Energy Prospectus

Michael S. Scialla at Stifel: Matador Resources Company (MTDR, $18.74, Buy; Target $32.00)
Capital Efficiency Poised to Improve, 1Q19 Beats
"We view the release as positive. The positives include: i) a 1Q19 beat; ii) 1Q19 capex was 8% below consensus; iii) the 2019 capital plan remained unchanged despite higher oil prices; iv) capital efficiency should improve as the company migrates to longer laterals and increased batch drilling. The negatives include: i) natural gas and NGL prices were lower than expected, ii) 2Q19 oil production guidance was slightly below (1% at the midpoint) consensus."

I am updating my forecast/valuation model for MTDR now. - Dan

From TPH

MTDR Q1'19 Quick Look
Neutral on in-line production, looking for clarity on use of capex savings
Sector: NAm E&P | Ticker: MTDR | Recommendation: BUY | Target: $32 | Close: $18.74

Q1 oil of 34.5mbopd in-line with Street while total production of 59.9mboepd beats consensus 58.0, helping drive an EBITDA beat of $125MM vs Street $121MM. Capex of $193MM undershoots TPHe $213MM / Street $209MM on lower than expected well costs driven by completion costs / regional sand savings. Implied Q2 oil midpoint of 35mbpd screens marginally below Street 35.3; no change to FY'19 budget or production expectations. Ops update highlights include solid Antelope Ridge results (4 WC A Lower wells with average IP-24hr rate of 619boepd / 1,000', 75% oil) and results from 2 Eagle Ford wells (average IP-24hr rate of 124boepd / 1,000', 85% oil). Glad to see San Mateo EBITDA improve +9% q/q to annual run rate of $83MM. Slide deck highlights 2020 capital efficiency upside via shift to more 3-4 wells pads (55-60% vs 25% in 2019) and longer laterals (8,700' vs 5,800' in 2019), which together should reduce D&C / ft by 12% y/y. On the call, looking for color on whether capex savings will go to the balance sheet or be repurposed for additional activity. Clean EPS of 19c compares to Street 16c.

First Call's target price for MTDR is $26.89, but only 3 of 17 analysts reports used by Reuters to come up with the target are dated in May (after Q1 results came out). Most of the old ones are based on much lower oil prices.

I have updated my forecast/valuation model, raising my valuation by $1 to $32/share.

The model will be posted to the EPG website this afternoon.