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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________________________ 
FORM 10-Q
 _________________________________________________________  
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission File Number 001-35410
 _________________________________________________________  
Matador Resources Company
(Exact name of registrant as specified in its charter)
  _________________________________________________________ 
Texas
27-4662601
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
 
5400 LBJ Freeway,
Suite 1500
75240
Dallas,
Texas
 
(Address of principal executive offices)
(Zip Code)
(972) 371-5200
(Registrant’s telephone number, including area code)
 _________________________________________________________  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
MTDR
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes      No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No
As of July 31, 2019, there were 116,646,526 shares of the registrant’s common stock, par value $0.01 per share, outstanding.


Table of Contents

MATADOR RESOURCES COMPANY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2019
TABLE OF CONTENTS
 
Page



Table of Contents

Part I — FINANCIAL INFORMATION
Item 1. Financial Statements — Unaudited
Matador Resources Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED
(In thousands, except par value and share data)
 
June 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current assets
 
 
 
Cash
$
59,950

 
$
64,545

Restricted cash
24,812

 
19,439

Accounts receivable
 
 
 
Oil and natural gas revenues
66,921

 
68,161

Joint interest billings
61,872

 
61,831

Other
18,386

 
16,159

Derivative instruments
8,271

 
49,929

Lease and well equipment inventory
20,281

 
17,564

Prepaid expenses and other assets
12,891

 
8,057

Total current assets
273,384

 
305,685

Property and equipment, at cost
 
 
 
Oil and natural gas properties, full-cost method
 
 
 
Evaluated
4,094,417

 
3,780,236

Unproved and unevaluated
1,234,176

 
1,199,511

Midstream properties
492,420

 
428,025

Other property and equipment
25,170

 
22,041

Less accumulated depletion, depreciation and amortization
(2,462,840
)
 
(2,306,949
)
Net property and equipment
3,383,343

 
3,122,864

Other assets
 
 
 
Derivative instruments
2,202

 

Deferred income taxes
7,149

 
20,457

Other assets
85,373

 
6,512

Total other assets
94,724

 
26,969

Total assets
$
3,751,451

 
$
3,455,518

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable
$
19,821

 
$
66,970

Accrued liabilities
191,608

 
170,855

Royalties payable
66,130

 
64,776

Amounts due to affiliates
10,200

 
13,052

Advances from joint interest owners
4,725

 
10,968

Amounts due to joint ventures
1,588

 
2,373

Other current liabilities
42,703

 
1,028

Total current liabilities
336,775

 
330,022

Long-term liabilities
 
 
 
Borrowings under Credit Agreement
205,000

 
40,000

Borrowings under San Mateo Credit Facility
240,000

 
220,000

Senior unsecured notes payable
1,038,625

 
1,037,837

Asset retirement obligations
30,686

 
29,736

Derivative instruments
189

 
83

Deferred income taxes
14,845

 
13,221

Other long-term liabilities
44,728

 
4,962

Total long-term liabilities
1,574,073

 
1,345,839

Commitments and contingencies (Note 10)


 


Shareholders’ equity
 
 
 
Common stock - $0.01 par value, 160,000,000 shares authorized; 116,866,013 and 116,374,503 shares issued; and 116,647,704 and 116,353,590 shares outstanding, respectively
1,169

 
1,164

Additional paid-in capital
1,955,504

 
1,924,408

Accumulated deficit
(216,472
)
 
(236,277
)
Treasury stock, at cost, 218,309 and 20,913 shares, respectively
(3,724
)
 
(415
)
Total Matador Resources Company shareholders’ equity
1,736,477

 
1,688,880

Non-controlling interest in subsidiaries
104,126

 
90,777

Total shareholders’ equity
1,840,603

 
1,779,657

Total liabilities and shareholders’ equity
$
3,751,451

 
$
3,455,518


The accompanying notes are an integral part of these financial statements.
3

Table of Contents


Matador Resources Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED
(In thousands, except per share data)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Revenues
 
 
 
 
 
 
 
Oil and natural gas revenues
$
211,060

 
$
209,019

 
$
404,329

 
$
390,973

Third-party midstream services revenues
14,359

 
3,407

 
26,197

 
6,475

Sales of purchased natural gas
8,963

 

 
20,194

 

Realized gain (loss) on derivatives
1,165

 
(2,488
)
 
4,435

 
(6,746
)
Unrealized gain (loss) on derivatives
6,157

 
1,429

 
(39,562
)
 
