Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”)
today reported financial and operating results for the second quarter of
2018. A short slide presentation summarizing the highlights of Matador’s
second quarter 2018 earnings release is also included on the Company’s
website at www.matadorresources.com
on the Presentations & Webcasts page under the Investors tab.
Second Quarter 2018 Financial and Operational Highlights
Note: All references to
net income, adjusted net income and Adjusted EBITDA reported throughout
this earnings release are those values attributable to Matador Resources
Company shareholders after giving effect to any net income, net loss or
Adjusted EBITDA, respectively, attributable to third-party
non-controlling interests, including in San Mateo. For a
definition of adjusted net income, adjusted earnings per diluted common
share, Adjusted EBITDA and PV-10 and reconciliations of such non-GAAP
financial metrics to their comparable GAAP metrics, please see
“Supplemental Non-GAAP Financial Measures” below.
Full-Year 2018 Updated Guidance
As a result of the Company’s production and financial performance
exceeding its expectations for the first two quarters of 2018, effective
August 1, 2018, Matador increased its full-year 2018 guidance estimates
as provided in the table below.
2017 Results
2018 Guidance(1)
2018 Guidance(2)
Change(3)
Drilling Activity Guidance
The full-year 2018 updated guidance estimates presented in the table
above assume that Matador will continue to operate six drilling rigs in
the Delaware Basin throughout the third and fourth quarters of 2018. At
August 1, 2018, Matador continues to evaluate adding a seventh operated
drilling rig during the fourth quarter of 2018, but the Company has not
made the decision to do so at this time. Should Matador elect to add a
seventh drilling rig during the fourth quarter of 2018, the Company
anticipates this additional rig will have no impact on its estimated
2018 oil and natural gas production and only a minor impact on its
anticipated capital expenditures for the remainder of 2018.
At August 1, 2018, Matador expects to complete and turn to sales a total
of 151 gross (74.1 net) operated and non-operated wells during 2018,
including 82 gross (66.5 net) operated wells and 69 gross (7.6 net)
non-operated wells, as shown in the tables below. These totals include
23 gross (6.1 net) additional wells as compared to Matador’s original
guidance for 2018 as provided on February 21, 2018, which estimated that
80 gross (62.9 net) operated and 48 gross (5.1 net) non-operated wells
would be completed and turned to sales in 2018.
The additional 3.6 net operated wells anticipated for full-year 2018 are
attributable to a slightly higher drilling and completions pace, as well
as additional working interests acquired or anticipated to be acquired
in certain operated wells during the course of the year. The additional
2.5 net non-operated wells anticipated for full-year 2018 are
attributable to a significantly higher-than-expected number of
non-operated well proposals received by Matador thus far in 2018. A
number of the non-operated well completions in 2018 are extended-length
laterals of 7,500 to 10,000 feet, with estimated drilling, completion
and equipping costs of $10 to $13 million.
Production Guidance
Overall, at August 1, 2018, Matador estimates that its full-year 2018
total production should increase by approximately 30% year-over-year to
18.5 million BOE, including an approximate 37% year-over-year increase
in oil production to 10.75 million barrels, both at the midpoint of the
Company’s updated guidance, due to the drilling and completion of
additional operated and non-operated wells and better-than-expected
performance in the first half of 2018. Matador also estimates that its
Adjusted EBITDA should increase approximately 50% year-over-year to $505
million at the midpoint of updated guidance, which is an increase of $65
million from the midpoint of Matador’s original guidance as provided on
February 21, 2018. Finally, largely attributable to the increased number
of operated and non-operated wells to be completed and turned to sales
for full-year 2018, Matador estimates that its capital expenditures for
drilling, completing and equipping wells should be between $620 and $650
million, an increase of $85 million at the midpoint of updated guidance,
with such increase being substantially funded by the additional cash
flows Matador now projects for full-year 2018. At August 1, 2018,
Matador’s estimated 2018 capital expenditures for midstream activities
remain unchanged at $70 to $90 million, which represents 51% of San
Mateo’s total estimated capital expenditures for 2018.
