Matador Resources Company Reports Fourth Quarter and Full Year 2022 Financial Results and Provides Operational Update, 2023 Operating Plan and Market Guidance

DALLAS–(BUSINESS WIRE)–Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today reported financial and operating results for the fourth quarter and full year 2022. A slide presentation summarizing the highlights of Matador’s fourth quarter and full year 2022 earnings release and 2023 operating plan is also included on the Company’s website at www.matadorresources.com on the Events and Presentations page under the Investor Relations tab.

Management Summary Comments

Joseph Wm. Foran, Matador’s Founder, Chairman and CEO, commented, “The fourth quarter of 2022 was a strong finish to another record year for Matador, and we look forward to an even better year in 2023. For additional information regarding our operational and financial results in 2022 as well as our 2023 plans, please see the set of seven slides identified as ‘Chairman’s Remarks’ (Slides A through G) on both our website and during the webcast planned for tomorrow’s earnings conference call.

“In the fourth quarter of 2022, we achieved record quarterly production of 111,700 barrels of oil and natural gas equivalent (“BOE”) per day, despite the impact of adverse weather in the Delaware Basin in late December 2022. In addition, our Board adopted a new dividend policy in December 2022 pursuant to which we recently announced an increase to our dividend to $0.15 per share payable on March 9, 2023 to shareholders of record on February 27, 2023, which is an increase of 50% over our prior quarterly dividend of $0.10 per share (see Slide A).

“During 2022, the Company achieved record oil production of 21.9 million barrels and record natural gas production of 99.3 billion cubic feet, resulting in record annual production of 38.5 million BOE, or 105,500 BOE per day, which was an increase of 22% as compared to 2021. Importantly and notably, 2022 is the first year in Matador’s history that we have exceeded 100,000 BOE per day on an annual basis (see Slide B). This record production was accompanied by record financial results in 2022, including record net income (GAAP) of $1.21 billion and record Adjusted EBITDA (non-GAAP) of $2.13 billion, both of which were increases of over 100% as compared to 2021. Matador’s 2022 earnings per share (GAAP) also increased over 100% from $4.91 per diluted share in 2021 to $10.11 per diluted share in 2022. In addition, Matador’s midstream joint venture, San Mateo, had an outstanding year with record net income (GAAP) of $147 million and record Adjusted EBITDA (non-GAAP) of $198 million (see Slide C).

“The generation of record net cash provided by operating activities (GAAP) of $1.98 billion and record adjusted Free Cash Flow (non-GAAP) of $1.22 billion during 2022 allowed us to not only repay a significant portion of our debt, including all the outstanding borrowings under our reserves-based commercial credit facility but also to repurchase over $350 million of our outstanding senior notes in open market transactions during 2022. We ended the year with a leverage ratio of 0.1x, which is the lowest leverage ratio for Matador since it became a publicly-traded company in early 2012 (see Slide D). Matador also ended 2022 with an annual increase of 10% to its 2022 total proved oil and natural gas reserves of 357 million BOE, which is an all-time high for Matador.

“These record operational and financial results during 2022 provided us the financial strength to announce in January that we had entered into a definitive agreement to acquire Advance Energy Partners Holdings, LLC (“Advance”) for an initial cash payment of $1.6 billion, subject to customary closing adjustments, including possible additional cash consideration depending on the price of oil during 2023 (see Slide E). This strategic bolt-on acquisition is expected to close in the second quarter of 2023, and we intend to fund it with a combination of cash on hand, free cash flow prior to closing and borrowings under our credit agreement, under which we expect to increase our elected commitment in connection with the acquisition of Advance. We are excited by the opportunity to develop this new quality acreage that will compete for capital immediately following closing of the Advance acquisition. This new acreage also provides expansion opportunities for our wholly-owned midstream subsidiary, Pronto Midstream, which we expect will provide us with operational advantages as we develop the Advance properties (see Slide F).

“While we are pleased with the record results of 2022, we are even more excited about the opportunities ahead for Matador in 2023 and in future years. The integration of the Advance assets will add to our increasing high quality inventory locations and provide opportunities for continued growth. Advance currently has one drilling rig operating on these assets, and we expect to continue drilling on this acreage and increase the number of our operated drilling rigs from seven to eight drilling rigs following the closing of the acquisition. Our production estimates for 2023 only include production from the Advance properties following closing of the acquisition, which we expect to occur in the second quarter of 2023, because any production revenues from the Advance assets prior to the closing date will be part of the purchase price adjustment at closing.

