Matador Resources Company (NYSE: MTDR) (“Matador” or the
“Company”) today reported financial and operating results for the
second quarter of 2022. A short slide presentation summarizing the
highlights of Matador’s second quarter 2022 earnings release is
also included on the Company’s website at www.matadorresources.com on the Events and
Presentations page under the Investor Relations tab.
Management Summary Comments
Joseph Wm. Foran, Matador’s Founder, Chairman and CEO,
commented, “On both our website and the webcast planned for
tomorrow’s earnings conference call is a set of five slides
identified as ‘Chairman’s Remarks’ (Slides A through E) to
add color and detail to my remarks. We invite you to review these
slides in conjunction with my comments below, which are intended to
provide context for the second quarter 2022 results. Matador is
celebrating its ten year anniversary as a public company.
Record Results in Second Quarter
2022
“The first quarter of 2022 was a record quarter—the best quarter
in Matador’s history. The second quarter of 2022 was even better,
operationally and financially. Matador set new financial records
across the board, including all-time quarterly highs for oil and
natural gas revenues of $893 million, net income of $416 million,
Adjusted EBITDA of $664 million and adjusted free cash flow of $454
million (see Slide A), and we expect the next two quarters
to be strong as well.
“Matador’s production has reached an important inflection point.
In March 2022, Matador averaged production of over 100,000 barrels
of oil and natural gas equivalent (“BOE”) per day. During the
second quarter of 2022, Matador increased its average oil and
natural gas equivalent production 18% sequentially to over 110,000
BOE per day (see Slide B).
“San Mateo Midstream also delivered a record quarter, including
all-time high throughput volumes for natural gas gathering and
processing, oil gathering and transportation and water handling, as
well as record quarterly net income for San Mateo of $42 million
and record Adjusted EBITDA for San Mateo of $53 million (see
Slide C).
Revolver Repaid, Bonds Repurchased and
Quarterly Dividend Doubled
“During the second quarter, Matador used a portion of its free
cash flow to pay down the remaining $50 million in borrowings
outstanding under its reserves-based revolving credit facility. In
addition, during the second quarter and through July 25, 2022,
Matador repurchased $158 million of its outstanding senior notes in
a series of open market transactions, reducing its outstanding
bonds from $1.05 billion to $892 million today. Over the past seven
quarters, beginning in the fourth quarter of 2020, Matador has
reduced its outstanding debt by $633 million or approximately 42%
of our then total revolving debt and senior notes outstanding. This
pay down of debt was an important achievement and safety goal for
Matador and its shareholders given the recent volatility in global
energy markets and increasing fears of a recession by the market.
Matador’s leverage ratio has now declined from 2.9x at year-end
2020 to 0.5x at the end of the second quarter of 2022, marking
Matador’s lowest leverage ratio since the quarter Matador became a
publicly-traded company in early 2012 (see Slide D). This
pay down provides Matador a number of additional strategic options
going forward.
“Given our strong results to-date and our continued confidence
in Matador’s growing operational and financial strength, we were
very pleased to announce at our Annual Meeting of Shareholders in
June the doubling of our cash dividend from $0.20 per share to
$0.40 per share on an annualized basis.
Looking Ahead and Adjusting Full Year 2022
Guidance
“Matador recently contracted a seventh drilling rig to
accelerate the timing of the next phase of drilling on its Rodney
Robinson leasehold in the western portion of the Antelope Ridge
asset area. The seventh rig will begin drilling operations there in
the third quarter of 2022. We continue to be very pleased with the
well performance and strong economic results across multiple
completion intervals throughout the Rodney Robinson leasehold. As a
result, we have elected to accelerate the drilling of eight wells
there into the second half of 2022. These wells, originally
scheduled for drilling in late 2023, are anticipated to be turned
to sales late in the first quarter or early in the second quarter
of 2023. Presently, there are 19 producing wells on this lease.
These next eight wells will increase the well count to 27.
“Despite the better-than-expected well performances across all
of our asset areas, we are only increasing the midpoints of our
2022 total oil and natural gas production guidance modestly at this
time from 21.5 million barrels to 21.7 million barrels for oil and
from 95.0 billion cubic feet to 95.5 billion cubic feet for natural
gas (see Slide E). This production growth is adversely
affected at the moment by divestitures of non-core producing
properties in the Eagle Ford and Haynesville, the uncertainty of
the number and timing of non-operating well proposals and offset
operator activity across our asset areas requiring shut-ins during
completion activities. In addition, the Rodney Robinson completions
in the second half of 2022 will also require shut-ins of various
producing wells during completion activities there. Similar to our
decision last year to accelerate the Voni completions, enabling the
Voni wells to be turned to sales earlier than originally planned,
the early completion of the eight Rodney Robinson wells should give
us positive momentum when they are turned on late in the first
quarter or early in the second quarter of next year.
“The midpoint of our 2022 capital expenditures guidance for
drilling, completing and equipping wells has been increased by $125
million from $675 million to $800 million. Most of this increase is
associated with the seventh rig and the accelerated drilling
program at Rodney Robinson and from additional working interests
obtained through acreage trades and non-operated well proposals.
Only approximately $30 million of the $125 million expected
increase is attributable to further service cost inflation
anticipated in the second half of 2022. Our staff and field
personnel have done a great job mitigating these inflationary
pressures with sustainable operating efficiencies, including
reduced days on well in both drilling and completions operations,
simultaneous and remote fracturing operations and the use of
dual-fuel fracturing operations, among other items.”
Second Quarter 2022 Financial and Operational
Highlights
Net Cash Provided by Operating Activities
and Adjusted Free Cash Flow
- Second quarter 2022 net cash provided by operating activities
was $646.3 million (GAAP basis), leading to second quarter 2022
adjusted free cash flow (a non-GAAP financial measure) of $453.8
million.
Net Income, Earnings Per Share and
Adjusted EBITDA
- Second quarter 2022 net income (GAAP basis) was $415.7 million,
or $3.47 per diluted common share, a 101% sequential increase from
net income of $207.1 million in the first quarter of 2022, and a
293% year-over-year increase from net income of $105.9 million in
the second quarter of 2021.
- Second quarter 2022 adjusted net income (a non-GAAP financial
measure) was $415.6 million, or adjusted earnings of $3.47 per
diluted common share, a 50% sequential increase from adjusted net
income of $277.5 million in the first quarter of 2022, and a 242%
year-over-year increase from adjusted net income of $121.7 million
in the second quarter of 2021.
- Second quarter 2022 adjusted earnings before interest expense,
income taxes, depletion, depreciation and amortization and certain
other items (“Adjusted EBITDA,” a non-GAAP financial measure) were
$663.8 million, a 44% sequential increase from $461.8 million in
the first quarter of 2022, and a 154% year-over-year increase from
$261.0 million in the second quarter of 2021.
Oil, Natural Gas and Total Production
Above Expectations
- As summarized in the table below, Matador’s second quarter 2022
average daily oil, natural gas and total production were all
quarterly records and above the Company’s expectations. The
majority of the higher-than-expected production resulted from
better-than-expected production from the most recent 11 Voni wells
and the most recent nine Rodney Robinson wells turned to sales late
in the first quarter of this year. Eight more Rodney Robinson wells
are expected to come online late in the first quarter or early in
the second quarter of 2023.
