SEC Filing | Matador Resources Company

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mtdr-20220930

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, 2022


☐			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 October 25, 2022, there were 118,161,520 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, 2022

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3
Item 1. Financial Statements — Unaudited			3
Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021			3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021			4
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021			5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021			9
Notes to Condensed Consolidated Financial Statements			10
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 5. Other Information			46
Item 6. Exhibits			48
SIGNATURES			49

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, 2022		December 31, 2021
ASSETS
Current assets
Cash	$	400,484	$	48,135

Restricted cash	41,236		38,785
Accounts receivable
Oil and natural gas revenues	268,869		164,242
Joint interest billings	120,786		48,366
Other	28,401		28,808
Derivative instruments	1,499		1,971


Lease and well equipment inventory	14,388		12,188
Prepaid expenses and other current assets	51,228		28,810
Total current assets	926,891		371,305
Property and equipment, at cost
Oil and natural gas properties, full-cost method
Evaluated	6,627,788		6,007,325
Unproved and unevaluated	1,000,720		964,714
Midstream properties	1,038,883		900,979
Other property and equipment	31,550		30,123
Less accumulated depletion, depreciation and amortization	(4,380,674)		(4,046,456)
Net property and equipment	4,318,267		3,856,685
Other assets


Other long-term assets	59,992		34,163

Total assets	$	5,305,150	$	4,262,153
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	61,105	$	26,256
Accrued liabilities	306,539		253,283
Royalties payable	134,373		94,359

Amounts due to affiliates	25,396		27,324
Derivative instruments	17,879		16,849
Advances from joint interest owners	26,993		18,074



Income taxes payable	3,439		—
Other current liabilities	49,465		28,692
Total current liabilities	625,189		464,837
Long-term liabilities
Borrowings under Credit Agreement	—		100,000
Borrowings under San Mateo Credit Facility	440,000		385,000
Senior unsecured notes payable	752,850		1,042,580
Asset retirement obligations	51,707		41,689


Deferred income taxes	349,205		77,938

Other long-term liabilities	20,591		22,721
Total long-term liabilities	1,614,353		1,669,928
Commitments and contingencies (Note 9)
Shareholders’ equity

Common stock - $0.01 par value, 160,000,000 shares authorized; 118,248,112 and 117,861,923 shares issued; and 118,155,815 and 117,850,233 shares outstanding, respectively	1,183		1,179
Additional paid-in capital	2,094,611		2,077,592
Retained earnings (accumulated deficit)	765,602		(171,318)
Treasury stock, at cost, 92,297 and 11,945 shares, respectively	(2,585)		(243)
Total Matador Resources Company shareholders’ equity	2,858,811		1,907,210
Non-controlling interest in subsidiaries	206,797		220,178
Total shareholders’ equity	3,065,608		2,127,388
Total liabilities and shareholders’ equity	$	5,305,150	$	4,262,153

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,
	2022		2021		2022		2021
Revenues
Oil and natural gas revenues	$	751,444	$	461,465	$	2,270,728	$	1,189,772
Third-party midstream services revenues	24,707		20,486		63,899		55,774
Sales of purchased natural gas	77,943		38,770		157,290		54,198

Realized loss on derivatives	(56,263)		(57,419)		(139,865)		(125,943)
Unrealized gain (loss) on derivatives	43,097		9,049		(1,502)		(77,178)
Total revenues	840,928		472,351		2,350,550		1,096,623
Expenses
Production taxes, transportation and processing	73,964		48,896		219,441		126,913
Lease operating	42,360		27,433		116,172		82,124
Plant and other midstream services operating	24,790		17,043		66,265		44,452
Purchased natural gas	69,442		34,581		142,903		47,064
Depletion, depreciation and amortization	118,870		89,061		334,747		255,368
Accretion of asset retirement obligations	679		518		1,739		1,529

General and administrative	27,549		24,633		81,713		71,218
Total expenses	357,654		242,165		962,980		628,668
Operating income	483,274		230,186		1,387,570		467,955
Other income (expense)
Net loss on asset sales and impairment	(1,113)		(251)		(1,311)		(251)
Interest expense	(15,996)		(17,989)		(50,740)		(55,579)