11,845

Total revenues
241,704

 
211,367

 
415,593

 
402,547

Expenses
 
 
 
 
 
 
 
Production taxes, transportation and processing
21,542

 
20,110

 
41,207

 
37,901

Lease operating
26,351

 
25,006

 
57,514

 
47,154

Plant and other midstream services operating
8,422

 
5,676

 
17,738

 
9,896

Purchased natural gas
8,172

 

 
18,806

 

Depletion, depreciation and amortization
80,132

 
66,838

 
156,999

 
122,207

Accretion of asset retirement obligations
420

 
375

 
834

 
739

General and administrative
19,876

 
19,369

 
38,166

 
37,295

Total expenses
164,915

 
137,374

 
331,264

 
255,192

Operating income
76,789

 
73,993

 
84,329

 
147,355

Other income (expense)
 
 
 
 
 
 
 
Inventory impairment
(368
)
 

 
(368
)
 

Interest expense
(18,068
)
 
(8,004
)
 
(35,997
)
 
(16,495
)
Other expense
(423
)
 
(352
)
 
(532
)
 
(299
)
Total other expense
(18,859
)
 
(8,356
)
 
(36,897
)
 
(16,794
)
Income before income taxes
57,930

 
65,637

 
47,432

 
130,561

Income tax provision
 
 
 
 
 
 
 
Deferred
12,858

 

 
11,845

 

Total income tax provision
12,858

 

 
11,845

 

Net income
45,072

 
65,637

 
35,587

 
130,561

Net income attributable to non-controlling interest in subsidiaries
(8,320
)
 
(5,831
)
 
(15,782
)
 
(10,861
)
Net income attributable to Matador Resources Company shareholders
$
36,752

 
$
59,806

 
$
19,805

 
$
119,700

Earnings per common share
 
 
 
 

 

Basic
$
0.32

 
$
0.53

 
$
0.17

 
$
1.08

Diluted
$
0.31

 
$
0.53

 
$
0.17

 
$
1.08

Weighted average common shares outstanding
 
 
 
 
 
 
 
Basic
116,571

 
112,706

 
116,469

 
110,809

Diluted
116,903

 
113,056

 
116,839

 
111,280


The accompanying notes are an integral part of these financial statements.
4

Table of Contents

Matador Resources Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED
(In thousands)
For the Three and Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity attributable to Matador Resources Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controlling interest in subsidiaries
 
Total shareholders’ equity
 
Common Stock
 
Additional
paid-in capital
 
Accumulated deficit
 
Treasury Stock
 
 
 
 
Shares
 
Amount
 
 
 
Shares

 
Amount

 
 
 
Balance at January 1, 2019
116,375

 
$
1,164

 
$
1,924,408

 
$
(236,277
)
 
21

 
$
(415
)
 
$
1,688,880

 
$
90,777

 
$
1,779,657

Issuance of common stock pursuant to employee stock compensation plan
6

 

 

 

 

 

 

 

 

Issuance of common stock pursuant to directors’ and advisors’ compensation plan
3

 

 

 

 

 

 

 

 

Stock-based compensation expense related to equity-based awards including amounts capitalized

 

 
5,802

 

 

 

 
5,802

 

 
5,802

Stock options exercised, net of options forfeited in net share settlements
210

 
2

 
3,109

 

 

 

 
3,111

 

 
3,111

Restricted stock forfeited

 

 

 

 
184

 
(3,170
)
 
(3,170
)
 

 
(3,170
)
Contribution related to formation of San Mateo I, net of tax of $3.1 million (see Note 7)

 

 
11,613

 

 

 

 
11,613

 

 
11,613

Contribution of property related to formation of San Mateo II (see Note 7)

 

 
(506
)
 

 

 

 
(506
)
 
506

 

Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 
2,040

 

 

 

 
2,040

 
10,291

 
12,331

Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 

 

 

 

 

 
(8,330
)
 
(8,330
)
Current period net (loss) income

 

 

 
(16,947
)
 

 

 
(16,947
)
 
7,462

 
(9,485
)
Balance at March 31, 2019
116,594

 
1,166

 
1,946,466

 
(253,224
)
 
205

 
(3,585
)
 
1,690,823

 
100,706

 
1,791,529

Issuance of common stock pursuant to employee stock compensation plan
220

 
2

 
(2
)
 

 

 

 

 

 

Issuance of common stock pursuant to directors’ and advisors’ compensation plan
42

 
1

 
(1
)
 

 

 

 

 

 

