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mtdr-20230930
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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, 2023
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)
  _________________________________________________________ 
Texas27-4662601
(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 classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareMTDRNew 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 24, 2023, there were 119,134,916 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, 2023
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)
September 30,
2023		December 31,
2022
ASSETS
Current assets
Cash$25,935 $505,179 
Restricted cash36,239 42,151 
Accounts receivable
Oil and natural gas revenues289,308 224,860 
Joint interest billings188,261 180,947 
Other49,345 48,011 
Derivative instruments— 3,930 
Lease and well equipment inventory35,468 15,184 
Prepaid expenses and other current assets86,819 51,570 
Total current assets711,375 1,071,832 
Property and equipment, at cost
Oil and natural gas properties, full-cost method
Evaluated9,291,696 6,862,455 
Unproved and unevaluated1,143,769 977,502 
Midstream properties1,209,756 1,057,668 
Other property and equipment39,626 32,847 
Less accumulated depletion, depreciation and amortization(5,008,909)(4,512,275)
Net property and equipment6,675,938 4,418,197 
Other assets
Other long-term assets 51,850 64,476 
Total assets$7,439,163 $5,554,505 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable$81,439 $58,848 
Accrued liabilities367,200 261,310 
Royalties payable150,365 117,698 
Amounts due to affiliates28,850 32,803 
Derivative instruments4,314 — 
Advances from joint interest owners21,416 52,357 
Other current liabilities68,743 52,857 
Total current liabilities722,327 575,873 
Long-term liabilities
Borrowings under Credit Agreement530,000 — 
Borrowings under San Mateo Credit Facility475,000 465,000 
Senior unsecured notes payable1,183,673 695,245 
Asset retirement obligations87,216 52,985 
Deferred income taxes552,937 428,351 
Other long-term liabilities12,712 19,960 
Total long-term liabilities2,841,538 1,661,541 
Commitments and contingencies (Note 10)
Shareholders’ equity
         Common stock - $0.01 par value, 160,000,000 shares authorized; 119,277,669 and 118,953,381 shares issued;
         and 119,145,818 and 118,948,624 shares outstanding, respectively
1,192 1,190 
Additional paid-in capital2,120,896 2,101,999 
Retained earnings1,545,712 1,007,642 
Treasury stock, at cost, 131,851 and 4,757 shares, respectively
(5,076)(34)
Total Matador Resources Company shareholders’ equity3,662,724 3,110,797 
Non-controlling interest in subsidiaries212,574 206,294 
Total shareholders’ equity3,875,298 3,317,091 
Total liabilities and shareholders’ equity$7,439,163 $5,554,505 




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
September 30,		Nine Months Ended
September 30,
 2023202220232022
Revenues
Oil and natural gas revenues$701,527 $751,444 $1,792,353 $2,270,728 
Third-party midstream services revenues29,931 24,707 86,517 63,899 
Sales of purchased natural gas40,329 77,943 106,481 157,290 
Realized loss on derivatives(6,975)(56,263)(6,454)(139,865)
Unrealized gain (loss) on derivatives7,482 43,097 (8,244)(1,502)
Total revenues772,294 840,928 1,970,653 2,350,550 
Expenses
Production taxes, transportation and processing71,697 73,964 189,174 219,441 
Lease operating66,395 42,360 171,845 116,172 
Plant and other midstream services operating30,808 24,790 92,510 66,265 
Purchased natural gas37,641 69,442 93,192 142,903 
Depletion, depreciation and amortization192,794 118,870 496,633 334,747 
Accretion of asset retirement obligations1,218 679 2,709 1,739 
General and administrative31,731 27,549 80,879 81,713 
Total expenses432,284 357,654 1,126,942 962,980 
Operating income340,010 483,274 843,711 1,387,570 
Other income (expense)
Net loss on impairment— (1,113)(202)(1,311)
Interest expense(35,408)(15,996)(85,813)(50,740)
Other (expense) income(11,614)1,804 5,289 (2,682)
Total other expense(47,022)(15,305)(80,726)(54,733)
Income before income taxes292,988 467,969 762,985 1,332,837 
Income tax provision (benefit)
Current8,958 270 8,958 51,940 
Deferred5,631 113,671 119,609 266,489 
Total income tax provision14,589 113,941 128,567 318,429 
Net income278,399 354,028 634,418 1,014,408 
Net income attributable to non-controlling interest in subsidiaries(14,660)(16,456)(42,883)(53,994)
Net income attributable to Matador Resources Company shareholders$263,739 $337,572 $591,535 $960,414 
Earnings per common share
Basic$2.21 $2.86 $4.97 $8.13 
Diluted$2.20 $2.82 $4.93 $8.01 
Weighted average common shares outstanding
Basic119,147 118,136 119,121 118,063 
Diluted120,081 119,850 120,045 119,867 
The accompanying notes are an integral part of these financial statements.
