Matador Resources(MTDR) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements — Unaudited Unaudited financial statements for Q2 2025 detail the company's financial position, performance, and cash flows Condensed Consolidated Financial Statements Financial statements reflect asset growth to $11.28 billion, lower net income, and increased operating cash flow Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $11,279,910 | $10,850,109 | | Total Current Assets | $915,854 | $927,345 | | Net Property and Equipment | $10,201,951 | $9,764,096 | | Total Liabilities | $5,553,388 | $5,392,677 | | Total Current Liabilities | $1,071,846 | $995,357 | | Total Long-term Liabilities | $4,481,542 | $4,397,320 | | Total Shareholders' Equity | $5,726,522 | $5,457,432 | Condensed Consolidated Statement of Income Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $895,312 | $847,136 | $1,909,270 | $1,634,829 | | Operating Income | $288,664 | $363,620 | $677,815 | $682,573 | | Net Income Attributable to Matador | $150,225 | $228,769 | $390,310 | $422,498 | | Diluted EPS | $1.21 | $1.83 | $3.12 | $3.45 | Condensed Consolidated Statement of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,228,906 | $1,061,489 | | Net Cash Used in Investing Activities | ($1,006,674) | ($1,120,147) | | Net Cash (Used in) Provided by Financing Activities | ($230,188) | $16,263 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, the Ameredev acquisition, debt structure, and segment performance - The company's operations are focused on oil and gas exploration and production in the Delaware Basin and Haynesville shale, supported by its midstream joint venture, San Mateo[20] - The acquisition of Ameredev in September 2024 was completed for cash consideration of $1.83 billion, with the purchase price allocated primarily to oil and natural gas properties[34][36] - In April 2025, the Board authorized a $400 million share repurchase program, and during Q2 2025, the company repurchased 1,095,667 shares for $44.2 million[60][61] - The company has significant minimum volume commitments with third parties and its San Mateo joint venture, totaling approximately $719.4 million and $773.3 million, respectively[85][87] Total Long-Term Debt Components (as of June 30, 2025, in thousands) | Debt Instrument | Amount | | :--- | :--- | | Credit Agreement due 2029 | $390,000 | | San Mateo Credit Facility due 2029 | $778,000 | | 6.875% senior notes due 2028 | $500,000 | | 6.500% senior notes due 2032 | $900,000 | | 6.250% senior notes due 2033 | $750,000 | | Total Long-Term Debt (Principal) | $3,318,000 | Segment Operating Income (Three Months Ended June 30, 2025, in thousands) | Segment | Operating Income | | :--- | :--- | | Exploration and Production | $233,671 | | Midstream | $81,788 | | Corporate | ($26,795) | | Consolidated Total | $288,664 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes increased production, revenue growth despite lower prices, and capital plans Overview and Highlights Q2 2025 saw higher production and Adjusted EBITDA, though net income declined due to lower prices Q2 2025 vs Q2 2024 Key Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Avg. Daily Oil Production (Bbl/day) | 122,875 | 95,488 | +29% | | Avg. Daily Nat Gas Production (MMcf/day) | 516.8 | 388.9 | +33% | | Net Income (attributable to Matador) | $150.2M | $228.8M | -34% | | Diluted EPS | $1.21 | $1.83 | -34% | | Adjusted EBITDA | $594.2M | $578.1M | +3% | - The company began 2025 with nine drilling rigs in the Delaware Basin and plans to reduce this to eight by August 1, 2025, maintaining flexibility in its drilling program[128] Results of Operations Q2 revenue grew 5% on higher production, which offset lower prices and was met with rising operating costs - Q2 2025 oil revenues increased 2% YoY to $719.4 million, as a 29% production increase was largely offset by a 21% decrease in realized oil prices ($64.34/Bbl vs $81.20/Bbl)[137] - Q2 2025 natural gas revenues increased 36% YoY to $96.4 million, driven by a 33% increase in production volume[137] - Lease operating expenses for Q2 2025 rose 34% to $105.7 million, primarily due to an increased number of operated wells, including those from the Ameredev Acquisition[150] - Depletion, depreciation, and amortization (DD&A) expense for Q2 2025 increased 34% to $302.6 million, corresponding with a 30% increase in total oil equivalent production[152] Liquidity