Quarterly / Earnings Reports | Second Quarter (2Q) Update | Financial Results | Capital Markets | Capital Expenditure | Drilling Program - Wells | Drilling Activity | Drilling Program

Matador Maintains 3 Rig Program In The Delaware Basin

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Matador Resources Company reported financial and operating results for the second quarter of 2016.

Key Points:

Drilling Program : 3 Rigs

Capital Expenditure (no change) : $325 Milion

Production Gudiance :

• Oil : 4.9 - 5.1 MMbbls
• Natural Gas : 28-29 Bcf
• Oil Equivalent : 9.6 - 9.9 MMboe

North Delaware Basin Wells Results

Matador provided a detailed summary of its second quarter 2016 operations and well results in a separate release on July 18, 2016. Click here to access the report.

Second Quarter 2016 Highlights:

• Record average daily production of approximately 28,000 barrels of oil equivalent per day, an increase of 18% sequentially, as compared to approximately 23,800 BOE per day in the first quarter of 2016 and an increase of 5% year-over-year, as compared to approximately 26,600 BOE per day in the second quarter of 2015.
• Capital expenditures during the first six months of 2016 of approximately $198 million, in line with the Company’s forecast of $192 million. By comparison, Matador’s capital expenditures during the first six months of 2015 were $266 million (excluding capital expenditures associated with the
• Adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items, a non-GAAP financial measure, of $39.0 million, an increase of 126% sequentially, as compared to $17.2 million in the first quarter of 2016, and a decrease of 42% year-over-year, as compared to $66.7 million in the second quarter of 2015.

Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “As evidenced by our second quarter results, Matador’s ongoing efforts to drill ‘better wells for less money’ is continuing to pay dividends, even in today’s challenging oil and natural gas price environment. As I said in our latest annual report, in this environment, we must and will focus on those things we can control in our operations, and we are confident our asset teams will continue to work together creatively to meet this challenge and to add real value for our shareholders through execution and innovation, as they have done in the past. Increases in production and reserves, improvements in well costs and total unit costs and expected additions to our inventory of engineered drilling locations in the Delaware Basin reflect these achievements.

“One of the goals we highlighted at our Analyst Day presentation in early February 2016was funding our ‘outspend’ in 2016, the same challenge we met successfully in 2015 with the $143 million sale of our cryogenic natural gas processing plant in Loving County, Texasand strategic financings. Today, we have a number of options to close the remaining funding gap, ranging from our undrawn line of credit to a sale of or joint venture with one of our midstream assets or a sale of or joint venture with one or more of our non-core oil and natural gas assets. We are evaluating and considering a number of interesting options. In doing so, we are determined to work methodically and carefully to maximize the financial and operational value of our various assets to our ongoing exploration and production needs.

“Finally, as we look ahead to the second half of 2016 and 2017, we are confident that, as they did in this quarter, our people, properties and financial resources will continue to deliver the positive results our shareholders expect and deserve.”

Operational Update

Matador provided a detailed summary of its second quarter 2016 operations and well results in a separate release on July 18, 2016. Click here to access the report.

Midstream Update

Matador’s midstream operations continue to grow and expand. As of July 2016, Matador’s midstream operations included approximately 90 miles of high pressure steel pipeline, primarily for oil and natural gas gathering in the Delaware Basin, but also inSouth Texas and Northwest Louisiana, and 30 miles of poly pipe, primarily for water gathering in the Delaware Basin. The Company also owns and operates a commercial salt water disposal facility in its Wolf prospect area in Loving County, Texas, where it is disposing of approximately 45,000 barrels per day of salt water for both Matador and third parties.

Matador is currently building a cryogenic natural gas processing plant and the associated natural gas gathering system in the Rustler Breaks prospect area to support its ongoing and future development efforts there. The Rustler Breaks processing plant is expected to have an inlet capacity of approximately 60 million cubic feet of natural gas per day, and at August 3, 2016, the installation of this plant is nearing completion. The construction of this processing plant continues to proceed on time and on budget, and Matador expects the plant to become operational later in August. The Company has also completed the installation and testing of the 12-inch natural gas gathering line running throughout the length of its Rustler Breaks acreage position, and this natural gas gathering line is now being used to gather much of Matador’s natural gas production at Rustler Breaks.

Delaware Basin Acreage Update

At December 31, 2015, Matador held 157,100 gross (88,800 net) acres in the Permian Basin, primarily in the Delaware Basin in Lea and Eddy Counties, New Mexico and Loving County, Texas. Between January 1 and August 3, 2016, the Company added approximately 6,400 gross (3,100 net) acres in Southeast New Mexico and West Texas, bringing Matador’s total Permian Basin acreage position to 161,900 gross (91,100 net) acres, almost all of which is located in the Delaware Basin.

