Matador Resources Company (NYSE: MTDR) — Q1 2024 Form 10-Q
Business context and period. Unaudited results cover the three months ended March 31, 2024, compared with Q1 2023. Matador explores for and produces oil and natural gas, primarily in the Delaware Basin, and also operates midstream businesses. The Delaware Basin generated about 99% of oil and 94% of natural gas production in Q1.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $787.7 million | $560.3 million |
| Operating income | $319.0 million | $251.4 million |
| Net income attributable to Matador shareholders | $193.7 million; diluted EPS $1.61 | $163.1 million; diluted EPS $1.36 |
| Adjusted EBITDA attributable to Matador shareholders (non-GAAP) | $505.4 million | $365.2 million |
| Cash provided by operating activities | $468.6 million | $339.5 million |
| Cash used in investing activities | $543.3 million | $343.5 million |
| Average daily production | 149,760 BOE; 84,777 Bbl oil and 389.9 MMcf natural gas | 106,654 BOE |
Total revenue grew 41% and operating income grew 27%. Operating margin was approximately 40.5% of revenue, versus 44.9% a year earlier. Net income attributable to Matador increased 19%; higher production and oil prices were partly offset by higher DD&A and interest expense. Oil production rose 45% and natural gas production 38%; realized oil price increased 2% to $77.58/Bbl, while realized natural gas price fell 25% to $2.96/Mcf. DD&A was $212.3 million, up from $126.3 million, and interest expense was $39.6 million, up from $16.2 million.
Capital expenditures and acquisitions contributed to investing cash outflows exceeding operating cash inflows by $74.8 million. At quarter-end, cash was $23.2 million and restricted cash was $51.1 million; restricted cash is subject to use restrictions. Debt outstanding was approximately $1.99 billion, comprising $260 million under Matador’s Credit Agreement, $526 million under San Mateo’s facility, and $1.20 billion of senior notes. Matador reported $851.3 million of current liabilities and $754.1 million of current assets.
Changes, outlook and notable items
- Growth and investment: Q1 production growth reflected the Advance acquisition and additional operated and non-operated wells. Matador acquired additional Lea County, New Mexico properties for approximately $155.1 million in February. Q1 capital expenditures were $638.6 million, including acquisition-related spending.
- Capital plan: Management estimated 2024 drilling, completion and equipping expenditures of $1.10–$1.30 billion and midstream capital expenditures of $200–$250 million. The midstream budget includes the Pronto processing-plant expansion, designed for 200 MMcf/day, and assumes Matador funds 100% of that expansion; potential partners were still under evaluation. Delaware Basin development is expected to remain the primary focus. The company began the year with seven rigs and added an eighth in Q1; it expects 99% of operated Delaware Basin wells to have completed laterals of at least one mile.
- Financing after quarter-end: In March, Matador amended its revolving facility, reaffirming a $2.50 billion borrowing base, increasing elected commitments to $1.50 billion and extending maturity to March 2029. It raised $344.2 million net from a March equity offering. In April, it issued $900 million of 6.50% notes due 2032 and used proceeds in part to repurchase approximately $556.3 million of 2026 notes, arrange redemption of the remaining approximately $142.9 million, and repay credit-facility borrowings. At April 23, Matador reported $500 million of 2028 notes, $900 million of 2032 notes and $25 million drawn under its credit facility. These are subsequent events, not quarter-end balances. San Mateo separately repaid $31 million after quarter-end.
- Shareholder returns: Matador paid a $0.20/share quarterly dividend in March and declared another $0.20/share dividend for payment in June.
- Commodity and operating risks: Oil and gas prices, regional differentials, pipeline takeaway capacity, production declines, service-cost inflation, operational interruptions and access to capital may affect results. Natural gas prices and realized prices were lower year over year; the Waha-Henry Hub differential widened after quarter-end. At March 31, the company reported natural gas basis swaps but no open oil or NGL price contracts.
- Commitments and contingencies: Third-party gathering, transportation, processing and disposal agreements had approximately $537.0 million of potential deficiency payments if the company ceased operations in covered areas. Remaining minimum commitments under San Mateo agreements were approximately $191.3 million. Management said ordinary-course legal proceedings were not expected to have a material adverse effect. No full-year production guidance is specified in the provided filing text.
- Other: No Q1 full-cost ceiling-test impairment was required. Management concluded disclosure controls were effective at March 31, 2024, and reported no material change in internal control over financial reporting.
Key facts for investors to verify
- Whether production growth and realized pricing support the planned capital program and cash generation, particularly if gas prices or regional differentials weaken.
- Actual 2024 capital spending, the cost and timing of the Pronto expansion, and whether a partner shares its funding.
- Post-quarter debt refinancing costs and effects on interest expense, maturities, liquidity and covenant headroom; distinguish Matador debt from non-recourse San Mateo debt.
- Liquidity available under credit facilities, including restrictions on San Mateo cash and the effect of letters of credit and borrowing-base terms.
- Exposure to minimum-volume commitments and potential deficiency fees, along with hedging volumes and terms; confirm subsequent hedge positions before relying on them.