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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Level 2Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that are valued with industry standard models that consider various inputs including: (i) quoted forward prices for commodities, (ii) time value of money and (iii) current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument and can be derived from observable data or supported by observable levels at which transactions are executed in the marketplace.
Fair Value Measurements at
September 30, 2017 using
DescriptionLevel 1Level 2Level 3Total
Assets (Liabilities)
Oil, natural gas and NGL derivatives$
$345
$
$345
Oil, natural gas and NGL derivatives
(3,850)
(3,850)
Total$
$(3,505)$
$(3,505)
Fair Value Measurements at
December 31, 2016 using
DescriptionLevel 1Level 2Level 3Total
Liabilities
Oil and natural gas derivatives$
$(24,954)$
$(24,954)
Total$
$(24,954)$
$(24,954)
September 30,
2017
December 31, 2016
Accrued evaluated and unproved and unevaluated property costs$90,789
$54,273
Accrued support equipment and facilities costs15,401
15,139
Accrued lease operating expenses14,217
16,009
Accrued interest on debt18,228
6,541
Accrued asset retirement obligations618
915
Accrued partners’ share of joint interest charges18,018
5,572
Other1,074
3,011
Total accrued liabilities$158,345
$101,460
Nine Months Ended
September 30,
20172016
Cash paid for interest expense, net of amounts capitalized$14,542
$13,370
Increase in asset retirement obligations related to mineral properties$2,484
$2,588
(Decrease) increase in asset retirement obligations related to support equipment and facilities$(138)$644
Increase (decrease) in liabilities for oil and natural gas properties capital expenditures$35,940
$(7,849)
Decrease in liabilities for support equipment and facilities$(247)$(2,687)
Stock-based compensation expense recognized as liability$150
$457
Decrease in liabilities for accrued cost to issue equity$(343)$
Transfer of inventory from oil and natural gas properties$74
$655
Exploration and ProductionConsolidations and EliminationsConsolidated Company
MidstreamCorporate
Three Months Ended September 30, 2017
Oil and natural gas revenues$134,488
$460
$
$
$134,948
Midstream services revenues
11,261

(8,043)3,218
Realized gain on derivatives485



485
Unrealized loss on derivatives(12,372)


(12,372)
Expenses(1)86,728
5,598
15,447
(8,043)99,730
Operating income (loss)(2)$35,873
$6,123
$(15,447)$
$26,549
Total assets$1,590,677
$222,274
$35,586
$
$1,848,537
Capital expenditures(3)$180,686
$35,008
$1,494
$
$217,188
Exploration and ProductionConsolidations and EliminationsConsolidated Company
MidstreamCorporate
Three Months Ended September 30, 2016
Oil and natural gas revenues$82,794
$285
$
$
$83,079
Midstream services revenues
5,609

(4,043)1,566
Realized gain on derivatives885



885
Unrealized gain on derivatives3,203



3,203
Expenses(1)60,222
2,277
13,423
(4,043)71,879
Operating income (loss)(2)$26,660
$3,617
$(13,423)$
$16,854
Total assets$1,020,648
$124,153
$32,892
$
$1,177,693
Capital expenditures$116,279
$17,370
$1,903
$
$135,552
Exploration and ProductionConsolidations and EliminationsConsolidated Company
MidstreamCorporate
Nine Months Ended September 30, 2017
Oil and natural gas revenues$362,040
$1,519
$
$
$363,559
Midstream services revenues
32,244

(25,373)6,871
Realized loss on derivatives(1,176)


(1,176)
Unrealized gain on derivatives21,449



21,449
Expenses(1)233,145
16,060
47,055
(25,373)270,887
Operating income (loss)(2)$149,168
$17,703
$(47,055)$
$119,816
Total assets$1,590,677
$222,274
$35,586
$
$1,848,537
Capital expenditures(3)$554,642
$75,235
$4,710
$
$634,587
Exploration and ProductionConsolidations and EliminationsConsolidated Company
MidstreamCorporate
Nine Months Ended September 30, 2016
Oil and natural gas revenues$195,467
$874
$
$
$196,341
Midstream services revenues
11,168

(8,212)2,956
Realized gain on derivatives10,413



10,413
Unrealized loss on derivatives(30,261)