Stock-based compensation expense related to equity-based awards including amounts capitalized

 

 
5,762

 

 

 

 
5,762

 

 
5,762

Stock options exercised, net of options forfeited in net share settlements
10

 

 
189

 

 

 

 
189

 

 
189

Restricted stock forfeited

 

 

 

 
13

 
(139
)
 
(139
)
 

 
(139
)
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 
3,090

 

 

 

 
3,090

 
4,410

 
7,500

Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 

 

 

 

 

 
(9,310
)
 
(9,310
)
Current period net income

 

 

 
36,752

 

 

 
36,752

 
8,320

 
45,072

Balance at June 30, 2019
116,866

 
$
1,169

 
$
1,955,504

 
$
(216,472
)
 
218

 
$
(3,724
)
 
$
1,736,477

 
$
104,126

 
$
1,840,603


The accompanying notes are an integral part of these financial statements.
5

Table of Contents


Matador Resources Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED
(in thousands)
For the Three and Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity attributable to Matador Resources Company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controlling interest in subsidiaries
 
Total shareholders’ equity
 
Common Stock
 
Additional
paid-in capital
 
Accumulated deficit
 
Treasury Stock
 
 
 
 
Shares
 
Amount
 
 
 
Shares

 
Amount

 
 
 
Balance at January 1, 2018
108,514

 
$
1,085

 
$
1,666,024

 
$
(510,484
)
 
3

 
$
(69
)
 
$
1,156,556

 
$
100,990

 
$
1,257,546

Issuance of common stock pursuant to employee stock compensation plan
697

 
7

 
(7
)
 

 

 

 

 

 

Issuance of common stock pursuant to directors’ and advisors’ compensation plan
6

 
1

 
(1
)
 

 

 

 

 

 

Stock-based compensation expense related to equity-based awards including amounts capitalized

 

 
5,390

 

 

 

 
5,390

 

 
5,390

Stock options exercised, net of options forfeited in net share settlements
130

 
1

 
(1,918
)
 

 

 

 
(1,917
)
 

 
(1,917
)
Restricted stock forfeited

 

 

 

 
82

 
(2,377
)
 
(2,377
)
 

 
(2,377
)
Contributions related to formation of San Mateo I (see Note 7)

 

 
14,700

 

 

 

 
14,700

 

 
14,700

Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 

 

 

 

 

 
29,400

 
29,400

Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 

 

 

 

 

 
(4,900
)
 
(4,900
)
Current period net income

 

 

 
59,894

 

 

 
59,894

 
5,030

 
64,924

Balance at March 31, 2018
109,347

 
1,094

 
1,684,188

 
(450,590
)
 
85

 
(2,446
)
 
1,232,246

 
130,520

 
1,362,766

Issuance of common stock pursuant to employee stock compensation plan
20

 

 

 

 

 

 

 

 

Issuance of common stock
7,000

 
70

 
226,542

 

 

 

 
226,612

 

 
226,612

Cost to issue equity

 

 
(146
)
 

 

 

 
(146
)
 

 
(146
)
Issuance of common stock pursuant to directors’ and advisors’ compensation plan
70

 

 

 

 

 

 

 

 

Stock-based compensation expense related to equity-based awards including amounts capitalized

 

 
5,937

 

 

 

 
5,937

 

 
5,937

Stock options exercised, net of options forfeited in net share settlements
24

 
1

 
300

 

 

 

 
301

 

 
301

Restricted stock forfeited

 

 

 

 
18

 
(224
)
 
(224
)
 

 
(224
)
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 

 

 

 

 

 
24,500

 
24,500

Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries

 

 

 

 

 

 

 
(5,635
)
 
(5,635
)
Current period net income

 

 

 
59,806

 

 

 
59,806

 
5,831

 
65,637

Balance at June 30, 2018
116,461

 
$
1,165

 
$
1,916,821

 
$
(390,784
)
 
103

 
$
(2,670
)
 
$
1,524,532

 
$
155,216

 
$
1,679,748



The accompanying notes are an integral part of these financial statements.
6

Table of Contents

Matador Resources Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(In thousands)
 
Six Months Ended 
 June 30,
 
2019
 
2018
Operating activities
 
 
 
Net income
$
35,587

 
$
130,561

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Unrealized loss (gain) on derivatives
39,562

 
(11,845
)
Depletion, depreciation and amortization
156,999

 
122,207

Accretion of asset retirement obligations
834

 
739

Stock-based compensation expense
9,076

 
8,945

Deferred income tax provision
11,845

 

