8-K: Matador Resources Reports Record 2023 Results and Outlines Ambitious 2024 Growth Plan

Matador Resources Company announced record production and financial results for 2023, alongside an optimistic outlook for continued growth and efficiency gains in 2024.

Summary

• Matador Resources Company reported record fourth quarter and full year 2023 results, with average daily production reaching 154,300 BOE per day in Q4, exceeding expectations.
• The company's 2023 average daily production grew from approximately 100,000 BOE per day in early January to over 150,000 BOE per day in the fourth quarter.
• Lease operating expenses decreased by 5% to $5.06 per BOE in Q4 2023, outperforming the guidance range of $5.40 to $5.80 per BOE.
• Net income for Q4 2023 was $254.5 million, with an Adjusted EBITDA of $552.8 million.
• Total proved oil and natural gas reserves reached a record 460.1 million BOE at the end of 2023, a 29% increase year-over-year.
• San Mateo Midstream, LLC, Matador's midstream joint venture, achieved a record Adjusted EBITDA of $200.2 million in 2023.
• Matador anticipates an 18% increase in total average production in 2024, reaching 156,000 BOE per day.
• Oil production is expected to increase by 23% to 93,000 barrels of oil per day in 2024.
• The company expects to spend $1.20 billion on drilling, completing, and equipping wells in 2024, similar to 2023.
• Drilling and completion costs are expected to decrease by 6% to $995 to $1,025 per completed lateral foot in 2024.
• Matador is expanding its midstream operations, including a 200 million cubic feet per day expansion of the Marlan Processing Plant, expected to be completed in the first half of 2025.

Sentiment

Score: 9

Explanation: The document is highly positive, highlighting record production, strong financial results, and ambitious growth plans. The company's focus on efficiency and innovation, combined with a positive outlook for 2024, suggests a strong investment opportunity. The only minor negative is the temporary midstream constraints.

Positives

• Matador's production significantly exceeded expectations in Q4 2023, driven by strong well performance and strategic acquisitions.
• The company successfully reduced operating costs, particularly lease operating expenses, through efficiency improvements and recycled water usage.
• Matador achieved record proved reserves, demonstrating the strength of its asset base.
• The midstream business, both San Mateo and Pronto, showed strong performance and growth, contributing to overall profitability.
• The company is implementing innovative drilling and completion techniques, such as Trimul-Frac and U-Turn wells, to further reduce costs and improve efficiency.
• Matador anticipates significant production growth in 2024, with a focus on increasing oil production.
• The company is expanding its midstream infrastructure to support its operations and provide services to third-party customers.
• Matador has a large inventory of high-quality acreage in the Delaware Basin, positioning it for continued success.

Negatives

• Matador expects temporary midstream constraints from third-party providers in the first quarter of 2024, which are estimated to have reduced production by approximately 5,500 BOE per day in January.
• The company's cash tax payments are expected to increase to 5-10% of pre-tax book net income in 2024, compared to approximately 1% in 2023.
• The Standardized Measure and PV-10 of total proved reserves decreased due to lower oil and natural gas prices.

Risks

• Temporary midstream constraints from third-party providers may impact production in the first quarter of 2024.
• Fluctuations in oil and natural gas prices could affect the company's revenue and profitability.
• The company's ability to achieve its production targets and cost reduction goals depends on the successful execution of its operational plans.
• The expansion of midstream infrastructure may face delays or cost overruns.
• Increased cash tax payments in 2024 could impact the company's cash flow.
• The company's future performance is subject to various risks and uncertainties, including economic conditions, regulatory changes, and operational challenges.

Future Outlook

Matador anticipates a record year in 2024 with an 18% increase in total average production and a 23% increase in oil production. The company expects continued growth, profitability, and increased efficiencies, despite temporary midstream constraints in the first quarter of 2024. They also plan to expand their midstream infrastructure and continue to innovate in drilling and completion techniques.

Management Comments

• Matador achieved another record quarter in the fourth quarter of 2023, which was another strong finish to yet another record year.
• Matador not only produced a record amount of oil and natural gas through strong well performance during the fourth quarter of 2023 but also steadily decreased costs during the quarter, resulting in better-than-expected free cash flow per share.
• In 2024, we anticipate that Matador will set further records as we continue our long tradition of profitable growth at a measured pace while consistently increasing our reserves and improving our operational efficiencies in the Delaware Basin.
• We believe our large and growing inventory of high-quality acreage in the core of the Delaware Basin combined with our very capable staff and board sets us up for years of continued and consistent success, especially when combined with our profitable midstream business that provides critical flow assurance for our oil and natural gas production.
• In other words, we like our chances going forward.

Industry Context

This announcement reflects a trend in the oil and gas industry towards increased production and efficiency gains, particularly in the Delaware Basin. Matador's focus on midstream infrastructure development aligns with the industry's need for reliable transportation and processing capabilities. The company's innovative drilling and completion techniques also demonstrate a commitment to cost reduction and operational excellence, which are key factors for success in the current market.

Comparison to Industry Standards

• Matador's 29% year-over-year increase in total proved reserves is a strong result compared to many of its peers in the exploration and production sector.
• The company's focus on cost reduction, with a 6% decrease in drilling and completion costs, is a positive sign in an industry where cost control is critical.
• The 18% increase in expected total average production for 2024 is ambitious and would place Matador among the fastest-growing producers in the Delaware Basin.
• San Mateo's 26% year-over-year growth in third-party revenue indicates a successful midstream business, which is a key differentiator for Matador compared to companies that rely solely on third-party midstream services.
• The company's use of innovative techniques like Simul-Frac and Trimul-Frac operations, with estimated savings of $250,000 and $350,000 per well respectively, demonstrates a commitment to efficiency that is above industry average.
• The U-Turn well technology, with $10 million in cost savings compared to traditional wells, is a significant innovation that could give Matador a competitive advantage.

Stakeholder Impact

• Shareholders will benefit from the company's strong financial performance, increased production, and potential for future growth.
• Employees will be impacted by the company's continued expansion and operational improvements.
• Customers will benefit from the company's reliable midstream services and increased production.
• Suppliers will benefit from the company's increased activity and capital expenditures.
• Creditors will be impacted by the company's strong cash flow and ability to service debt.

Next Steps

• Matador will continue to operate eight drilling rigs in the Delaware Basin throughout 2024.
• The company will turn to sales 21 DUC wells from the Advance acquisition in the second quarter of 2024.
• Matador will complete the natural gas pipeline connections between Pronto and San Mateo by the end of the first quarter of 2024.
• The company will continue to move forward with the 200 million cubic feet per day expansion of the Marlan Processing Plant, expected to be completed in the first half of 2025.
• Matador will continue to evaluate potential partners in Pronto.

Key Dates

Keywords

Matador Resources, Oil and Gas, Production, Delaware Basin, Midstream, Reserves, EBITDA, Drilling, Completions, Operating Costs