During the second quarter of 2016, Matador also acquired mineral ownership in approximately 7,900 gross (1,700 net) acres in its Rustler Breaks, Wolf and Ranger/Arrowhead prospect areas. Approximately 50% of these minerals were being leased by Matador, 25% were leased to other operators and 25% were unleased.

Capital Spending Update

Matador incurred total capital spending of approximately $198.0 million during the first six months of 2016, in line with the $192.0 million in capital spending anticipated at mid-year.

At August 3, 2016, the Company had no outstanding borrowings and approximately $0.8 million in outstanding letters of credit under its revolving credit facility, and the borrowing base under its revolving credit facility was $300 million. Matador has ample liquidity to continue its three-rig drilling program in the Delaware Basin for the remainder of 2016 and 2017.

2016 Guidance Update

At August 3, 2016, Matador affirmed or increased certain elements of its 2016 guidance as summarized in the highlights section at the beginning of this release.

At August 3, Matador provides the following update of its anticipated production profile for the remainder of 2016.

• Oil production is expected to increase by 6 to 7% in the third quarter and by approximately the same amount again in the fourth quarter of 2016.
• Natural gas production is expected to decline by about 8 to 9% in the third quarter and then by another 4 to 5% in the fourth quarter of 2016 as a result of (1) declines in the flush production from new wells completed in the Delaware Basin in the second quarter, (2) a shift in Matador’s drilling program for the remainder of 2016, including moving one rig to its Ranger/Arrowhead prospect area, where gas-oil ratios are much lower and (3) anticipated natural gas production declines attributable to essentially no drilling activity in the Eagle Ford and Haynesville shale plays during 2016.
• Total oil equivalent production is expected to remain relatively flat to second quarter 2016 production volumes during the remaining two quarters of 2016, with oil production continuing to grow and the oil volume mix increasing from approximately 48% by volume in the second quarter to approximately 55% by volume in the fourth quarter of 2016. This increasing percentage of oil production should continue to improve the Company’s operating margins throughout the remainder of 2016.

Production and Revenues

Average daily oil equivalent production increased 18% sequentially from 23,846 BOE per day (48% oil) in the first quarter of 2016 to 28,022 BOE per day (48% oil) in the second quarter of 2016, and increased 5% year-over-year from 26,601 BOE per day (52% oil) in the second quarter of 2015. Matador’s second quarter 2016 average daily oil equivalent production of 28,022 BOE per day was the best quarterly result in the Company’s history.

Average daily oil production increased 18% sequentially from 11,473 barrels per day in the first quarter of 2016 to 13,516 barrels per day in the second quarter of 2016, and decreased 2% year-over-year from 13,847 barrels per day in the second quarter of 2015. Matador’s second quarter 2016 average daily oil production of 13,516 barrels per day was the second best quarterly result in the Company’s history, exceeded only by the second quarter of 2015, a period during which Matador decreased its drilling program from five operated rigs in the first quarter of 2015 to two operated rigs in the second quarter of 2015.

Average daily natural gas production increased 17% sequentially from 74.2 million cubic feet per day in the first quarter of 2016 to 87.0 million cubic feet per day in the second quarter of 2016, and increased 14% year-over-year from 76.5 million cubic feet per day in the second quarter of 2015. Matador’s second quarter 2016 average daily natural gas production was the best quarterly result in the Company’s history.

These second quarter increases in oil and natural gas production exceeded the Company’s expectations and were primarily attributable to both the productivity of recent completions, as well as the flush production resulting from a total of 19 gross (16.4 net) operated horizontal Wolfcamp A and B wells placed on production in the Wolf and Rustler Breaks prospect areas during the second quarter, including three new tests of the Blair shale (deepest tested bench of the Wolfcamp B) that produced comparable volumes of oil to previous Wolfcamp B tests, but with higher volumes of natural gas.

Oil and natural gas revenues increased 58% sequentially from $43.9 million in the first quarter of 2016 to $69.3 million in the second quarter of 2016, and decreased 21% year-over-year from $87.8 million in the second quarter of 2015. Realized oil and natural gas prices increased from $28.89 per barrel and $2.04 per thousand cubic feet in the first quarter of 2016 to $42.84 per barrel and $2.10 per thousand cubic feet, respectively, in the second quarter of 2016, and decreased from $54.37 per barrel and $2.78 per thousand cubic feet, respectively, in the second quarter of 2015.

Total realized revenues, including realized hedging gains, increased 41% sequentially from$51.0 million in the first quarter of 2016 to $71.8 million in the second quarter of 2016, and decreased 29% year-over-year from $101.6 million in the second quarter of 2015. Realized hedging gains, primarily from oil and natural gas hedges, were $2.5 million in the second quarter of 2016, as compared to realized hedging gains of $7.1 million in the first quarter of 2016 and $13.8 million in the second quarter of 2015.