8-K: Matador Resources Reports Record Second Quarter Results and Boosts 2024 Production Guidance

Matador Resources Company announced record financial and operating results for the second quarter of 2024, along with an increase to its full-year production guidance.

Summary

• Matador Resources Company reported record financial and operating results for the second quarter of 2024.
• The company increased its full-year 2024 production guidance for total oil and natural gas equivalent production, oil production, and natural gas production.
• This increased guidance does not include any expected production from the pending Ameredev acquisition, which is expected to close late in the third quarter of 2024.
• Matador's second quarter average total production was 160,305 BOE per day, exceeding expectations by 2%.
• Average oil production was 95,488 barrels per day, 3% better than expected.
• The company turned a record 47 gross (38.6 net) operated horizontal wells to sales during the quarter.
• D/C/E capital expenditures were $314.5 million, which was $25.5 million better than expected.
• Matador expects full-year 2024 drilling and completion costs to decrease by 11% compared to 2023, to $960 per completed lateral foot.
• The company's net income was $228.8 million, or $1.83 per diluted common share.
• Adjusted net income was $255.9 million, or $2.05 per diluted common share.
• Adjusted EBITDA was $578.1 million.
• San Mateo, Matador's midstream affiliate, reported net income of $38.3 million and Adjusted EBITDA of $58.0 million.
• Matador ended the second quarter with only $95 million outstanding on its $1.5 billion revolving credit agreement, which was fully repaid in July 2024.

Sentiment

Score: 9

Explanation: The document is highly positive, highlighting record production, cost savings, a major acquisition, and increased guidance. The company's strong financial performance and positive outlook contribute to a very favorable sentiment.

Positives

• Matador achieved record production and financial results in the second quarter of 2024.
• The company successfully reduced costs and improved operational efficiencies.
• Matador increased its full-year 2024 production guidance.
• The company has a strong balance sheet with no debt outstanding under its revolving credit agreement.
• The Ameredev acquisition is expected to significantly increase Matador's acreage and reserves.
• Matador's stock has been a top performer among its peer group recently.
• The company's midstream operations, San Mateo, also performed well.
• Matador's operations team set 20 drilling records during the second quarter of 2024, saving an estimated $6 million.
• The company successfully performed its first trimul-frac completion, saving approximately $350,000 per well compared to conventional zipper-frac operations.
• Matador's lease operating expenses decreased 3% sequentially to $5.42 per BOE.
• General and administrative expenses decreased 12% sequentially to a record low of $1.91 per BOE.

Negatives

• Natural gas prices decreased significantly, with realized prices at $2.00 per Mcf, down 32% sequentially and 23% year-over-year.
• San Mateo's natural gas gathering and processing volumes decreased sequentially.
• Midstream capital expenditures were below expectations due to timing of projects, indicating potential delays.
• The company's share price decreased by 11% from $66.77 to $59.60 during the second quarter of 2024.

Risks

• The Ameredev acquisition is subject to customary closing conditions, including regulatory approval, and may not close as expected.
• The company's future performance is dependent on commodity prices, which can be volatile.
• The company's cash tax payments are dependent on various factors that cannot be calculated at this time.
• There are risks associated with integrating acquisitions, including the Ameredev acquisition.
• The company's operations are subject to various risks, including weather, environmental conditions, and regulatory restrictions.

Future Outlook

Matador anticipates a strong finish to 2024 and looks forward to drilling and acquisition opportunities in 2025. The company expects its average daily oil equivalent production to grow by 2% in the third quarter of 2024. The company also expects to turn to sales 32 gross (26.5 net) operated horizontal wells in the Delaware Basin during the third quarter of 2024.

Management Comments

• Joseph Wm. Foran, Matador's Founder, Chairman and CEO, commented that the second quarter of 2024 was one of the most important quarters in the company's history.
• He highlighted the record production results, substantial cost savings, and the agreement to acquire Ameredev for $1.905 billion.
• He also noted that Matador's stock has been the top performer among its peer group for the last month-and-a-half following the announcement of the proposed Ameredev acquisition.
• Management is increasingly excited about the outlook for the remainder of 2024 and beyond.

Industry Context

This announcement reflects the ongoing consolidation and growth in the oil and gas industry, particularly in the Delaware Basin. Matador's acquisition of Ameredev is a significant move to expand its footprint and reserves in this key region. The focus on operational efficiencies and cost reduction is also a common theme among oil and gas companies in the current market environment.

Comparison to Industry Standards

• Matador's production growth of 23% year-over-year is strong compared to many of its peers, indicating successful execution of its drilling program and integration of acquisitions.
• The company's cost reductions, particularly the 11% decrease in drilling and completion costs, are notable and demonstrate a focus on efficiency, which is a key differentiator in the industry.
• The Ameredev acquisition, with its 33,500 net acres and 25,500 BOE per day production, is a significant transaction that positions Matador as a major player in the northern Delaware Basin, similar to other large acquisitions in the region by companies such as Diamondback Energy and Pioneer Natural Resources.
• The company's focus on operational efficiencies, such as simul-frac and trimul-frac completions, is in line with industry best practices aimed at reducing costs and improving well performance, similar to techniques used by companies like EOG Resources and Devon Energy.
• Matador's midstream operations, San Mateo, are also performing well, which is a key advantage as it provides control over transportation and processing, similar to integrated midstream operations of companies like Enterprise Products Partners and Kinder Morgan.

Stakeholder Impact

• Shareholders will benefit from the company's strong financial performance, increased production, and the potential value creation from the Ameredev acquisition.
• Employees will benefit from the company's growth and success.
• Customers will benefit from the company's increased production and reliable supply of oil and natural gas.
• Vendors will benefit from the company's continued operations and capital expenditures.
• Creditors will benefit from the company's strong balance sheet and ability to service debt.

Next Steps

• Matador will close the Ameredev acquisition late in the third quarter of 2024.
• The company will continue to operate nine drilling rigs in the Delaware Basin for the remainder of 2024.
• Matador will turn to sales 32 gross (26.5 net) operated horizontal wells in the Delaware Basin during the third quarter of 2024.
• The company will provide additional detail regarding its expectations and plans for the remainder of 2024 on a combined basis with the Ameredev properties after the acquisition has closed.
• Matador will host a live conference call on July 24, 2024, to review its second quarter 2024 operational and financial results.

Key Dates

Keywords

Matador Resources, Production, Oil and Gas, Delaware Basin, Acquisition, Ameredev, Financial Results, EBITDA, Midstream, Drilling, Capital Expenditures