Matador Resources Company — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide a clear standalone fourth-quarter income statement or quarterly financial comparison. Figures below are full-year unless noted.
Business context
Matador is an independent U.S. oil and gas producer with operations concentrated in the Delaware Basin of Southeast New Mexico and West Texas, alongside smaller Eagle Ford and Northwest Louisiana positions. It also provides gathering, processing, transportation and produced-water services, primarily through its 51%-owned San Mateo joint venture, and owns Pronto, acquired in June 2022.
Key financial and operating metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenues | $3.06 billion | $1.66 billion |
| Oil and natural gas revenues | $2.91 billion | $1.70 billion |
| Net income attributable to Matador shareholders | $1.21 billion; diluted EPS $10.11 | $585.0 million; diluted EPS $4.91 |
| Operating income | $1.76 billion | $793.1 million |
| Net cash provided by operating activities | $1.98 billion | $1.05 billion |
| Net cash used in investing activities | $1.04 billion | $729.3 million |
| Net cash used in financing activities | $480.9 million | $328.6 million |
| Adjusted EBITDA attributable to Matador shareholders | $2.13 billion | $1.05 billion |
| Average production | 105,465 BOE/day | 86,176 BOE/day |
| Average realized oil price, before derivative settlements | $96.32/Bbl | $67.58/Bbl |
| Average realized natural gas price, before derivative settlements | $7.98/Mcf | $6.06/Mcf |
Oil and gas production rose 22% overall, with oil up 23% and natural gas up 22%. Oil and gas revenue increased 71%, reflecting both higher realized prices and greater volumes. Total revenue includes derivative results: realized derivative losses were $157.5 million, partly offset by an $18.8 million unrealized gain. Operating costs increased, including production taxes, transportation and processing costs of $7.33/BOE versus $5.69, and lease operating costs of $4.08/BOE versus $3.46.
Operating margin was approximately 57.5% of total revenue and net income attributable to Matador was approximately 39.7% of total revenue, calculated from reported figures. These are simple derived ratios, not filing-defined measures. Adjusted EBITDA is non-GAAP and should not be treated as a substitute for GAAP earnings or operating cash flow.
Cash, debt and capital allocation
- At year-end, cash was $505.2 million and restricted cash was $42.2 million; restricted cash was primarily held by less-than-wholly-owned subsidiaries and restricted to their operations and capital expenditures.
- Matador had no borrowings under its revolving Credit Agreement at December 31, 2022, with $45.6 million of letters of credit outstanding. The borrowing base was $2.25 billion, but the elected commitment was $775 million and the maximum facility amount was $1.5 billion. The filing reported approximately $729.4 million of available borrowing capacity at February 21, 2023.
- Matador reported $699.2 million principal amount of senior notes outstanding at year-end, bearing 5.875% and due in 2026. During 2022 it repurchased $350.8 million principal amount for $344.3 million.
- San Mateo, consolidated in Matador’s statements but non-recourse to Matador and its wholly owned subsidiaries, had $465 million drawn under its credit facility at year-end, plus $9 million of letters of credit. Its facility was extended to December 2026 and commitments increased to $485 million. San Mateo repaid another $30 million after year-end through February 21, 2023.
- Drilling, completion and equipping capital expenditures were approximately $772.5 million. The company also reported $80.1 million of midstream capital expenditures and $155.1 million of oil and gas property acquisitions in the cash flow statement. It said it generated free cash flow in each quarter, but the supplied text does not provide a clearly defined annual free-cash-flow figure.
- Quarterly dividends increased from $0.05 to $0.10 per share during 2022 and to $0.15 for future payments. The Board declared a $0.15 dividend in February 2023, subject to its stated payment terms.
Material changes versus 2021
- Net income attributable to shareholders more than doubled, while operating cash flow increased about 88%; growth primarily reflected higher commodity prices and production.
- Year-end cash increased from $48.1 million to $505.2 million. Matador repaid its $100 million year-end 2021 revolving-credit balance and reduced senior-note principal through repurchases; San Mateo borrowings increased from $385 million to $465 million.
- Total proved reserves increased 10% to 356.7 million BOE; proved developed reserves rose to 62% of total reserves from 60%. The Delaware Basin represented about 97% of proved reserves and 95% of average production.
- Standardized Measure increased 60% to $6.98 billion and PV-10 increased 71% to $9.13 billion. Management attributed most of these increases to higher SEC reserve-case prices, as well as reserve growth; these measures are not estimates of market value.
- Matador acquired Pronto’s processing plant and related assets for approximately $77.8 million in cash and sold non-core assets for approximately $46.5 million, primarily in South Texas and Northwest Louisiana.
- Income tax expense increased to $399.4 million from $74.7 million. Matador said it had used substantially all federal net operating loss carryforwards and expected to pay federal and New Mexico income taxes in 2023.
Outlook, risks and unusual items
- Management expected the Delaware Basin to remain the principal focus. Its 2023 budget was $1.18–$1.32 billion for drilling, completion and equipping, including anticipated Advance-acquisition activity, and $150–$200 million for midstream capital expenditures. It budgeted 10%–20% oilfield-service cost inflation.
- In January 2023, Matador agreed to acquire Advance Energy Partners for $1.6 billion in cash, subject to customary adjustments, plus $7.5 million for each 2023 month in which the specified average crude price exceeds $85/Bbl. Closing was expected in the second quarter of 2023 and remained subject to closing conditions. Management intended to use cash, pre-closing free cash flow and increased borrowings; completion and financing outcomes were not assured.
- Key exposures include volatile oil, gas and NGL prices; inflation and supply-chain constraints; widening gas-price differentials and takeaway capacity; concentration in the Delaware Basin; federal permitting and litigation affecting federal acreage; emissions and climate regulation; water availability and disposal restrictions, including induced-seismicity controls; and reliance on major purchasers and third-party infrastructure.
- At year-end, three purchasers accounted for 70% of oil, gas and NGL revenues. Contractual obligations included approximately $833 million of minimum-volume commitments over their terms, including obligations to San Mateo; actual amounts payable depend on performance and volumes.
- Ordinary-course legal proceedings were assessed by management as unlikely to have a material adverse impact. A 2019 EPA and New Mexico Environment Department notice alleged Clean Air Act and state-plan violations at certain New Mexico locations; management considered a material adverse impact remote but noted potential monetary sanctions could exceed $300,000.
- No full-cost ceiling impairment was recorded in 2022 or 2021; a $684.7 million impairment was recorded in 2020. Reserve valuations and depletion depend on estimates and commodity-price assumptions. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor verification priorities
- Review the complete audited statements and notes for debt, interest, derivative positions, cash restrictions and the distinction between Matador and San Mateo obligations.
- Verify the Advance acquisition’s closing status, final purchase price, contingent payments, funding mix and resulting leverage; it was pending when the 10-K was filed.
- Assess sensitivity of earnings, liquidity and reserve values to commodity prices, basis differentials, production costs and reserve-estimation assumptions.
- Examine the terms and potential cash costs of minimum-volume commitments, particularly if production or throughput falls short.
- Confirm subsequent production, capital spending, dividend declarations and the availability of credit capacity; future dividends remain at the Board’s discretion.