Given its strong financial position, including $143.5 million in cash
and restricted cash at June 30, 2018, no outstanding borrowings under
its credit facility at June 30 and August 1, 2018 and its anticipated
increase in cash flows for full-year 2018, Matador believes that it has
sufficient liquidity to execute its drilling and completion and
midstream activities for the remainder of 2018 and into 2019.
Third Quarter 2018 Production Estimates
Matador estimates its average daily oil production will increase
approximately 3% in the third quarter as compared to the second quarter
of 2018, and its average daily natural gas production will decrease
approximately 7% in the third quarter as compared to the second quarter
of 2018. For the reasons described more fully in the Production
Results section of this earnings release, Matador anticipates that
its average daily natural gas production for 2018 most likely reached
its peak during the second quarter. Even so, Matador’s anticipated
third-quarter 2018 average daily natural gas production should still be
an increase of approximately 15% as compared to the first quarter of
2018. In addition, of the remaining 41 gross operated wells estimated to
be completed and turned to sales in the second half of 2018, Matador
expects 15 and 26 gross wells to be completed and turned to sales in the
third and fourth quarters of 2018, respectively, primarily due to the
projected cadence of drilling and completion operations during the
second half of 2018.
Management Comments
Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “As highlighted
throughout this earnings release, the second quarter of 2018 was an
outstanding quarter for Matador—both operationally and financially—and
was the overall best quarter in the Company’s history. (In fact, the
first and second quarters of 2018 were the two best quarters in the
Company’s history.) As a result of these better-than-expected operating
and financial results for the first half of 2018, and the fact we are
ahead of our expected pace for turning wells to sales, we increased our
production, Adjusted EBITDA and capital expenditures guidance for
full-year 2018 effective August 1, 2018, as stated above.
“During the second quarter, our midstream team, San Mateo, entered into
a significant long-term agreement with a third-party producer in Eddy
County, New Mexico for the gathering and disposal of salt water. This
agreement—along with others—keeps San Mateo on track for achieving the
high end of its financial targets for 2018, including meeting an
annualized Adjusted EBITDA approaching $100 million in the fourth
quarter of 2018. On the marketing front, Matador also executed a firm
sales agreement with an affiliate of Kinder Morgan, Inc., securing firm
natural gas sales for a significant portion of our natural gas volumes
based on Houston Ship Channel pricing beginning on the in-service date
of the Gulf Coast Express Pipeline Project, which is expected to be
operational in October 2019. Despite recent concerns over oil and
natural gas takeaway from the Delaware Basin, we have not experienced
any pipeline-related interruptions to our oil, natural gas and NGL
production. We remain confident that the steps we have taken and the
agreements we have put in place thus far, as summarized in more detail
in this earnings release and in our prior press release on June 4, 2018,
should continue to provide flow assurance for our oil, natural gas and
NGL production going forward.
“Finally, our land team continues to add to and block up our leasehold
and minerals position in the Delaware Basin, primarily by making
opportunistic acquisitions at attractive prices and by executing
strategic acreage trades with other operators. From January 1 through
August 1, 2018, Matador acquired, or had under contract, approximately
16,000 net acres of leasehold and minerals in the Delaware Basin,
including approximately 3,400 net mineral acres located in and around
our existing asset areas. We expect to continue building our leasehold
and mineral position in the Delaware Basin ‘one brick at a time,’ which
is a low cost approach we believe has served Matador and our
shareholders well over the past several years.”
Sequential and year-over-year quarterly comparisons of selected
financial and operating items are shown in the following table:
March 31, 2018
Significant Well Results
The following table highlights the 24-hour initial potential (“IP”) test
results from certain of Matador’s operated wells completed and turned to
sales in the Delaware Basin during the second quarter of 2018. Matador
continues to be pleased with its well results across all of its acreage
position in the Delaware Basin and particularly with a number of
better-than-expected well results during the second quarter of 2018.
Twin Lakes Asset Area, Lea County, New Mexico
Matador has recently completed drilling its second test of the Wolfcamp
D interval on the western portion of its Twin Lakes asset area. This
well, the Northeast Kemnitz #233H well, was drilled to a similar
Wolfcamp D target as that tested by Cimarex Energy Co. on its recent
State LF 32 5 #2H well, which tested 977 BOE per day (84% oil) on pump.
