SEC Filing | Matador Resources Company

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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



☐	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
PART I — FINANCIAL INFORMATION	3
Item 1. Financial Statements — Unaudited	3
Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018	3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018	4
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018	5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
PART II — OTHER INFORMATION	43
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6. Exhibits	44
SIGNATURES	45

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.

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.

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		Additional paid-in capital			Accumulated deficit			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.

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		Additional paid-in capital			Accumulated deficit			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.

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.

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.

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%