Matador Resources Stock

Matador Resources Company (Matador) operates as an independent energy company.

The company engages 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 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 the support of the company’s exploration, development and production operations and provide natural gas processing, oil transportation services, oil, natural gas and produced water gathering services and produced water disposal services to third parties.

Strategy

The company’s business strategies are to focus the company’s exploration and development activities primarily on unconventional plays, including the Wolfcamp and Bone Spring plays in the Delaware Basin; identify, evaluate, and develop additional oil and natural gas plays as necessary to maintain a balanced portfolio of oil and natural gas properties; identify and develop midstream opportunities that support and enhance the company’s exploration and development activities and that generate value for San Mateo and Pronto; pursue opportunistic acquisitions, divestitures and joint ventures; and provide the energy that society needs in a manner that is safe, protects the environment and is consistent with the oil and natural gas industry’s best practices.

The successful execution of the company’s business strategies, including the Advance Acquisition, led to increases in the company’s oil and natural gas production and proved oil and natural gas reserves in 2023.

Advance Acquisition

On April 12, 2023, the company completed the Initial Advance Acquisition, pursuant to which the company’s wholly-owned subsidiary acquired 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 Initial Advance Acquisition had an effective date of January 1, 2023.

On December 1, 2023, the company completed the Advance Royalty Acquisition, pursuant to which the company acquired additional interests from affiliates of EnCap Investments L.P., including overriding royalty interests and royalty interests in certain oil and natural gas properties located primarily in Lea County, New Mexico, most of which were included in the Initial Advance Acquisition. The Advance Royalty Acquisition had an effective date of October 1, 2023.

Matador conducts its midstream operations primarily through San Mateo, which is owned 51% by the company and 49% by its joint venture partner, Five Point, and through Pronto, which is the company’s wholly-owned subsidiary.

During 2023, San Mateo closed new midstream transactions with oil and natural gas producers and other counterparties in Eddy County, New Mexico, which are expected to generate additional natural gas gathering and processing and water handling volumes in future periods. A majority of these new opportunities reflect additional business awarded to San Mateo by existing customers, which is indicative of the quality of service San Mateo provides to all of its customers in the Delaware Basin.

At December 31, 2023, San Mateo’s midstream system included:

Natural Gas Assets: 460 MMcf per day of designed natural gas cryogenic processing capacity and approximately 160 miles of natural gas gathering pipelines in Eddy County, New Mexico and Loving County, Texas, including 43 miles of large diameter natural gas gathering lines spanning from the Stateline asset area to the southern portion of the Arrowhead asset area (the ‘Greater Stebbins Area’);

Oil Assets: three oil central delivery points (‘CDP’) with over 100,000 Bbl of designed oil throughput capacity and approximately 100 miles of oil gathering and transportation pipelines in Eddy County, New Mexico and Loving County, Texas, as well as a 400,000-acre joint development area with Plains Marketing, L.P. (‘Plains’) to gather the company’s and other producers’ oil production in Eddy County, New Mexico; and

Produced Water Assets: 16 commercial salt water disposal wells and associated facilities with designed produced water disposal capacity of 475,000 Bbl per day and approximately 175 miles of produced water gathering pipelines in Eddy County, New Mexico and Loving County, Texas.

During 2023, Pronto closed new natural gas gathering and processing transactions with counterparties in Eddy and Lea counties, New Mexico, which are expected to generate additional natural gas gathering and processing volumes in future periods. At December 31, 2023, Pronto’s midstream system included a cryogenic natural gas processing plant with a designed inlet processing capacity of 60 MMcf per day (the ‘Marlan Processing Plant’), three compressor stations and approximately 70 miles of natural gas gathering pipelines in Eddy and Lea counties, New Mexico, spanning from the northeastern portion of the Arrowhead asset area into the Ranger asset area. Pronto has also contracted to construct an additional natural gas processing plant with a designed inlet processing capacity of 200 MMcf per day, including a nitrogen rejection unit and additional related facilities to be located near the Marlan Processing Plant.

Exploration and Production segment

The company’s 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.