“During 2023, we anticipate turning to sales over 90 net operated wells for the first time in the Company’s history. These wells are expected to be diversified across our asset areas and include, among others, (i) eight gross (7.7 net) wells in the Rodney Robinson leasehold and eight gross (8.0 net) wells in the Stateline asset area in the first half of the year, and (ii) 21 gross (20.4 net) wells on the Advance properties, 18 gross (11.5 net) wells in and around our Stebbins leasehold in the Arrowhead asset area and nine gross (8.3 net) wells in the Wolf asset area in the second half of the year (see Slide G). We expect to turn to sales the remaining horizontal wells in our 2023 plan in our other asset areas. Our 2023 plan and current drilling rig contracts also provide us flexibility to reduce the number of drilling rigs that we operate in the event that oil and natural gas prices substantially decrease.

“Our operation groups continue to execute at a high level, and we expect drilling and completion capital efficiencies to carry forward into 2023 to help mitigate service cost inflation. Earlier this month, our MaxCom Operations Center, where we have engineers and geologists monitoring our drilling operations 24 hours a day, 365 days a year, celebrated its fifth year in service. This MaxCom Operations Center, together with improved processes and refined targeting, continue to provide the Company with drilling cost reductions, improved well performance and production gains.

“The Board and I are grateful for the continued support of our friends and shareholders. We believe that we are better together and are excited for the future of Matador as we continue to create value for our stakeholders through a disciplined approach to developing our excellent Delaware Basin, South Texas and North Louisiana assets while still achieving our overall aim of generating free cash flow, paying regular dividends, strengthening the balance sheet, making accretive acquisitions and expanding our midstream business.”

Fourth Quarter 2022 Operational and Financial Highlights

• Record quarterly average production of 111,700 BOE per day (62,300 barrels of oil per day)
• Net cash provided by operating activities of $446.5 million
• Adjusted free cash flow of $249.3 million
• Net income of $253.8 million, or $2.11 per diluted common share
• Adjusted net income of $249.9 million, or $2.08 per diluted common share
• Adjusted EBITDA of $461.8 million
• San Mateo net income of $37.0 million
• San Mateo Adjusted EBITDA of $52.3 million
• Increased quarterly dividend policy to $0.15 per diluted common share, or $0.60 per annum, a 50% increase

Full Year 2022 Operational and Financial Highlights

• Record annual average production of 105,500 BOE per day (60,100 barrels of oil per day) – the first year the Company has averaged over 100,000 BOE per day
• Record annual net cash provided by operating activities of $1.98 billion
• Record adjusted Free Cash Flow of $1.22 billion
• Net income of $1.21 billion, or $10.11 per diluted common share
• Adjusted net income of $1.26 billion, or $10.53 per diluted common share
• Adjusted EBITDA of $2.13 billion
• San Mateo net income of $147.2 million
• San Mateo Adjusted EBITDA of $198.0 million
• Record low leverage ratio of 0.1x at December 31, 2022

2023 Guidance Highlights (pro forma for the Advance acquisition)

• Oil production guidance of 26.4 to 27.3 million barrels
• Natural gas production guidance of 107.7 to 113.7 billion cubic feet
• Total production guidance of 44.35 to 46.25 million BOE, or 121,500 to 126,700 BOE per day
• Drilling, completing and equipping capital expenditures of $1.18 to 1.32 billion
• Midstream capital expenditures of $150 to 200 million

Note: All references to Matador’s net income, adjusted net income, Adjusted EBITDA and adjusted free cash flow reported throughout this earnings release are those values attributable to Matador Resources Company shareholders after giving effect to any net income, Adjusted EBITDA or adjusted free cash flow, respectively, attributable to third-party non-controlling interests, including in San Mateo Midstream, LLC (“San Mateo”). Matador owns 51% of San Mateo. For a definition of adjusted net income, adjusted earnings per diluted common share, Adjusted EBITDA, adjusted free cash flow and PV-10 and reconciliations of such non-GAAP financial metrics to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.

Operational Update

The table below provides a summary of Matador’s production for the fourth quarter of 2022, which exceeded the Company’s expectations. The primary driver behind this outperformance was better-than-expected production from the 15 most recent Stateline wells turned to sales this year. In addition, several anticipated incremental shut-ins in the Rodney Robinson leasehold due to the Company’s offset completions were deferred from the fourth quarter of 2022 to the first quarter of 2023. Matador’s fourth quarter production exceeded its expectations despite weather-related downtime in late December due to the good work of the field staff. The Company estimates that the December 2022 winter storm impacted the Company’s production by less than 1%.

