DALLAS--(BUSINESS WIRE)--Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today reported financial and operating results for the second quarter of 2021. A short slide presentation summarizing the highlights of Matador’s second quarter 2021 earnings release is also included on the Company’s website at www.matadorresources.com on the Events and Presentations page under the Investor Relations tab.

Second Quarter 2021 Management Summary Comments

Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “On both our website and the webcast planned for tomorrow’s earnings conference call is a set of six slides identified as ‘Chairman’s Remarks’ (Slides A through F) to add color and detail to my remarks. We invite you to review these slides in conjunction with my comments below, which are intended to provide context for the second quarter of 2021 compared to Matador’s goals for the year.

Record Results in Second Quarter 2021

“The second quarter of 2021 was an outstanding quarter for Matador highlighted by record operational and financial achievements (see Slide A), including a significant increase in net income and all-time quarterly highs for oil and natural gas production, oil and natural gas revenues, Adjusted EBITDA and adjusted free cash flow. San Mateo also delivered record results in the second quarter highlighted by all-time quarterly highs for third-party midstream revenues, net income, Adjusted EBITDA and adjusted free cash flow (see Slide B). The Board and I would like to acknowledge and express our sincere appreciation to both the Matador and San Mateo teams for their strong execution once again in the second quarter.

“Net cash provided by operating activities in the second quarter was $258.2 million, a 52% sequential increase, leading to second quarter 2021 adjusted free cash flow of $156.3 million, a sequential increase of 145% and an all-time quarterly high. This adjusted free cash flow included $16.3 million in performance incentives received by Matador from our midstream joint venture partner Five Point associated with turning the first 13 Voni wells to sales in the Stateline asset area in the second quarter. Given this strong free cash flow, Matador repaid $100 million in borrowings outstanding in the second quarter of 2021. Matador has now reduced the borrowings outstanding under its reserves-based revolving credit facility by $235 million, or essentially half of the prior borrowings outstanding, during the past three quarters. As a result, Matador’s leverage ratio under the reserves-based credit facility has now declined to 1.8x (see Slide C), which marks the lowest leverage ratio in two years, dating back to the second quarter of 2019. Matador expects to use a significant portion of its free cash flow in future periods to continue reducing the borrowings outstanding under its reserves-based credit facility and paying quarterly dividends to shareholders.

Operations Tracking Key 2021 Milestones, Including Strong Well Results and Improved Capital Efficiency

“Matador’s 2021 priorities and milestones are shown in Slide D, and we continue to be on schedule, or even slightly ahead, of this operating and capital efficiency plan for 2021. During the second quarter of 2021, we achieved our second key operational milestone when we turned to sales in April the first 13 Voni wells in the Stateline asset area. Just recently, we achieved our third key operational milestone when we turned to sales four wells, all two-mile, Second Bone Spring completions, in the Greater Stebbins Area. We remain very pleased with the continued better-than-expected well performance being achieved all across our acreage position in the Delaware Basin, but we are particularly excited by the better-than-expected well performance we continue to achieve in the Stateline asset area and in the Rodney Robinson wells in the western portion of the Antelope Ridge asset area. In fact, the first six Rodney Robinson wells turned to sales in late March 2020, in aggregate, achieved payout in approximately one year, and the first 13 Boros wells turned to sales in September 2020, in aggregate, achieved payout in approximately nine months, all despite being turned to sales in 2020 during periods of significantly lower oil and natural gas prices than we enjoy today. Further, we currently expect the initial 13 Voni wells, in aggregate, to achieve payout even quicker than the first 13 Boros wells.

“Matador’s drilling and completion costs and operating efficiencies continue to improve. Drilling and completion costs averaged $615 per completed lateral foot in the second quarter of 2021, an all-time quarterly low, and $655 per completed lateral foot in the first six months of 2021, approximately 4% below expectations (see Slide E). This improvement in capital efficiency through our transition to drilling and completing longer laterals has been and continues to be a high priority for Matador. Matador expects that 98% of the wells it turns to sales this year should have completed lateral lengths of two miles or longer.

