Matador Resources (MTDR) Q3 Results - Oct 27

[dan_s]

I will be updating my MTDR valuation today.

Here is Stifel's take on their Q3 results:

Matador Resources Company (MTDR, $45.55, Buy; Target $57.00)
FCF Beat Drives Material Debt Reduction - Michael S. Scialla

We view the release as positive. The positives include: i) production, realized price, and capex drove FCF 54% above consensus; ii) MTDR reduced debt by $120MM during 3Q21 (and another $20MM in October); iii) the company recently doubled its annual dividend to $0.20/sh. The negatives include: i) well costs/ft increased 6% from 2Q21; ii) 4Q21 production/capex guidance were 3% below/7% above consensus. In summary, another material beat for a company that consistently under-promises and delivers solid results. With debt/TTM EBITDA projected to decline below 1.0x by 1Q22 per our estimates, MTDR appears well-positioned to continue to ramp its dividend and/or complete an accretive acquisition next year.
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This is key to my increasing valuation:
"Net cash provided by operating activities in the third quarter was $291.2 million (compares to my operating cash flow forecast of $258.1 million), a 13% sequential increase, leading to third quarter 2021 adjusted free cash flow of $147.5 million. This adjusted free cash flow included $6.0 million in performance incentives received by Matador from our midstream joint venture partner Five Point Energy LLC for wells turned to sales and connected to San Mateo during the third quarter. Given this strong free cash flow, Matador repaid $120 million in borrowings outstanding under its reserves-based revolving credit facility in the third quarter of 2021, and the Company has repaid another $20 million in October. As a result of these recent repayments totaling $140 million, Matador has reduced the current borrowings outstanding under its reserves-based revolving credit facility to $100 million, as compared to $475 million at the end of the third quarter of 2020. Matador’s leverage ratio under the reserves-based revolving credit facility declined to 1.3x at the end of the third quarter, which marks Matador’s lowest leverage ratio since mid-2018."


Third quarter 2021 adjusted net income (a non-GAAP financial measure) was $148.6 million, or $1.25 per diluted common share (compares to my forecast of $117 net income), a 22% sequential increase from adjusted net income of $121.7 million in the second quarter of 2021, and an almost 13-fold year-over-year increase from adjusted net income of $11.6 million in the third quarter of 2020.