Matador should begin completing the Northeast Kemnitz #233H well in
early September and expects to report initial test results from that
well as part of its third quarter 2018 earnings release.
Overall, industry activity continues to increase in the Twin Lakes asset
area. At August 1, 2018, Matador was also participating with Continental
Resources, Inc. in its Reed 24 25 B State #1H (Reed State #1H) well
located approximately four miles northwest of Matador’s D. Culbertson
#234H well. The Reed State #1H well is planned as a two-mile lateral
testing a shallower carbonate target in the Wolfcamp B interval, as
compared to the deeper Wolfcamp D targets tested in the Twin Lakes asset
area thus far by Matador and Cimarex Energy Co. At August 1, 2018,
drilling operations were in progress on the Reed State #1H well. Matador
owns an approximate 13% working interest in this well.
Midstream and Marketing Highlights
Delaware Basin Acreage Acquisitions
Matador continues to improve and block up its acreage position in its
various asset areas throughout the Delaware Basin and expects to
continue to do so throughout the remainder of 2018. As a result of these
efforts, from January 1 through August 1, 2018, Matador acquired or had
under contract approximately 16,000 net leasehold and mineral acres in
and around its existing acreage positions in the Delaware Basin,
including approximately 3,400 net mineral acres. From January 1 through
August 1, 2018, Matador had incurred net capital expenditures of
approximately $155 million to acquire approximately 9,500 net acres of
these leasehold and mineral interests. (A map showing the location of
those leasehold and mineral acres acquired between January 1 and August
1, 2018 is provided with the slide presentation accompanying this
earnings release.) Matador expects to incur net capital expenditures of
approximately $32 million to acquire the additional approximately 6,500
net acres in leasehold and mineral interests that were under contract as
of August 1, 2018 during the third and fourth quarters of 2018; the
purchase price for such additional acquisitions is expected to be funded
with a portion of the proceeds of Matador’s May 2018 equity offering.
During the second quarter of 2018, Matador also divested of
approximately 400 net undeveloped acres of its Eagle Ford leasehold
position in South Texas for total consideration of approximately $8
million.
Proved Reserves, Standardized Measure and PV-10
The following table summarizes Matador’s estimated total proved oil and
natural gas reserves at June 30, 2018, December 31, 2017 and June 30,
2017.
Matador’s estimated total proved oil and
natural gas reserves were a record 170.2 million BOE (56% oil, 48%
proved developed, 87% Delaware Basin) at June 30, 2018,
consisting of 95.4 million barrels of oil and 448.2 billion cubic feet
of natural gas (both also all-time highs), with a record Standardized
Measure of $1.6 billion (GAAP basis) and a record PV-10 (a non-GAAP
financial measure) of $1.8 billion. Estimated total proved oil and
natural gas reserves increased 11% from 152.8 million BOE, (57% oil, 45%
proved developed, 84% Delaware Basin) at December 31, 2017 and increased
27% from 134.4 million BOE, (56% oil, 41% proved developed, 80% Delaware
Basin) at June 30, 2017.
The reserves estimates presented for each period in the table above were
prepared by the Company’s internal engineering staff and audited by an
independent reservoir engineering firm, Netherland, Sewell & Associates,
Inc. These reserves estimates were prepared in accordance with the SEC’s
rules for oil and natural gas reserves reporting and do not include any
unproved reserves classified as probable or possible that might exist on
Matador’s properties.
For a reconciliation of PV-10 (non-GAAP) to Standardized Measure
(GAAP), please see “Supplemental Non-GAAP Financial Measures” below.
Operations Update
Drilling and Completion Activities
During the second quarter of 2018, Matador continued to focus on the
exploration, delineation and development of the Company’s Delaware Basin
acreage position in Loving County, Texas and Lea and Eddy Counties, New
Mexico. Matador began 2018 operating six drilling rigs in the Delaware
Basin and continued to operate six drilling rigs throughout the second
quarter of 2018. Matador currently expects to continue operating six
drilling rigs in the Delaware Basin throughout 2018, including three
rigs in the Rustler Breaks asset area, one rig in the Wolf and Jackson
Trust asset areas, one rig in the Arrowhead, Ranger and Twin Lakes asset
areas and one rig in the Antelope Ridge asset area. Depending on
commodity prices and basis differentials, capital and operating costs,
opportunities in asset areas like Arrowhead and Antelope Ridge,
liquidity and other factors, Matador may consider adding a seventh rig
during the fourth quarter of 2018, although the Company had not made the
decision to do so at August 1, 2018.
