Business Context and Reporting Period
Matador Resources Company (MTDR) filed a Form 8-K on November 18, 2021, reporting the entry into a material definitive agreement. The filing details the execution of a Fourth Amended and Restated Credit Agreement by MRC Energy Company, a wholly-owned subsidiary, with Matador Resources Company acting as a guarantor.
Key Financial Metrics and Facility Details
- Maximum Facility Amount: $1.5 billion (reaffirmed).
- Borrowing Base: Increased to $1.35 billion.
- Elected Borrowing Commitment: $700.0 million (reaffirmed).
- Outstanding Borrowings (as of Nov 18, 2021): $100.0 million.
- Outstanding Letters of Credit: Approximately $45.9 million.
- Available Capacity: Approximately $554.1 million.
- Maturity Date: October 31, 2026, or 180 days prior to the earliest redemption date of senior notes exceeding $25.0 million.
- Interest Rates: Base rate loans at Prime/Fed Funds/LIBOR + 0.75% to 1.75%; Eurodollar loans at LIBOR + 1.75% to 2.75%.
- Commitment Fee: 0.375% to 0.50% per annum.
Material Changes and Covenants
The primary material change is the increase in the borrowing base from the previous agreement to $1.35 billion, while the maximum facility and elected commitment remained unchanged. The agreement introduces specific financial covenants:
- Current Ratio: Must maintain a ratio of not less than 1.0 to 1.0 (calculated as total consolidated current assets plus unused availability divided by total consolidated current liabilities less current maturities).
- Debt to EBITDA Ratio: Must maintain a ratio of 3.5 to 1.0 or less (total debt net of up to $75.0 million cash divided by rolling four-quarter EBITDA).
The agreement restricts the company's ability to incur additional indebtedness, grant liens, pay dividends, merge, or engage in certain asset dispositions without lender consent.
Outlook, Risks, and Contingencies
The borrowing base is determined semi-annually (May 1 and November 1) based on the estimated value of proved oil and natural gas reserves. If a redetermination results in a borrowing base lower than outstanding borrowings, the company must provide additional collateral or repay the deficit over six months. Events of default include failure to pay principal or interest, covenant breaches, bankruptcy, or a change of control, which could trigger acceleration of the debt.
Investor Verification Checklist
- Verify the current value of proved oil and natural gas reserves to assess the stability of the $1.35 billion borrowing base.
- Confirm the company's compliance with the 3.5x Debt to EBITDA and 1.0x Current Ratio covenants.
- Review the maturity dates of the company's senior unsecured notes to determine the effective maturity of the credit facility.
- Monitor commodity prices, as reserve valuations and borrowing capacity are directly tied to them.