Q2 2022 Average Daily Volume
Production Change (%)
Production
Actual
Guidance(1)
Sequential(2)
YoY(3)
Difference vs. Guidance(4)
Total, BOE per day
110,750
106,000 to 108,000
+18%
+19%
+3.5%
Oil, Bbl per day
64,300
61,700 to 62,700
+20%
+21%
+3.4%
Natural Gas, MMcf per day
278.5
268.0 to 272.0
+15%
+16%
+3.1%
(1) As provided on February 22, 2022 and
reaffirmed on April 26, 2022.
(2) As compared to the first quarter of
2022.
(3) Represents year-over-year percentage
change from the second quarter of 2021.
(4) As compared to midpoint of guidance
provided on February 22, 2022 and reaffirmed on April 26, 2022.
Capital Expenditures Below
Expectations
Q2 2022 Capital Expenditures ($
millions)
Actual
Guidance(1)
Difference vs. Guidance(2)
Drilling, completing and equipping
(“D/C/E”)
$143.0
$187.0
(24)%
Midstream
$8.9
$17.0
(48)%
(1) As provided on April 26, 2022.
(2) As compared to guidance provided on
April 26, 2022.
- Drilling and completion costs for the 11 gross (6.4 net)
operated horizontal wells turned to sales in the second quarter of
2022 averaged $772 per completed lateral foot, an increase of 3%
from average drilling and completion costs of $752 per completed
lateral foot achieved in the first quarter of 2022. Additional
increases in service costs are anticipated in the second half of
2022, and the Company now expects drilling and completion costs of
approximately $890 per completed lateral foot for full-year 2022,
an increase of approximately 5%.
Strategic Acquisition of Midstream Assets in Lea and Eddy
Counties, New Mexico
- On June 30, 2022, a wholly-owned subsidiary of Matador closed
its previously announced acquisition of the Lane Gathering and
Processing System, which is being renamed the “Marlan Gathering and
Processing System,” in Lea and Eddy Counties, New Mexico from a
subsidiary of Summit Midstream Partners, LP (see Matador’s June 9,
2022 press release for additional details). The acquired midstream
entity is now named Pronto Midstream, LLC (“Pronto Midstream”) and
is not part of San Mateo. The Marlan Gathering and Processing
System includes a 60 million cubic feet per day cryogenic natural
gas processing plant, three compressor stations and approximately
45 miles of natural gas gathering pipelines. This acquisition is a
further extension of Matador’s strategy to control the efficiency
of midstream operations and to use its midstream assets to further
enhance and assist the Company’s exploration, production and
environmental operations and add third-party customers.
Note: All references to Matador’s
net income, adjusted net income, Adjusted EBITDA and adjusted free
cash flow reported throughout this earnings release are those
values attributable to Matador Resources Company shareholders after
giving effect to any net income, adjusted net income, Adjusted
EBITDA or adjusted free cash flow, respectively, attributable to
third-party non-controlling interests, including in San Mateo
Midstream, LLC (“San Mateo”). Matador owns 51% of San Mateo. For a
definition of adjusted net income, adjusted earnings per diluted
common share, Adjusted EBITDA and adjusted free cash flow and
reconciliations of such non-GAAP financial metrics to their
comparable GAAP metrics, please see “Supplemental Non-GAAP
Financial Measures” below.
Sequential and year-over-year quarterly comparisons of selected
financial and operating items are shown in the following table:
Three Months Ended
June 30, 2022
March 31, 2022
June 30, 2021
Net Production Volumes:(1)
Oil (MBbl)(2)
5,855
4,820
4,855
Natural gas (Bcf)(3)
25.3
21.8
21.8
Total oil equivalent (MBOE)(4)
10,078
8,457
8,482
Average Daily Production Volumes:(1)
Oil (Bbl/d)(5)
64,339
53,561
53,354
Natural gas (MMcf/d)(6)
278.5
242.4
239.1
Total oil equivalent (BOE/d)(7)
110,750
93,969
93,210
Average Sales Prices:
Oil, without realized derivatives (per
Bbl)
$
111.06
$
95.45
$
64.90
Oil, with realized derivatives (per
Bbl)
$
105.21
$
91.68
$
56.13
Natural gas, without realized derivatives
(per Mcf)(8)
$
9.57
$
7.63
$
4.46
Natural gas, with realized derivatives
(per Mcf)
$
8.51
$
7.43
$
4.46
Revenues (millions):
Oil and natural gas revenues
$
892.8
$
626.5
$
412.1
Third-party midstream services
revenues
$
21.9
$
17.3
$
19.9
Realized loss on derivatives
$
(61.2
)
$
(22.4
)
$
(42.6
)
Operating Expenses (per BOE):
Production taxes, transportation and
processing
$
8.50
$
7.07
$
5.17
Lease operating
$
3.95
$
4.01
$
3.39
Plant and other midstream services
operating
$
2.18
$
2.30
$
1.62
Depletion, depreciation and
amortization
$
11.91
$
11.33
$
10.78
General and administrative(9)
$
2.42
$
3.52
$
2.88
Total(10)
$
28.96
$
28.23
$
23.84
Other (millions):
Net sales of purchased natural gas(11)
$
3.6
$
2.3
$
1.3
Net income (millions)(12)
$
415.7
$
207.1
$
105.9
Earnings per common share
(diluted)(12)
$
3.47
$
1.73
$
0.89
Adjusted net income (millions)(12)(13)
$
415.6
$
277.5
$
121.7
Adjusted earnings per common share
(diluted)(12)(14)
$
3.47
$
2.32
$
1.02
Adjusted EBITDA (millions)(12)(15)
$
663.8
$
461.8
$
261.0
Net cash provided by operating activities
(millions)(16)
$
646.3
$
329.0
$
258.2
Adjusted free cash flow
(millions)(12)(17)
$
453.8
$
245.7
$
156.3
San Mateo net income (millions)(18)
$
41.8
$
34.8
$
32.6
San Mateo Adjusted EBITDA
(millions)(15)(18)
$
52.9
$
45.1
$
42.3
San Mateo net cash provided by operating
activities (millions)(18)
$
49.9
$
45.5
$
25.3
San Mateo adjusted free cash flow
(millions)(16)(17)(18)
$
33.4
$
23.8
$
32.7
D/C/E capital expenditures (millions)
$
143.0
$
198.8
$
100.6
Midstream capital expenditures
(millions)(19)
$
8.9
$
9.7
$
4.1
(1) Production volumes reported in two
streams: oil and natural gas, including both dry and liquids-rich
natural gas.
(2) One thousand barrels of oil.
(3) One billion cubic feet of natural
gas.
(4) One thousand barrels of oil
equivalent, estimated using a conversion ratio of one barrel of oil
per six thousand cubic feet of natural gas.
(5) Barrels of oil per day.
(6) Millions of cubic feet of natural gas
per day.
