Energy Prospectus

As I have said many times here, Matador's production growth will be "choppy" as they are drilling and completing multiple wells from pads. They have to shut in wells on the pad to complete new wells. Q3 production came in below forecast, but the long-term outlook is quite strong for this one. I am updating my forecast model and will post it soon. - Dan

In a report published Friday, Wunderlich Securities analyst Irene O. Haas reiterated a Buy rating on Matador Resources Company (NYSE: MTDR), and raised the price target from $31.00 to $33.00.

In the report, Wunderlich Securities noted, “Matador Resources (MTDR) had an uncharacteristic miss this quarter. Production was in line with the detailed update in mid-October, but per unit costs were surprisingly high in 3Q14. However, with a large production ramp ahead and the company's continual cost reductions, the fourth quarter should look better. MTDR's shares took a hit as positive events were overlooked. Firstly, the company confirmed October production of 20,000 boepd, setting MTDR up for a nice growth ramp. Secondly, the company grew proved reserves by 7% during the quarter which positively impacted our NAV and price target by $2 per share. Thirdly, with more wells coming on line, the company's year-end reserves addition should be very robust. We reiterate our Buy rating on MTDR shares.”

2014 Guidance Affirmation

Matador today reaffirms its 2014 guidance metrics as revised upwards on October 14, 2014, including (1) estimated capital expenditures of $570 million, (2) estimated total natural gas production of 16.0 to 17.5 billion cubic feet, (3) estimated total oil and natural gas revenues of $380 to $400 million, (4) estimated Adjusted EBITDA of $270 to $290 million and (5) estimated total oil production of 3.2 to 3.3 million barrels. Further, based on its October production results, the Company is now guiding investors to the high end of its upwardly revised oil production guidance, but maintaining its present guidance for oil and natural gas revenues and Adjusted EBITDA for 2014 due to the recent downward trend in oil price.

Matador expects to achieve strong growth in both oil and natural gas production during the fourth quarter of 2014. On October 14, 2014, the Company announced that it expected total oil equivalent production for 2014 to be between 5.9 and 6.0 million BOE. Based on its October production results, Matador anticipates its total oil equivalent production should be at the high end of this range, which represents an anticipated growth of approximately 33% in total oil equivalent production in the fourth quarter alone. Achieving the high end of its oil production and total oil equivalent production guidance would result in year-over-year growth of approximately 55% in oil production and approximately 40% in total oil equivalent production for 2014 as compared to 2013.

An updated Net Income & Cash Flow Forecast model for MTDR is now available under the Sweet 16. Matador is one of the smallest companies in the Sweet 16. It is going to report strong Q4 results, so accumulating it on the dips may be a good idea. The year-end reserve report should be impressive.

4th quarter production should be up more than 30% quarter-over-quarter. That should turn a few heads.

I have increased my Fair Value Estimate $0.40 to $29.50, compares to First Call's Price Target of $31.55. I can definitely see a lot more upsides for this one, especially if oil prices firm up a bit.