From Stifel:
Matador Resources Company (MTDR, $10.87, Buy; Target $24.00)
4Q19 Beats on Strong Production - Michael S. Scialla
We view the release as neutral. The positives include: i) a strong 4Q19 production driven beat; ii) capital efficiency continues to improve as 4Q19 well costs declined 9% from the 1Q-3Q19 average and 2020 TIL footage is expected to increase 32% y/y with a 7% y/y increase to the D/C/E budget; iii) 2020 oil production guidance was 2% above consensus. The negatives include: i) implied 4Q19 capex was 4% above consensus; ii) 2020 capex guidance was 3% above consensus; iii) 1Q20 oil production/capex guidance was 3% below/22% above consensus.
I have updated my forecast/valuation model for MTDR and it will be posted to the EPG website this evening. This company has generated strong production growth (27% YOY in 2019), they have many years of low-risk development drilling inventory and a strong balance sheet. The only negative is that they will continue to outspend operating cash flow in 2020, but they have more than enough liquidity to reach their production targets. Most of the outspend is caused by their rapidly growing midstream business, which will have a high market value by year-end. They should be generating free cash flow from operations early in 2021. My valuation is close to Stifel's price target (above).
Matador will be hosting a luncheon for us at The Hess Club on April 8.
Matador Resources (MTDR) Q4 Results - Feb 26
Matador Resources (MTDR) Q4 Results - Feb 26
Last edited by dan_s on Wed Feb 26, 2020 6:31 pm, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Matador Resources (MTDR) Q4 Results - Feb 26
Fourth Quarter 2019 Operational and Financial Highlights
Record Oil, Natural Gas and Oil Equivalent Production
Fourth quarter 2019 average daily oil equivalent production increased 6% sequentially to a record quarterly high for the Company of 73,700 barrels of oil equivalent (“BOE”) per day (57% oil), as compared to 69,600 BOE per day (57% oil) in the third quarter of 2019. Both average daily oil production and average daily natural gas production increased 6% sequentially to 42,100 barrels per day and 190.0 million cubic feet per day, respectively.
This significant outperformance in production relative to the Company’s expectations was primarily attributable to (i) less than anticipated shut-in time of recently completed wells in the Rustler Breaks asset area for offset hydraulic fracturing operations by another operator, (ii) several wells being completed and turned to sales earlier than anticipated during the fourth quarter of 2019 and (iii) the continued outperformance of certain wells completed earlier in 2019 in the Rustler Breaks and Antelope Ridge asset areas and two non-operated Haynesville shale wells initially turned to sales in the third quarter of 2019.
Net Income, Earnings Per Share and Adjusted EBITDA
Fourth quarter 2019 net income (GAAP basis) was $24.0 million, or $0.21 per diluted common share, a 45% sequential decrease from $44.0 million in the third quarter of 2019, and an 82% year-over-year decrease from $136.7 million in the fourth quarter of 2018, due primarily to a $24.0 million non-cash, unrealized loss on derivatives in the fourth quarter of 2019, as compared to non-cash, unrealized gains on derivatives of $9.8 million and $74.6 million in the third quarter of 2019 and the fourth quarter of 2018, respectively.
Fourth quarter 2019 adjusted net income (a non-GAAP financial measure) was $46.1 million, or $0.39 per diluted common share, a 22% sequential increase from $37.9 million in the third quarter of 2019, and a 7% year-over-year increase from $43.0 million in the fourth quarter of 2018. < "Adjusted Net Income" compares to my forecast of $38.3 million or $0.33 per share.
Fourth quarter 2019 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) were $181.0 million, a 13% sequential increase from $160.8 million in the third quarter of 2019, and a 26% year-over-year increase from $143.2 million in the fourth quarter of 2018.
Third-Party Midstream Services Revenues and San Mateo Net Income and Adjusted EBITDA
Third-party midstream services revenues were $17.7 million in the fourth quarter of 2019, a 16% sequential increase from $15.3 million in the third quarter of 2019, and a two-fold year-over-year increase from $8.6 million in the fourth quarter of 2018.
San Mateo (as defined below) net income (GAAP basis) was $19.6 million in the fourth quarter of 2019, down slightly from $20.0 million in the third quarter of 2019, and a 30% year-over-year increase from $15.1 million in the fourth quarter of 2018.