(7) Barrels of oil equivalent per day,
estimated using a conversion ratio of one barrel of oil per six
thousand cubic feet of natural gas.
(8) Per thousand cubic feet of natural
gas.
(9) Includes approximately $0.40, $0.36
and $0.21 per BOE of non-cash, stock-based compensation expense in
the second quarter of 2022, the first quarter of 2022 and the
second quarter of 2021, respectively.
(10) Total does not include the impact of
purchased natural gas or immaterial accretion expenses.
(11) Net sales of purchased natural gas
reflect those natural gas purchase transactions that the Company
periodically enters into with third parties whereby the Company
purchases natural gas and (i) subsequently sells the natural gas to
other purchasers or (ii) processes the natural gas at San Mateo’s
cryogenic natural gas processing plant in Eddy County, New Mexico
(the “Black River Processing Plant”) and subsequently sells the
residue natural gas and natural gas liquids (“NGL”) to other
purchasers. Such amounts reflect revenues from sales of purchased
natural gas of $60.0 million, $19.3 million and $10.9 million less
expenses of $56.4 million, $17.0 million and $9.6 million in the
second quarter of 2022, the first quarter of 2022 and the second
quarter of 2021, respectively.
(12) Attributable to Matador Resources
Company shareholders.
(13) Adjusted net income is a non-GAAP
financial measure. For a definition of adjusted net income and a
reconciliation of adjusted net income (non-GAAP) to net income
(GAAP), please see “Supplemental Non-GAAP Financial Measures.”
(14) Adjusted earnings per diluted common
share is a non-GAAP financial measure. For a definition of adjusted
earnings per diluted common share and a reconciliation of adjusted
earnings per diluted common share (non-GAAP) to earnings per
diluted common share (GAAP), please see “Supplemental Non-GAAP
Financial Measures.”
(15) Adjusted EBITDA is a non-GAAP
financial measure. For a definition of Adjusted EBITDA and a
reconciliation of Adjusted EBITDA (non-GAAP) to net income (GAAP)
and net cash provided by operating activities (GAAP), please see
“Supplemental Non-GAAP Financial Measures.”
(16) As reported for each period on a
consolidated basis, including 100% of San Mateo’s net cash provided
by operating activities.
(17) Adjusted free cash flow is a non-GAAP
financial measure. For a definition of adjusted free cash flow and
a reconciliation of adjusted free cash flow (non-GAAP) to net cash
provided by operating activities (GAAP), please see “Supplemental
Non-GAAP Financial Measures.”
(18) Represents 100% of San Mateo’s net
income, adjusted EBITDA, net cash provided by operating activities
or adjusted free cash flow for each period reported.
(19) Includes Matador’s 51% share of San
Mateo’s capital expenditures plus 100% of other midstream capital
expenditures not associated with San Mateo.
Full-Year 2022 Guidance Update
As shown in the table below, effective July 26, 2022, Matador
updated its full year 2022 guidance estimates for oil, natural gas
and total oil equivalent production and D/C/E capital expenditures,
which were originally provided on February 22, 2022. In addition,
Matador affirmed its 2022 estimates for midstream capital
expenditures.
2022 Guidance Estimates
Guidance Metric
Actual 2021 Results
February 22, 2022(1)
% YoY Change(2)
July 26, 2022(3)
% YoY Change(2)
Total Oil Production, million Bbl
17.8
21.0 to 22.0
+21%
21.4 to 22.0
+22%
Total Natural Gas Production, Bcf
81.7
92.0 to 98.0
+16%
93.0 to 98.0
+17%
Total Oil Equivalent Production, million
BOE
31.5
36.3 to 38.3
+19%
36.9 to 38.3
+20%
D/C/E CapEx(4), millions
$513
$640 to $710
+31%
$765 to $835
+56%
Midstream CapEx(5), millions
$31
$50 to $60
+79%
$50 to $60
+79%
Total D/C/E and Midstream CapEx,
millions
$544
$690 to $770
+34%
$815 to $895
+57%
(1) As of and as provided on February 22,
2022.
(2) Represents percentage change from 2021
actual results to the midpoint of 2022 guidance, as provided on
February 22, 2022 and July 26, 2022, respectively.
(3) As of and as affirmed or updated on
July 26, 2022.
(4) Capital expenditures associated with
drilling, completing and equipping wells.
(5) Includes Matador’s share of estimated
capital expenditures for San Mateo and other wholly-owned midstream
projects. Excludes the acquisition of Pronto Midstream.
The guidance estimates presented in the table above reflect the
following key assumptions and modifications for anticipated
drilling and completions and midstream activity for full year 2022
as provided on July 26, 2022.
- Matador now expects to turn to sales 80 gross (63.7 net)
operated horizontal wells during 2022, an increase of 2.9 net wells from the Company’s prior
expectations, primarily as a result of additional working interests
from anticipated acreage trades. Most of the wells impacted by
these acreage trades are expected to be turned to sales in the
fourth quarter of 2022 and will not contribute significantly to
Matador’s production in 2022. Matador expects to incur incremental
D/C/E capital expenditures of approximately $40 million associated
with these additional working interests.
- Matador contracted a seventh drilling rig, which is expected to
begin drilling eight wells on the Company’s Rodney Robinson
leasehold in western Antelope Ridge in the third quarter of 2022.
These eight Rodney Robinson wells are expected to be turned to
sales late in the first quarter or early in the second quarter of
2023 rather than in the fourth quarter of 2023. Matador estimates
additional D/C/E capital expenditures attributable to the seventh
rig and the acceleration of operations at Rodney Robinson to be
approximately $55 million in 2022.
- Increases due to anticipated service cost inflation make up
only $30 million of the $125 million increase in the Company’s
estimates for full year 2022 D/C/E capital expenditures, primarily
as a result of Matador’s cost mitigation efforts, as noted
above.
- During the first half of 2022, Matador divested certain
operated assets in the Eagle Ford shale in South Texas as well as a
small portion of its non-operated assets in the Haynesville shale
in Northwest Louisiana. The Company received approximately $35
million in proceeds from these asset sales. These divestitures of
non-core producing properties are expected to result in a reduction
in estimated production in the second half of 2022 of approximately
220,000 BOE, including a decrease of approximately 70,000 barrels
of oil and approximately 0.9 Bcf of natural gas.
- Matador estimates that the acceleration of completion
operations for the eight Rodney Robinson wells and incremental
shut-ins at Stateline due to offset operator completions during the
second half of 2022 should result in a reduction in estimated
second half production of approximately 315,000 BOE, including a
decrease of approximately 180,000 barrels of oil and 0.8 Bcf of
natural gas, as compared to prior estimates. These changes in
estimates have been already incorporated in the guidance provided
on July 26, 2022.
Third and Fourth Quarter 2022 Completions
and Production Cadence Update
Third Quarter 2022 Estimated Wells Turned to Sales
At July 26, 2022, Matador expects to turn to sales 24 gross
(20.1 net) operated horizontal wells in the Delaware Basin during
the third quarter of 2022, consisting of 16 gross (12.8 net) wells
in the Antelope Ridge asset area, four gross (4.0 net) wells in the
Stateline asset area and four gross (3.3 net) in the Rustler Breaks
asset area. The Company expects the average completed lateral
length of these wells to be approximately 9,600 feet.