				Production Change (%)
Production		Q4 2022 Average Daily Volume		Sequential(1)		Guidance(2)		Difference(3)		YoY(4)
Total, BOE per day		111,735		+6%		flat to +2%		+5%		+28%
Oil, Bbl per day		62,316		+4%		+1% to +3%		+2%		+25%
Natural Gas, MMcf per day		296.5		+10%		(1%) to +1%		+10%		+32%

(1)	As compared to the third quarter of 2022.
(2)	Production change previously projected, as provided on October 25, 2022.
(3)	As compared to midpoint of guidance provided on October 25, 2022.
(4)	Represents year-over-year percentage change from the fourth quarter of 2021.

During the fourth quarter of 2022, Matador turned to sales 24 gross (15.4 net) operated horizontal wells. The table below provides a summary of our operated and non-operated activity in the fourth quarter of 2022.

Fourth Quarter 2022 Quarterly Well Count
		Operated				Non-Operated				Total				Gross Operated and Non-Operated
Asset/Operating Area		Gross		Net		Gross		Net		Gross		Net		Well Completion Intervals
Western Antelope Ridge (Rodney Robinson)		—		—		—		—		—		—		No wells turned to sales in Q4 2022
Antelope Ridge		4		1.7		—		—		4		1.7		2-2BS, 2-1BS
Arrowhead		2		1.1		2		0.4		4		1.5		4-2BS
Ranger		12		8.8		—		—		12		8.8		2-WC A, 4-3BS, 5-2BS, 1-1BS
Rustler Breaks		6		3.8		3		0.1		9		3.9		4-WC B, 1-WC A, 1-3BS Carb, 1-2BS, 1-1BS, 1-BYCN
Stateline		—		—		—		—		—		—		No wells turned to sales in Q4 2022
Wolf/Jackson Trust		—		—		—		—		—		—		No wells turned to sales in Q4 2022
Delaware Basin		24		15.4		5		0.5		29		15.9
South Texas		—		—		—		—		—		—		No wells turned to sales in Q4 2022
Haynesville Shale		—		—		—		—		—		—		No wells turned to sales in Q4 2022
Total		24		15.4		5		0.5		29		15.9

Note: WC = Wolfcamp; BS = Bone Spring; BS Carb = Bone Spring Carbonate; BYCN = Brushy Canyon. For example, 2-2BS indicates two Second Bone Spring completions and 2-WC A indicates two Wolfcamp A completions.

Financial Update

Matador’s fourth quarter 2022 net income was $253.8 million, or $2.11 per diluted common share, a sequential decrease of 25% from net income of $337.6 million, or $2.82 per diluted common share, in the third quarter of 2022 primarily due to lower commodity prices in the fourth quarter of 2022, and a year-over-year increase of 18% from net income of $214.8 million, or $1.80 per diluted common share, in the fourth quarter of 2021.

Matador’s fourth quarter 2022 adjusted net income was $249.9 million, or adjusted earnings of $2.08 per diluted common share, a sequential decrease of 22% from adjusted net income of $321.7 million, or $2.68 per diluted common share, in the third quarter of 2022 primarily due to lower commodity prices in the fourth quarter of 2022, and a year-over-year increase of 65% from adjusted net income of $151.2 million, or $1.26 per diluted common share, in the fourth quarter of 2021.

Fourth quarter 2022 Adjusted EBITDA was $461.8 million, a sequential decrease of 14% from $539.7 million in the third quarter of 2022 primarily due to lower commodity prices in the fourth quarter of 2022, and a year-over-year increase of 54% from $299.1 million in the fourth quarter of 2021.

The following table summarizes Matador’s realized commodity prices during the fourth quarter of 2022, as compared to the third quarter of 2022 and the fourth quarter of 2021.

Realized Commodity Prices		Q4 2022		Q3 2022		Sequential(1)		Q4 2021		YoY(2)
Oil Prices, per Bbl		$83.90		$94.36		(11) %		$76.82		+9%
Natural Gas Prices, per Mcf		$5.65		$9.22		(39) %		$7.68		+74%

(1)	Fourth quarter 2022 as compared to third quarter 2022.
(2)	Fourth quarter 2022 as compared to fourth quarter 2021.

