SEC Filing | Matador Resources Company

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mtdr-20200630

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, 2020


☐			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 Dallas, Texas			75240
(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 28, 2020, there were 116,840,409 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, 2020

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			4
Item 1. Financial Statements — Unaudited			4
Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019			4
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019			5
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019			6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019			8
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			44
Item 4. Controls and Procedures			45
PART II — OTHER INFORMATION			46
Item 1. Legal Proceedings			46
Item 1A. Risk Factors			46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			46

Item 6. Exhibits			47
SIGNATURES			48

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, 2020		December 31, 2019
ASSETS
Current assets
Cash	$	20,573	$	40,024

Restricted cash	22,935		25,104
Accounts receivable
Oil and natural gas revenues	57,854		95,228
Joint interest billings	64,037		67,546
Other	21,623		26,639
Derivative instruments	13,304		—


Lease and well equipment inventory	11,940		10,744
Prepaid expenses and other current assets	15,017		13,207
Total current assets	227,283		278,492
Property and equipment, at cost
Oil and natural gas properties, full-cost method
Evaluated	5,041,026		4,557,265
Unproved and unevaluated	983,391		1,126,992
Midstream properties	773,314		643,903
Other property and equipment	28,233		27,021
Less accumulated depletion, depreciation and amortization	(3,163,037)		(2,655,586)
Net property and equipment	3,662,927		3,699,595
Other assets
Derivative instruments	6,634		—
Deferred income taxes	35,694		—
Other long-term assets	68,595		91,589

Total assets	$	4,001,133	$	4,069,676
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	15,747	$	25,230
Accrued liabilities	189,115		200,695
Royalties payable	60,995		85,193

Amounts due to affiliates	862		19,606
Derivative instruments	14,073		1,897
Advances from joint interest owners	19,931		14,837

Amounts due to joint ventures	—		486


Other current liabilities	44,046		51,828
Total current liabilities	344,769		399,772
Long-term liabilities
Borrowings under Credit Agreement	385,000		255,000
Borrowings under San Mateo Credit Facility	320,000		288,000
Senior unsecured notes payable	1,040,207		1,039,416
Asset retirement obligations	37,997		35,592
Derivative instruments	5,984		1,984

Deferred income taxes	11,090		37,329

Other long-term liabilities	37,585		43,131
Total long-term liabilities	1,837,863		1,700,452
Commitments and contingencies (Note 9)
Shareholders’ equity

Common stock - $0.01 par value, 160,000,000 shares authorized; 116,983,790 and 116,644,246 shares issued; and 116,843,587 and 116,642,899 shares outstanding, respectively	1,170		1,166
Additional paid-in capital	2,020,298		1,981,014
Accumulated deficit	(376,187)		(148,500)
Treasury stock, at cost, 140,203 and 1,347 shares, respectively	(1,449)		(26)
Total Matador Resources Company shareholders’ equity	1,643,832		1,833,654
Non-controlling interest in subsidiaries	174,669		135,798
Total shareholders’ equity	1,818,501		1,969,452
Total liabilities and shareholders’ equity	$	4,001,133	$	4,069,676

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,
	2020		2019		2020		2019
Revenues
Oil and natural gas revenues	$	118,767	$	211,060	$	316,681	$	404,329
Third-party midstream services revenues	14,668		14,359		30,498		26,197
Sales of purchased natural gas	13,981		8,963		24,525		20,194
Lease bonus - mineral acreage	4,062		—		4,062		—
Realized gain on derivatives	44,110		1,165		54,977		4,435
Unrealized (loss) gain on derivatives	(132,668)		6,157		3,762		(39,562)
Total revenues	62,920		241,704		434,505		415,593
Expenses
Production taxes, transportation and processing	18,797		21,542		40,513		41,207
Lease operating	26,162		26,351		57,072		57,514
Plant and other midstream services operating	9,780		8,422		19,744		17,738
Purchased natural gas	10,922		8,172		18,980		18,806
Depletion, depreciation and amortization	93,350		80,132		184,057		156,999
Accretion of asset retirement obligations	495		420		971		834
Full-cost ceiling impairment	324,001		—		324,001		—
General and administrative	14,723		19,876		30,945		38,166
Total expenses	498,230		164,915		676,283		331,264
Operating (loss) income	(435,310)		76,789		(241,778)		84,329
Other income (expense)
Net loss on asset sales and impairment	(2,632)		(368)		(2,632)		(368)
Interest expense	(18,297)		(18,068)		(38,109)		(35,997)

