Matador Resources(US:MTDR)2023-07-28 20:16Production and Operations - For Q2 2023, Matador reported total oil equivalent production of 11.9 million BOE, with an average daily production of 130,683 BOE per day, of which 58% was oil and 42% was natural gas [114]. - Average daily oil production increased by 19% year-over-year to 76,345 Bbl per day, while average daily natural gas production rose by 17% to 326.0 MMcf per day [115]. - The company turned to sales a total of 55 gross (22.8 net) horizontal wells in Q2 2023, including 27 gross (20.6 net) operated wells [121]. - Average daily oil equivalent production in the Delaware Basin for Q2 2023 was 125,000 BOE per day, a 19% increase from 105,200 BOE per day in Q2 2022 [122]. - Matador operated seven drilling rigs in the Delaware Basin for the remainder of 2023, maintaining flexibility to adjust operations based on commodity prices [120]. - The company plans to operate seven drilling rigs in the Delaware Basin for the remainder of 2023, focusing on longer horizontal wells with 96% expected completed lateral lengths greater than one mile [170]. Financial Performance - Net income attributable to Matador shareholders for Q2 2023 was $164.7 million, or $1.37 per diluted share, down from $415.7 million, or $3.47 per diluted share, in Q2 2022 [116]. - Adjusted EBITDA for Q2 2023 was $423.3 million, compared to $663.8 million in Q2 2022 [116]. - Total oil and natural gas revenues decreased by $304.9 million, or 34%, to $587.9 million for Q2 2023 compared to Q2 2022 [134]. - Oil revenues decreased by $139.9 million, or 22%, to $510.4 million for Q2 2023, attributed to a 34% decrease in the weighted average oil price to $73.46 per Bbl [134]. - Natural gas revenues decreased by $165.0 million, or 68%, to $77.6 million for Q2 2023, due to a 73% decrease in the weighted average natural gas price to $2.61 per Mcf [134]. - For the six months ended June 30, 2023, net income attributable to Matador shareholders decreased by $295.1 million to $327.8 million, compared to $622.8 million for the same period in 2022 [189]. - Adjusted EBITDA decreased by $337.2 million to $788.5 million for the six months ended June 30, 2023, compared to $1.13 billion for the same period in 2022 [191]. Capital Expenditures and Investments - The 2023 estimated capital expenditure budget was decreased to $1.10 to $1.22 billion, reflecting increased operational efficiencies and adjustments to the operating plan [125]. - The anticipated capital expenditure budget for drilling, completion, and equipment (D/C/E) was adjusted to $1.10 to $1.22 billion for 2023, down from $1.18 to $1.32 billion [170]. - Net cash used in investing activities increased by $1.72 billion to $2.24 billion for the six months ended June 30, 2023, compared to $521.0 million for the same period in 2022 [176]. Debt and Financing - As of June 30, 2023, the company had $560.0 million in borrowings outstanding under its Credit Agreement and $500.0 million of outstanding 2028 Notes [129]. - Long-term debt as of June 30, 2023, was reported at $1.74 billion [182]. - The company closed the Advance Acquisition in April 2023, funded through cash and borrowings, and issued $500.0 million in 2028 Notes, using net proceeds to partially repay borrowings [162]. - Total interest expense for the six months ended June 30, 2023, was approximately $59.1 million, up from $39.1 million in the same period of 2022, due to borrowings related to the Advance Acquisition [160]. Operational Costs and Expenses - Total operating expenses increased by $86.3 million, or 14%, to $694.7 million for the six months ended June 30, 2023, compared to $605.3 million for the same period in 2022 [145]. - Lease operating expenses rose by $31.6 million, or 43%, to $105.5 million for the six months ended June 30, 2023, attributed to an increased number of wells operated and inflation in operating costs [155]. - Plant and other midstream services operating expenses increased by $20.2 million, or 49%, to $61.7 million for the six months ended June 30, 2023, driven by increased throughput volumes [156]. - Production taxes, transportation, and processing expenses decreased by $28.0 million, or 19%, to $117.5 million for the six months ended June 30, 2023, primarily due to a decrease in oil and natural gas revenues [154]. Market Conditions and Pricing - For Q2 2023, the average oil price was $73.56 per Bbl, down from $108.52 per Bbl in Q2 2022, with realized average oil price at $73.46 per Bbl compared to $111.06 per Bbl in Q2 2022 [197]. - Natural gas prices averaged $2.33 per MMBtu in Q2 2023, significantly lower than $7.50 per MMBtu in Q2 2022, with realized average natural gas price at $2.61 per Mcf compared to $9.57 per Mcf in Q2 2022 [198][199]. Regulatory and Environmental Factors - The company is subject to extensive federal, state, and local regulations, which increase operational costs and affect profitability [208]. - Approximately 31% of the company's leasehold and mineral acres in the Delaware Basin are located on federal lands, which may face administrative permitting requirements and potential restrictions [209]. - The New Mexico Oil Conservation Division requires a 98% natural gas capture rate by the end of 2026, impacting operational strategies [208]. - Recent regulatory changes in New Mexico and Texas may impose additional requirements on saltwater disposal wells, potentially increasing operational costs [210]. Risk Management - The company has entered into derivative financial instruments to manage market risks related to oil, natural gas, and NGL price fluctuations [216]. - The company utilizes costless collars and swap contracts to provide downside price protection against market volatility [217]. - The company has experienced inflation in oilfield service costs and supply chain disruptions, which may impact future operational costs [205]. Shareholder Returns - The company declared a quarterly cash dividend of $0.15 per share, totaling $17.8 million for Q1 2023 and $17.9 million for Q2 2023 [126]. - A quarterly cash dividend of $0.15 per share was declared for the first and second quarters of 2023, totaling $17.8 million and $17.9 million, respectively [169].