Production Results
Average daily oil equivalent production increased 17% sequentially from
45,300 BOE per day (58% oil) in the first quarter of 2018 to 52,900 BOE
per day (56% oil) in the second quarter of 2018, a record quarterly high
for Matador.
Average daily oil production increased 12% sequentially from 26,500
barrels per day in the first quarter of 2018 to 29,700 barrels per day
in the second quarter of 2018, also a record quarterly high, and well
above the Company’s expectations that oil production would average
approximately 27,400 barrels per day at the midpoint of its estimated
range for the second quarter. This better-than-expected oil production
in the second quarter was attributable, in part, to strong initial well
results from the SST 6 State #123H and #124H wells in the Arrowhead
asset area and the Bill Alexander #111H well in the Antelope Ridge asset
area, all of which exhibited early well performance above the Company’s
expectations.
Average daily natural gas production increased 23% sequentially from
112.9 million cubic feet per day in the first quarter of 2018 to 139.2
million cubic feet per day in the second quarter of 2018, much higher
than the Company’s expectations for approximately 117.0 million cubic
feet per day at the midpoint of its estimated range for the second
quarter. The significant increase in natural gas production in the
second quarter of 2018 resulted not only from strong well results, but
also from the timing and nature of the new wells being completed and
turned to sales. Near the end of the first quarter of 2018 and early in
the second quarter of 2018, four new Wolfcamp B-Blair wells were
completed and turned to sales in the Rustler Breaks asset area; thus,
each of these wells was producing at near-peak rates during all or
substantially all of the second quarter. Matador also deepened and
recompleted a vertical Morrow well, the Norris-Thornton #2 well, in the
Rustler Breaks asset area in the latter half of the first quarter, and
this well produced at an essentially constant rate of about 3 million
cubic feet of natural gas per day throughout the second quarter. In
addition, the Wolf 80-TTT-B33 WF #205H and Wolf 80-TTT-B33 WF #207H
wells in the Wolf asset area were completed and turned to sales in early
May. The better-than-expected results from these wells also contributed
to the higher natural gas volumes reported for the second quarter of
2018.
Matador anticipates that its oil production will continue to grow in the
third and fourth quarters of 2018, but that its natural gas production
will decline from the 139.2 million cubic feet per day achieved in the
second quarter of 2018. Even so, Matador’s natural gas production in the
third and fourth quarters of 2018 is anticipated to be 12% to 15% above
its first quarter 2018 natural gas production of 112.9 million cubic
feet per day. As a result, the Company anticipates the oil percentage of
its total oil and natural gas production should increase to between 58%
to 60% oil in subsequent quarters, as originally projected for 2018 and
as observed in the first quarter of 2018 (58% oil).
Realized Commodity Prices
Matador’s weighted average realized oil price, excluding derivatives,
decreased 1% sequentially from $62.20 per barrel in the first quarter of
2018 to $61.44 per barrel in the second quarter of 2018. Average oil
price differentials relative to the West Texas Intermediate benchmark
widened from ($0.66) per barrel in the first quarter of 2018 to ($6.47)
per barrel in the second quarter of 2018, inclusive of trucking costs.
The oil price differentials in the Delaware Basin increased throughout
the second quarter from approximately ($3.00) per barrel in April 2018
to approximately ($12.00) per barrel in June 2018. At August 1, 2018,
Matador expects the oil price differentials associated with its Delaware
Basin oil production to widen further in the third quarter of 2018,
approaching ($17.00) per barrel by the latter part of the quarter,
including trucking costs. As of June 30, 2018, Matador had oil basis
hedges in place to mitigate its exposure to these widening oil price
differentials on approximately 50% of its anticipated Delaware Basin oil
production for the second half of 2018, limiting Matador’s differential
for this production to a weighted average price of ($1.02) per barrel.