Third Quarter 2022 Estimated Oil, Natural Gas and Total Oil
Equivalent Production
The table below provides Matador’s estimates, as of July 26,
2022, for the anticipated quarterly sequential changes in the
Company’s average daily total oil equivalent, oil and natural gas
production for the third quarter and fourth quarters of 2022.
Q3 and Q4 2022 Production
Estimates
Period
Average Daily Total Production,
BOE per day
Average Daily Oil Production, Bbl
per day
Average Daily Natural Gas
Production, MMcf per day
Q2 2022
110,750
64,339
278.5
Q3 2022
100,000 to 102,000
58,000 to 59,000
254.0 to 258.0
Q4 2022
105,000 to 107,000
61,000 to 62,000
267.0 to 271.0
As noted in the table above, Matador expects its average daily
total production to decrease 9% sequentially from 110,750 BOE per
day in the second quarter of 2022 to approximately 101,000 BOE per
day in the third quarter of 2022 but is expected to increase in the
fourth quarter of 2022 to approximately 106,000 BOE per day. The
third quarter sequential decrease was anticipated as part of
Matador’s original guidance for 2022 and is primarily attributable
to (i) fewer wells being completed and turned to sales in the
second quarter of 2022 and the first half of the third quarter of
2022, as compared to prior periods, (ii) the timing of new wells
anticipated to be turned to sales late in the third quarter of
2022, (iii) additional production being shut in due to accelerated
offset completion activity, as compared to previous expectations
and as noted above and (iv) sales of non-core properties as noted
above.
Horizontal Wells Completed and Turned to Sales
Operated
Non-Operated
Total
Gross Operated and
Non-Operated
Asset/Operating Area
Gross
Net
Gross
Net
Gross
Net
Well Completion Intervals
Western Antelope Ridge (Rodney
Robinson)
—
—
—
—
—
—
No wells turned to sales in Q2
2022
Antelope Ridge
—
—
9
0.1
9
0.1
2-2BS, 7-WC A
Arrowhead
—
—
2
0.7
2
0.7
2-3BS
Ranger
—
—
2
0.1
2
0.1
2-2BS
Rustler Breaks
11
6.4
5
0.4
16
6.8
3-1BS, 5-2BS, 2-3BS, 5-WC A,
1-WC B
Stateline
—
—
—
—
—
—
No wells turned to sales in Q2
2022
Wolf/Jackson Trust
—
—
—
—
—
—
No wells turned to sales in Q2
2022
Delaware Basin
11
6.4
18
1.3
29
7.7
South Texas
—
—
—
—
—
—
No wells turned to sales in Q2
2022
Haynesville Shale
—
—
—
—
—
—
No wells turned to sales in Q2
2022
Total
11
6.4
18
1.3
29
7.7
Note: WC = Wolfcamp; BS = Bone Spring. For
example, 2-BS indicates two Second Bone Spring completions and 7-WC
A indicates seven Wolfcamp A completions.
Realized Commodity Prices
Q2 2022
Change
Realized Commodity Prices
Benchmark(1)
Actual
Differential Guidance(2)
Sequential(3)
YoY(4)
Actual Differential
Oil Prices, per Bbl
$108.52
$111.06
($0.50) to +$0.50
+16%
+71%
+$2.54
Natural Gas Prices, per Mcf
$7.50
$9.57
+$1.75 to +$2.25
+25%
+115%
+$2.07
(1) Oil benchmark is West Texas
Intermediate (“WTI”) and natural gas benchmark is Henry Hub.
(2) As provided on April 26, 2022.
(3) Second quarter 2022 as compared to
first quarter 2022.
(4) Second quarter 2022 as compared to
second quarter 2021.
Oil Prices
For the third quarter of 2022, Matador’s weighted average oil
price differential relative to the WTI benchmark price, inclusive
of the monthly roll and transportation costs, is anticipated to be
in the range of +$1.50 to +$2.50 per barrel.
At July 26, 2022, Matador had approximately 5.4 million barrels
of oil hedged for the second half of 2022 using costless collars
with a weighted average floor price of approximately $65 per barrel
and a weighted average ceiling price of approximately $110 per
barrel. Please see the accompanying slide presentation for a more
complete summary of Matador’s current oil derivative positions.
Natural Gas Prices
For the third quarter of 2022, Matador’s weighted average
natural gas price differential relative to the Henry Hub average
daily benchmark price is anticipated to be in the range of +$1.25
to +$1.75 per thousand cubic feet, which is lower than the
differential of +$2.07 per thousand cubic feet of natural gas
realized in the second quarter of 2022, as NGL prices are not
expected to be as strong in the third quarter, as compared to the
second quarter of 2022. Matador is a
two-stream reporter, and the revenues associated with its NGL
production are included in the weighted average realized natural
gas price. NGL prices do not contribute to or affect Matador’s
realized gain or loss on natural gas derivatives.
At July 26, 2022, Matador had approximately 31.2 billion cubic
feet of natural gas hedged for the second half of 2022 using
costless collars with a weighted average floor price of
approximately $3.58 per MMBtu and a weighted average ceiling price
of approximately $7.08 per MMBtu and 2.4 billion cubic feet of
natural gas hedged for the first quarter of 2023 using costless
collars with a weighted average floor price of approximately $6.00
per MMBtu and a weighted average ceiling price of approximately
$14.00 per MMBtu. Please see the accompanying slide presentation
for a more complete summary of Matador’s current natural gas
derivative positions.
Operating Expenses
On a unit of production basis:
- Production taxes, transportation and processing expenses
increased 9% sequentially from $7.07 per BOE in the first quarter
of 2022 to $8.50 per BOE in the second quarter of 2022. This
increase was primarily attributable to increased production taxes
associated with increased oil and natural gas revenues of $892.8
million, an all-time quarterly high, reported by Matador in the
second quarter. Most of the sequential and year-over-year increases
in Matador’s total operating costs on a per unit basis were
attributable primarily to the increases in production taxes on the
higher revenues.
- Lease operating expenses held steady and decreased 1%
sequentially from $4.01 per BOE in the first quarter of 2022 to
$3.95 per BOE in the second quarter of 2022 but increased 17%
year-over-year from $3.39 per BOE in the second quarter of 2021.
The year-over-year increase is primarily attributable to the
increased number of wells being both operated by Matador and by
other operators (where Matador owns a working interest) and to
operating cost inflation between the two periods.
- General and administrative expenses decreased 31% sequentially
from $3.52 per BOE in the first quarter of 2022 to $2.42 per BOE in
the second quarter of 2022. As part of its compensation program,
the Company has issued to its employees stock awards that are based
on the value of Matador’s stock but that are settled in cash.