Amortization of debt issuance cost
1,189

 
411

Inventory impairment
368

 

Changes in operating assets and liabilities

 

Accounts receivable
(378
)
 
(9,321
)
Lease and well equipment inventory
(3,456
)
 
(8,611
)
Prepaid expenses
(4,834
)
 
(2,167
)
Other assets
(415
)
 
(149
)
Accounts payable, accrued liabilities and other current liabilities
(48,746
)
 
(883
)
Royalties payable
1,353

 
8,393

Advances from joint interest owners
(6,243
)
 
16,025

Other long-term liabilities
1,756

 
(97
)
Net cash provided by operating activities
194,497

 
254,208

Investing activities


 


Oil and natural gas properties capital expenditures
(349,915
)
 
(421,595
)
Midstream capital expenditures
(64,106
)
 
(78,302
)
Expenditures for other property and equipment
(2,206
)
 
(1,258
)
Proceeds from sale of assets
21,533

 
7,593

Net cash used in investing activities
(394,694
)
 
(493,562
)
Financing activities


 


Repayments of borrowings

 
(45,000
)
Borrowings under Credit Agreement
165,000

 
45,000

Borrowings under San Mateo Credit Facility
20,000

 

Cost to amend credit facilities
(415
)
 

Proceeds from issuance of common stock

 
226,612

Cost to issue equity

 
(73
)
Proceeds from stock options exercised
3,298

 
464

Contributions related to formation of San Mateo I
14,700

 
14,700

Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries
19,831

 
53,900

Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries
(17,640
)
 
(10,535
)
Taxes paid related to net share settlement of stock-based compensation
(3,309
)
 
(4,683
)
Cash paid under financing lease obligations
(490
)
 

Net cash provided by financing activities
200,975

 
280,385

Increase in cash and restricted cash
778

 
41,031

Cash and restricted cash at beginning of period
83,984

 
102,482

Cash and restricted cash at end of period
$
84,762

 
$
143,513

 
 
 
 
Supplemental disclosures of cash flow information (Note 11)


 



The accompanying notes are an integral part of these financial statements.
7


Table of Contents
Matador Resources Company and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED
NOTE 1 — NATURE OF OPERATIONS
Matador Resources Company, a Texas corporation (“Matador” and, collectively with its subsidiaries, the “Company”), 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. The Company’s 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. The Company 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, the Company conducts midstream operations, primarily through its midstream joint ventures, San Mateo Midstream, LLC (“San Mateo I”) and San Mateo Midstream II, LLC (“San Mateo II” and, together with San Mateo I, “San Mateo”), in support of the Company’s exploration, development and production operations and provides natural gas processing, oil transportation services, oil, natural gas and salt water gathering services and salt water disposal services to third parties.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements, Basis of Presentation, Consolidation and Significant Estimates
The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) but do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 1, 2019 (the “Annual Report”). The Company consolidates certain subsidiaries and joint ventures that are less than wholly-owned and are not involved in oil and natural gas exploration, including San Mateo, and the net income and equity attributable to the non-controlling interest in these subsidiaries have been reported separately as required by Accounting Standards Codification (“ASC”), Consolidation (Topic 810). The Company proportionately consolidates certain joint ventures that are less than wholly-owned and are involved in oil and natural gas exploration. All intercompany accounts and transactions have been eliminated in consolidation. In management’s opinion, these interim unaudited condensed consolidated financial statements include all normal, recurring adjustments that are necessary for a fair presentation of the Company’s interim unaudited condensed consolidated financial statements as of June 30, 2019. Amounts as of December 31, 2018 are derived from the Company’s audited consolidated financial statements included in the Annual Report. Certain reclassifications have been made to the December 31, 2018 financial statement amounts in order to conform them to the June 30, 2019 presentations.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s interim unaudited condensed consolidated financial statements are based on a number of significant estimates, including oil and natural gas revenues, accrued assets and liabilities, stock-based compensation, valuation of derivative instruments, deferred tax assets and liabilities and oil and natural gas reserves. The estimates of oil and natural gas reserves quantities and future net cash flows are the basis for the calculations of depletion and impairment of oil and natural gas properties, as well as estimates of asset retirement obligations and certain tax accruals. While the Company believes its estimates are reasonable, changes in facts and assumptions or the discovery of new information may result in revised estimates. Actual results could differ from these estimates.
Change in Accounting Principles
Leases. During the first quarter of 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) and the amendments provided for in ASU 2018-11, Leases (Topic 842), which require the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that the Company chose to apply. These practical expedients relate to (i) the identification and classification of leases that commenced before the effective date, (ii) the treatment of initial direct costs for leases that commenced before the effective date, (iii) the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset and (iv) the ability to initially apply the new lease standard at the adoption date. During the first quarter of 2019, the Company also adopted ASU 2018-01, Leases (Topic 842), which is a land easement practical expedient, and, as a result, the Company began evaluating land easements that are entered into or modified after December 31, 2018. See Note 3 for additional disclosures related to leases.