Matador’s weighted average realized natural gas price, excluding
derivatives, increased 2% sequentially from $3.33 per thousand cubic
feet in the first quarter of 2018 to $3.38 per thousand cubic feet in
the second quarter of 2018. Matador realized a primarily NGL-related
uplift of $0.55 per thousand cubic feet above the average NYMEX Henry
Hub natural gas price in the second quarter of 2018, as compared to
$0.48 per thousand cubic feet in the first quarter of 2018. Matador’s
realized price for its Delaware Basin natural gas production is exposed
to the Waha-Henry Hub basis differentials, and these differentials were
wider in the second quarter as compared to the first quarter of 2018.
Matador’s weighted average realized natural gas price was positively
impacted, however, by higher prices received for its NGL production in
the second quarter of 2018. Matador is a
two-stream reporter, and the revenues associated with its NGL production
are included in the weighted average realized natural gas price.
Operating Expenses
On a unit-of-production basis:
Wells Completed and Turned to Sales
During the second quarter of 2018, Matador completed and turned to sales
a total of 36 gross (19.5 net) wells in its various operating areas, all
of which were horizontal wells. This total was comprised of 24 gross
(18.5 net) operated wells and 12 gross (1.0 net) non-operated wells.
These results were above the Company’s forecast of 24 gross (17.2 net)
operated wells and 11 gross (1.2 net) non-operated wells for the second
quarter of 2018.
Essentially all of the Company’s operated and non-operated drilling and
completions activity in the second quarter of 2018 was undertaken in the
Delaware Basin, as summarized in the table below.
4-WC B-Blair
Note: WC = Wolfcamp; BS = Bone Spring. For example, 1-2BS indicates one
Second Bone Spring completion and 9-WC A-XY indicates nine Wolfcamp A-XY
completions in the second quarter of 2018.
Second Quarter 2018 Capital Expenditures and Liquidity
During the second quarter of 2018, Matador incurred capital
expenditures, excluding land and mineral acquisitions, of $182.8
million, including $166.1 million for drilling, completing and equipping
wells and $16.7 million for midstream investments, which primarily
represented 51% of San Mateo’s second quarter capital expenditures of
$32.7 million. These capital expenditures were in-line with the
Company’s forecasted capital expenditures of $174.0 million in the
second quarter, including $151.0 million for drilling, completing and
equipping wells and $23.0 million for midstream investments. The small
variation in capital expenditures for drilling, completing and equipping
wells in the second quarter of 2018, as compared to Matador’s forecasts,
was primarily attributable to the timing of well completions. During the
second quarter of 2018, Matador completed and turned to sales 36 gross
(19.5 net) operated and non-operated wells (as noted in the table
above), which was an additional 1.1 net wells above the Company’s second
quarter forecast. In addition, the Company completed two gross (1.7 net)
additional wells for which almost all of the capital costs were incurred
in the second quarter, but which were not turned to sales until the
first week of July. This somewhat accelerated drilling and completion
pace in the second quarter of 2018 was partially attributable to having
all three operated rigs in the Rustler Breaks asset area drilling oil
and natural gas wells throughout most of the second quarter until
mid-June when one of the three operated drilling rigs began drilling a
salt water disposal well on behalf of San Mateo.
At June 30, 2018, the Company had approximately $143.5 million in cash
and restricted cash, no borrowings outstanding under its credit facility
(borrowing base of $725 million, with lenders’ borrowing commitment at
$400 million) and approximately $3.0 million in outstanding letters of
credit. Matador’s net debt to Adjusted EBITDA (trailing twelve months)
ratio was approximately 1.0x at June 30, 2018, as compared to 1.4x at
March 31, 2018.
Hedging Positions
As of June 30, 2018, Matador had approximately 50% of its anticipated
oil production and approximately 35% of its anticipated natural gas
production hedged for the second half of 2018 based on the midpoint of
its updated 2018 production guidance. In addition, Matador had various
Midland-Cushing oil basis swaps in place for approximately 2.6 million
barrels of oil, or approximately 50% of its anticipated Delaware Basin
oil production, for the second half of 2018.
The following is a summary of the Company’s open derivative financial
instruments for the second half of 2018 as of June 30, 2018.
The following is a summary of the Company’s open derivative financial
instruments for 2019 as of June 30, 2018.