4
Table of Contents

Matador Resources Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED
(In thousands)
For the Three and Nine Months Ended September 30, 2023
Total shareholders’ equity attributable to Matador Resources Company
Non-controlling interest in subsidiariesTotal shareholders’ equity
 Common StockAdditional
paid-in capital		Retained earningsTreasury Stock
 SharesAmountSharesAmount
Balance at January 1, 2023118,953 $1,190 $2,101,999 $1,007,642 5 $(34)$3,110,797 $206,294 $3,317,091 
Dividends declared ($0.15 per share)
— — — (17,768)— — (17,768)— (17,768)
Issuance of common stock pursuant to employee stock compensation plan264 2 (17,592)— — — (17,590)— (17,590)
Stock-based compensation expense related to equity-based awards including amounts capitalized— — 3,894 — — — 3,894 — 3,894 
Stock options exercised, net of options forfeited in net share settlements15 — 12 — — — 12 — 12 
Restricted stock forfeited— — — — 21 (1,236)(1,236)— (1,236)
Contribution related to formation of San Mateo, net of tax of $3.1 million (see Note 7)
— — 11,613 — — — 11,613 — 11,613 
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries— — — — — — — (19,110)(19,110)
Current period net income— — — 163,130 — — 163,130 15,794 178,924 
Balance at March 31, 2023119,232 $1,192 $2,099,926 $1,153,004 26 $(1,270)$3,252,852 $202,978 $3,455,830 
Dividends declared ($0.15 per share)
— — — (17,917)— — (17,917)— (17,917)
Issuance of common stock pursuant to employee stock compensation plan27 — 950 — — — 950 — 950 
Issuance of common stock pursuant to directors’ and advisors’
compensation plan		11 — — — — — — — — 
Stock-based compensation expense related to equity-based awards including amounts capitalized— — 6,097 — — — 6,097 — 6,097 
Stock options exercised, net of options forfeited in net share settlements2 — 14 — — — 14 — 14 
Restricted stock forfeited— — — — 100 (3,806)(3,806)— (3,806)
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries (see Note 7)— — — — — — — 24,500 24,500 
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries— — — — — — — (25,333)(25,333)
Current period net income— — — 164,666 — — 164,666 12,429 177,095 
Balance at June 30, 2023119,272 $1,192 $2,106,987 $1,299,753 126 $(5,076)$3,402,856 $214,574 $3,617,430 



The accompanying notes are an integral part of these financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED
(In thousands)

For the Three and Nine Months Ended September 30, 2023
Total shareholders’ equity attributable to Matador Resources Company
Non-controlling interest in subsidiariesTotal shareholders’ equity
Common StockAdditional
paid-in capital		Retained earningsTreasury Stock
SharesAmountSharesAmount
Balance at July 1, 2023119,272 $1,192 $2,106,987 $1,299,753 126 $(5,076)$3,402,856 $214,574 $3,617,430 
Dividends declared ($0.15 per share)
— — — (17,780)— — (17,780)— (17,780)
Issuance of common stock pursuant to employee stock compensation plan3 — 43 — — — 43 — 43 
Stock-based compensation expense related to equity-based awards including amounts capitalized— — 6,751 — — — 6,751 — 6,751 
Stock options exercised, net of options forfeited in net share settlements, and employee stock purchases2 — 5 — — — 5 — 5 
Restricted stock forfeited— — — — 6 — — — — 
Contribution related to formation of San Mateo, net of tax of $1.9 million (see Note 7)
— — 7,110 — — — 7,110 — 7,110 
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries— — — — — — — (16,660)(16,660)
Current period net income— — — 263,739 — — 263,739 14,660 278,399 
Balance at September 30, 2023119,277 $1,192 $2,120,896 $1,545,712 132 $(5,076)$3,662,724 $212,574 $3,875,298 









The accompanying notes are an integral part of these financial statements.
