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Matador (MTDR) Beats on Q2 Earnings, Boosts Production View

Zacks Equity Research

Matador Resources Company MTDR reported second-quarter 2020 adjusted loss of 3 cents per share, narrower than the Zacks Consensus Estimate of a loss of 18 cents. In the year-ago quarter, earnings came in at 30 cents per share.

Revenues of $147.4 million significantly declined from the year-ago level of $241.7 million. Moreover, the metric missed the Zacks Consensus Estimate of $166 million.

The better-than-expected quarterly earnings were supported by higher oil and gas production volumes, as well as decreased operating expenses. This was partially offset by weak oil and natural gas price realizations.

Matador Resources Company Price, Consensus and EPS Surprise

Matador Resources Company Price, Consensus and EPS Surprise
Matador Resources Company Price, Consensus and EPS Surprise

Matador Resources Company price-consensus-eps-surprise-chart | Matador Resources Company Quote

Production Rises

Second-quarter 2020 total production volume averaged 6,670 thousand barrels of oil equivalent (MBOE) (comprising 58.8% oil), higher than 5,577 MBOE a year ago.

The average production volume of oil was 43,074 barrels per day (Bbls/d), up from 36,767 Bbls/d in second-quarter 2019. Natural gas production was 181.4 million cubic feet per day (MMcf/d), up from 147.1 MMcf/d a year ago.

Price Realization Declines

Average realized price for oil (excluding realized derivatives) was $24.03 per barrel, down from $56.51 in the year-ago quarter. Moreover, natural gas price of $1.49 per thousand cubic feet was lower than $1.64 in the prior-year quarter.

San Mateo Operations

The company gathered an average of 195 million cubic feet of natural gas per day in the Wolf and Rustler Breaks asset regions and Greater Stebbins area, indicating a 2% year-over-year rise. It reported adjusted EBITDA of $23.2 million, reflecting a 22% rise from the year-ago period.

Operating Expenses Decline

The company’s production taxes, transportation and processing costs decreased to $2.82 per BOE from $3.86 in the year-ago quarter. Moreover, plant and other midstream services operating expenses fell to $1.47 per BOE from the year-earlier number of $1.51. Also, lease operating costs decreased from $4.72 per BOE in second-quarter 2019 to $3.92. Total operating expenses per BOE were recorded at $24.42, lower than the year-ago level of $28.02.

Balance Sheet

As of Jun 30, 2020, Matador had cash and restricted cash of $43.5 million, down from the first quarter’s $56.8 million. Long-term debt increased from $1,662.3 million in first-quarter 2020 to $1,745.2 million, which included $385 million of borrowings under its credit agreement. The debt to capitalization was 49%.

Capital Spending

For drilling, completing and equipping wells during the second quarter, the company spent $123 million, which is 13% lower than expected. This was supported by improved operational efficiencies, and low drilling and completion costs in the Delaware Basin. Midstream capital spending was $33 million compared with the expectation of $41 million, primarily due to a change in pipeline construction timing.

Guidance

Due to market uncertainty that stemmed from energy demand destruction owing to coronavirus-induced lockdowns, oversupplied market and low commodity prices, the company partially paused activities in the Delaware Basin and Eagle Ford Shale in May and June. However, with improvement in crude prices, the company boosted production and expects 2020 output to be higher than expected.

It boosted its 2020 oil equivalent production guidance to 26.3-27.1 million barrels, indicating an increase from 24.2 million BOE in 2019. Total oil production will likely come in the range of 15.35-15.65 million barrels, indicating an increase from the 2019 level of 14 million barrels. Moreover, the company had around 6.1 million barrels of oil production hedged for the period of July to December. It made additional hedging deals for 2021 oil and gas production in the second quarter.

It reiterated 2020 capital expenditure view for drilling, completing and equipping wells in the range of $440-$500 million, suggesting a significant decline from the 2019 level of $671 million. San Mateo midstream capital expenditure guidance for the year is maintained in the band of $85-$105 million, implying a rise from $77 million in 2019.

Even with low overall capital expenditures, the company expects to increase production while keeping unit costs in check, which will likely enable it to attain free cash flow by 2020-end.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include NGL Energy Partners LP NGL, Antero Resources Corporation AR and Cimarex Energy Co. XEC, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 92.7% year over year.

Antero Resources’ bottom line for second-quarter 2020 is expected to rise 28.6% year over year.

Cimarex Energy’s bottom line for 2020 has witnessed 15 upward and five downward estimate revisions in the past 60 days.

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