Matador Resources (MTDR) is one of the largest companies in our Small-Cap Growth Portfolio with a market-cap over $5 Billion. They announced Q3 2021 results that beat my forecast and they are now locked in to generate over $1 Billion of operating cash flow and over $400 million of free cash flow from operations in 2021. I will be adding MTDR back to the Sweet 16 in my November newsletter.
The Company's production will be down ~9% from Q3 to Q4 because they have to shut-in over a dozen wells, so that they can complete more high-rate horizontal wells in the Permian Basin. Despite the production decline in Q4, 2021 full-year production will be up more than 12% year-over-year. When all of the new wells are completed, Matador's production will snap back in Q1 2022 to over 90,000 BOE per day and for the year it should increase by ~12% to over 95,000 Boepd.
MTDR is trading today for $44.60. Since Matador released Q3 results, three analysts have increased their price targets for MTDR and all three rate it a BUY.
> $57.00 < Stifel 10/27/2021
> $57.00 < Siebert W 10/27/2021
> $55.00 < Truist Fin 10/21/2021
My current valuation increases by $13 to $58 per share, primarily because I am now giving more weight to my 2022 operating cash flow forecast.
Matador Resources (MTDR) Update - Oct 27
Matador Resources (MTDR) Update - Oct 27
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Matador Resources (MTDR) Update - Oct 27
My updated forecast/valuation model for Matador has been posted to the EPG website. Your focus should be on row 51.
Note that all of Matador's "Bad Hedges" expire at the end of December.
For 2022:
> Crude oil: ~10% hedged for full-year with collars that have $50 floors and $68 ceilings.
> Natural gas: ~40% of Q1 hedged with collars that have $2.70 floors and $6.33 ceilings. NO GAS HEDGED AFTER Q1.
Also note the Matador reports natural gas and NGLs on a combined basis. Their combined realized price for gas, including cash settlements on their hedges, was $6.05/mcfe in Q3. Where they are producing in the Permian Basin the wells produce a lot of NGLs in the gas stream, therefore the gas price used in my forecast model for Q4 2021 and 2022 could be too conservative.
Note that all of Matador's "Bad Hedges" expire at the end of December.
For 2022:
> Crude oil: ~10% hedged for full-year with collars that have $50 floors and $68 ceilings.
> Natural gas: ~40% of Q1 hedged with collars that have $2.70 floors and $6.33 ceilings. NO GAS HEDGED AFTER Q1.
Also note the Matador reports natural gas and NGLs on a combined basis. Their combined realized price for gas, including cash settlements on their hedges, was $6.05/mcfe in Q3. Where they are producing in the Permian Basin the wells produce a lot of NGLs in the gas stream, therefore the gas price used in my forecast model for Q4 2021 and 2022 could be too conservative.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group