Business Overview Matador Resources Company (MTDR) is a leading independent energy company that has carved out a niche for itself in the prolific Permian Basin of West Texas and New Mexico. With a strong focus on oil and liquids-rich natural gas production, Matador has consistently demonstrated its ability to navigate the cyclical energy market and deliver robust financial and operational performance for its shareholders.
Matador Resources was founded in July 2003 by Joseph Wm. Foran, who currently serves as the company's Chairman and Chief Executive Officer. Foran's extensive experience in the oil and gas industry dates back to 1983 when he founded Foran Oil Company with $270,000 in contributed capital from 17 friends and family members. This venture evolved into Matador Petroleum Corporation in 1988, which Foran led until its sale in June 2003 for an enterprise value of approximately $388.5 million.
Initially incorporated as a Texas corporation, Matador Resources Company has grown to become a significant player in the U.S. energy sector. The company's operations extend beyond the Delaware Basin, encompassing activities in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. This diversification has contributed to Matador's resilience and growth potential.
A pivotal moment in Matador's history came in February 2012 when its common stock began trading on the New York Stock Exchange under the symbol "MTDR," marking its transition to a publicly-traded company. This move provided Matador with increased access to capital markets and enhanced its ability to pursue strategic growth opportunities.
In addition to its exploration and production activities, Matador has expanded its midstream operations, primarily through its joint venture, San Mateo Midstream, LLC, formed in 2017. This venture provides critical services such as natural gas processing, oil transportation, gathering services for oil, natural gas and produced water, as well as produced water disposal services. These midstream operations play a crucial role in supporting Matador's core business and providing flow assurance for its exploration, development, and production operations.
In 2024, Matador made a transformative acquisition with the $1.83 billion purchase of Ameredev Stateline II, LLC, which added significant proved reserves, production, and midstream assets to its portfolio. This deal, coupled with the company's organic drilling program, has resulted in a 33% year-over-year increase in Matador's total proved reserves to 611.5 million BOE as of the end of 2024. Proved oil reserves grew by a similar 33% to 361.8 million barrels, while proved natural gas reserves increased 33% to 1.5 Tcf.
Financial Strength and Efficiency Matador's financial position has strengthened considerably in recent years, with the company reporting net debt of $3.30 billion as of the end of 2024, down from $2.15 billion a year earlier. This improvement was driven by robust free cash flow generation, which totaled $280 million in 2024. The company's liquidity position remains healthy, with $23 million in cash and $1.55 billion in undrawn borrowing capacity under its credit facility as of the end of 2024.
In addition to its strong balance sheet, Matador has also demonstrated impressive capital efficiency, with drilling, completion, and equipping (DC&E) costs per foot declining 3% year-over-year to $880 in 2024. This was achieved through the increased use of innovative completion techniques like SimulFrac and TrimulFrac, as well as improved partnerships with vendors. The company's focus on operational excellence has translated into industry-leading margins, with an EBITDA margin of 41.5% in 2024.
Matador's financial performance in 2024 was robust, with annual revenue reaching $3.14 billion and net income of $885.32 million. The company generated $2.25 billion in operating cash flow and $280 million in free cash flow for the year. In the fourth quarter of 2024, Matador reported revenue of $970.37 million and net income of $214.53 million.
The company's exploration and production segment was the primary driver of financial results, generating $3.13 billion in oil and natural gas revenues in 2024, a 24% increase from the previous year. This growth was primarily attributable to a 33% increase in oil production to 36.53 million barrels and a 26% increase in natural gas production to 155.80 billion cubic feet. The segment's operating income of $1.30 billion accounted for the majority of Matador's consolidated operating income of $1.43 billion for the year.
Matador's midstream segment also contributed significantly to the company's financial performance, generating $453.46 million in intercompany revenues and $141.03 million in third-party midstream services revenues in 2024, representing a 30% increase compared to 2023. The segment's operating income of $245.99 million accounted for approximately 17% of Matador's consolidated operating income.
Growth Prospects and Outlook Looking ahead, Matador's growth prospects remain bright, underpinned by its substantial inventory of high-quality drilling locations in the Delaware Basin. At the end of 2024, the company had identified 5,080 gross (1,870 net) engineered drilling locations, primarily in the Wolfcamp and Bone Spring plays, but also including the shallower Brushy Canyon, Yeso, and Avalon formations.
For 2025, Matador has provided guidance for total production of 170,000 to 180,000 BOE/d, representing growth of 20-25% year-over-year. The company's capital expenditure budget ranges from $1.4 billion to $1.7 billion, with the majority allocated to continued development of its Delaware Basin assets.
Matador's management team has expressed confidence in the company's production and financial outlook for 2025. They expect to generate around $1 billion in free cash flow during the year. The company anticipates strong year-over-year production growth, with approximately 30% growth in Q1 2025 compared to Q1 2024, around 29-30% growth in Q2 2025 compared to Q2 2024, and 20% or more growth in Q3 2025 compared to Q3 2024. While specific guidance for Q4 2025 was not provided, management indicated that the growth rate would be comparable to the other quarters.
Operational Excellence and Industry Trends Matador's operational performance has been impressive, with oil and natural gas production reaching 170,750 BOE/d in 2024, representing a 30% increase from 131,810 BOE/d in 2023. This growth was driven by the company's successful drilling program in the Delaware Basin, where it operated an average of nine drilling rigs during 2024, completing and bringing online 251 gross (110.2 net) horizontal wells, including 124 gross (101.9 net) operated wells and 127 gross (8.3 net) non-operated wells.
The company's focus on operational efficiency and technological innovation aligns with broader industry trends. The oil and gas sector has seen significant technological advancements that have improved efficiency and cost reduction in exploration and production activities. According to the International Energy Agency (IEA), global oil demand is projected to increase by approximately 3.2 million barrels per day by 2030 compared to 2023 levels, providing a favorable backdrop for companies like Matador.
Risks and Challenges As with any energy company, Matador is exposed to the inherent volatility of commodity prices, which can significantly impact its financial performance. The company mitigates this risk through the use of derivative contracts, but it remains susceptible to fluctuations in oil, natural gas, and NGL prices.
Additionally, Matador's operations are concentrated in the Permian Basin, exposing it to regional market dynamics and infrastructure constraints that could affect realized pricing and limit production growth. The company is also subject to various regulatory and environmental regulations, which could increase its cost of doing business.
Conclusion Matador Resources Company is a well-positioned player in the Permian Basin, with a dominant acreage position, strong financial profile, and proven ability to drive operational efficiencies. The company's transformative Ameredev acquisition, coupled with its organic growth initiatives, have positioned it for continued success in the years ahead. With a robust production outlook, significant free cash flow generation potential, and a focus on year-over-year growth, Matador appears well-equipped to capitalize on the favorable industry dynamics. While not immune to the cyclical nature of the energy industry, Matador's deep value proposition and growth potential make it an attractive investment opportunity for investors seeking exposure to the rebounding oil and gas sector.