Energy Prospectus

Q1 results slightly above my forecast model. I am updating my model now and will post it under the Sweet 16 Tab shortly. - Dan

Matador Resources Company (MTDR) (“Matador” or the “Company”), an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources, with an emphasis on oil and natural gas shale and other unconventional plays and with a current focus on its Eagle Ford operations in South Texas and its Permian Basin operations in Southeast New Mexico and West Texas, today reported financial and operating results for the three months ended March 31, 2014 and increased full-year 2014 guidance estimates. Headlines include the following:
•Record quarterly oil production of 661,000 Bbl for the three months ended March 31, 2014, a year-over-year increase of 44% from 460,000 Bbl produced in the three months ended March 31, 2013, and a sequential increase of 9% from 608,000 Bbl produced in the three months ended December 31, 2013.
•Average daily oil equivalent production of 11,904 BOE per day for the quarter ended March 31, 2014, consisting of 7,344 Bbl of oil per day and 27.4 MMcf of natural gas per day, a year-over-year BOE increase of 9% from 10,897 BOE per day, consisting of 5,115 Bbl of oil per day and 34.7 MMcf of natural gas per day, for the quarter ended March 31, 2013.
•Oil and natural gas revenues of $78.9 million for the quarter ended March 31, 2014, a year-over-year increase of 33% from $59.3 million reported for the quarter ended March 31, 2013, and a sequential increase of 13% from $69.7 million for the quarter ended December 31, 2013.
•Adjusted EBITDA of $56.3 million for the first quarter of 2014, a year-over-year increase of 39% from $40.7 million reported for the first quarter of 2013, and a sequential increase of 15% from $48.8 million for the fourth quarter of 2013.
•Added approximately 16,100 gross (11,400 net) acres primarily in Loving County, Texas and Lea and Eddy Counties, New Mexico between January 1 and May 6, 2014, bringing the Company’s total acreage position in the Permian Basin to approximately 87,000 gross (56,200 net) acres.
•Updated its full-year 2014 guidance estimates as provided at its Analyst Day on December 12, 2013 to adjust for (1) an increase in estimated capital expenditures from $440 million to $540 million to account for larger than expected Permian Basin and Eagle Ford acreage acquisitions and for increases in non-operated Haynesville shale drilling activity, (2) an approximately 18% increase in estimated natural gas production from 13.5 to 15.0 Bcf to 16.0 to 17.5 Bcf, (3) an increase in estimated oil and natural gas revenues from $325 to $355 million to $380 to $400 million and (4) an increase in estimated Adjusted EBITDA from $235 to $265 million to $270 to $290 million. Further, the Company guides investors to the high end of its 2014 estimated oil production range of 2.8 million to 3.1 million barrels.

This is VERY GOOD news for MTDR. Looks like the Permian Basin will quickly become a 2nd core area of growth. So far, I see no reason for the stock to be down today. Only negative is the increase in capital spending, but that is primarily because they are buying more acreage and drilling a few more high rate wells in the Haynesville. - Dan

These are fantastic well results in the Permian.

“We are especially pleased by the performance of our initial horizontal wells in the Permian Basin. The Ranger 33 State Com #1H well, completed in the Second Bone Spring sand in Lea County, New Mexico, has produced 87,000 BOE, including almost 80,000 Bbl of oil (91% oil) in its first six months of production, and continues to produce between 450 and 500 Bbl of oil per day. The Dorothy White #1H well, completed in the Wolfcamp “A” formation in Loving County, Texas, has produced almost 100,000 BOE in just under four months of production and is currently flowing approximately 1.8 MMcf of natural gas per day and 600 Bbl of oil per day at about 2,700 psi surface pressure. Our third horizontal well, the Rustler Breaks 12-24-27 #1H well, a Wolfcamp “B” completion in Eddy County, New Mexico, has just recently been connected to a gas pipeline and is currently flowing at approximately 1,160 BOE per day, including 3.6 MMcf of natural gas per day and 560 Bbl of oil per day (48% oil) at about 2,750 psi flowing tubing pressure on a 20/64th inch choke. Initial production to sales from the Rustler Breaks 12-24-27 #1H has exceeded the 24-hour initial potential test results we reported in March of 987 BOE per day, including 3.3 MMcf of natural gas per day and 436 Bbl of oil per day (44% oil) at about 3,000 psi on a 24/64th inch choke. Not only has each of these wells exceeded our expectations, but we are also particularly pleased by the shallow declines exhibited thus far by both the Ranger 33 State Com #1H and the Dorothy White #1H wells.

“Due to a temporary drilling contract overlap, we are currently operating two rigs in the Permian Basin. We are using this second rig in the Permian to drill the next two wells on our Wolf prospect — the Norton Schaub #1H and the Arno #1H wells — and we are considering keeping this rig in the Permian to accelerate the development of our Permian properties.

“We continue to increase our leasehold position in the Permian Basin and are pleased to report that we hold approximately 87,000 gross (56,200 net) acres in the Permian Basin, primarily in Loving County, Texas and Lea and Eddy Counties, New Mexico, that we believe to be prospective for the Wolfcamp and Bone Spring plays, as well as other targets. Of particular note, our Permian Basin acreage now includes approximately 10,900 gross (7,000 net) acres in the Loving County area. Since January 1, we have added approximately 5,700 gross (3,700 net) acres to our Loving County area leasehold position, with 1,800 gross (1,700 net) acres located adjacent to our existing Wolf prospect acreage. We have also added approximately 1,400 gross (1,300 net) acres in South Texas prospective for the Eagle Ford shale since the first of the year. We will continue our leasing efforts in all three of our operating areas, Permian, Eagle Ford and Haynesville, as opportunities arise.”