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CONDENSED CONSOLIDATED STATEMENTS 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 subsidiariesTotal shareholders’ equity
Common StockAdditional
paid-in capital		Retained earnings (accumulated deficit)Treasury Stock
SharesAmountSharesAmount
Balance at January 1, 2022117,862 $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 plan205 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 settlements24 — (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 7)
— — 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, 2022118,091 $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 plan10 — — — — — — — — 
Issuance of common stock pursuant to director' and advisors' compensation plan25 — — — — — — — — 
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 settlements75 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, 2022118,201 $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.
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CONDENSED CONSOLIDATED STATEMENTS 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 subsidiariesTotal shareholders’ equity
Common StockAdditional
paid-in capital		Accumulated deficitTreasury Stock
SharesAmountSharesAmount
Balance at July 1, 2022118,201 $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 plan12 — — — — — — — — 
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 settlements35 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.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(In thousands)
 Nine Months Ended
September 30,
 20232022
Operating activities
Net income$634,418 $1,014,408 
Adjustments to reconcile net income to net cash provided by operating activities
Unrealized loss on derivatives8,244 1,502 
Depletion, depreciation and amortization496,633 334,747 
Accretion of asset retirement obligations2,709 1,739 
Stock-based compensation expense10,777 10,887 
Deferred income tax provision119,609 266,489 
Amortization of debt issuance cost and other debt-related costs4,996 (682)
Other non-cash changes14 1,311 
Changes in operating assets and liabilities
Accounts receivable3,424 (170,101)
Lease and well equipment inventory(10,223)(1,732)
Prepaid expenses and other current assets(41,817)(21,886)
Other long-term assets1,269 257 
Accounts payable, accrued liabilities and other current liabilities18,691 51,078 
Royalties payable22,655 40,014 
Advances from joint interest owners(30,941)8,919 
Income taxes payable8,873 3,439 
Other long-term liabilities150 (8,173)
Net cash provided by operating activities1,249,481 1,532,216 
Investing activities
Drilling, completion and equipping capital expenditures(855,468)(545,453)
Acquisition of Advance(1,608,427)— 
Acquisition of oil and natural gas properties(120,586)(134,255)
Midstream capital expenditures(75,609)(51,413)
Acquisition of midstream assets— (75,816)
Expenditures for other property and equipment(2,964)(690)
Proceeds from sale of assets730 46,507 
Net cash used in investing activities(2,662,324)(761,120)
Financing activities
Purchase of senior unsecured notes— (283,960)
Repayments of borrowings under Credit Agreement(2,622,000)(300,000)
Borrowings under Credit Agreement3,152,000 200,000 
Repayments of borrowings under San Mateo Credit Facility(140,000)(120,000)
Borrowings under San Mateo Credit Facility150,000 175,000 
Cost to amend credit facilities(8,645)(506)
Proceeds from issuance of senior unsecured notes494,800 — 
Cost to issue senior unsecured notes(8,503)— 
Dividends paid(53,465)(23,494)
Contributions related to formation of San Mateo23,700 22,750 
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries24,500 — 
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries(61,103)(67,375)
Taxes paid related to net share settlement of stock-based compensation(22,833)(18,264)
Other(764)(447)
Net cash provided by (used in) financing activities927,687 (416,296)
Change in cash and restricted cash(485,156)354,800 
Cash and restricted cash at beginning of period547,330 86,920 
Cash and restricted cash at end of period$62,174 $441,720 
Supplemental disclosures of cash flow information (Note 11)

The accompanying notes are an integral part of these financial statements.
