Matador Resources Co current report, 04 March 2019

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Business Context and Reporting Period

Company: Matador Resources Company
Filing Type: Form 8-K (Current Report)
Date: March 4, 2019
Item: 7.01 Regulation FD Disclosure
Context: The filing addresses recent market reports suggesting that forecasted performance of new Delaware Basin oil and natural gas wells is being adversely affected by wells being drilled closer to existing wells ("parent-child" interference).

Key Financial and Operational Metrics

The filing does not provide specific revenue, profit, cash flow, margin, debt, or liquidity figures. It focuses on operational capacity and capital allocation:

  • 2019 Capital Expenditures: Approximately 90% of estimated 2019 capital expenditures for drilling, completing, and equipping wells are allocated to the Delaware Basin.
  • Drilling Locations: Approximately 2,300 net operated drilling locations in the Delaware Basin.
  • 2019 Well Completions: Anticipated completion of approximately 73 gross (54.9 net) operated wells in the Delaware Basin.
  • Well Spacing Strategy: Approximately 90% of future Delaware Basin drilling locations are established based on a 160-acre spacing pattern.

Material Changes and Operational Strategy

The Company highlights its strategic approach to mitigate interference issues compared to industry concerns:

  • Spacing Pattern: The drilling program relies almost entirely on a wider 160-acre well spacing pattern.
  • Exceptions: Locations with tighter spacing (80 to 120-acre "wine rack" spacing) are primarily in thick intervals (Wolfcamp B and Avalon, 500 to 1,000 feet thick) where multiple benches allow for desired distances between wells.
  • Performance Attribution: The Company attributes its well results to the 160-acre spacing practice, improvements in hydraulic fracturing design, and the use of gas lift and electric submersible pumps.

Management Commentary and Outlook

Management Commentary:

  • The Company continues to be pleased with the performance of its Delaware Basin drilling results.
  • Management notes that the Company was commended in a recent report as one of the few energy companies whose actual production outperformed published projections in a three-year study.
Outlook:
  • The Company maintains its 2019 drilling program based on the 160-acre spacing strategy to avoid parent-child interference.
Risks and Contingencies:
  • The filing addresses the risk of "parent-child" interference but asserts that the Company's specific spacing and technical strategies mitigate this risk.
Unusual Items:
  • None reported in this filing.

Investor Verification Checklist

  • Verify the accuracy of the 90% capital expenditure allocation to the Delaware Basin for 2019.
  • Confirm the actual well completion rates against the projected 73 gross (54.9 net) wells for 2019.
  • Review the three-year study cited by management regarding production outperformance versus published projections.
  • Assess the technical feasibility of the "wine rack" spacing in Wolfcamp B and Avalon intervals as described.