10-Q: Matador Resources Reports Strong Q3 Production Growth, Completes Ameredev Acquisition

Matador Resources Company announced a 29% year-over-year increase in average daily oil production and completed the acquisition of Ameredev in its third quarter report.

Summary

• Matador Resources Company reported a net income attributable to shareholders of $248.3 million, or $1.99 per diluted share, for the third quarter of 2024.
• The company's average daily oil production increased by 29% year-over-year to 100,315 barrels per day.
• Natural gas production also saw a 24% increase, reaching 427.0 million cubic feet per day.
• Adjusted EBITDA for the quarter was $574.5 million, up from $508.3 million in the same period last year.
• For the first nine months of 2024, net income attributable to shareholders was $670.8 million, or $5.44 per diluted share.
• The company completed the acquisition of Ameredev for approximately $1.831 billion in cash, effective June 1, 2024.
• Matador increased its 2024 drilling, completing, and equipping capital expenditure budget to a range of $1.15 to $1.35 billion.
• The company also increased its quarterly dividend to $0.25 per share, effective for the December 2024 payment.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to strong production growth, a major acquisition, and increased shareholder returns. However, there are some concerns about natural gas prices and rising operating costs.

Positives

• The company experienced significant production growth in both oil and natural gas.
• The Ameredev acquisition expands Matador's asset base and production capacity.
• The increase in the quarterly dividend reflects the company's strong financial performance and commitment to shareholder returns.
• The company's midstream operations are contributing to revenue growth.
• Matador has successfully raised capital through debt and equity offerings to fund acquisitions and operations.

Negatives

• The weighted average natural gas price realized decreased by 49% in Q3 2024 compared to Q3 2023.
• Lease operating expenses increased by 31% in Q3 2024 compared to Q3 2023.
• Depletion, depreciation, and amortization expenses increased by 26% in Q3 2024 compared to Q3 2023.
• The company incurred a loss of approximately $3.0 million related to the repurchase of senior notes.

Risks

• The company is exposed to commodity price volatility, which can impact revenues and profitability.
• The company's operations are subject to regulatory risks and environmental regulations.
• The company faces risks related to integrating acquisitions, including the Ameredev acquisition.
• The company's future success depends on its ability to generate operating cash flows and access outside sources of capital.
• The company is exposed to risks related to pipeline capacity constraints and potential interruptions to production.

Future Outlook

Matador expects to continue focusing on the development of its Delaware Basin assets and may consider divesting non-core assets. The company also intends to evaluate opportunistic acquisitions and may adjust capital expenditures based on market conditions.

Management Comments

• We have built significant optionality into our drilling program, which should generally allow us to decrease or increase the number of rigs we operate as necessary based on changing commodity prices and other factors.
• Our 2024 Delaware Basin operated drilling program is expected to focus on the continued development of our various asset areas throughout the Delaware Basin, with a continued emphasis on drilling and completing a high percentage of longer horizontal wells in 2024, including 99% with anticipated completed lateral lengths of one mile or greater.

Industry Context

The report reflects the ongoing trend of consolidation in the oil and gas industry, with Matador's acquisition of Ameredev. The company's focus on the Delaware Basin aligns with the industry's emphasis on high-growth, liquids-rich plays. The report also highlights the challenges of natural gas price volatility and the importance of midstream infrastructure.

Comparison to Industry Standards

• Matador's production growth in oil and natural gas is above average compared to many of its peers in the Permian Basin.
• The company's Adjusted EBITDA growth is also strong, indicating efficient operations and cost management.
• The Ameredev acquisition is a significant strategic move, similar to other large acquisitions in the industry, such as ExxonMobil's acquisition of Pioneer Natural Resources.
• Matador's focus on longer horizontal wells is consistent with industry best practices for maximizing production and efficiency.
• The company's midstream investments are comparable to other operators who are seeking to control their infrastructure and reduce reliance on third parties.

Related Party Transactions

• San Mateo distributed $23.7 million to the Company and $22.8 million to Five Point Energy LLC during the three months ended September 30, 2024.
• The Company contributed $19.9 million and Five Point contributed $19.1 million of cash to San Mateo during the nine months ended September 30, 2024.
• Five Point paid the Company $12.3 million of performance incentives during the three months ended September 30, 2024.

Stakeholder Impact

• Shareholders will benefit from increased dividends and potential future growth.
• Employees may see increased opportunities due to the company's expansion.
• Customers will benefit from increased production and midstream services.
• Suppliers may see increased demand for their products and services.
• Creditors will be impacted by the company's increased debt levels.

Next Steps

• The company will continue to develop its Delaware Basin assets.
• The company will evaluate potential partners in Pronto Midstream.
• The company will continue to evaluate opportunistic acquisitions.
• The company expects to receive between $110.0 million and $120.0 million from the sale of Pion Midstream.
• The company will pay a quarterly cash dividend of $0.25 per share on December 6, 2024.

Key Dates

Keywords

oil and gas, production, Delaware Basin, acquisition, Ameredev, EBITDA, dividends, midstream, capital expenditures, natural gas