8

Table of Contents
Matador Resources Company and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

The adoption of these ASUs resulted in the Company recording in the condensed consolidated balance sheet beginning January 1, 2019 certain of the Company’s compressor leases, drilling rig leases and office leases, which were previously considered operating leases and not reported on the Company’s condensed consolidated balance sheets. As such, upon adoption, the Company recorded (i) long-term right of use assets of $62.3 million, which are included in “Other assets” and “Other property and equipment,” and (ii) net right of use liabilities of $62.3 million, which are included in “Other current liabilities” and “Other long-term liabilities.” There was no cumulative-effect adjustment to the opening balance of accumulated deficit as a result of the adoption of these ASUs.
Stock Compensation. During the first quarter of 2019, the Company also adopted ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which extends the scope of Topic 718 to include share-based payment transactions related to the acquisition of goods and services from nonemployees. Previously, the Company accounted for stock-based awards to special advisors and contractors under ASC 505-50 as liability instruments, and the fair value of the awards was recalculated each reporting period. Upon adoption, all such awards are now measured at fair value on the grant date and the resulting expense is recognized on a straight-line basis over the awards’ vesting periods. The transitional guidance requires entities to remeasure all unvested awards that are being accounted for under ASC 505-50 as liability instruments as of the beginning of the year in which this ASU is adopted. Adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements.
Revenues
The following table summarizes the Company’s total revenues and revenues from contracts with customers on a disaggregated basis for the three and six months ended June 30, 2019 and 2018 (in thousands).
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Revenues from contracts with customers
$
234,382

 
$
212,426

 
$
450,720

 
$
397,448

Realized gain (loss) on derivatives
1,165

 
(2,488
)
 
4,435

 
(6,746
)
Unrealized gain (loss) on derivatives
6,157

 
1,429

 
(39,562
)
 
11,845

Total revenues
$
241,704

 
$
211,367

 
$
415,593

 
$
402,547

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Oil revenues
$
189,085

 
$
166,271

 
$
343,288

 
$
314,430

Natural gas revenues
21,975

 
42,748

 
61,041

 
76,543

Third-party midstream services revenues
14,359

 
3,407

 
26,197

 
6,475

Sales of purchased natural gas
8,963

 

 
20,194

 

Total revenues from contracts with customers
$
234,382

 
$
212,426

 
$
450,720

 
$
397,448


Property and Equipment
The Company uses the full-cost method of accounting for its investments in oil and natural gas properties. Under this method, the Company is required to perform a ceiling test each quarter that determines a limit, or ceiling, on the capitalized costs of oil and natural gas properties based primarily on the after-tax estimated future net cash flows from oil and natural gas properties using a 10% discount rate and the arithmetic average of first-day-of-the-month oil and natural gas prices for the prior 12-month period. For both the three and six months ended June 30, 2019 and 2018, the cost center ceiling was higher than the capitalized costs of oil and natural gas properties, and, as a result, no impairment charge was necessary.
The Company capitalized approximately $8.4 million and $6.8 million of its general and administrative costs and approximately $2.6 million and $2.6 million of its interest expense for the three months ended June 30, 2019 and 2018, respectively. The Company capitalized approximately $16.8 million and $14.1 million of its general and administrative costs and approximately $4.2 million and $4.5 million of its interest expense for the six months ended June 30, 2019 and 2018, respectively.

9

Table of Contents
Matador Resources Company and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

Earnings (Loss) Per Common Share
The Company reports basic earnings attributable to Matador shareholders per common share, which excludes the effect of potentially dilutive securities, and diluted earnings attributable to Matador shareholders per common share, which includes the effect of all potentially dilutive securities unless their impact is anti-dilutive.
The following table sets forth the computation of diluted weighted average common shares outstanding for the three and six months ended June 30, 2019 and 2018 (in thousands).
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
2019
 
2018
 
2019
 
2018
Weighted average common shares outstanding