Conference Call Information
The Company will host a live conference call on Thursday, August 2,
2018, at 9:00 a.m. Central Time to review its second quarter 2018
financial and operational results. To access the conference call,
domestic participants should dial (855) 875-8781 and international
participants should dial (720) 634-2925. The conference ID and passcode
is 1978358. The conference call will also be available through the
Company’s website at www.matadorresources.com
on the Presentations & Webcasts page under the Investors tab. The replay
for the event will be available on the Company’s website at www.matadorresources.com
on the Presentations & Webcasts page under the Investors tab through
August 31, 2018.
About Matador Resources Company
Matador is an independent energy company engaged in the exploration,
development, production and acquisition of oil and natural gas resources
in the United States, with an emphasis on oil and natural gas shale and
other unconventional plays. Its current operations are focused primarily
on the oil and liquids-rich portion of the Wolfcamp and Bone Spring
plays in the Delaware Basin in Southeast New Mexico and West Texas.
Matador also operates in the Eagle Ford shale play in South Texas and
the Haynesville shale and Cotton Valley plays in Northwest Louisiana and
East Texas. Additionally, Matador conducts midstream operations,
primarily through its midstream joint venture, San Mateo, in support of
its exploration, development and production operations and provides
natural gas processing, oil transportation services, natural gas, oil
and salt water gathering services and salt water disposal services to
third parties.
For more information, visit Matador Resources Company at www.matadorresources.com.
Forward-Looking Statements
This press release includes “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
“Forward-looking statements” are statements related to future, not past,
events. Forward-looking statements are based on current expectations and
include any statement that does not directly relate to a current or
historical fact. In this context, forward-looking statements often
address expected future business and financial performance, and often
contain words such as “could,” “believe,” “would,” “anticipate,”
“intend,” “estimate,” “expect,” “may,” “should,” “continue,” “plan,”
“predict,” “potential,” “project,” “hypothetical,” “forecasted” and
similar expressions that are intended to identify forward-looking
statements, although not all forward-looking statements contain such
identifying words. Such forward-looking statements include, but are not
limited to, statements about guidance, projected or forecasted financial
and operating results, results in certain basins, objectives, project
timing, expectations and intentions and other statements that are not
historical facts. Actual results and future events could differ
materially from those anticipated in such statements, and such
forward-looking statements may not prove to be accurate. These
forward-looking statements involve certain risks and uncertainties,
including, but not limited to, the following risks related to financial
and operational performance: general economic conditions; the Company’s
ability to execute its business plan, including whether its drilling
program is successful; changes in oil, natural gas and natural gas
liquids prices and the demand for oil, natural gas and natural gas
liquids; its ability to replace reserves and efficiently develop current
reserves; costs of operations; delays and other difficulties related to
producing oil, natural gas and natural gas liquids; delays and other
difficulties related to regulatory and governmental approvals and
restrictions; its ability to make acquisitions on economically
acceptable terms; its ability to integrate acquisitions; availability of
sufficient capital to execute its business plan, including from future
cash flows, increases in its borrowing base and otherwise; weather and
environmental conditions; the operating results of the Company’s
midstream joint venture’s expansion of the Black River cryogenic
processing plant; the timing and operating results of the buildout by
the Company’s midstream joint venture of oil, natural gas and water
gathering and transportation systems and the drilling of any additional
salt water disposal wells; and other important factors which could cause
actual results to differ materially from those anticipated or implied in
the forward-looking statements. For further discussions of risks and
uncertainties, you should refer to Matador’s filings with the Securities
and Exchange Commission (“SEC”), including the “Risk Factors” section of
Matador’s most recent Annual Report on Form 10-K and any subsequent
Quarterly Reports on Form 10-Q. Matador undertakes no obligation to
update these forward-looking statements to reflect events or
circumstances occurring after the date of this press release, except as
required by law, including the securities laws of the United States and
the rules and regulations of the SEC. You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as
of the date of this press release. All forward-looking statements are
qualified in their entirety by this cautionary statement.