Other income (expense)	1,804		(585)		(2,682)		(1,246)
Total other expense	(15,305)		(18,825)		(54,733)		(57,076)
Income before income taxes	467,969		211,361		1,332,837		410,879
Income tax provision (benefit)
Current	270		—		51,940		—
Deferred	113,671		(6,701)		266,489		1,488
Total income tax provision (benefit)	113,941		(6,701)		318,429		1,488
Net income	354,028		218,062		1,014,408		409,391
Net income attributable to non-controlling interest in subsidiaries	(16,456)		(14,434)		(53,994)		(39,213)
Net income attributable to Matador Resources Company shareholders	$	337,572	$	203,628	$	960,414	$	370,178
Earnings per common share
Basic	$	2.86	$	1.74	$	8.13	$	3.17
Diluted	$	2.82	$	1.71	$	8.01	$	3.12
Weighted average common shares outstanding
Basic	118,136		117,008		118,063		116,872
Diluted	119,850		119,197		119,867		118,788

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, 2022


												Total shareholders’ equity attributable to Matador Resources Company


														Non-controlling interest in subsidiaries		Total shareholders’ equity
	Common Stock			Additional paid-in capital	Retained earnings (accumulated deficit)		Treasury Stock
	Shares	Amount							Shares	Amount
Balance at January 1, 2022	117,862	$	1,179		$	2,077,592	$	(171,318)	12	$	(243)	$	1,907,210	$	220,178	$	2,127,388
Dividends declared ($0.05 per share)	—	—			—		(5,866)		—	—		(5,866)		—		(5,866)
Issuance of common stock pursuant to employee stock compensation plan	205	2			(11,536)		—		—	—		(11,534)		—		(11,534)




Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			4,344		—		—	—		4,344		—		4,344
Stock options exercised, net of options forfeited in net share settlements	24	—			(585)		—		—	—		(585)		—		(585)



Restricted stock forfeited	—	—			—		—		12	(66)		(66)		—		(66)


Contribution related to formation of San Mateo, net of tax of $4.8 million (see Note 6)	—	—			17,973		—		—	—		17,973		—		17,973


Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(18,375)		(18,375)

Current period net income	—	—			—		207,124		—	—		207,124		17,061		224,185
Balance at March 31, 2022	118,091	$	1,181		$	2,087,788	$	29,940	24	$	(309)	$	2,118,600	$	218,864	$	2,337,464
Dividends declared ($0.05 per share)	—	—			—		(5,878)		—	—		(5,878)		—		(5,878)
Issuance of common stock pursuant to employee stock compensation plan	10	—			—		—		—	—		—		—		—



Issuance of common stock pursuant to directors’ and advisors’ compensation plan	25	—			—		—		—	—		—		—		—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			5,383		—		—	—		5,383		—		5,383
Stock options exercised, net of options forfeited in net share settlements	75	1			(2,607)		—		—	—		(2,606)		—		(2,606)



Restricted stock forfeited	—	—			—		—		47	(2,047)		(2,047)		—		(2,047)




Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(26,460)		(26,460)


Current period net income	—	—			—		415,718		—	—		415,718		20,477		436,195
Balance at June 30, 2022	118,201	$	1,182		$	2,090,564	$	439,780	71	$	(2,356)	$	2,529,170	$	212,881	$	2,742,051

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, 2022


												Total shareholders’ equity attributable to Matador Resources Company


														Non-controlling interest in subsidiaries		Total shareholders’ equity
	Common Stock			Additional paid-in capital	Retained earnings (accumulated deficit)		Treasury Stock
	Shares	Amount							Shares	Amount
Balance at July 1, 2022	118,201	$	1,182		$	2,090,564	$	439,780	71	$	(2,356)	$	2,529,170	$	212,881	$	2,742,051
Dividends declared ($0.10 per share)	—	—			—		(11,750)		—	—		(11,750)		—		(11,750)
Issuance of common stock pursuant to employee stock compensation plan	12	—			—		—		—	—		—		—		—

Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			5,222		—		—	—		5,222		—		5,222
Stock options exercised, net of options forfeited in net share settlements, and employee stock purchases	35	1			(1,175)		—		—	—		(1,174)		—		(1,174)




