10-Q: Matador Resources Reports Q1 2026 Net Loss Amid Derivative Impacts

Matador Resources Company announced a net loss for the first quarter of 2026, primarily driven by significant unrealized losses on derivative instruments, despite an increase in oil production.

Summary

• Matador Resources Company reported a net loss of $35.9 million, or $0.29 per diluted share, for the first quarter ended March 31, 2026.
• This contrasts with a net income of $240.1 million, or $1.92 per diluted share, in the same period of 2025.
• The net loss was significantly impacted by a $255.5 million unrealized loss on derivative instruments during the quarter.
• Adjusted EBITDA, a non-GAAP measure, was $577.2 million for Q1 2026, down from $644.2 million in Q1 2025, primarily due to lower realized natural gas prices.
• Total revenues decreased by 34% to $671.6 million in Q1 2026 from $1,013.9 million in Q1 2025.
• Oil revenues increased by 5% to $818.7 million, driven by a 5% increase in oil production and a 1% increase in average oil price.
• Natural gas revenues decreased by 81% to $30.4 million, primarily due to an 82% decrease in the average natural gas price realized.
• The company maintained its 2026 capital expenditure budget, with $1.35 to $1.44 billion for drilling, completing, and equipping, and $100 to $110 million for midstream operations.
• Matador Resources completed the repurchase of $419.8 million of its 2028 Notes and issued $750.0 million in new 6.00% senior notes due 2034 in March 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to the reported net loss and decreased Adjusted EBITDA, largely driven by unfavorable derivative movements and lower natural gas prices, despite positive operational trends in oil production.

Positives

• Oil production increased by 5% year-over-year to an average of 120,277 barrels per day in Q1 2026.
• Total oil equivalent production increased by 5% to 18.7 million BOE in Q1 2026.
• Third-party midstream services revenues increased by 26% to $42.1 million.
• Sales of purchased natural gas increased by 29% to $80.8 million.
• The company repaid $140.0 million of borrowings under its Credit Agreement and $58.0 million under the San Mateo Credit Facility after the quarter end.
• The company declared a quarterly cash dividend of $0.375 per share, consistent with the previous quarter.

Negatives

• Reported a net loss of $35.9 million for the quarter, compared to a significant profit in the prior year.
• Unrealized loss on derivatives was $255.5 million, a substantial swing from a $5.1 million unrealized gain in Q1 2025.
• Realized loss on derivatives was $14.5 million, compared to a $2.7 million gain in Q1 2025.
• Natural gas revenues decreased by 81% due to a significant drop in realized prices.
• Total revenues decreased by 34% to $671.6 million.
• Adjusted EBITDA decreased by 10% to $577.2 million.

Risks

• Commodity price volatility, particularly for natural gas, continues to impact revenues and profitability.
• The company is exposed to basis differentials, especially the Waha-Henry Hub differential, which has been volatile.
• Potential for future pipeline-related interruptions affecting production or disposal.
• Inflation in the costs of oilfield services, including diesel, steel, labor, and completion costs, could increase expenses.
• Supply chain disruptions, tariffs, and trade restrictions may impact the timely and cost-effective procurement of necessary products and services.
• Natural production declines from existing wells require continuous development and exploration to maintain production levels.
• The company's business success and financial results are dependent on factors beyond its control, including economic, political, and regulatory developments.

Future Outlook

The company expects to fund its 2026 capital expenditures through cash on hand, operating cash flows, and performance incentives. If expenditures exceed these sources, they may utilize borrowings under credit facilities, explore other capital sources, or consider asset sales. Development of Delaware Basin assets is expected to be the primary focus for the remainder of 2026, with flexibility to adjust drilling based on market conditions. The company may also divest non-core assets or monetize other assets as value-creating opportunities arise.