General and administrative expenses in the second quarter reflect a
decrease in stock-based compensation expense associated with these
cash-settled stock awards, the values of which are remeasured at
each reporting period. These cash-settled stock award amounts
decreased due to the fact that Matador’s share price decreased 12%
from $52.98 at March 31, 2022 to $46.59 at June 30, 2022.
San Mateo Highlights and Update
Operating Highlights and Financial
Results
Operating Highlights
San Mateo’s operations in the second quarter of 2022 were
highlighted by record operating and financial results. These record
results reflect not only better-than-expected volumes delivered by
Matador during the second quarter of 2022, but also increased
volumes delivered by other San Mateo customers as a result of
several new business opportunities recently awarded to San
Mateo.
Operationally, natural gas gathering and processing, oil
gathering and transportation and water handling volumes achieved in
the second quarter of 2022 were all-time highs for San Mateo and
are shown in the table below, each as compared to the respective
volumes reported in the first quarter of 2022 and the second
quarter of 2021. These volumes do not include the full quantity of
volumes that would have otherwise been delivered by certain San
Mateo customers subject to minimum volume commitments (although
partial deliveries were made in each period), but for which San
Mateo recognized revenues during each period.
San Mateo Throughput Volumes
Q2 2022
Q1 2022
Sequential
Q2 2021
YoY
Natural gas gathering, MMcf per day
293
267
+10%
252
+16%
Natural gas processing, MMcf per day
292
253
+15%
223
+31%
Oil gathering and transportation, Bbl per
day
51,200
47,800
+7%
43,900
+17%
Produced water handling, Bbl per day
348,000
344,000
+1%
281,000
+24%
Financial Results
During the second quarter of 2022, San Mateo achieved record
financial results as described below.
- Net income (GAAP basis) of $41.8 million, an all-time quarterly
high and a 20% sequential increase from $34.8 million in the first
quarter of 2022, and a 28% year-over-year increase from $32.6
million in the second quarter of 2021.
- Adjusted EBITDA (a non-GAAP financial measure) of $52.9
million, an all-time quarterly high and a 17% sequential increase
from $45.1 million in the first quarter of 2022, and a 25%
year-over-year increase from $42.3 million in the second quarter of
2021.
- Net cash provided by San Mateo operating activities (GAAP
basis) of $49.9 million, leading to San Mateo adjusted free cash
flow (a non-GAAP financial measure) of $33.4 million, both all-time
quarterly highs.
- Third-party midstream services revenues of $21.9 million, an
all-time quarterly high and a 27% sequential increase from $17.3
million in the first quarter of 2022, and a 10% year-over-year
increase from $19.9 million in the second quarter of 2021.
Capital Expenditures
Matador’s portion of San Mateo’s capital expenditures was
approximately $8.9 million in the second quarter of 2022,
approximately 50% below the Company’s estimate of $17 million for
the quarter mostly due to the timing of projects underway during
the quarter with most of these costs currently expected to be
incurred in the third quarter of 2022. During the third quarter of
2022, the Company expects to incur midstream capital expenditures
of approximately $24 million associated primarily with San Mateo’s
new midstream business opportunities and with new infrastructure
San Mateo anticipates adding to handle anticipated increased
volumes from Matador and other customers. These midstream capital
expenditures include Matador’s 51% share of San Mateo’s estimated
capital expenditures and other wholly-owned midstream projects but
exclude the acquisition of Pronto Midstream.
Conference Call Information
The Company will host a live conference call on Wednesday, July
27, 2022, at 9:00 a.m. Central Time to review its second quarter
2022 operational and financial results. To access the live
conference call by phone, you can use the following link
https://register.vevent.com/register/BI1c168e702fa54614b5ef189dbee9d125
and you will be provided with dial in details. To avoid delays, it
is recommended that participants dial into the conference call 15
minutes ahead of the scheduled start time.
The live conference call will also be available through the
Company’s website at www.matadorresources.com on the Events and
Presentations page under the Investor Relations tab. The replay for
the event will be available on the Company’s website at
www.matadorresources.com on the Events and Presentations page under
the Investor Relations tab for one year.
About Matador Resources Company
Matador is an independent energy company engaged in the
exploration, development, production and acquisition of oil and
natural gas resources in the United States, with an emphasis on oil
and natural gas shale and other unconventional plays. Its current
operations are focused primarily on the oil and liquids-rich
portion of the Wolfcamp and Bone Spring plays in the Delaware Basin
in Southeast New Mexico and West Texas. Matador also operates in
the Eagle Ford shale play in South Texas and the Haynesville shale
and Cotton Valley plays in Northwest Louisiana. Additionally,
Matador conducts midstream operations in support of its
exploration, development and production operations and provides
natural gas processing, oil transportation services, natural gas,
oil and produced water gathering services and produced water
disposal services to third parties.
For more information, visit Matador Resources Company at
www.matadorresources.com.
Forward-Looking Statements
This press release includes “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. “Forward-looking statements” are statements related to
future, not past, events. Forward-looking statements are based on
current expectations and include any statement that does not
directly relate to a current or historical fact. In this context,
forward-looking statements often address expected future business
and financial performance, and often contain words such as “could,”
“believe,” “would,” “anticipate,” “intend,” “estimate,” “expect,”
“may,” “should,” “continue,” “plan,” “predict,” “potential,”
“project,” “hypothetical,” “forecasted” and similar expressions
that are intended to identify forward-looking statements, although
not all forward-looking statements contain such identifying words.
Such forward-looking statements include, but are not limited to,
statements about guidance, projected or forecasted financial and
operating results, future liquidity, the payment of dividends,
results in certain basins, objectives, project timing, expectations
and intentions, regulatory and governmental actions and other
statements that are not historical facts. Actual results and future
events could differ materially from those anticipated in such
statements, and such forward-looking statements may not prove to be
accurate. These forward-looking statements involve certain risks
and uncertainties, including, but not limited to, the following
risks related to financial and operational performance: general
economic conditions; the Company’s ability to execute its business
plan, including whether its drilling program is successful; changes
in oil, natural gas and natural gas liquids prices and the demand
for oil, natural gas and natural gas liquids; its ability to
replace reserves and efficiently develop current reserves; the
operating results of the Company’s midstream’s oil, natural gas and
water gathering and transportation systems, pipelines and
facilities, the acquiring of third-party business and the drilling
of any additional salt water disposal wells; costs of operations;
delays and other difficulties related to producing oil, natural gas
and natural gas liquids; delays and other difficulties related to
regulatory and governmental approvals and restrictions; impact on
the Company’s operations due to seismic events; availability of
sufficient capital to execute its business plan, available
borrowing capacity under its revolving credit facilities and
otherwise; its ability to make acquisitions on economically
acceptable terms; its ability to integrate acquisitions; the
operating results of and the availability of any potential
distributions from our joint ventures; weather and environmental
conditions; the impact of the worldwide spread of the novel
coronavirus, or COVID-19, on oil and natural gas demand, oil and
natural gas prices and its business; and the other factors which
could cause actual results to differ materially from those
anticipated or implied in the forward-looking statements. For
further discussions of risks and uncertainties, you should refer to
Matador’s filings with the Securities and Exchange Commission
(“SEC”), including the “Risk Factors” section of Matador’s most
recent Annual Report on Form 10-K and any subsequent Quarterly
Reports on Form 10-Q. Matador undertakes no obligation to update
these forward-looking statements to reflect events or circumstances
occurring after the date of this press release, except as required
by law, including the securities laws of the United States and the
rules and regulations of the SEC. You are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date of this press release. All forward-looking
statements are qualified in their entirety by this cautionary
statement.
