Business Context and Reporting Period
Company: Matador Resources Company
Filing Type: Form 8-K (Current Report)
Date of Report: December 5, 2016 (Events reported through December 9, 2016)
Context: The filing details the entry into material definitive agreements regarding a public equity offering and a private debt offering to fund acquisitions, capital expenditures, and debt repayment.
Key Financial Metrics and Capital Structure
Equity Offering:
- Shares Issued: 6,000,000 shares of common stock.
- Price Per Share: $24.36.
- Closing Date: December 9, 2016.
- Instrument: 6.875% Senior Notes due 2023.
- Principal Amount: $175,000,000.
- Closing Date: December 9, 2016.
- Interest Payment Dates: Semiannually on April 15 and October 15 (first payment April 15, 2017).
- Maturity: April 15, 2023.
- Acquisition of approximately 4,600 net leasehold acres and 475 net mineral acres in Eddy and Lea Counties, New Mexico.
- Funding midstream initiatives in the Delaware Basin.
- Repayment of outstanding borrowings under the revolving credit facility.
- General corporate purposes, including adding a fourth drilling rig.
The filing text does not provide specific values for revenue, profit, cash flow, margins, or total liquidity positions. It focuses exclusively on the terms of the capital raising transactions.
Material Changes and Agreements
Debt Structure:
- The new $175 million in Additional Notes will be treated as a single class with the $400 million Initial Notes issued in April 2015.
- Total aggregate principal amount of the Notes class is now $575 million.
- On December 9, 2016, the Company amended its Revolving Credit Agreement to permit the issuance of the Additional Notes.
- A Registration Rights Agreement was entered into for the Additional Notes, requiring the Company to file a registration statement for an exchange offer within 365 days or pay additional interest.
Outlook, Risks, and Covenants
Optional Redemption:
- Equity Redemption: Prior to April 15, 2018, the Company may redeem up to 35% of the Notes at 106.875% of principal using net proceeds from equity offerings.
- Make-Whole Redemption: Prior to April 15, 2018, the Company may redeem all or part of the Notes at 100% of principal plus a make-whole premium.
- Scheduled Redemption: On or after April 15, 2018, redemption prices decline from 105.156% to 100.000% by April 15, 2021.
- Upon a Change of Control, holders may require the Company to repurchase the Notes at 101% of principal plus accrued interest.
- The Indenture restricts additional debt, dividends, asset sales, and mergers.
- Many covenants will terminate if the Notes are rated investment grade by both Moody's and S&P.
- Events of Default: Include failure to pay interest/principal, failure to comply with reporting obligations, bankruptcy, or payment defaults on other indebtedness exceeding $25 million.
- Registration Risk: Failure to consummate the exchange offer for the Additional Notes within 365 days triggers additional interest payments.
Investor Verification Checklist
- Verify the total net proceeds received from the $146.16 million equity offering and $175 million debt offering after underwriting discounts and expenses.
- Confirm the specific amount of outstanding borrowings under the revolving credit facility that were repaid with the proceeds.
- Review the definitive purchase agreements for the 4,600 net leasehold acres to verify the purchase price and production estimates (1,150 BOE/day).
- Monitor the timeline for the registration statement filing required for the Additional Notes exchange offer to avoid additional interest costs.
- Check the Company's current credit rating status to determine if restrictive covenants remain in full force.