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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. Additionally, the Company conducts midstream operations in support of the Company’s exploration, development and production operations and provides natural gas processing, oil transportation services, oil, natural gas and produced water gathering services and produced 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, 2022 filed with the SEC on March 1, 2023 (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 its midstream joint venture, San Mateo Midstream, LLC (collectively with its subsidiaries, “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, 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 September 30, 2023. Amounts as of December 31, 2022 are derived from the Company’s audited consolidated financial statements included in the Annual Report.
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, purchase price allocations 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.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
Revenues
The following table summarizes the Company’s total revenues and revenues from contracts with customers on a disaggregated basis for the three and nine months ended September 30, 2023 and 2022 (in thousands).
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Revenues from contracts with customers$771,787 $854,094 $1,985,351 $2,491,917 
Realized loss on derivatives(6,975)(56,263)(6,454)(139,865)
Unrealized gain (loss) on derivatives7,482 43,097 (8,244)(1,502)
Total revenues$772,294 $840,928 $1,970,653 $2,350,550 
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Oil revenues$588,370 $522,266 $1,500,511 $1,632,621 
Natural gas revenues113,157 229,178 291,842 638,107 
Third-party midstream services revenues29,931 24,707 86,517 63,899 
Sales of purchased natural gas40,329 77,943 106,481 157,290 
Total revenues from contracts with customers$771,787 $854,094 $1,985,351 $2,491,917 

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 each of the three and nine months ended September 30, 2023 and 2022, 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 $14.4 million and $11.4 million of its general and administrative costs for the three months ended September 30, 2023 and 2022, respectively, and $41.4 million and $35.0 million of its general and administrative costs for the nine months ended September 30, 2023 and 2022, respectively. The Company capitalized approximately $7.4 million and $3.0 million of its interest expense for the three months ended September 30, 2023 and 2022, respectively, and $16.1 million and $7.4 million of its interest expense for the nine months ended September 30, 2023 and 2022, respectively.
Earnings 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.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued
The following table sets forth the computation of diluted weighted average common shares outstanding for the three and nine months ended September 30, 2023 and 2022 (in thousands).
 Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Weighted average common shares outstanding
Basic119,147 118,136 119,121 118,063 
Dilutive effect of options and restricted stock units934 1,714 924 1,804 
Diluted weighted average common shares outstanding 120,081 119,850 120,045 119,867 
NOTE 3 — BUSINESS COMBINATIONS

On April 12, 2023, a wholly-owned subsidiary of the Company completed the acquisition of Advance Energy Partners Holdings, LLC (“Advance”) from affiliates of EnCap Investments L.P., including certain oil and natural gas producing properties, undeveloped acreage and midstream assets located primarily in Lea County, New Mexico and Ward County, Texas (the “Advance Acquisition”). The Advance Acquisition had an effective date of January 1, 2023 and an aggregate purchase price consisting of (i) an amount in cash equal to approximately $1.60 billion (which amount is subject to certain customary post-closing adjustments) (the “Cash Consideration”) and (ii) potential additional cash consideration of $7.5 million for each month of 2023 in which the average oil price (as defined in the securities purchase agreement) exceeds $85 per barrel (all such payments for the 12 months in 2023, the “Contingent Consideration”). The Cash Consideration was paid upon the closing of the Advance Acquisition and was funded by a combination of cash on hand and borrowings under the Company’s reserves-based revolving credit facility (the “Credit Agreement”). In October 2023, the Company paid $7.5 million of the Contingent Consideration, as the average oil price for the month of September 2023 exceeded $85 per barrel.
The Advance Acquisition was accounted for under the acquisition method of accounting as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC Topic 805”). Under ASC Topic 805, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values as of the respective acquisition date, with any excess purchase price allocated to goodwill. As the Company acquired 100% of the membership interests of Advance, the acquisition was treated as an asset acquisition for tax purposes.
