Matador Resources (MTDR) Valuation Update - July 26

[dan_s]

At the time of this post MTDR was trading at $53.05. I see nothing in their Q2 results to justify the current price.

I have updated my forecast/valuation model for Q2 results, which beat my forecast, and their updated guidance for Q3 and Q4. Matador always under-promises and over-delivers on production guidance, so I am using the top of their production guidance for Q3 and the mid-point for Q4.

My valuation increases by $1.50 to $83.50.

TipRanks: "In the last 2 weeks, 4 ranked analysts set 12-month price targets for MTDR. The average price target among the analysts is $70.75."
Three of the analysts have updated their price targets this week to $70, $74, and $81. The $81 PT was updated this morning.

Matador is an "Aggressive Growth" company. < Some of the Wall Street Gang does not like this, but I really do.
> They are running 7 operated rigs and likely to add another high-spec rig in Q4.
> Their 2023 exit rate of production should be over 145,000 Boepd (60% oil), up from Q1 2023 production of 106,654 Boepd.
> They are on pace to generate over $1.8 billion of operating cash flow and ~$500 million of free cash flow from operations this year.
> My 2024 forecast is based on production of 155,000 Boepd, which is probably too conservative if they continue to run 8 operated rigs all year.
> Matador has a strong balance sheet, no near-term debt issues and it has a lot of high-quality development drilling locations.
> The Advanced Energy Acquisition was a BIG DEAL for Matador.