The company is active both as an operator and as a non-operating, co-working interest owner with various industry participants. At December 31, 2023, the company operated a significant majority of its acreage in the Delaware Basin in Southeast New Mexico and West Texas. At December 31, 2023, the company also operated approximately 90% of the company’s Eagle Ford acreage and approximately 51% of the company’s Haynesville acreage.

Southeast New Mexico and West Texas — Delaware Basin

The greater Permian Basin in Southeast New Mexico and West Texas is a mature exploration and production region with extensive developments in a wide variety of petroleum systems resulting in stacked target horizons in many areas. Historically, the majority of development in this basin had focused on relatively conventional reservoir targets, but the combination of advanced formation evaluation, 3-D seismic technology, horizontal drilling and hydraulic fracturing technology has enhanced the development potential of this basin, particularly in the organic rich shales, or source rocks, of the Wolfcamp formation and in the low permeability sand and carbonate reservoirs of the Bone Spring, Brushy Canyon and Avalon formations.

In the western part of the Permian Basin, also known as the Delaware Basin, there are multiple horizontal targets in a given area that exist within the several thousand feet of hydrocarbon bearing layers that make up the Bone Spring and Wolfcamp plays. Multiple horizontal drilling and completion targets are being identified and targeted by companies, including the company, throughout the vertical section, including the Brushy Canyon, Avalon and Bone Spring (First, Second and Third Sand and Carbonate) and several intervals within the Wolfcamp shale, often identified as Wolfcamp A through D.

At December 31, 2023, the company’s total acreage position in Southeast New Mexico and West Texas was approximately 265,600 gross (152,200 net) acres, primarily in Lea and Eddy counties, New Mexico and Loving and Ward counties, Texas. These acreage totals included approximately 62,500 gross (36,200 net) acres in the company’s Ranger asset area in Lea County, 58,000 gross (23,300 net) acres in the company’s Arrowhead asset area in Eddy County, 45,700 gross (26,100 net) acres in the company’s Rustler Breaks asset area in Eddy County, 31,900 gross (21,100 net) acres in the company’s Antelope Ridge asset area in Lea County, 2,900 gross (2,900 net) acres in the company’s Stateline asset area in Eddy County, 42,900 gross (27,100 net) acres in the company’s Twin Lakes asset area in Lea County and 21,200 gross (15,000 net) acres in the company’s Wolf, Jackson Trust and Quito asset areas in Loving and Ward County (collectively ‘West Texas’) at December 31, 2023. The company considers the vast majority of its Delaware Basin acreage position to be prospective for oil and liquids-rich targets in the Bone Spring and Wolfcamp formations. Other potential targets on certain portions of the company’s acreage include the Brushy Canyon and Avalon formations, as well as the Abo, Strawn, Devonian, Penn Shale, Atoka, Yeso and Morrow formations. At December 31, 2023, the company’s acreage position in the Delaware Basin was approximately 78% held by existing production. Excluding the undeveloped acreage acquired in the Bureau of Land Management New Mexico Oil and Gas Lease Sale on September 5 and 6, 2018 (the ‘BLM Acquisition’), which has 10-year leases with favorable lease-holding provisions, and the Twin Lakes asset area, the company’s acreage position in the Delaware Basin was approximately 96% held by existing production at December 31, 2023.

During the year ended December 31, 2023, the company continued the delineation and development of the company’s Delaware Basin acreage. At December 31, 2023, the company had tested a number of different producing horizons at various locations across the company’s acreage position, including the Brushy Canyon, two benches of the Avalon, two benches of the First Bone Spring, the Second Bone Spring Carbonate, three benches of the Second Bone Spring Sand, three benches of the Third Bone Spring Carbonate, two benches of the Third Bone Spring Sand, four benches of the Wolfcamp A, including the X, Y and Z sands and the more organic, lower section of the Wolfcamp A, three benches of the Wolfcamp B, the Wolfcamp D, the Strawn and the Morrow.

At December 31, 2023, the company had identified 4,640 gross (1,627 net) engineered locations for potential future drilling on the company’s Delaware Basin acreage, primarily in the Wolfcamp and Bone Spring plays, but also including the shallower Brushy Canyon and Avalon formations. These locations include 2,287 gross (1,437 net) locations that the company anticipates operating as the company holds a working interest of at least 25% in each of these locations.

