Why Is Matador (MTDR) Down 5.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Matador Resources (MTDR). Shares have lost about 5.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Matador due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Matador Q3 Earnings Beat Estimates on Record Production
Matador Resources reported third-quarter 2023 adjusted earnings of $1.86 per share, which beat the Zacks Consensus Estimate of $1.59. However, the bottom line declined from the year-ago quarter’s level of $2.68.
Total quarterly revenues of $772 million beat the Zacks Consensus Estimate of $697 million. The top line, however, declined from the year-ago quarter’s level of $841 million.
Matador’s milestone with its highest-ever total production, averaging more than 135,000 barrels of oil and natural gas equivalent per day, led to better-than-expected third-quarter results. However, declining realized commodity prices offset the positive.
Upstream Business in Q3
Since MTDR is engaged in oil and gas exploration and production activities, the fate of its overall business primarily depends on the oil and gas pricing scenario. The majority of the company’s production comprises oil (57% of total production in the third quarter), making this commodity’s price the prime factor in determining MTDR’s earnings.
Let’s have a look at Matador’s average sales prices of commodities along with production.
Declining Average Sales Prices of Commodities
MTDR reported third-quarter 2023 average sales price for oil (without realized derivatives) at $82.49 per barrel, declining from $94.36 in the year-ago period. However, the commodity price was higher than our projection of $80.51 per barrel. The price of natural gas was recorded at $3.56 per thousand cubic feet (Mcf), which slipped from $9.22 in the year-ago quarter but beat our estimate of $3.23.
Notably, our estimates and the reported figures for oil and gas prices were significantly lower year over year in the third quarter. This was possibly due to concerns over a looming recession and an economic slowdown.
Increasing Production
Matador reported third-quarter 2023 oil production at 77,529 barrels per day (B/D), up from 60,163 in the prior-year quarter. The figure also beat our estimate of 76,084.3 B/D. Natural gas production was recorded at 345.4 million cubic feet per day (MMcf/D), up from 270.3 MMcf/D recorded a year ago. The reported figure also outpaced our estimate of 325.3 MMcf/D.
Significant success in MTDR’s drilling program in 2022 and 2023 primarily contributed to higher-than-expected production. Total oil equivalent production in the third quarter was 135,096 BOE/D, which not only surged from the year-ago quarter’s level of 105,214 BOE/D, but also surpassed our projection of 130,304.8 BOE/D.
Operating Expenses
MTDR’s plant and other midstream services’ operating expenses declined to $2.48 per barrel of oil equivalent (BOE) from the year-earlier level of $2.56 and our expected figure of $2.57. However, lease operating costs increased from $4.38 per BOE in third-quarter 2022 to $5.34, surpassing our projection of $5.12. Yet, production taxes, transportation and processing costs declined to $5.77 per BOE from $7.64 in the year-ago quarter and our projected figure of $5.86.
Total operating expense per BOE was $31.65, higher than the prior-year reported figure of $29.71. It was also marginally higher than our projection of $31.28.
Balance Sheet & Capital Spending
As of Sep 30, 2023, Matador had cash and restricted cash of $62.2 million. Long-term debt was $2,188.7 million. The company spent $315.9 million for the drilling, completing and equipping of wells in the third quarter.
Outlook
For the fourth quarter of 2023, Matador expects its average daily oil equivalent production to be 145,000 BOE. The recent guidance indicates a 2% upward revision from the prior projection of 143,000 BOE/D.
MTDR expects lower capital expenditures for full-year 2023, primarily due to lower midstream capital expenditures of $25 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 9.2% due to these changes.
VGM Scores
At this time, Matador has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Matador has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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