The Company recorded the Contingent Consideration at fair value on the date of the business combination and will record the change in the fair value in future periods as “Other (expense) income” in its unaudited condensed consolidated statements of operations. The fair value of the Contingent Consideration was $21.2 million at April 12, 2023. The change in fair value of the Contingent Consideration included in “Other (expense) income” during the three and nine months ended September 30, 2023 was an expense of $15.7 million and income of $0.2 million, respectively. The Company made no cash payments related to the Contingent Consideration during the three and nine months ended September 30, 2023. The estimated fair value of the remaining payments of the Contingent Consideration for the fourth quarter was $13.5 million as of September 30, 2023. The Company used the Monte Carlo simulation method to measure the fair value of the Contingent Consideration, which has unobservable inputs and is thus classified at Level 3 in the fair value hierarchy (see Note 9 for discussion of the fair value hierarchy).
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED
NOTE 3 — BUSINESS COMBINATIONS — Continued
The preliminary allocation of the total purchase price for the Advance Acquisition is set forth below (in thousands). The Company anticipates that the allocation of the purchase price should be finalized during 2023 upon determination of the final purchase price adjustments.
Consideration Allocation
Cash$1,595,387 
Working capital adjustments(4,846)
Fair value of Contingent Consideration at April 12, 202321,151
Total consideration given$1,611,692 
Allocation of purchase price
Current assets$76,706 
Oil and natural gas properties
Evaluated1,363,470
Unproved and unevaluated189,087
Midstream assets63,644
Current liabilities(72,889)
Asset retirement obligations(8,326)
Net assets acquired$1,611,692 
The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation.
Significant inputs to the valuation of oil and gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) future plugging and abandonment costs, (v) estimated future cash flows, (vi) recent market comparable transactions for unproved acreage and (vii) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates and are the most sensitive and subject to change.
The results of operations for the Advance Acquisition since the closing date have been included in the Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2023. The oil and natural gas production from Advance increased the Company’s revenues and net income for the period from April 12, 2023 through September 30, 2023 by $222.4 million and $120.3 million, respectively.
Pro Forma Information
The following unaudited pro forma financial information represents a summary of the condensed consolidated results of operations for the three and nine months ended September 30, 2023 and 2022, assuming the Advance Acquisition had been completed as of January 1, 2022. The pro forma financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been had the Advance Acquisition occurred on the dates noted above, nor is it necessarily indicative of the future results of operations or consolidated financial position of the Company. Future results may vary significantly from the results reflected because of various factors.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED
NOTE 3 — BUSINESS COMBINATIONS — Continued
The information below reflects certain nonrecurring pro forma adjustments that were directly related to the business combination based on currently available information and certain estimates and assumptions that the Company believes provide a reasonable basis for presenting the significant effects of the Advance Acquisition, including (i) the increase in depletion reflecting the relative fair values and production volumes attributable to Advance’s properties and the revision to the depletion rate reflecting the reserve volumes acquired, (ii) adjustments to interest expense as a result of the incremental borrowings necessary to finance the Advance Acquisition and (iii) the estimated tax impacts of the pro-forma adjustments. The pro forma financial information does not reflect the benefits of projected synergies, potential cost savings or the costs that may be necessary to achieve such savings, opportunities to increase revenue generation or other factors that may result from the Advance Acquisition and, accordingly, does not attempt to predict or suggest future results. Management cannot identify the timing, nature and amount of such savings, costs or other factors, any of which could affect the future consolidated results of operations or consolidated financial position of the Company.
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(In thousands, except per share data)
Total revenue$772,294 $1,060,732 $2,126,934 $2,931,739 
Net income attributable to Matador Resources Company shareholders$263,739 $421,390 $620,420 $1,177,630 
Earnings per share:
Basic$2.21 $3.57 $5.21 $9.97 
Diluted$2.20 $3.52 $5.17 $9.82 
NOTE 4 — ASSET RETIREMENT OBLIGATIONS
The following table summarizes the changes in the Company’s asset retirement obligations for the nine months ended September 30, 2023 (in thousands).