Looking Ahead

“We are today announcing two important modifications to our anticipated operated and non-operated activities for the second half of 2021. First, as the operations team continues to reduce drilling times for wells in the Stateline asset area, we are now expecting to advance completion operations for the next 11 Voni wells currently being drilled entirely into the fourth quarter of 2021, as opposed to completing most of those wells in the first quarter of 2022. Accelerating these completions should allow us to make more capital-efficient use of two stimulation crews during the fall of 2021 and into early 2022, which should enable us to turn this next group of Voni wells to sales two to three months earlier in 2022 than previously anticipated, but will defer some of our expected fourth quarter 2021 production until after the first of next year. Second, we now expect to participate in approximately 2.3 net fewer non-operated well opportunities during 2021 as a result of certain of Matador’s operating partners deferring activity from 2021 into 2022. Given the cost savings in operated D/C/E capital expenditures Matador has achieved thus far in 2021, the capital efficiency this change provides us and the anticipated savings from fewer non-operated well opportunities during the remainder of 2021, we believe we can accelerate completion operations on the 11 new Voni wells in the fourth quarter of 2021 without increasing our total estimated D/C/E capital expenditures for full year 2021. Further, given our strong start during the first two quarters of 2021, we also expect to achieve our full year 2021 production guidance despite the loss of production resulting from fewer non-operated wells being turned to sales in the second half of 2021 and the deferral of production in the Stateline asset area from the fourth quarter into the first quarter of 2022 as currently producing wells are expected to be shut in during completion operations on the next 11 Voni wells. Additional details on these modifications to our operating plan and updates to our third and fourth quarter production estimates are provided in more detail later in this earnings release (see Slide F).

“We are also pleased to announce that San Mateo has recently secured several new midstream opportunities with new and existing customers in Eddy County, New Mexico. We salute the San Mateo team for their successful business development efforts and look forward to these new natural gas, oil and water volumes being connected to San Mateo’s system. As a result, we have increased our anticipated full year 2021 midstream capital expenditures by approximately $15 million to connect these new midstream volumes and to be ready for first production from Matador’s next 11 Voni wells in early 2022. We expect San Mateo to continue to generate free cash flow in the second half of 2021 and have increased our estimates for San Mateo’s Adjusted EBITDA by approximately $10 million for full year 2021.

“We believe the second half of 2021 will continue to be exciting for Matador and its stakeholders as we work to generate additional free cash flow, lower costs, reduce debt, pay dividends to our shareholders and grow the value of our oil and natural gas and midstream assets. We look forward to finishing 2021 in a capital efficient manner to set up even stronger value creation for Matador stakeholders in 2022 and beyond.”

Second Quarter 2021 Financial and Operational Highlights

Net Cash Provided by Operating Activities and Adjusted Free Cash Flow

• Second quarter 2021 net cash provided by operating activities was $258.2 million (GAAP basis), leading to second quarter 2021 adjusted free cash flow (a non-GAAP financial measure) of $156.3 million, a 2.5-fold increase from adjusted free cash flow of $63.9 million in the first quarter of 2021.

Net Income, Earnings Per Share and Adjusted EBITDA

• Second quarter 2021 net income (GAAP basis) was $105.9 million, or $0.89 per diluted common share, a significant improvement from net income of $60.6 million in the first quarter of 2021, and a year-over-year increase from a net loss of $353.4 million in the second quarter of 2020. The change in net income between the year-over-year periods was significantly impacted by a non-cash full cost ceiling impairment of $324.0 million recorded in the second quarter of 2020.

• Second quarter 2021 adjusted net income (a non-GAAP financial measure) was $121.7 million, or $1.02 per diluted common share, a 44% sequential increase from adjusted net income of $84.5 million in the first quarter of 2021, and a significant year-over-year increase from an adjusted net loss of $3.1 million in the second quarter of 2020.

• Second quarter 2021 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) were $261.0 million, a 32% sequential increase from $198.1 million in the first quarter of 2021, and a 143% year-over-year increase from $107.6 million in the second quarter of 2020.

Record Oil, Natural Gas and Oil Equivalent Production

• As summarized in the table below, Matador’s second quarter 2021 average daily oil, natural gas and total oil equivalent production all exceeded the Company’s expectations and were all-time quarterly highs. The majority of the production outperformance resulted from the better-than-expected performance of the 13 Voni wells in the Stateline asset area, which were turned to sales in April 2021, as well as by continued strong performance from the four most recent Rodney Robinson wells turned to sales in mid-March 2021. The 13 new Voni wells are anticipated to have typical estimated ultimate recoveries (“EURs”) between 1.75 and 2.5 million barrels of oil equivalent (“BOE”), while the ten Rodney Robinson wells turned to sales thus far are currently anticipated to have typical EURs between 1.5 and 2.0 million BOE.