(30,261)
Expenses(1)327,585
5,373
40,089
(8,212)364,835
Operating (loss) income(2)$(151,966)$6,669
$(40,089)$
$(185,386)
Total assets$1,020,648
$124,153
$32,892
$
$1,177,693
Capital expenditures$278,396
$49,620
$5,485
$
$333,501
(1) Includes depletion, depreciation and amortization expenses of $87.9 million and $1.7 million for the exploration and production and midstream segments, respectively, and full-cost ceiling impairment expenses of $158.6 million for the exploration and production segment. Also includes corporate depletion, depreciation and amortization expenses of $0.6 million.
September 30,
2017
December 31,
2016
September 30,
2016
Estimated Proved Reserves Data: (1)(2)
Estimated proved reserves:
Oil (MBbl)(3)83,014
56,977
55,031
Natural Gas (Bcf)(4)377.1
292.6
279.4
Total (MBOE)(5)145,860
105,752
101,604
Estimated proved developed reserves:
Oil (MBbl)(3)31,961
22,604
21,204
Natural Gas (Bcf)(4)164.4
126.8
118.8
Total (MBOE)(5)59,357
43,731
41,012
Percent developed40.7%41.4%40.4%
Estimated proved undeveloped reserves:
Oil (MBbl)(3)51,053
34,373
33,827
Natural Gas (Bcf)(4)212.7
165.9
160.6
Total (MBOE)(5)86,503
62,021
60,592
Standardized Measure(6) (in millions)$1,096.2
$575.0
$516.8
PV-10(7) (in millions)$1,225.9
$581.5
$524.7
(2)Our 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 the first-day-of-the-month prices for the period from October 2016 through September 2017 were $46.27 per Bbl for oil and $3.00 per MMBtu for natural gas, for the period from January 2016 through December 2016 were $39.25 per Bbl for oil and $2.48 per MMBtu for natural gas and for the period from October 2015 through September 2016 were $38.17 per Bbl for oil and $2.28 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. We report our proved
(7)PV-10 is a non-GAAP financial measure and generally differs from Standardized Measure, the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net revenues. PV-10 is not an estimate of the fair market value of our properties. We and others in the industry use PV-10 as a measure to compare the relative size and value of proved reserves held by companies and of the potential return on investment related to the companies’ properties without regard to the specific tax characteristics of such entities. Our PV-10 at September 30, 2017, December 31, 2016 and September 30, 2016 may be reconciled to the Standardized Measure of discounted future net cash flows at such dates by reducing our PV-10 by the discounted future income taxes associated with such reserves. The discounted future income taxes at September 30, 2017, December 31, 2016 and September 30, 2016 were $129.7 million, $6.5 million and $7.9 million, respectively.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017201620172016
Operating Data:
Revenues (in thousands):(1)
Oil$100,150
$58,589
$265,107
$141,437
Natural gas34,798
24,490
98,452
54,904
Total oil and natural gas revenues134,948
83,079
363,559
196,341
Third-party midstream services revenues3,218
1,566
6,871
2,956
Realized gain (loss) on derivatives485
885
(1,176)10,413
Unrealized (loss) gain on derivatives(12,372)3,203
21,449
(30,261)
Total revenues$126,279
$88,733
$390,703
$179,449
Net Production Volumes:(1)
Oil (MBbl)(2)2,166
1,376
5,582
3,650
Natural gas (Bcf)(3)10.2
8.0
27.6
22.6
Total oil equivalent (MBOE)(4)3,860
2,703
10,190
7,423
Average daily production (BOE/d)(5)41,954
29,381
37,325
27,091
Average Sales Prices:
Oil, without realized derivatives (per Bbl)$46.25
$42.57
$47.49
$38.75
Oil, with realized derivatives (per Bbl)$46.47
$43.18
$47.39
$40.63
Natural gas, without realized derivatives (per Mcf)$3.42
$3.08
$3.56
$2.43
Natural gas, with realized derivatives (per Mcf)$3.42
$3.08
$3.54
$2.58
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands, except expenses per BOE)2017201620172016
Expenses:
Production taxes, transportation and processing $15,666
$12,388
$40,348
$30,846
Lease operating16,689
14,605
48,486
41,300
Plant and other midstream services operating3,096
1,449
8,379
3,537
Depletion, depreciation and amortization47,800
30,015
123,066
90,185
Accretion of asset retirement obligations323
276
937
828
Full-cost ceiling impairment