(In thousands, except par value and share data)
(In thousands, except per share data)
(In thousands)
Supplemental Non-GAAP Financial Measures
Adjusted EBITDA
This press release includes the non-GAAP financial measure of Adjusted
EBITDA. Adjusted EBITDA is a supplemental non-GAAP financial measure
that is used by management and external users of the Company’s
consolidated financial statements, such as industry analysts, investors,
lenders and rating agencies. “GAAP” means Generally Accepted Accounting
Principles in the United States of America. The Company believes
Adjusted EBITDA helps it evaluate its operating performance and compare
its results of operations from period to period without regard to its
financing methods or capital structure. The Company defines Adjusted
EBITDA as earnings before interest expense, income taxes, depletion,
depreciation and amortization, accretion of asset retirement
obligations, property impairments, unrealized derivative gains and
losses, certain other non-cash items and non-cash stock-based
compensation expense, and net gain or loss on asset sales and inventory
impairment. Adjusted EBITDA is not a measure of net income (loss) or net
cash provided by operating activities as determined by GAAP.
Adjusted EBITDA should not be considered an alternative to, or more
meaningful than, net income (loss) or net cash provided by operating
activities as determined in accordance with GAAP or as an indicator of
the Company’s operating performance or liquidity. Certain items excluded
from Adjusted EBITDA are significant components of understanding and
assessing a company’s financial performance, such as a company’s cost of
capital and tax structure. Adjusted EBITDA may not be comparable to
similarly titled measures of another company because all companies may
not calculate Adjusted EBITDA in the same manner. The following table
presents the calculation of Adjusted EBITDA and the reconciliation of
Adjusted EBITDA to the GAAP financial measures of net income (loss) and
net cash provided by operating activities, respectively, that are of a
historical nature. Where references are pro forma, forward-looking,
preliminary or prospective in nature, and not based on historical fact,
the table does not provide a reconciliation. The Company could not
provide such reconciliation without undue hardship because such Adjusted
EBITDA numbers are estimations, approximations and/or ranges. In
addition, it would be difficult for the Company to present a detailed
reconciliation on account of many unknown variables for the reconciling
items, including future income taxes, full-cost ceiling impairments,
unrealized gains or losses on derivatives and gains or losses on asset
sales and inventory impairments. For the same reasons, the Company is
unable to address the probable significance of the unavailable
information, which could be material to future results.
Adjusted Net Income and Adjusted Earnings Per
Diluted Common Share
This press release includes the non-GAAP financial measures of adjusted
net income and adjusted earnings per diluted common share. These
non-GAAP items are measured as net income attributable to Matador
Resources Company shareholders, adjusted for dollar and per share impact
of certain items, including unrealized gains or losses on derivatives,
the impact of full cost-ceiling impairment charges, if any, and
non-recurring transaction costs for certain acquisitions or other
non-recurring expense items, along with the related tax effect for all
periods. This non-GAAP financial information is provided as additional
information for investors and is not in accordance with, or an
alternative to, GAAP financial measures. Additionally, these non-GAAP
financial measures may be different than similar measures used by other
companies. The Company believes the presentation of adjusted net income
and adjusted earnings per diluted common share provides useful
information to investors, as it provides them an additional relevant
comparison of the Company’s performance across periods and to the
performance of the Company’s peers. In addition, these non-GAAP
financial measures reflect adjustments for items of income and expense
that are often excluded by industry analysts and other users of the
Company’s financial statements in evaluating the Company’s performance.
The table below reconciles adjusted net income and adjusted earnings per
diluted common share to their most directly comparable GAAP measure of
net income attributable to Matador Resources Company shareholders.
(1)
Non-recurring, non-cash expense attributable to a change in the
vesting schedule applicable to equity awards granted to the
Company’s directors.
(2)
Estimated using federal statutory tax rate in effect for the
period.
PV-10
PV-10 is a non-GAAP financial measure and generally differs from
Standardized Measure, the most directly comparable GAAP financial
measure, because it does not include the effects of income taxes on
future net revenues. PV-10 is not an estimate of the fair market value
of the Company’s properties. Matador and others in the industry use
PV-10 as a measure to compare the relative size and value of proved
reserves held by companies and of the potential return on investment
related to the companies’ properties without regard to the specific tax
characteristics of such entities. PV-10 may be reconciled to the
Standardized Measure of discounted future net cash flows at such dates
by adding the discounted future income taxes associated with such
reserves to the Standardized Measure.
(in millions)
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