Restricted stock forfeited	—	—			—		—		21	(229)		(229)		—		(229)



Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(22,540)		(22,540)
Current period net income	—	—			—		337,572		—	—		337,572		16,456		354,028
Balance at September 30, 2022	118,248	$	1,183		$	2,094,611	$	765,602	92	$	(2,585)	$	2,858,811	$	206,797	$	3,065,608

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, 2021


												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, 2021	116,847	$	1,169		$	2,027,069	$	(741,705)	2	$	(3)	$	1,286,530	$	226,495	$	1,513,025
Dividends declared ($0.025 per share)	—	—			—		(2,913)		—	—		(2,913)		—		(2,913)
Issuance of common stock pursuant to employee stock compensation plan	3	—			—		—		—	—		—		—		—



Issuance of common stock pursuant to directors’ and advisors’ compensation plan	9	—			—		—		—	—		—		—		—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			1,477		—		—	—		1,477		—		1,477
Stock options exercised, net of options forfeited in net share settlements	13	—			—		—		—	—		—		—		—



Restricted stock forfeited	—	—			(219)		—		90	(1,501)		(1,720)		—		(1,720)


Contribution related to formation of San Mateo (see Note 6)	—	—			15,376		—		—	—		15,376		—		15,376


Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(14,210)		(14,210)
Current period net income	—	—			—		60,645		—	—		60,645		8,853		69,498
Balance at March 31, 2021	116,872	$	1,169		$	2,043,703	$	(683,973)	92	$	(1,504)	$	1,359,395	$	221,138	$	1,580,533
Dividends declared ($0.025 per share)	—	—			—		(2,913)		—	—		(2,913)		—		(2,913)
Issuance of common stock pursuant to employee stock compensation plan	138	1			(1)		—		—	—		—		—		—



Issuance of common stock pursuant to directors’ and advisors’ compensation plan	73	1			(1)		—		—	—		—		—		—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			2,289		—		—	—		2,289		—		2,289
Stock options exercised, net of options forfeited in net share settlements	40	—			—		—		—	—		—		—		—



Restricted stock forfeited	—	—			(425)		—		38	(739)		(1,164)		—		(1,164)


Contribution related to formation of San Mateo (see Note 6)	—	—			16,250		—		—	—		16,250		—		16,250

Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(14,700)		(14,700)
Current period net income	—	—			—		105,905		—	—		105,905		15,926		121,831
Balance at June 30, 2021	117,123	$	1,171		$	2,061,815	$	(580,981)	130	$	(2,243)	$	1,479,762	$	222,364	$	1,702,126

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, 2021


												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 July 1, 2021	117,123	$	1,171		$	2,061,815	$	(580,981)	130	$	(2,243)	$	1,479,762	$	222,364	$	1,702,126
Dividends declared ($0.025 per share)	—	—			—		(2,915)		—	—		(2,915)		—		(2,915)
Issuance of common stock pursuant to employee stock compensation plan	3	—			—		—		—	—		—		—		—

Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			3,856		—		—	—		3,856		—		3,856
Stock options exercised, net of options forfeited in net share settlements	123	1			211		—		—	—		212		—		212




Restricted stock forfeited	—	—			(1,138)		—		16	(138)		(1,276)		—		(1,276)
Contribution related to formation of San Mateo, net of tax of $1.3 million (see Note 6)	—	—			4,740		—		—	—		4,740		—		4,740


Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(16,905)		(16,905)
Current period net income	—	—			—		203,628		—	—		203,628		14,434		218,062
Balance at September 30, 2021	117,249	$	1,172		$	2,069,484	$	(380,268)	146	$	(2,381)	$	1,688,007	$	219,893	$	1,907,900

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)


	Nine Months Ended September 30,
	2022		2021
Operating activities
Net income	$	1,014,408	$	409,391
Adjustments to reconcile net income to net cash provided by operating activities
Unrealized loss on derivatives	1,502		77,178
Depletion, depreciation and amortization	334,747		255,368
Accretion of asset retirement obligations	1,739		1,529

Stock-based compensation expense	10,887		5,617

Deferred income tax provision	266,489		1,488
Amortization of debt issuance cost and other debt-related costs	(682)		2,443