Beginning asset retirement obligations$53,741 
Liabilities incurred during period5,466 
Liabilities settled during period(1,161)
Revisions in estimated cash flows21,795 
Acquisitions during period8,326 
Divestitures during period(872)
Accretion expense2,709 
Ending asset retirement obligations90,004 
Less: current asset retirement obligations(1)
(2,788)
Long-term asset retirement obligations$87,216 
 _______________
(1)Included in accrued liabilities in the Company’s interim unaudited condensed consolidated balance sheet at September 30, 2023.
NOTE 5 — DEBT
At September 30, 2023, the Company had (i) $699.2 million of outstanding senior notes due 2026 (the “2026 Notes”), (ii) $500.0 million of outstanding senior notes due 2028 (the “2028 Notes”), (iii) $530.0 million in borrowings outstanding under the Credit Agreement and (iv) approximately $45.4 million in outstanding letters of credit issued pursuant to the Credit Agreement. Between September 30, 2023 and October 24, 2023, the Company repaid $30.0 million of borrowings under the Credit Agreement.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED

NOTE 5 — DEBT — Continued
At September 30, 2023, San Mateo had $475.0 million in borrowings outstanding under its revolving credit facility (the “San Mateo Credit Facility”) and approximately $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility. Between September 30, 2023 and October 24, 2023, San Mateo repaid $23.0 million of borrowings under the San Mateo Credit Facility.
Credit Agreements
MRC Energy Company
The borrowing base under the Credit Agreement is determined semi-annually as of May 1 and November 1 by the lenders based primarily on the estimated value of the Company’s proved oil and natural gas reserves at December 31 and June 30 of each year, respectively. The Company and the lenders may each request an unscheduled redetermination of the borrowing base once between scheduled redetermination dates. On March 31, 2023, the lenders completed their review of the Company’s proved oil and natural gas reserves, and, as a result, the Company and its lenders entered into an amendment to the Fourth Amended and Restated Credit Agreement, which amended the Credit Agreement to, among other things: (i) reaffirm the borrowing base at $2.25 billion, (ii) increase the elected commitment from $775.0 million to $1.25 billion and (iii) maintain the maximum facility amount at $1.50 billion. This March 2023 reaffirmation of the borrowing base constituted the regularly scheduled May 1 redetermination.
On October 19, 2023, the lenders completed their review of the Company’s proved oil and natural gas reserves, and, as a result, the Company and its lenders entered into an amendment to the Fourth Amended and Restated Credit Agreement, which amended the Credit Agreement to, among other things: (i) increase the borrowing base from $2.25 billion to $2.50 billion, (ii) increase the elected commitment from $1.25 billion to $1.325 billion and (iii) increase the maximum facility amount from $1.50 billion to $2.00 billion. This October 2023 redetermination constituted the regularly scheduled November 1 redetermination. Borrowings under the Credit Agreement are limited to the lowest of the borrowing base, the maximum facility amount and the elected commitment (subject to compliance with the covenants noted below). The Credit Agreement matures October 31, 2026.
The Credit Agreement requires the Company to maintain (i) a current ratio, which is defined as (x) total consolidated current assets plus the unused availability under the Credit Agreement divided by (y) total consolidated current liabilities less current maturities under the Credit Agreement, of not less than 1.0 to 1.0 at the end of each fiscal quarter and (ii) a debt to EBITDA ratio, which is defined as debt outstanding (net of up to $75.0 million of cash or cash equivalents), divided by a rolling four quarter EBITDA calculation, of 3.5 to 1.0 or less. The Company believes that it was in compliance with the terms of the Credit Agreement at September 30, 2023.
San Mateo Midstream, LLC
The San Mateo Credit Facility is non-recourse with respect to Matador and its wholly-owned subsidiaries but is guaranteed by San Mateo’s subsidiaries and secured by substantially all of San Mateo’s assets, including real property. The San Mateo Credit Facility matures December 9, 2026, and the lender commitments under that facility were $485.0 million at September 30, 2023. The San Mateo Credit Facility includes an accordion feature, which provides for potential increases in lender commitments of up to $735.0 million.