San Mateo Adjusted EBITDA (a non-GAAP financial measure) was $26.5 million in the fourth quarter of 2019, up slightly from $26.3 million in the third quarter of 2019, and a 39% year-over-year increase from $19.1 million in the fourth quarter of 2018.
Improvements in Capital Efficiency and Lease Operating Expenses
Matador’s drilling and completion costs for horizontal wells turned to sales in the fourth quarter of 2019 averaged $1,110 per lateral foot, 6% better than the Company’s expectations of $1,175 per lateral foot in the quarter, and 27% better than Matador’s 2018 drilling and completion costs of $1,528 per lateral foot.
Lease operating expenses per BOE were $4.43 per BOE in the fourth quarter of 2019, a 5% sequential decrease from $4.64 per BOE in the third quarter of 2019, and a 3% decrease from $4.56 per BOE in the fourth quarter of 2018.
Record Oil, Natural Gas and Oil Equivalent Production
Fourth quarter 2019 average daily oil equivalent production increased 6% sequentially to a record quarterly high for the Company of 73,700 barrels of oil equivalent (“BOE”) per day (57% oil), as compared to 69,600 BOE per day (57% oil) in the third quarter of 2019. Both average daily oil production and average daily natural gas production increased 6% sequentially to 42,100 barrels per day and 190.0 million cubic feet per day, respectively.
This significant outperformance in production relative to the Company’s expectations was primarily attributable to (i) less than anticipated shut-in time of recently completed wells in the Rustler Breaks asset area for offset hydraulic fracturing operations by another operator, (ii) several wells being completed and turned to sales earlier than anticipated during the fourth quarter of 2019 and (iii) the continued outperformance of certain wells completed earlier in 2019 in the Rustler Breaks and Antelope Ridge asset areas and two non-operated Haynesville shale wells initially turned to sales in the third quarter of 2019.
Net Income, Earnings Per Share and Adjusted EBITDA
Fourth quarter 2019 net income (GAAP basis) was $24.0 million, or $0.21 per diluted common share, a 45% sequential decrease from $44.0 million in the third quarter of 2019, and an 82% year-over-year decrease from $136.7 million in the fourth quarter of 2018, due primarily to a $24.0 million non-cash, unrealized loss on derivatives in the fourth quarter of 2019, as compared to non-cash, unrealized gains on derivatives of $9.8 million and $74.6 million in the third quarter of 2019 and the fourth quarter of 2018, respectively.
Fourth quarter 2019 adjusted net income (a non-GAAP financial measure) was $46.1 million, or $0.39 per diluted common share, a 22% sequential increase from $37.9 million in the third quarter of 2019, and a 7% year-over-year increase from $43.0 million in the fourth quarter of 2018. < "Adjusted Net Income" compares to my forecast of $38.3 million or $0.33 per share.
Fourth quarter 2019 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) were $181.0 million, a 13% sequential increase from $160.8 million in the third quarter of 2019, and a 26% year-over-year increase from $143.2 million in the fourth quarter of 2018.
Third-Party Midstream Services Revenues and San Mateo Net Income and Adjusted EBITDA
Third-party midstream services revenues were $17.7 million in the fourth quarter of 2019, a 16% sequential increase from $15.3 million in the third quarter of 2019, and a two-fold year-over-year increase from $8.6 million in the fourth quarter of 2018.
San Mateo (as defined below) net income (GAAP basis) was $19.6 million in the fourth quarter of 2019, down slightly from $20.0 million in the third quarter of 2019, and a 30% year-over-year increase from $15.1 million in the fourth quarter of 2018.
San Mateo Adjusted EBITDA (a non-GAAP financial measure) was $26.5 million in the fourth quarter of 2019, up slightly from $26.3 million in the third quarter of 2019, and a 39% year-over-year increase from $19.1 million in the fourth quarter of 2018.
Improvements in Capital Efficiency and Lease Operating Expenses
Matador’s drilling and completion costs for horizontal wells turned to sales in the fourth quarter of 2019 averaged $1,110 per lateral foot, 6% better than the Company’s expectations of $1,175 per lateral foot in the quarter, and 27% better than Matador’s 2018 drilling and completion costs of $1,528 per lateral foot.
Lease operating expenses per BOE were $4.43 per BOE in the fourth quarter of 2019, a 5% sequential decrease from $4.64 per BOE in the third quarter of 2019, and a 3% decrease from $4.56 per BOE in the fourth quarter of 2018.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group