Matador Resources (MTDR) Price Target - Jan

[dan_s]

Comments below are from Raymond James

Matador Resources Company
Advance Acquisition a No-Brainer; Reiterate Outperform
MTDR-NYSE | $65.98 Outperform 2 | $78.00 target
by John Freeman , CFA (RJA)

On Tuesday, Matador (MTDR) announced the acquisition of Permian operator Advance
Energy. Immediately upon first glance, this deal screened as a no-brainer for MTDR given
the assets’ proximity to MTDR’s acreage (and midstream assets), drilling inventory, and the
attractive valuation. At only 3.2x forward EBITDA (compared to MTDR’s 4.9x multiple), this
deal is comfortably accretive for Matador. Additionally, the acquisition’s $1.6B price tag
(all cash deal) means MTDR can easily take down Advance while remaining well below 1x
leverage (RJe ~0.5x YE23 leverage). MTDR’s operational expertise in New Mexico will allow
the company to take full advantage of the Advance assets, ensuring responsible, cash flow
conscious growth through FY23 and beyond.
As such, we reiterate our Outperform rating and target price of $78/share.
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My updated forecast/valuation model for MTDR is based on the Advance Energy acquisition closing in April.
I expect Matador to report Q4 2022 results of:
> 107,000 Boepd (61,500 bpd of crude oil)
> Adjusted Net Income (not including the MTM gain on their hedges) of $267.6 million ($2.27/share)
> Operating Cash Flow of $468.4 million for Q4 and $2,098.8 million ($17.76/share) for the year

Matador's realized oil & gas prices for 2022 were approximately $7.68/mcf for ngas and NGLs (which they report on a combined basis) and $95.52/bbl of oil. < NGLs increased the realized gas price by about $1.25/mcfe.

For 2023, I expect the Company to produce approximately 134,550 Boepd (~80,000 bpd of crude oil) and sell it for approximately $5.25/mcfe for ngas + NGLs and $82.00/bbl of oil. Net Income should be approximately $1,150 million ($9.66/share) and operating cash flow should be within the range of $1.8 to $2.0 billion with ~50% free cash flow.

At the beginning of 2021 MTDR was trading for $12.72. At the time of this post it was trading for $67.94.
My current valuation is $92.00/share.

MTDR is an "Aggressive Growth" company that is getting fantastic well results in the Delaware Basin in SE New Mexico. It should now have over 20% annual production growth locked in both 2023 and 2024.