Other income (expense)	473		(423)		1,793		(532)
Total other expense	(20,456)		(18,859)		(38,948)		(36,897)
(Loss) income before income taxes	(455,766)		57,930		(280,726)		47,432
Income tax (benefit) provision

Deferred	(109,823)		12,858		(69,866)		11,845
Total income tax (benefit) provision	(109,823)		12,858		(69,866)		11,845
Net (loss) income	(345,943)		45,072		(210,860)		35,587
Net income attributable to non-controlling interest in subsidiaries	(7,473)		(8,320)		(16,827)		(15,782)
Net (loss) income attributable to Matador Resources Company shareholders	$	(353,416)	$	36,752	$	(227,687)	$	19,805
(Loss) earnings per common share
Basic	$	(3.04)	$	0.32	$	(1.96)	$	0.17
Diluted	$	(3.04)	$	0.31	$	(1.96)	$	0.17
Weighted average common shares outstanding
Basic	116,071		116,571		115,977		116,469
Diluted	116,071		116,903		115,977		116,839

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, 2020


											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, 2020	116,644	$	1,166	$	1,981,014	$	(148,500)	1	$	(26)			$	1,833,654			$	135,798			$	1,969,452
Issuance of common stock pursuant to employee stock compensation plan	3	—		—		—		—	—		—				—				—



Issuance of common stock pursuant to directors’ and advisors’ compensation plan	2	—		—		—		—	—		—				—				—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—		5,066		—		—	—		5,066				—				5,066
Stock options exercised, net of options forfeited in net share settlements	—	—		(24)		—		—	—		(24)				—				(24)
Liability-based stock option awards settled in equity	22	1		297		—		—	—		298				—				298


Restricted stock forfeited	—	—		—		—		106	(1,267)		(1,267)				—				(1,267)


Contribution related to formation of San Mateo I, net of tax of $3.1 million (see Note 6)	—	—		11,613		—		—	—		11,613				—				11,613

Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries, net of tax of $4.3 million (see Note 6)	—	—		16,280		—		—	—		16,280				29,394				45,674
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—		—		—	—		—				(11,515)				(11,515)

Current period net income	—	—		—		125,729		—	—		125,729				9,354				135,083
Balance at March 31, 2020	116,671	1,167		2,014,246		(22,771)		107	(1,293)		1,991,349				163,031				2,154,380
Issuance of common stock pursuant to employee stock compensation plan	230	2		(2)		—		—	—		—				—				—



Issuance of common stock pursuant to directors’ and advisors’ compensation plan	83	1		(1)		—		—	—		—				—				—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—		4,103		—		—	—		4,103				—				4,103




Restricted stock forfeited	—	—		—		—		33	(156)		(156)				—				(156)



Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries, net of tax of $0.5 million (see Note 6)	—	—		1,952		—		—	—		1,952				14,700				16,652
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—		—		—	—		—				(10,535)				(10,535)


Current period net (loss) income	—	—		—		(353,416)		—	—		(353,416)				7,473				(345,943)
Balance at June 30, 2020	116,984	$	1,170	$	2,020,298	$	(376,187)	140	$	(1,449)	$	1,643,832			$	174,669			$	1,818,501

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							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 6)	—	—		11,613		—		—	—		11,613			—			11,613
Contribution of property related to formation of San Mateo II (see Note 6)	—	—		(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