The San Mateo Credit Facility requires San Mateo to maintain a debt to EBITDA ratio, which is defined as total consolidated funded indebtedness outstanding (as defined in the San Mateo Credit Facility) divided by a rolling four quarter EBITDA calculation, of 5.0 or less, subject to certain exceptions. The San Mateo Credit Facility also requires San Mateo to maintain an interest coverage ratio, which is defined as a rolling four quarter EBITDA calculation divided by San Mateo’s consolidated interest expense for such period, of 2.5 or more. The San Mateo Credit Facility also restricts the ability of San Mateo to distribute cash to its members if San Mateo’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility. The Company believes that San Mateo was in compliance with the terms of the San Mateo Credit Facility at September 30, 2023.
Senior Unsecured Notes
At September 30, 2023, the Company had $699.2 million of outstanding 2026 Notes, which have a 5.875% coupon rate. The 2026 Notes mature September 15, 2026, and interest is payable on the 2026 Notes semi-annually in arrears on each March 15 and September 15. The 2026 Notes are jointly and severally guaranteed on a senior unsecured basis by certain subsidiaries of the Company (the “Guarantor Subsidiaries”).
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Matador Resources Company and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED

NOTE 5 — DEBT — Continued
On April 11, 2023, the Company completed the sale of $500.0 million in aggregate principal amount of the 2028 Notes, which have a 6.875% coupon rate and mature April 15, 2028. Interest is payable on the 2028 Notes semi-annually in arrears on each April 15 and October 15, and the first interest payment date for the 2028 Notes was October 15, 2023. The 2028 Notes are jointly and severally guaranteed on a senior unsecured basis by the Guarantor Subsidiaries.
At any time prior to April 15, 2025, the Company may redeem up to 35% in aggregate principal amount of 2028 Notes at a redemption price of 106.875% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, in an amount not greater than the net proceeds of certain equity offerings so long as the redemption occurs within 180 days of completing such equity offering and at least 65% of the aggregate principal amount of the 2028 Notes remains outstanding after such redemption. In addition, at any time prior to April 15, 2025, the Company may redeem all or part of the 2028 Notes for cash at a redemption price equal to 100% of their principal amount plus an applicable make-whole premium and accrued and unpaid interest.
On or after April 15, 2025, the Company may redeem all or a part of the 2028 Notes at any time or from time to time at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:
YearRedemption Price
2025103.438%
2026101.719%
2027100.000%
Debt Maturities
The outstanding borrowings of $530.0 million at September 30, 2023 under the Credit Agreement mature on October 31, 2026. The outstanding borrowings of $475.0 million at September 30, 2023 under the San Mateo Credit Facility mature on December 9, 2026. The $699.2 million of outstanding 2026 Notes at September 30, 2023 mature on September 15, 2026. The $500.0 million of outstanding 2028 Notes at September 30, 2023 mature on April 15, 2028.
NOTE 6 — INCOME TAXES
The Company recorded a current income tax provision of $9.0 million for each of the three and nine months ended September 30, 2023 and a deferred income tax provision of $5.6 million and $119.6 million for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2022, the Company recorded a current income tax provision of $0.3 million and $51.9 million, respectively, and a deferred income tax provision of $113.7 million and $266.5 million, respectively.
The Company’s effective income tax rates of 5% and 18% for the three and nine months ended September 30, 2023, respectively, differed from the U.S. federal statutory rate due primarily to recognizing research and experimental expenditure tax credits of $65.1 million in the third quarter of 2023, which were partially offset by permanent differences between book and taxable income and state taxes, primarily in New Mexico. The Company’s effective income tax rate of 25% for both the three and nine months ended September 30, 2022 differed from the U.S. federal statutory rate due primarily to permanent differences between book and taxable income and state taxes, primarily in New Mexico.