and Capital Resources Capital resources are primarily funded by operating cash flow to support development expenditures - The company expects to fund its 2025 capital expenditures of $1.18 to $1.37 billion for D/C/E and $120 to $180 million for midstream primarily through cash flow from operations[163][171] - Net cash from operating activities increased by $167.4 million to $1.23 billion for the six months ended June 30, 2025, compared to the same period in 2024, mainly due to higher production[177] - At June 30, 2025, the company had total contractual obligations of approximately $5.2 billion, primarily consisting of senior notes, credit facility borrowings, and transportation agreements[192] Reconciliation of Net Income to Adjusted EBITDA (Six Months Ended June 30, in thousands) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $444,606 | $460,717 | | Interest expense | $102,834 | $75,548 | | Total income tax provision | $139,383 | $144,764 | | Depletion, depreciation and amortization | $584,493 | $438,245 | | Unrealized gain on derivatives | $32,242 | $9,754 | | Other adjustments | $6,368 | $11,347 | | Consolidated Adjusted EBITDA | $1,309,926 | $1,140,375 | General Outlook and Trends The outlook is shaped by commodity price volatility, tax legislation benefits, and Permian Basin differentials - The newly signed 'One Big Beautiful Bill Act' (OBBBA) is expected to significantly benefit the company by making 100% bonus depreciation permanent, reducing expected 2025 cash tax payments to 0% to 5% of pre-tax income[194] - Commodity price volatility remains a key factor, with the average WTI oil price lower in Q2 2025 ($63.68/Bbl) compared to Q2 2024 ($80.66/Bbl), while average Henry Hub natural gas prices were higher ($3.51/MMBtu vs $2.27/MMBtu)[197][198] - The Waha-Henry Hub natural gas basis differential remains wide, though the company mitigates this exposure by selling a significant portion of its gas at Houston Ship Channel pricing[201] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is commodity price volatility, managed through derivative instruments - The company's main market risk is commodity price exposure, which it manages by entering into derivative financial instruments to hedge a significant portion of its anticipated future production[211] - As of June 30, 2025, the company had open costless collar contracts for oil and natural gas, as well as natural gas basis differential swap contracts, to manage price volatility[214] Item 4. Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of the quarter-end - Based on an evaluation by management, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[216] - No changes in internal control over financial reporting occurred during the three months ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[217] PART II — OTHER INFORMATION Item 1. Legal Proceedings Ongoing legal proceedings are not expected to have a material adverse impact on the company - The company is party to several legal proceedings in the ordinary course of business, but management believes it is remote that these will have a material adverse impact[219] Item 1A. Risk Factors This section refers to the company's Annual Report on Form 10-K for a full discussion of risk factors - For a discussion of risks and uncertainties, the report refers to "Item 1A. Risk Factors" in the company's Annual Report on Form 10-K[221] Item 2. Repurchase of Equity by the Company or Affiliates The company repurchased 1,095,667 shares for $44.2 million under its new share buyback program Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Program | Total Cost of Program Purchases | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 745,667 | $40.61 | 745,667 | ~$30.3M | | May 2025 | 357,533 | $39.84 | 350,000 | ~$13.9M | | June 2025 | 2,410 | $46.40 | 0 | $0 | | Total Q2 | 1,105,610 | $40.37 | 1,095,667 | $44.2M | Item 5. Other Information No director or officer initiated, modified, or terminated a Rule 10b5-1 trading plan in Q2 2025 - During the three months ended June 30, 2025, no director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement[224] Item 6. Exhibits This section lists all exhibits filed with the report, including required SOX certifications - The report includes a list of filed exhibits, such as the CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and financial data formatted in Inline XBRL[226]