The Company continues to improve completion capital efficiencies with dual-fuel pressure pumping and Simul-Frac completions. For the full year 2022, drilling and completion costs for all operated horizontal wells turned to sales averaged approximately $879 per completed lateral foot, or 1% below the Company’s expectations of $890 per completed lateral foot. Drilling and completion costs for all operated horizontal wells turned to sales in the fourth quarter of 2022 averaged approximately $1,019 per completed lateral foot.

During the fourth quarter of 2022, Matador’s lease operating expenses were $3.98 per BOE, which was a 9% sequential decrease from $4.38 per BOE in the third quarter of 2022, primarily due to increased production between the two periods, and a 19% year-over-year increase in lease operating expenses from $3.34 per BOE in the fourth quarter of 2021, primarily due to operating cost inflation between the two periods.

Matador’s general and administrative expenses increased 18% sequentially from $2.85 per BOE in the third quarter of 2022 to $3.36 per BOE in the fourth quarter of 2022. General and administrative expenses in the fourth quarter reflected year-end bonus payments made to Matador’s employees related to record 2022 performance as well as employee stock awards that are settled in cash, the values of which are remeasured at each reporting period. These cash-settled stock award amounts increased due to the fact that Matador’s share price increased 17% from $48.92 at September 30, 2022 to $57.24 at December 31, 2022.

Matador’s drilling, completing and equipping (“D/C/E”) and midstream capital expenditures were better than it expected for the fourth quarter of 2022 as set forth in the table below, primarily due to the timing of operations.

Q4 2022 Capital Expenditures ($ millions)		Actual		Guidance(1)		Difference vs. Guidance(2)
D/C/E		188.9		216.0		(13%)
Midstream		10.6		22.0		(52%)

(1)	Midpoint of guidance as provided on October 25, 2022.
(2)	As compared to the midpoint of guidance provided on October 25, 2022.

Strengthened Balance Sheet

Matador continued to strengthen its balance sheet through the repayment of debt during the fourth quarter of 2022. At December 31, 2022, Matador’s leverage ratio was 0.1x, which was better than the Company’s expectations for year-end 2022. At December 31, 2022, there were no borrowings outstanding under Matador’s reserves-based commercial credit facility.

In late November 2022, Matador received an increase in its borrowing base from $2.0 billion to $2.25 billion under its reserves-based commercial credit facility, an increase of 13%. This increase was based on a review by Matador’s 12 lenders of the Company’s proved oil and natural gas reserves as part of the fall 2022 redetermination process. The elected borrowing commitment under the reserves-based commercial credit facility was reaffirmed at $775 million.

At December 31, 2022, Matador had $699.2 million in senior notes outstanding, which is a reduction of $58.2 million in senior notes during the fourth quarter of 2022 and a reduction of $350.8 million in senior notes during the year ended 2022 from $1.05 billion at December 31, 2021.

Midstream Update

San Mateo also experienced better-than-expected operating and financial results during the fourth quarter of 2022. The table below summarizes San Mateo’s throughput volumes for the fourth quarter of 2022, as well as the corresponding results for the third quarter of 2022 and the fourth quarter of 2021. Natural gas gathering and processing and water handling volumes in the fourth quarter of 2022 were all-time highs for San Mateo. The volumes in the table do not include the full quantity of volumes that would have otherwise been delivered by certain San Mateo customers subject to minimum volume commitments (although partial deliveries were made in each period), but for which San Mateo recognized revenues during each period.

San Mateo Throughput Volumes		Q4 2022		Q3 2022		Sequential(1)		Q4 2021		YoY(2)
Natural gas gathering, MMcf per day		305		285		+7%		252		+21%
Natural gas processing, MMcf per day		328		280		+17%		236		+39%
Oil gathering and transportation, Bbl per day		46,000		44,800		+3%		41,800		+10%
Produced water handling, Bbl per day		386,000		358,000		+8%		313,000		+23%

(1)	Fourth quarter 2022 as compared to third quarter 2022.
(2)	Fourth quarter 2022 as compared to fourth quarter 2021.

During the fourth quarter of 2022, San Mateo achieved net income of $37.0 million, a 10% sequential increase from $33.6 million in both the third quarter of 2022 and the fourth quarter of 2021. This quarterly result was a record high for San Mateo and above the Company’s expectations for the fourth quarter, primarily resulting from stronger-than-expected throughput volumes.

San Mateo achieved Adjusted EBITDA of $52.3 million in the fourth quarter of 2022, a 10% sequential increase from $47.6 million in the third quarter of 2022, and a 20% year-over-year increase from $43.6 million in the fourth quarter of 2021. This quarterly result was a record high for San Mateo and above the Company’s expectations for the fourth quarter for the reasons noted above.

