Matador Resources Company — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report; the supplied filing text does not provide clear standalone fourth-quarter financial results. Matador is an independent oil and gas producer, focused primarily on the Delaware Basin, with additional Eagle Ford and Haynesville/Cotton Valley operations and midstream activities through San Mateo.
Financial and operating results
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $862.1 million | $983.7 million |
| Oil and natural gas revenue | $744.5 million | $892.3 million |
| Net income (loss) attributable to Matador shareholders | $(593.2) million; $(5.11) per diluted share | $87.8 million; $0.75 per diluted share |
| Operating income (loss) | $(521.5) million | $235.5 million |
| Adjusted EBITDA attributable to Matador shareholders | $519.3 million | $610.8 million |
| Net cash from operating activities | $477.6 million | $552.0 million |
| Net cash used in investing activities | $(775.7) million | $(904.0) million |
| Net cash from financing activities | $324.3 million | $333.1 million |
Oil and natural gas production rose 14% to 27.5 million BOE (75,175 BOE/day). Oil averaged 43,526 barrels/day; natural gas averaged 189.9 MMcf/day. Oil and natural gas revenues fell 17% as realized oil price declined 31% to $37.38/barrel, partly offset by higher production. Realized natural gas price was $2.14/Mcf, compared with $2.17/Mcf.
The $593.2 million attributable net loss principally reflects a $684.7 million non-cash full-cost ceiling impairment, recorded in the second, third and fourth quarters after commodity prices fell. The impairment reduced asset carrying value and equity, but did not directly reduce operating cash flow. Lease operating expense fell to $3.81/BOE from $4.85/BOE, and G&A fell to $2.27/BOE from $3.31/BOE. Adjusted EBITDA is a non-GAAP measure.
Reserves, liquidity and debt
Year-end proved reserves increased 7% to 270.3 million BOE, including 159.9 million barrels of oil and 662.3 Bcf of natural gas; approximately 97% were in the Delaware Basin. Proved developed reserves were 45.7% of total, versus 41.9% in 2019. Despite reserve growth, the Standardized Measure declined 22% to $1.58 billion and PV-10 declined 26% to $1.66 billion, primarily due to lower SEC reserve-price assumptions: $36.04/barrel oil and $1.99/MMBtu gas.
At December 31, 2020, cash was $57.9 million and restricted cash was $33.5 million. Matador had $440.0 million outstanding on its revolving credit facility, $1.05 billion of 5.875% senior notes due 2026, and a $7.5 million SBA loan. San Mateo, 51%-owned by Matador and consolidated in its financial statements, had $334.0 million outstanding on its facility; this debt is non-recourse to Matador and its wholly owned subsidiaries. The credit facilities had $900 million and $375 million borrowing bases/commitments, respectively, subject to their terms and covenants. Matador reported compliance with its debt covenant at year-end.
Operating cash flow was below investing outflows; financing included $185 million of net borrowings under Matador’s credit agreement, $46 million of San Mateo borrowings, joint-venture/non-controlling-interest contributions and the SBA loan. The filing reported $214.2 million of undrawn capacity under Matador’s facility at year-end after letters of credit; availability is subject to facility limits and covenants.
Material changes, outlook and risks
- Matador reduced operated Delaware Basin rigs from six at the start of 2020 to three by midyear in response to the COVID-19 demand shock and oil-price collapse. Delaware Basin production increased about 21% for the year and represented 90% of total production.
- San Mateo merged its two joint ventures effective October 1, 2020. Its Black River gas plant expansion raised designed capacity to 460 MMcf/day. San Mateo’s oil pipeline throughput and produced-water handling increased 32% and 15%, respectively; gas gathering and processing volumes declined slightly year over year.
- For 2021, management budgeted $525–$575 million for drilling, completion and equipment and $20–$30 million for midstream capital expenditures. It planned three Delaware Basin rigs for most of the first quarter, adding a fourth in March, subject to market conditions. Management expected to fund the program with cash, operating cash flow and San Mateo performance incentives, with borrowing or other financing possible if needed.
- Commodity-price volatility, COVID-19, basis differentials, concentrated Delaware Basin exposure, federal leasing/permitting actions, environmental and emissions regulation, water disposal and induced-seismicity rules, and reliance on major purchasers and third-party infrastructure are material risks. About 28% of Delaware Basin net acreage is on federal land; the impact of January 2021 federal lease orders was described as unclear.
- Long-term gathering, transportation, processing and disposal agreements include minimum-volume commitments. Contractual obligations totaled approximately $3.14 billion at year-end; certain agreements could require substantial deficiency payments if volumes are not met. Management disclosed approximately $523.1 million of potential deficiencies if operations ceased in covered areas, in addition to other future commitments.
- An EPA and New Mexico Environment Department matter alleges Clean Air Act and state-plan violations at certain New Mexico locations. Management considered a material adverse impact remote, but resolution could involve monetary sanctions exceeding $300,000. Management also considered the impact of other ordinary-course legal proceedings unlikely to be material.
- On February 22, 2021, Matador declared its first quarterly dividend of $0.025 per share; future dividends remain at the board’s discretion. The 2020 annual report identifies a $7.5 million SBA Paycheck Protection Program loan, used for permitted payroll and related costs, as eligible for forgiveness subject to program requirements.
KPMG issued an unqualified opinion on the consolidated financial statements and an unqualified opinion on internal control over financial reporting.
Most important facts for investors to verify
- Standalone fourth-quarter results, production and impairment detail in the relevant quarterly filings; annual figures should not be treated as Q4 results.
- Current borrowing-base availability, debt-covenant headroom, and the use and repayment or forgiveness status of the SBA loan.
- Actual 2021 capital spending, rig count, production, and realized commodity prices and differentials versus management’s plan.
- Progress in converting proved undeveloped reserves into production, and the assumptions underlying reserve valuations and future impairment exposure.
- Minimum-volume obligations, potential deficiency payments, and San Mateo’s performance incentives, leverage and cash distributions.
- Developments in federal leasing and permitting, environmental matters, and the EPA/NMED notices.