Matador Resources Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS -
UNAUDITED
(In thousands, except par value and share
data)
June 30, 2022
December 31,
2021
ASSETS
Current assets
Cash
$
230,394
$
48,135
Restricted cash
51,889
38,785
Accounts receivable
Oil and natural gas revenues
328,758
164,242
Joint interest billings
102,646
48,366
Other
26,965
28,808
Derivative instruments
3,861
1,971
Lease and well equipment inventory
13,179
12,188
Prepaid expenses and other current
assets
43,235
28,810
Total current assets
800,927
371,305
Property and equipment, at cost
Oil and natural gas properties, full-cost
method
Evaluated
6,352,486
6,007,325
Unproved and unevaluated
971,185
964,714
Midstream properties
1,011,017
900,979
Other property and equipment
30,871
30,123
Less accumulated depletion, depreciation
and amortization
(4,261,984
)
(4,046,456
)
Net property and equipment
4,103,575
3,856,685
Other assets
Other long-term assets
59,374
34,163
Total assets
$
4,963,876
$
4,262,153
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
$
39,526
$
26,256
Accrued liabilities
226,306
253,283
Royalties payable
150,898
94,359
Amounts due to affiliates
15,476
27,324
Derivative instruments
63,338
16,849
Advances from joint interest owners
18,931
18,074
Income taxes payable
38,170
—
Other current liabilities
56,494
28,692
Total current liabilities
609,139
464,837
Long-term liabilities
Borrowings under Credit Agreement
—
100,000
Borrowings under San Mateo Credit
Facility
420,000
385,000
Senior unsecured notes payable
900,261
1,042,580
Asset retirement obligations
38,392
41,689
Deferred income taxes
235,534
77,938
Other long-term liabilities
18,499
22,721
Total long-term liabilities
1,612,686
1,669,928
Shareholders’ equity
Common stock - $0.01 par value,
160,000,000 shares authorized; 118,201,399 and 117,861,923 shares
issued; and 118,130,068 and 117,850,233 shares outstanding,
respectively
1,182
1,179
Additional paid-in capital
2,090,564
2,077,592
Retained earnings (accumulated
deficit)
439,780
(171,318
)
Treasury stock, at cost, 71,331 and 11,945
shares, respectively
(2,356
)
(243
)
Total Matador Resources Company
shareholders’ equity
2,529,170
1,907,210
Non-controlling interest in
subsidiaries
212,881
220,178
Total shareholders’ equity
2,742,051
2,127,388
Total liabilities and shareholders’
equity
$
4,963,876
$
4,262,153
Matador Resources Company and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS - UNAUDITED
(In thousands, except per share data)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Revenues
Oil and natural gas revenues
$
892,769
$
412,074
$
1,519,284
$
728,307
Third-party midstream services
revenues
21,886
19,850
39,192
35,288
Sales of purchased natural gas
60,008
10,918
79,347
15,428
Realized loss on derivatives
(61,163
)
(42,611
)
(83,602
)
(68,524
)
Unrealized gain (loss) on derivatives
30,430
(42,804
)
(44,599
)
(86,227
)
Total revenues
943,930
357,427
1,509,622
624,272
Expenses
Production taxes, transportation and
processing
85,658
43,843
145,477
78,017
Lease operating
39,857
28,752
73,812
54,691
Plant and other midstream services
operating
22,014
13,746
41,475
27,409
Purchased natural gas
56,440
9,628
73,461
12,483
Depletion, depreciation and
amortization
120,024
91,444
215,877
166,307
Accretion of asset retirement
obligations
517
511
1,060
1,011
General and administrative
24,431
24,397
54,164
46,585
Total expenses
348,941
212,321
605,326
386,503
Operating income
594,989
145,106
904,296
237,769
Other income (expense)
Net loss on asset sales and impairment
—
—
(198
)
—
Interest expense
(18,492
)
(17,940
)
(34,744
)
(37,590
)
Other (expense) income
(4,342
)
14
(4,486
)
(661
)
Total other expense
(22,834
)
(17,926
)
(39,428
)
(38,251
)
Income before income taxes
572,155
127,180
864,868
199,518
Income tax provision
Current
36,261
—
51,670
—
Deferred
99,699
5,349
152,818
8,189
Total income tax provision
135,960
5,349
204,488
8,189
Net income
436,195
121,831
660,380
191,329
Net income attributable to non-controlling
interest in subsidiaries
(20,477
)
(15,926
)
(37,538
)
(24,779
)
Net income attributable to Matador
Resources Company shareholders
$
415,718
$
105,905
$
622,842
$
166,550
Earnings per common share
Basic
$
3.52
$
0.91
$
5.28
$
1.43
Diluted
$
3.47
$
0.89
$
5.20
$
1.40
Weighted average common shares
outstanding
Basic
118,103
116,801
118,027
116,804
Diluted
119,903
118,993
119,857
118,617
Matador Resources Company and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS - UNAUDITED
(In thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Operating activities
Net income
$
436,195
$
121,831
$
660,380
$
191,329
Adjustments to reconcile net income to net
cash provided by operating activities
Unrealized (gain) loss on derivatives
(30,430
)
42,804
44,599
86,227
Depletion, depreciation and
amortization
120,024
91,444
215,877
166,307
Accretion of asset retirement
obligations
517
511
1,060
1,011
Stock-based compensation expense
4,063
1,795
7,077
2,650
Deferred income tax provision
99,699
5,349
152,818
8,189
Amortization of debt issuance cost and
other debt-related costs
263
931
1,206
1,655
Net loss on asset sales and impairment
—
—
198
—
Changes in operating assets and
liabilities
Accounts receivable
(85,678
)
(39,220
)
(211,023
)
(78,900
)
Lease and well equipment inventory
(751
)
(549
)
(829
)
(437
)
Prepaid expenses and other current
assets
(6,921
)
(3,681
)
(14,717
)
(4,483
)
Other long-term assets
130
72
227
91
Accounts payable, accrued liabilities and
other current liabilities
36,160
25,785
30,492
34,345
Royalties payable
48,228
10,466
56,539
16,207
Advances from joint interest owners
2,188
(792
)
857
2,017
Income taxes payable
22,761
—
38,170
—
Other long-term liabilities
(146
)
1,454
(7,675
)
1,387
Net cash provided by operating
activities
646,302
258,200
975,256
427,595
Investing activities
Drilling, completion and equipping capital
expenditures
(182,064
)
(124,739
)
(389,893
)
(210,725
)
Acquisition of oil and natural gas
properties
(29,353
)
(8,680
)
(73,114
)
(15,356
)
Midstream capital expenditures
(16,318
)
(8,712
)
(28,310
)
(25,092
)
Acquisition of midstream assets
(75,816
)
—
(75,816
)
—
Expenditures for other property and
equipment
(58
)
(112
)
(283
)
(245
)
Proceeds from sale of assets
34,501
16
46,412
296
Net cash used in investing activities
(269,108
)
(142,227
)
(521,004
)
(251,122
)
Financing activities
Purchase of senior unsecured notes
(142,404
)
—
(142,404
)
—
Repayments of borrowings under Credit
Agreement
(90,000
)
(140,000
)
(300,000
)
(240,000
)
Borrowings under Credit Agreement
40,000
40,000
200,000
40,000
Repayments of borrowings under San Mateo
Credit Facility
(40,000
)
(23,000
)
(70,000
)
(34,000
)