In the fourth quarter of 2022, San Mateo’s net cash provided by operating activities was $44.8 million, leading to San Mateo adjusted free cash flow of $27.7 million.

In December 2022, the lenders under San Mateo’s revolving credit facility (the “San Mateo Credit Agreement”) extended the maturity of the facility by three years from December 2023 to December 2026 and increased the lender commitments from $450 million to $485 million. In addition, the lenders agreed to refresh the San Mateo Credit Agreement’s accordion feature of $250 million, which could expand lender commitments to up to $735 million. Total borrowings outstanding under the San Mateo Credit Agreement at December 31, 2022 were $465 million. In early 2023, San Mateo repaid $30 million in borrowings outstanding under its credit facility, and as of February 21, 2023, $435 million was outstanding under the San Mateo Credit Agreement. The San Mateo Credit Agreement 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.

Capital expenditures for Pronto Midstream, LLC (“Pronto”) and Matador’s portion of San Mateo’s capital expenditures were $10.6 million in the fourth quarter of 2022, about $11 million less than the Company’s estimate of $22 million, primarily due to the timing of operations.

Proved Reserves, Standardized Measure and PV-10

The following table summarizes Matador’s estimated total proved oil and natural gas reserves at December 31, 2022 and 2021.

		At December 31,								% YoY Change
			2022				2021
Estimated proved reserves:(1)(2)
Oil (MBbl)(3)			196,289				181,306			+8%
Natural Gas (Bcf)(4)			962.6				852.5			+13%
Total (MBOE)(5)			356,722				323,397			+10%
Estimated proved developed reserves:
Oil (MBbl)(3)			116,030				102,233			+13%
Natural Gas (Bcf)(4)			632.9				546.2			+16%
Total (MBOE)(5)			221,507				193,262			+15%
Percent developed			62.1	%			59.8	%
Estimated proved undeveloped reserves:
Oil (MBbl)(3)			80,259				79,073			+1%
Natural Gas (Bcf)(4)			329.7				306.4			+8%
Total (MBOE)(5)			135,215				130,135			+4%
Standardized Measure (in millions)(6)		$	6,983.2			$	4,375.4			+60%
PV-10 (in millions)(7)		$	9,132.2			$	5,347.6			+71%
Commodity prices:(2)
Oil (per Bbl)		$	90.15			$	63.04			+43%
Natural Gas (per MMBtu)		$	6.36			$	3.60			+77%

(1) Numbers in table may not total due to rounding.

(2) Matador’s estimated proved reserves, Standardized Measure and PV-10 were determined using index prices for oil and natural gas, without giving effect to derivative transactions, and were held constant throughout the life of the properties. The unweighted arithmetic averages of first-day-of-the-month prices for the period from January through December 2022 were $90.15 per Bbl for oil and $6.36 per MMBtu for natural gas and for the period from January through December 2021 were $63.04 per Bbl for oil and $3.60 per MMBtu for natural gas. These prices were adjusted by property for quality, energy content, regional price differentials, transportation fees, marketing deductions and other factors affecting the price received at the wellhead. Matador reports its proved reserves in two streams, oil and natural gas, and the economic value of the natural gas liquids (“NGL”) associated with the natural gas is included in the estimated wellhead price on those properties where NGLs are extracted and sold.

(3) One thousand barrels of oil.

(4) One billion cubic feet of natural gas.

(5) One thousand barrels of oil equivalent, estimated using a conversion factor of one barrel of oil per six thousand standard cubic feet of natural gas.

(6) Standardized Measure represents the present value of estimated future net cash flows from proved reserves, less estimated future development, production, plugging and abandonment and income tax expenses, discounted at 10% per annum to reflect the timing of future cash flows. Standardized Measure is not an estimate of the fair market value of Matador’s properties.

(7) PV-10 is a non-GAAP financial measure. For a reconciliation of PV-10 (non-GAAP) to Standardized Measure (GAAP), please see “Supplemental Non-GAAP Financial Measures.” PV-10 is not an estimate of the fair market value of our properties.

The proved reserves estimates presented for each period in the table above were prepared by the Company’s internal engineering staff and audited by an independent reservoir engineering firm, Netherland, Sewell & Associates, Inc.

Contacts

Mac Schmitz

Vice President – Investor Relations

(972) 371-5225

investors@matadorresources.com

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