158,633
General and administrative16,156
13,146
49,671
39,506
Total expenses$99,730
$71,879
$270,887
$364,835
Operating income (loss)$26,549
$16,854
$119,816
$(185,386)
Other income (expense):
Net gain on asset sales and inventory impairment$16
$1,073
$23
$3,140
Interest expense(8,550)(6,880)(26,229)(20,244)
Other (expense) income(36)(141)1,956
(17)
Total other expense$(8,570)$(5,948)$(24,250)$(17,121)
Income (loss) before income taxes$17,979
$10,906
$95,566
$(202,507)
Total income tax benefit
(1,141)
(1,141)
Net income attributable to non-controlling interest in subsidiaries(2,940)(116)(8,034)(209)
Net income (loss) attributable to Matador Resources Company shareholders$15,039
$11,931
$87,532
$(201,575)
Expenses per BOE:
Production taxes, transportation and processing $4.06
$4.58
$3.96
$4.16
Lease operating$4.32
$5.40
$4.76
$5.56
Plant and other midstream services operating$0.80
$0.54
$0.82
$0.48
Depletion, depreciation and amortization$12.38
$11.10
$12.08
$12.15
General and administrative$4.19
$4.86
$4.87
$5.32
Nine Months Ended
September 30,
(In thousands)20172016
Net cash provided by operating activities$222,516
$96,462
Net cash used in investing activities(606,339)(297,596)
Net cash provided by financing activities191,117
204,968
Net change in cash$(192,706)$3,834
Adjusted EBITDA(1) attributable to Matador Resources Company shareholders$227,444
$103,406
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands)2017201620172016
Unaudited Adjusted EBITDA Reconciliation to Net Income (Loss):
Net income (loss) attributable to Matador Resources Company shareholders$15,039
$11,931
$87,532
$(201,575)
Net income attributable to non-controlling interest in subsidiaries2,940
116
8,034
209
Net income (loss)17,979
12,047
95,566
(201,366)
Interest expense8,550
6,880
26,229
20,244
Total income tax provision (benefit)
(1,141)
(1,141)
Depletion, depreciation and amortization47,800
30,015
123,066
90,185
Accretion of asset retirement obligations323
276
937
828
Full-cost ceiling impairment


158,633
Unrealized loss (gain) on derivatives12,372
(3,203)(21,449)30,261
Stock-based compensation expense1,296
3,584
12,488
9,138
Net gain on asset sales and inventory impairment(16)(1,073)(23)(3,140)
Consolidated Adjusted EBITDA88,304

47,385

236,814

103,642
Adjusted EBITDA attributable to non-controlling interest in subsidiaries(3,471)(125)(9,370)(236)
Adjusted EBITDA attributable to Matador Resources Company shareholders$84,833
$47,260
$227,444
$103,406
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands)2017201620172016
Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities:
Net cash provided by operating activities$101,274
$46,862
$222,516
$96,462
Net change in operating assets and liabilities(21,481)(4,909)(11,828)(11,024)
Interest expense, net of non-cash portion8,511
6,573
26,126
19,345
Current income tax provision (benefit)
(1,141)
(1,141)
Adjusted EBITDA attributable to non-controlling interest in subsidiaries(3,471)(125)(9,370)(236)
Adjusted EBITDA attributable to Matador Resources Company shareholders$84,833
$47,260
$227,444
$103,406
Payments Due by Period
(In thousands)TotalLessThan1 Year1 - 3Years3 - 5YearsMoreThan5 Years
Contractual Obligations:
Revolving credit borrowings, including letters of credit(1)$821
$
$
$821
$
Senior unsecured notes(2)575,000



575,000
Office leases23,245
2,498
5,087
5,377
10,283
Non-operated drilling commitments(3)28,500
28,500



Drilling rig contracts(4)36,117
24,253
11,864


Asset retirement obligations23,923
618
578
3,781
18,946
Gas processing agreements with non-affiliates(5)11,420
11,420



Gathering, processing and disposal agreements with San Mateo(6)245,645

25,343
69,994
150,308
Natural gas plant engineering, procurement, construction and installation contract(7)24,689
24,689



Total contractual cash obligations$969,360
$91,978
$42,872
$79,973
$754,537
(3)At September 30, 2017, we had outstanding commitments to participate in the drilling and completion of various non-operated wells. Our working interests in these wells are typically small, and certain of these wells were in progress at September 30, 2017. If all of these wells are drilled and completed, we will have minimum outstanding aggregate commitments for our participation in these wells of approximately $28.5 million at September 30, 2017, which we expect to incur within the next year.

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