The Company recognizes tax benefits from an uncertain tax position on the basis of a two-step process in which (i) the Company determines whether it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based upon the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
As of September 30, 2023, the Company had unrecognized tax benefits (“UTB”) of $28.0 million as a result of research and experimental expenditures related to horizontal drilling and completion innovations. There were no UTBs as of December 31, 2022. Although the Company believes it has adequately reserved for its uncertain tax positions in respect of such research and experimental expenditures, no assurance can be given that the final tax outcome of these matters will not be different. The timing as to when the Company will substantially resolve the uncertainties associated with the UTBs is unknown as of October 24, 2023.
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NOTE 7 — EQUITY
Stock-based Compensation
During the nine months ended September 30, 2023, the Company granted awards to certain of its employees of 228,550 service-based restricted stock units to be settled in cash, which are liability instruments, and 143,500 performance-based stock units and 272,010 service-based shares of restricted stock, which are equity instruments. The performance-based stock units vest in an amount between zero and 200% of the target units granted based on the Company’s relative total shareholder return over the three-year period ending December 31, 2025, as compared to a designated peer group. The service-based restricted stock and restricted stock units vest over a three-year period. The fair value of these awards was approximately $38.9 million on the grant date.
Common Stock Dividend
The Board of Directors (the “Board”) declared a quarterly cash dividend of $0.15 per share of common stock in each of the first, second and third quarters of 2023. The first quarter dividend, which totaled $17.8 million, was paid on March 9, 2023 to shareholders of record as of February 27, 2023. The second quarter dividend, which totaled $17.9 million, was paid on June 1, 2023 to shareholders of record as of May 11, 2023. The third quarter dividend, which totaled $17.8 million, was paid on September 1, 2023 to shareholders of record as of August 11, 2023. On October 19, 2023, the Board amended the Company’s dividend policy to increase the quarterly dividend to $0.20 per share of common stock for future dividend payments and also declared a quarterly cash dividend of $0.20 per share of common stock payable on December 1, 2023 to shareholders of record as of November 10, 2023.
San Mateo Distributions and Contributions
During the three months ended September 30, 2023 and 2022, San Mateo distributed $17.3 million and $23.5 million, respectively, to the Company and $16.7 million and $22.5 million, respectively, to a subsidiary of Five Point Energy LLC (“Five Point”), the Company’s joint venture partner in San Mateo. During the nine months ended September 30, 2023 and 2022, San Mateo distributed $63.6 million and $70.1 million, respectively, to the Company and $61.1 million and $67.4 million, respectively, to Five Point. During the nine months ended September 30, 2023, the Company contributed $25.5 million and Five Point contributed $24.5 million of cash to San Mateo. During the three months ended September 30, 2023 and the three and nine months ended September 30, 2022, there were no contributions to San Mateo by either the Company or Five Point.
Performance Incentives
Five Point paid to the Company $9.0 million of performance incentives during the three months ended September 30, 2023. No performance incentives were paid by Five Point to the Company during the three months ended September 30, 2022. Five Point paid to the Company $23.7 million and $22.8 million of performance incentives during the nine months ended September 30, 2023 and 2022, respectively. These performance incentives are recorded when received, net of the $1.9 million deferred tax impact to Matador for the three months ended September 30, 2023 and net of the $5.0 million and $4.8 million deferred tax impact to Matador for the nine months ended September 30, 2023 and 2022, respectively, in “Additional paid-in capital” in the Company’s interim unaudited condensed consolidated balance sheets. These performance incentives for the nine months ended September 30, 2023 and 2022 are also denoted as “Contributions related to formation of San Mateo” under “Financing activities” in the Company’s interim unaudited condensed consolidated statements of cash flows and changes in shareholders’ equity.
NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS
At September 30, 2023, the Company had one natural gas basis differential swap contract open and in place to mitigate its exposure to natural gas price volatility, with a specific term (calculation period), notional quantity (volume hedged) and fixed price. At September 30, 2023, the contract was set to expire during the fourth quarter of 2023. The Company had no open contracts associated with oil or natural gas liquids prices at September 30, 2023.
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Table of Contents
Matador Resources Company and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
UNAUDITED — CONTINUED

NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS — Continued
The following is a summary of the Company’s open basis differential swap contract at September 30, 2023.