Borrowings under San Mateo Credit
Facility
55,000
41,500
105,000
52,500
Cost to amend credit facilities
(506
)
(830
)
(506
)
(830
)
Dividends paid
(5,878
)
(2,913
)
(11,744
)
(5,826
)
Contributions related to formation of San
Mateo
—
16,250
22,750
31,626
Distributions to non-controlling interest
owners of less-than-wholly-owned subsidiaries
(26,460
)
(14,700
)
(44,835
)
(28,910
)
Taxes paid related to net share settlement
of stock-based compensation
(4,668
)
(1,163
)
(16,852
)
(2,884
)
Other
(152
)
(166
)
(298
)
(324
)
Net cash used in financing activities
(215,068
)
(85,022
)
(258,889
)
(188,648
)
Increase (decrease) in cash and restricted
cash
162,126
30,951
195,363
(12,175
)
Cash and restricted cash at beginning of
period
120,157
48,257
86,920
91,383
Cash and restricted cash at end of
period
$
282,283
$
79,208
$
282,283
$
79,208
Supplemental Non-GAAP Financial Measures
Adjusted EBITDA
This press release includes the non-GAAP financial measure of
Adjusted EBITDA. Adjusted EBITDA is a supplemental non-GAAP
financial measure that is used by management and external users of
the Company’s consolidated financial statements, such as industry
analysts, investors, lenders and rating agencies. “GAAP” means
Generally Accepted Accounting Principles in the United States of
America. The Company believes Adjusted EBITDA helps it evaluate its
operating performance and compare its results of operations from
period to period without regard to its financing methods or capital
structure. The Company defines, on a consolidated basis and for San
Mateo, Adjusted EBITDA as earnings before interest expense, income
taxes, depletion, depreciation and amortization, accretion of asset
retirement obligations, property impairments, unrealized derivative
gains and losses, certain other non-cash items and non-cash
stock-based compensation expense and net gain or loss on asset
sales and impairment. Adjusted EBITDA is not a measure of net
income or net cash provided by operating activities as determined
by GAAP. All references to Matador’s Adjusted EBITDA are those
values attributable to Matador Resources Company shareholders after
giving effect to Adjusted EBITDA attributable to third-party
non-controlling interests, including in San Mateo.
Adjusted EBITDA should not be considered an alternative to, or
more meaningful than, net income or net cash provided by operating
activities as determined in accordance with GAAP or as an indicator
of the Company’s operating performance or liquidity. Certain items
excluded from Adjusted EBITDA are significant components of
understanding and assessing a company’s financial performance, such
as a company’s cost of capital and tax structure. Adjusted EBITDA
may not be comparable to similarly titled measures of another
company because all companies may not calculate Adjusted EBITDA in
the same manner. The following table presents the calculation of
Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the
GAAP financial measures of net income and net cash provided by
operating activities, respectively, that are of a historical
nature. Where references are pro forma, forward-looking,
preliminary or prospective in nature, and not based on historical
fact, the table does not provide a reconciliation. The Company
could not provide such reconciliation without undue hardship
because such Adjusted EBITDA numbers are estimations,
approximations and/or ranges. In addition, it would be difficult
for the Company to present a detailed reconciliation on account of
many unknown variables for the reconciling items, including future
income taxes, full-cost ceiling impairments, unrealized gains or
losses on derivatives and gains or losses on asset sales and
impairment. For the same reasons, the Company is unable to address
the probable significance of the unavailable information, which
could be material to future results.
Adjusted EBITDA – Matador Resources
Company
Three Months Ended
June 30,
March 31,
June 30,
(In thousands)
2022
2022
2021
Unaudited Adjusted EBITDA
Reconciliation to Net Income:
Net income attributable to Matador
Resources Company shareholders
$
415,718
$
207,124
$
105,905
Net income attributable to non-controlling
interest in subsidiaries
20,477
17,061
15,926
Net income
436,195
224,185
121,831
Interest expense
18,492
16,252
17,940
Total income tax provision
135,960
68,528
5,349
Depletion, depreciation and
amortization
120,024
95,853
91,444
Accretion of asset retirement
obligations
517
543
511
Unrealized (gain) loss on derivatives
(30,430
)
75,029
42,804
Non-cash stock-based compensation
expense
4,063
3,014
1,795
Net loss on asset sales and impairment
—
198
—
Expense related to contingent
consideration and other
4,889
356
—
Consolidated Adjusted EBITDA
689,710
483,958
281,674
Adjusted EBITDA attributable to
non-controlling interest in subsidiaries
(25,916
)
(22,115
)
(20,708
)
Adjusted EBITDA attributable to Matador
Resources Company shareholders
$
663,794
$
461,843
$
260,966
Three Months Ended
June 30,
March 31,
June 30,
(In thousands)
2022
2022
2021
Unaudited Adjusted EBITDA
Reconciliation to Net Cash Provided by Operating
Activities:
Net cash provided by operating
activities
$
646,302
$
328,954
$
258,200
Net change in operating assets and
liabilities
(15,971
)
123,930
6,465
Interest expense, net of non-cash
portion
18,229
15,309
17,009
Current income tax provision
36,261
15,409
—
Expense related to contingent
consideration and other
4,889
356
—
Adjusted EBITDA attributable to
non-controlling interest in subsidiaries
(25,916
)
(22,115
)
(20,708
)
Adjusted EBITDA attributable to Matador
Resources Company shareholders
$
663,794
$
461,843
$
260,966
Adjusted EBITDA – San Mateo (100%)
Three Months Ended
June 30,
March 31,
June 30,
(In thousands)
2022
2022
2021
Unaudited Adjusted EBITDA
Reconciliation to Net Income:
Net income
$
41,789
$
34,819
$
32,562
Depletion, depreciation and
amortization
8,041
7,778
7,521
Interest expense
2,990
2,269
2,118
Accretion of asset retirement
obligations
69
68
61
Net loss on asset sales and impairment
—
198
—
Adjusted EBITDA
$
52,889
$
45,132
$
42,262
Three Months Ended
June 30,
March 31,
June 30,
(In thousands)
2022
2022
2021
Unaudited Adjusted EBITDA
Reconciliation to Net Cash Provided by Operating
Activities:
Net cash provided by operating
activities
$
49,902
$
45,511
$
25,261
Net change in operating assets and
liabilities
250
(2,393
)
15,210
Interest expense, net of non-cash
portion
2,737
2,014
1,791
Adjusted EBITDA
$
52,889
$
45,132
$
42,262
Adjusted Net Income and Adjusted Earnings
Per Diluted Common Share
This press release includes the non-GAAP financial measures of
adjusted net income and adjusted earnings per diluted common share.
