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 September 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 October 29, 2019, there were 116,641,109 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 SEPTEMBER 30, 2019

TABLE OF CONTENTS



	Page
PART I — FINANCIAL INFORMATION	3
Item 1. Financial Statements — Unaudited	3
Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018	3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018	4
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018	5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018	9
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44
PART II — OTHER INFORMATION	45
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 6. Exhibits	46
SIGNATURES	47

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)



	September 30, 2019			December 31, 2018
ASSETS
Current assets
Cash	$	15,709		$	64,545
Restricted cash	25,097			19,439
Accounts receivable
Oil and natural gas revenues	86,333			68,161
Joint interest billings	74,880			61,831
Other	23,981			16,159
Derivative instruments	15,481			49,929
Lease and well equipment inventory	14,678			17,564
Prepaid expenses and other assets	13,157			8,057
Total current assets	269,316			305,685
Property and equipment, at cost
Oil and natural gas properties, full-cost method
Evaluated	4,363,545			3,780,236
Unproved and unevaluated	1,166,501			1,199,511
Midstream properties	557,841			428,025
Other property and equipment	26,754			22,041
Less accumulated depletion, depreciation and amortization	(2,554,516		)	(2,306,949		)
Net property and equipment	3,560,125			3,122,864
Other assets
Derivative instruments	4,650			—
Deferred income taxes	—			20,457
Other assets	102,548			6,512
Total other assets	107,198			26,969
Total assets	$	3,936,639		$	3,455,518
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	40,584		$	66,970
Accrued liabilities	222,565			170,855
Royalties payable	64,191			64,776
Amounts due to affiliates	14,557			13,052
Advances from joint interest owners	7,809			10,968
Amounts due to joint ventures	469			2,373
Other current liabilities	53,182			1,028
Total current liabilities	403,357			330,022
Long-term liabilities
Borrowings under Credit Agreement	215,000			40,000
Borrowings under San Mateo Credit Facility	260,000			220,000
Senior unsecured notes payable	1,039,020			1,037,837
Asset retirement obligations	33,507			29,736
Derivative instruments	—			83
Deferred income taxes	21,186			13,221
Other long-term liabilities	52,151			4,962
Total long-term liabilities	1,620,864			1,345,839
Commitments and contingencies (Note 10)
Shareholders’ equity
Common stock - $0.01 par value, 160,000,000 shares authorized; 116,880,345 and 116,374,503 shares issued; and 116,638,712 and 116,353,590 shares outstanding, respectively	1,169			1,164
Additional paid-in capital	1,970,737			1,924,408
Accumulated deficit	(172,519		)	(236,277		)
Treasury stock, at cost, 241,633 and 20,913 shares, respectively	(4,080		)	(415		)
Total Matador Resources Company shareholders’ equity	1,795,307			1,688,880
Non-controlling interest in subsidiaries	117,111			90,777
Total shareholders’ equity	1,912,418			1,779,657
Total liabilities and shareholders’ equity	$	3,936,639		$	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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues
Oil and natural gas revenues	$	229,377		$	216,282		$	633,706		$	607,255
Third-party midstream services revenues	15,257			6,809			41,454			13,284
Sales of purchased natural gas	19,864			—			40,058			—
Lease bonus - mineral acreage	1,711			—			1,711			—
Realized gain (loss) on derivatives	3,346			5,424			7,781			(1,322		)
Unrealized gain (loss) on derivatives	9,847			(21,337		)	(29,715		)	(9,492		)
Total revenues	279,402			207,178			694,995			609,725
Expenses
Production taxes, transportation and processing	24,762			20,215			65,969			58,116
Lease operating	29,714			22,531			87,228			69,685
Plant and other midstream services operating	8,817			7,291			26,555			17,187
Purchased natural gas	16,608			—			35,414			—
Depletion, depreciation and amortization	92,498			70,457			249,497			192,664
Accretion of asset retirement obligations	520			387			1,354			1,126
General and administrative	20,381			18,444			58,547			55,739
Total expenses	193,300			139,325			524,564			394,517
Operating income	86,102			67,853			170,431			215,208
Other income (expense)
Net loss on asset sales and inventory impairment	(439		)	(196		)	(807		)	(196		)
Interest expense	(18,175		)	(10,340		)	(54,172		)	(26,835		)
Prepayment premium on extinguishment of debt	—			(31,226		)	—			(31,226		)
Other expense	(245		)	(976		)	(777		)	(1,275		)
Total other expense	(18,859		)	(42,738		)	(55,756		)	(59,532		)
Income before income taxes	67,243			25,115			114,675			155,676
Income tax provision
Deferred	13,490			—			25,335			—
Total income tax provision	13,490			—			25,335			—
Net income	53,753			25,115			89,340			155,676
Net income attributable to non-controlling interest in subsidiaries	(9,800		)	(7,321		)	(25,582		)	(18,182		)
Net income attributable to Matador Resources Company shareholders	$	43,953		$	17,794		$	63,758		$	137,494
Earnings per common share
Basic	$	0.38		$	0.15		$	0.55		$	1.22
Diluted	$	0.38		$	0.15		$	0.54		$	1.21
Weighted average common shares outstanding
Basic	116,643			116,358			116,541			112,659
Diluted	116,976			116,912			116,994			113,208

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 Nine Months Ended September 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 — CONTINUED

(In thousands)

For the Three and Nine Months Ended September 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 June 30, 2019	116,866	$	1,169	$	1,955,504	$	(216,472	)	218	$	(3,724	)	$	1,736,477		$	104,126		$	1,840,603
Issuance of common stock pursuant to employee stock compensation plan	12	—		—		—			—	—			—			—			—
Issuance of common stock pursuant to directors’ and advisors’ compensation plan	2	—		—		—			—	—			—			—			—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—		5,963		—			—	—			5,963			—			5,963
Restricted stock forfeited	—	—		—		—			24	(356		)	(356		)	—			(356		)
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		9,270		—			—	—			9,270			13,230			22,500
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—		—			—	—			—			(10,045		)	(10,045		)
Current period net income	—	—		—		43,953			—	—			43,953			9,800			53,753
Balance at September 30, 2019	116,880	$	1,169	$	1,970,737	$	(172,519	)	242	$	(4,080	)	$	1,795,307		$	117,111		$	1,912,418

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 Nine Months Ended September 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 STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED — CONTINUED

(In thousands)

For the Three and Nine Months Ended September 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

Amount

Balance at June 30, 2018

116,461

1,165

1,916,821

(390,784

)

103