Drilling and Completion Costs Continue at Record Lows

• Drilling and completion costs for the 15 operated horizontal wells turned to sales in the second quarter of 2021 averaged $615 per completed lateral foot, a decrease of 28% from average drilling and completion costs of $850 per completed lateral foot achieved in full year 2020. Drilling and completion costs associated with the 21 operated horizontal wells turned to sales in the first half of 2021 averaged $655 per completed lateral foot, approximately 4% below the Company’s expectations.

• Matador incurred capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) of approximately $101 million in the second quarter of 2021, or 20% below the Company’s estimate of $125 million for D/C/E capital expenditures during the quarter. Matador estimates that approximately $10 million of these savings were directly attributable to improved operational efficiencies and lower-than-expected drilling and completion costs in the Delaware Basin. The remainder of these cost savings resulted primarily from the timing of both operated and non-operated drilling and completion activities, and most of these costs are currently expected to be incurred in the second half of 2021. Through the first six months of 2021, Matador estimates that it achieved cost savings of approximately $16 million attributable to improved operational efficiencies and lower-than-expected drilling and completion costs in the Delaware Basin.

Credit Rating and Senior Unsecured Notes Upgraded by S&P Global Ratings

• On June 28, 2021, S&P Global Ratings raised Matador’s issuer credit rating from “B-” to “B” and raised the issue-level rating on Matador’s senior unsecured notes from “B” to “B+”.

Lender Commitments Increased Under San Mateo’s Revolving Credit Facility

• On June 29, 2021, Matador announced a $75 million increase in lender commitments to the credit facility of its midstream affiliate, San Mateo Midstream, LLC (“San Mateo”), from $375 million to $450 million. In addition, the lenders agreed to refresh and increase the accordion feature under the credit facility to $250 million, which could further expand lender commitments to up to $700 million. The $75 million increase in lender commitments to the credit facility should provide San Mateo with greater operating and financial flexibility.

Quarterly Cash Dividend Declared

• On July 26, 2021, Matador announced that its Board of Directors declared a quarterly cash dividend of $0.025 per share of common stock payable on September 3, 2021 to shareholders of record as of August 12, 2021.

Environmental, Social and Governance (ESG) Metrics Updated

• Coincident with this earnings release on July 27, 2021, Matador published an update to its sustainability metrics aligned with standards developed by the Sustainability Accounting Standards Board (“SASB”), reflecting Matador’s continued efforts to highlight its commitment to ESG excellence. These updated metrics provide supplemental information to the Company’s inaugural report on SASB-aligned ESG metrics as published on May 17, 2021 and are available on the Company’s website at www.matadorresources.com/sustainability.

Note: All references to Matador’s net income (loss), adjusted net income (loss), Adjusted EBITDA and adjusted free cash flow reported throughout this earnings release are those values attributable to Matador Resources Company shareholders after giving effect to any net income (loss), Adjusted EBITDA or adjusted free cash flow, respectively, attributable to third-party non-controlling interests, including in San Mateo. Matador owns 51% of San Mateo. For a definition of adjusted net income (loss), adjusted earnings (loss) per diluted common share, Adjusted EBITDA and adjusted free cash flow and reconciliations of such non-GAAP financial metrics to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.

Sequential and year-over-year quarterly comparisons of selected financial and operating items are shown in the following table:

Full Year 2021 Guidance – Production and D/C/E Capital Expenditures Guidance Affirmed, Midstream Capital Expenditures Guidance Increased $15 Million for New Opportunities

As shown in the table below, effective July 27, 2021, Matador affirmed its full year 2021 guidance estimates for oil, natural gas and total oil equivalent production and D/C/E capital expenditures, which were originally provided on February 23, 2021. As explained further below, Matador has increased its full year 2021 estimates for midstream capital expenditures by $15 million at the midpoint of guidance, primarily to accommodate several new midstream opportunities in the second half of 2021.

The guidance estimates presented in the table above are based upon the following key assumptions and modifications for anticipated drilling and completions and midstream activity and capital expenditures for full year 2021 as provided on July 27, 2021. Consistent with its February 23, 2021 guidance estimates, Matador still expects 49 gross (45.

Mac Schmitz
Capital Markets Coordinator
(972) 371-5225
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