These non-GAAP items are measured as net income attributable to
Matador Resources Company shareholders, adjusted for dollar and per
share impact of certain items, including unrealized gains or losses
on derivatives, the impact of full cost-ceiling impairment charges,
if any, and non-recurring transaction costs for certain
acquisitions or other non-recurring expense items, along with the
related tax effect for all periods. This non-GAAP financial
information is provided as additional information for investors and
is not in accordance with, or an alternative to, GAAP financial
measures. Additionally, these non-GAAP financial measures may be
different than similar measures used by other companies. The
Company believes the presentation of adjusted net income and
adjusted earnings per diluted common share provides useful
information to investors, as it provides them an additional
relevant comparison of the Company’s performance across periods and
to the performance of the Company’s peers. In addition, these
non-GAAP financial measures reflect adjustments for items of income
and expense that are often excluded by industry analysts and other
users of the Company’s financial statements in evaluating the
Company’s performance. The table below reconciles adjusted net
income and adjusted earnings per diluted common share to their most
directly comparable GAAP measure of net income attributable to
Matador Resources Company shareholders.
Three Months Ended
June 30,
March 31,
June 30,
2022
2022
2021
(In thousands, except per share data)
Unaudited Adjusted Net Income and
Adjusted Earnings Per Share Reconciliation to
Net Income:
Net income attributable to Matador
Resources Company shareholders
$
415,718
$
207,124
$
105,905
Total income tax provision
135,960
68,528
5,349
Income attributable to Matador Resources
Company shareholders before taxes
551,678
275,652
111,254
Less non-recurring and unrealized charges
to income before taxes:
Unrealized (gain) loss on derivatives
(30,430
)
75,029
42,804
Net loss on asset sales and impairment
—
198
—
Expense related to contingent
consideration and other
4,889
356
—
Adjusted income attributable to Matador
Resources Company shareholders before taxes
526,137
351,235
154,058
Income tax expense(1)
110,489
73,759
32,352
Adjusted net income attributable to
Matador Resources Company shareholders (non-GAAP)
$
415,648
$
277,476
$
121,706
Weighted average shares outstanding -
basic
118,103
117,951
116,801
Dilutive effect of options and restricted
stock units
1,800
1,863
2,192
Weighted average common shares outstanding
- diluted
119,903
119,814
118,993
Adjusted earnings per share attributable
to Matador Resources Company
shareholders (non-GAAP)
Basic
$
3.52
$
2.35
$
1.04
Diluted
$
3.47
$
2.32
$
1.02
(1) Estimated using federal statutory tax
rate in effect for the period.
Adjusted Free Cash Flow
This press release includes the non-GAAP financial measure of
adjusted free cash flow. This non-GAAP item is measured, on a
consolidated basis for the Company and for San Mateo, as net cash
provided by operating activities, adjusted for changes in working
capital and cash performance incentives that are not included as
operating cash flows, less cash flows used for capital
expenditures, adjusted for changes in capital accruals. On a
consolidated basis, these numbers are also adjusted for the cash
flows related to non-controlling interest in subsidiaries that
represent cash flows not attributable to Matador shareholders.
Adjusted free cash flow should not be considered an alternative to,
or more meaningful than, net cash provided by operating activities
as determined in accordance with GAAP or an indicator of the
Company’s liquidity. Adjusted free cash flow is used by the
Company, securities analysts and investors as an indicator of the
Company’s ability to manage its operating cash flow, internally
fund its D/C/E capital expenditures, pay dividends and service or
incur additional debt, without regard to the timing of settlement
of either operating assets and liabilities or accounts payable
related to capital expenditures. Additionally, this non-GAAP
financial measure may be different than similar measures used by
other companies. The Company believes the presentation of adjusted
free cash flow provides useful information to investors, as it
provides them an additional relevant comparison of the Company’s
performance, sources and uses of capital associated with its
operations across periods and to the performance of the Company’s
peers. In addition, this non-GAAP financial measure reflects
adjustments for items of cash flows that are often excluded by
securities analysts and other users of the Company’s financial
statements in evaluating the Company’s cash spend.
The table below reconciles adjusted free cash flow to its most
directly comparable GAAP measure of net cash provided by operating
activities. All references to Matador’s adjusted free cash flow are
those values attributable to Matador shareholders after giving
effect to adjusted free cash flow attributable to third-party
non-controlling interests, including in San Mateo.
Adjusted Free Cash Flow - Matador
Resources Company
Three Months Ended
June 30,
March 31,
June 30,
(In thousands)
2022
2022
2021
Net cash provided by operating
activities
$
646,302
$
328,954
$
258,200
Net change in operating assets and
liabilities
(15,971
)
123,930
6,465
San Mateo discretionary cash flow
attributable to non-controlling interest in subsidiaries(1)
(24,574
)
(21,128
)
(19,831
)
Performance incentives received from Five
Point
—
22,750
16,250
Total discretionary cash flow
605,757
454,506
261,084
Drilling, completion and equipping capital
expenditures
182,064
207,829
124,739
Midstream capital expenditures
16,318
11,992
8,712
Expenditures for other property and
equipment
58
225
112
Net change in capital accruals
(38,250
)
(1,768
)
(24,938
)
San Mateo accrual-based capital
expenditures related to non-controlling interest in
subsidiaries(2)
(8,200
)
(9,446
)
(3,812
)
Total accrual-based capital
expenditures(3)
151,990
208,832
104,813
Adjusted free cash flow
$
453,767
$
245,674
$
156,271
(1)
Represents Five Point Energy LLC’s (“Five
Point”) 49% interest in San Mateo discretionary cash flow, as
computed below.
(2)
Represents Five Point’s 49% interest in
accrual-based San Mateo capital expenditures, as computed
below.
(3)
Represents drilling, completion and
equipping costs, Matador’s share of San Mateo capital expenditures
plus 100% of other immaterial midstream capital expenditures not
associated with San Mateo.
Adjusted Free Cash Flow - San Mateo
(100%)
Three Months Ended
June 30,
March 31,
June 30,
(In thousands)
2022
2022
2021
Net cash provided by San Mateo operating
activities
$
49,902
$
45,511
$
25,261
Net change in San Mateo operating assets
and liabilities
250
(2,393
)
15,210
Total San Mateo discretionary cash
flow
50,152
43,118
40,471
San Mateo capital expenditures
16,616
12,170
8,688
Net change in San Mateo capital
accruals
119
7,107
(909
)
San Mateo accrual-based capital
expenditures
16,735
19,277
7,779
San Mateo adjusted free cash flow
$
33,417
$
23,841
$
32,692
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220726005899/en/
Mac Schmitz Vice President - Investor Relations (972) 371-5225
investors@matadorresources.com
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