Matador Resources (MTDR) Valuation Update - Feb 22

[dan_s]

I have updated my forecast/valuation model for Matador's outstanding Q4 results and their fresh guidance for 2023.
I am lowering my current valuation by $8 to $84. At the time of this post MTDR was trading at $53.28.

Matador is an "Aggressive Growth" company, which is somewhat out of favor with the Wall Street Gang.
> The Company's 2023 production guidance is lower than I expected, primarily due to the Q1 operational issues (all temporary) that I posted earlier.
> That said, Matador ALWAYS "under-promises and over-delivers" on their production forecasts.
> Timing of the Advanced Energy acquisition will impact their reported production, but as long as it does close the financial impact will be minimal.
> Matador only has ~9% of their natural gas hedged in Q1 with collars at a $6.00 floor. None of their oil is hedged and no more gas is hedged after Q1.
> Matador does report natural gas and NGLs on a combined basis. NGLs add ~$1.00 per mcf to their realized natural gas price.
> They are reporting outstanding well results in the Delaware Basin + the Advanced acquisition should give them a lot more running room.
> They will run 7 to 8 operated drilling rigs this year and expect to complete 90 net wells this year.
> Free cash flow should be $300 to $400 million this year, more than enough to fund their dividends of $0.15/share/quarter.

This company has an outstanding management team that continues to deliver double digit production growth year-after-year. I do expect their production to beat my forecasts after Q1 2023.

TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for MTDR. The average price target among the analysts is $76.88. The 8 price targets range from $70 to $94."

[dan_s]

Note from Neal Dingmann at Truist Financial 2-23-2023

Matador Resources Company (MTDR, $52.38, Buy) -
Suggested Early 2023 Plan Causes Share Underperformance
Though Exciting 2024 Setup - Matador shares underperformed
today after investors were skeptical of the growth and FCF
prospects over this year’s operational plans. While guidance
raised some questions, we would suggest the company has a
history of under promising and over delivering. Further, while
MTDR like all E&Ps did not give 2024 expectations, there is
potential for attractive upside next year. We forecast the company
to potentially generate nearly $1B of FCF and over $2.5B
EBITDAX next year even with our rather conservative price
deck. We have lowered our Price Target to $68 from $79.

[dan_s]

Note from RBC Capital Markets 2-23-2023

Matador Resources Company (NYSE: MTDR; 58.05) Published February 22 2023 13:17:15 EST
Conservative Set-Up for 2023 & Tailwinds into 2024
Rating: Outperform
Price Target: 78.00
Our view: MTDR shares traded down as much as 10+% today based on concerns
over the 2023 guidance (production & capital) that was below market expectations.
Based on our conversations with management, conference call commentary, and
our model we think the outlook is very conservative. The company has a proven
track record of outperforming guidance, and we think there is another buffer level
given the closing of an acquisition planned for May. The company is also positioned
for capital efficiency improvements into 2024 with a large DUC level at YE23E.