Business Context and Reporting Period
Company: Matador Resources Company
Filing Type: Form 8-K (Current Report)
Date of Report: March 12, 2014
Reporting Period: The filing primarily addresses a credit agreement amendment effective March 12, 2014, and incorporates by reference financial results for the three months and year ended December 31, 2013.
Key Financial Metrics and Credit Facility
This filing details an amendment to the Company's senior secured revolving credit agreement rather than providing a full set of GAAP financial statements. Key metrics disclosed include:
- Borrowing Base: Increased from $350 million to $385 million based on proved reserves as of December 31, 2013.
- Conforming Borrowing Base: Increased from $275 million to $310 million.
- Debt to EBITDA Covenant: Increased to 4.25 or less.
- Interest Rate: Reduced by 0.25% across the borrowing grid based on outstanding borrowings.
- Covenants: The current ratio covenant was eliminated.
- Lenders: Wells Fargo Bank, N.A. replaced Capital One, N.A. in the lending group.
Note: Specific revenue, profit, cash flow, and margin figures for the period ended December 31, 2013, are contained in the attached Press Release (Exhibit 99.1) and are not explicitly detailed in the text of this Form 8-K.
Material Changes Versus Prior Period
The primary material change is the restructuring of the Company's credit facility terms:
- Capacity Increase: The borrowing base was raised by $35 million, reflecting a positive review of the Company's proved oil and natural gas reserves.
- Covenant Relaxation: The removal of the current ratio covenant and the increase in the allowable debt-to-EBITDA ratio provide greater financial flexibility.
- Cost Reduction: Interest costs were lowered by 0.25%.
- Lender Composition: A change in the administrative agent and lender group occurred with the entry of Wells Fargo.
Guidance, Outlook, and Contingencies
Automatic Reduction Clause: The Amendment stipulates that the borrowing base will automatically reduce to the conforming borrowing base ($310 million) at the earlier of June 30, 2015, or concurrent with the issuance of senior unsecured notes in an amount greater than or equal to $10 million.
Non-GAAP Measures: The Company utilizes Adjusted EBITDA and PV-10 (present value of proved reserves) as non-GAAP financial measures, with reconciliations provided in the referenced Press Release.
Related Party Transactions: Certain lenders or their affiliates may perform investment banking or commercial banking services for the Company, for which they receive customary fees.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific GAAP revenue, net income, and cash flow figures for the year ended December 31, 2013.
- Verify the reconciliation of Adjusted EBITDA and PV-10 to GAAP measures in the Press Release.
- Monitor the Company's issuance of senior unsecured notes, as exceeding $10 million in such issuance will trigger an automatic reduction of the borrowing base to $310 million.
- Confirm the impact of the 0.25% interest rate reduction on future debt service costs.
- Assess the implications of the eliminated current ratio covenant on liquidity management.