Management Comments

• The decrease in net income attributable to Matador shareholders primarily resulted from a $255.5 million unrealized loss on derivatives for the three months ended March 31, 2026, as compared to a $5.1 million unrealized gain on derivatives for the three months ended March 31, 2025, combined with lower realized natural gas prices for the comparative periods.
• Adjusted EBITDA, a non-GAAP financial measure, decreased $67.1 million to $577.2 million for the three months ended March 31, 2026, as compared to $644.2 million for the three months ended March 31, 2025. This decrease was primarily attributable to lower realized natural gas prices for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, partially offset by increased oil and natural gas production for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025.

Industry Context

StockSavvy.ai notes that Matador Resources' results reflect the ongoing volatility in commodity prices, particularly natural gas, and the significant impact of derivative accounting on reported earnings. The company's strategic focus on the Delaware Basin and its midstream investments through San Mateo align with industry trends in resource-rich unconventional plays.

Comparison to Industry Standards

• The net loss reported by Matador Resources for Q1 2026, largely due to derivative accounting, is a common occurrence in the volatile energy sector where accounting treatments can create significant swings in reported net income that may not directly reflect operational cash flow generation.
• The company's Adjusted EBITDA of $577.2 million for Q1 2026, while lower than the prior year, demonstrates continued strong operational cash flow generation, a key metric used by industry peers to assess performance.
• The significant unrealized derivative losses highlight the complex hedging strategies employed by energy companies like Matador Resources to manage price risk, a practice standard across the industry, though the accounting impact can be substantial.
• Matador's capital expenditure plans for 2026, focusing on development in the Delaware Basin, are consistent with major E&P companies prioritizing core acreage for efficient production growth.

Legal Proceedings

• The company is party to several legal proceedings encountered in the ordinary course of business. Management believes it is remote that these proceedings will have a material adverse impact on the company's financial condition, results of operations, or cash flows.

Related Party Transactions

• San Mateo Midstream, LLC, a joint venture with Five Point Infrastructure LLC, conducts midstream operations. Matador Resources has dedicated certain leasehold interests and entered into operational agreements with San Mateo. Five Point Infrastructure LLC paid Matador Resources $6.9 million in performance incentives during Q1 2026.

Stakeholder Impact

• Shareholders: The net loss and decrease in Adjusted EBITDA may negatively impact investor sentiment. However, the continued declaration of dividends provides some return.
• Creditors: The company's debt levels and covenant compliance (current ratio and debt to EBITDA) are key considerations. The company was in compliance with its Credit Agreement and San Mateo Credit Facility terms as of March 31, 2026.
• Suppliers: Increased costs for oilfield services and potential supply chain disruptions could impact suppliers.
• Employees: The increase in general and administrative expenses was largely attributable to employee compensation costs, including stock-based compensation.

Next Steps

• Continue development of Delaware Basin assets, which is expected to be the primary focus for the remainder of 2026.
• Evaluate opportunistic acquisitions of producing properties, acreage, mineral interests, and midstream assets.
• Consider divestitures of non-core assets and monetization of other assets as value-creating opportunities arise.
• Monitor and adjust capital expenditures based on market conditions, costs, drilling results, and other factors.
• The Hugh Brinson pipeline is expected to begin flowing natural gas during the third or fourth quarter of 2026 and be fully in-service by year-end 2026, providing access to Henry Hub markets.

Key Dates

Recommendation

While Matador Resources reported a net loss due to derivative accounting and lower natural gas prices, operational improvements in oil production and a strong capital structure (including recent debt refinancing) provide a stable foundation. The company's strategic focus on the Delaware Basin and its flexible capital expenditure plan suggest resilience. However, the significant impact of commodity price volatility and derivative accounting warrants a cautious 'hold' rating until market conditions stabilize and the impact of new midstream infrastructure becomes clearer.

Keywords

Matador Resources, SEC Filing, 10-Q, Quarterly Report, Oil and Gas, Delaware Basin, Wolfcamp, Bone Spring, Financial Results, Net Loss, Derivative Instruments, Adjusted EBITDA, Capital Expenditures, Debt Refinancing, Senior Notes, Production