength of our balance sheet and our liquidity position.

Industry Context

The announcement reflects the ongoing trend of increased activity and production in the Permian Basin, particularly the Delaware Basin, as companies focus on unconventional resource plays. The company's emphasis on longer laterals and efficient operations aligns with industry best practices for maximizing production and reducing costs. The company's focus on ESG initiatives also reflects the growing importance of sustainability in the oil and gas industry.

Comparison to Industry Standards

• Matador's 29% increase in total proved reserves is a strong result compared to many of its peers, though the 16% decrease in PV-10 is a common trend due to lower commodity prices.
• The company's 25% increase in average daily oil equivalent production is above the average growth rate for many independent E&P companies.
• The company's focus on longer laterals and multi-well pad drilling is consistent with industry best practices for maximizing production and reducing costs.
• The company's commitment to ESG initiatives, including reductions in greenhouse gas and methane emissions, is in line with growing industry trends and investor expectations.
• The company's capital expenditure efficiency, with D/C/E costs below initial estimates, is a positive sign of effective cost management.
• The company's free cash flow generation in all four quarters of 2023 is a strong result compared to many of its peers.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and potential for future growth.
• Employees will benefit from the company's commitment to continuing education and professional development.
• Customers will benefit from the company's reliable supply of oil and natural gas.
• Suppliers will benefit from the company's continued operations and capital expenditures.
• Creditors will benefit from the company's strong balance sheet and liquidity position.

Next Steps

• The company expects to continue the delineation and development of its Delaware Basin assets in 2024.
• The company plans to focus its 2024 capital expenditures on the Delaware Basin, with a continued emphasis on drilling and completing longer horizontal wells.
• The company will continue to evaluate opportunistic acquisitions of producing properties, acreage and mineral interests and midstream assets, principally in the Delaware Basin.
• The company expects to complete the review of fiscal year 2023 data from its ESG initiatives in the second half of 2024 in connection with the preparation of its 2023 Sustainability Report.

Key Dates

Keywords

Delaware Basin, oil and gas production, reserves, midstream, Advance Acquisition, production, natural gas, capital expenditures, dividends, San Mateo Midstream, environmental, sustainability