Matador Resources (MTDR) Update - Jan 6

[dan_s]

I have updated my forecast/valuation model for Matador.

At the time of this post, MTDR is trading at $14.64
My valuation increases from $15.00 to $17.50.

If Matador can show the market that it will NOT outspend operating cash flow and can still generate 10% or more annual production growth this stock has a lot more upside.
My valuation is just 3X annualized operating cash flow per share for 2020 to 2021.
FCF positive upstream companies with 10% annual production growth should trade for 5X to 6X operating cash flow per share.

Matador's D&C spending in 2020 was ~$465 million, slightly less than operating cash flow and they increased production 12.3% year-over-year.
In 2019, Matador's YOY production growth was 27%.
My 2021 forecast, based on realized prices (net of cash settlements on their hedges) of $46.50/bbl and $2.61/mcfe of natural gas & NGLs shows Matador generating ~$700 million of operating cash flow ($5.95 per share). A commitment to generate FCF should push this stock to $30.