Matador Resources (MTDR) Q2 Results - Aug 1

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Second Quarter 2019 Financial and Operational Highlights

Increased Oil and Oil Equivalent Production

Second quarter 2019 average daily oil equivalent production increased 2% sequentially to a record quarterly high for the Company of 61,300 barrels of oil equivalent (“BOE”) per day (60% oil) as compared to the first quarter of 2019.
> Average daily oil production increased 7% sequentially to 36,800 barrels per day < My forecast was 35,350 BOPD.
> Average daily natural gas production decreased 4% sequentially to 147.1 million cubic feet per day < My forecast was 141.9 MMcfpd.
The sequential changes in oil and natural gas production were better than the Company’s expectations for the second quarter.

Delaware Basin average daily oil production increased 3% sequentially to 32,800 barrels per day, and Delaware Basin average daily natural gas production decreased 8% sequentially to 113.5 million cubic feet per day, each as compared to the first quarter of 2019. The sequential decrease in natural gas production was primarily attributable to operations undertaken by Matador to mitigate the impact of particularly low natural gas prices in the Delaware Basin during the second quarter.

Increased Net Income, Earnings Per Share and Adjusted EBITDA

Second quarter 2019 net income (GAAP basis) was $36.8 million, or $0.31 per diluted common share, a sequential increase from a net loss of $16.9 million in the first quarter of 2019, and a year-over-year decrease from net income of $59.8 million in the second quarter of 2018.
Second quarter 2019 adjusted net income (a non-GAAP financial measure) was $34.6 million, or $0.30 per diluted common share (compares to my forecast of $0.29 EPS), a sequential increase from $21.9 million in the first quarter of 2019, and a year-over-year decrease from $46.1 million in the second quarter of 2018.
Second quarter 2019 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) was $144.1 million, a sequential increase from $124.8 million in the first quarter of 2019, and a year-over-year increase from $137.3 million in the second quarter of 2018.

Decreased Lease Operating Expenses

Lease operating expenses per BOE decreased 18% sequentially from $5.78 per BOE in the first quarter of 2019 to $4.72 per BOE in the second quarter of 2019. The sequential decrease was primarily attributable to fewer workover expenses incurred during the second quarter of 2019, as compared to the first quarter, and to lower salt water disposal expenses on a per BOE basis, as additional salt water volumes were converted from being trucked to being transported by pipeline.

Reduced Capital Expenditures

Matador incurred capital expenditures, excluding land and mineral acquisitions, of approximately $174 million in the second quarter of 2019, including $159 million for drilling, completing and equipping wells (“D/C/E”) and $15 million for midstream investments, which primarily represented Matador’s share of San Mateo’s (as defined below) second quarter capital expenditures. Matador’s D/C/E and midstream capital expenditures were 10% and 32% below its estimates of $177 million and $22 million, respectively, for the second quarter of 2019. Matador estimates that approximately $15 million of the difference in D/C/E capital expenditures resulted from lower-than-expected well costs on many of its wells in both the Delaware Basin and South Texas, primarily attributable to improved operational efficiencies and lower-than-expected completion costs, including from the increased use of regional sand in the Company’s stimulation operations in the Delaware Basin. Matador achieved these D/C/E cost savings across all of its various asset areas in the Delaware Basin and in South Texas during the second quarter of 2019.