Antelope Ridge Asset Area - Lea County, New Mexico

The 1,300 gross and net acre Rodney Robinson leasehold is one of the key tracts the company acquired in the BLM Acquisition. At the end of the first quarter of 2023, the company achieved one of the company’s five operational milestones the company sets for Matador in 2023 when the company turned to sales eight gross (7.7 net) wells on the Rodney Robinson leasehold. These wells were the fourth group of wells drilled on the Rodney Robinson leasehold. The eight Rodney Robinson wells, which included four Second Bone Spring Carbonate, two Third Bone Spring Carbonate, and two Wolfcamp B completions, have produced in aggregate approximately 1.7 million BOE in approximately 10 months of production.

Stateline Asset Area - Eddy County, New Mexico

The company’s wells, which include Wolfcamp B, Upper Avalon, and Lower Avalon completions, have produced in aggregate approximately 1.8 million BOE in approximately six months of production. These wells had average completed lateral lengths of approximately 11,100 feet.

Ranger and Twin Lakes Asset Areas - Lea County, New Mexico

The company’s wells had a lateral length of 2.25 miles, resulting in approximately 240,000 completed lateral feet. These wells included Second Bone Spring Carbonate, Second Bone Spring Sand, Third Bone Spring Carbonate, Third Bone Spring Sand, and Wolfcamp A completions, which averaged 24-hour initial production tests of 1,600 BOE per day with oil cuts averaging 84% and have in aggregate produced 2.4 million BOE in approximately four months of production.

Arrowhead Asset Area - Eddy County, New Mexico

The company’s wells include Wolfcamp A, Second Bone Spring and First Bone Spring completions, which produced in aggregate approximately 1.2 million BOE in approximately two months of production. These wells had average completed lateral lengths of approximately 8,800 feet.

West Texas Asset Area - Loving and Ward Counties, Texas

The company’s wells include Wolfcamp B, Wolfcamp A and Third Bone Spring Carbonate completions, which have produced in aggregate approximately 0.6 million BOE in approximately two months of production. These wells had average completed lateral lengths of approximately 10,600 feet.

Rustler Breaks Asset Area - Eddy County, New Mexico

The company has wells in the Rustler Breaks asset area, which include First Bone Spring Sand, Second Bone Spring Sand, Wolfcamp A and Wolfcamp B completions.

South Texas — Eagle Ford Shale and Other Formations

At December 31, 2023, the company’s properties included approximately 14,400 gross (12,100 net) acres in the Eagle Ford shale play in South Texas. Approximately 76% of the company’s Eagle Ford acreage is prospective predominantly for oil or liquids-rich natural gas with condensate, with the remainder being prospective for less liquids-rich natural gas. All of the company’s Eagle Ford leasehold was held by existing production at December 31, 2023.

Northwest Louisiana — Haynesville Shale, Cotton Valley and Other Formations

The company did not conduct any operated drilling and completion activities on the company’s leasehold properties in Northwest Louisiana during 2023.

At December 31, 2023, the company held approximately 18,500 gross (17,300 net) acres in Northwest Louisiana, including 16,200 gross (8,900 net) acres in the Haynesville shale play and 15,700 gross (14,800 net) acres in the Cotton Valley play. The company operates substantially all of its Cotton Valley and shallower production on the company’s leasehold interests in Northwest Louisiana, as well as all of the company’s Haynesville production on the acreage outside the core area of the Haynesville shale play. The company operates approximately 8% of the 11,600 gross (4,700 net) acres that the company considers to be in the core area of the Haynesville shale play. All of the company’s leasehold in the Haynesville and Cotton Valley plays in Northwest Louisiana was held by existing production at December 31, 2023.

For the year ended December 31, 2023, approximately 3% of the company’s average daily oil equivalent production, or 4,025 BOE per day, including five Bbl of oil per day and 24.1 MMcf of natural gas per day, was attributable to the company’s leasehold interests in Northwest Louisiana. For the year ended December 31, 2023, approximately 7% of the company’s daily natural gas production, or 24.1 MMcf of natural gas per day, was attributable to the company’s leasehold interests in Northwest Louisiana.

Midstream segment

The company’s Midstream segment conducts midstream operations in the 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.

Southeast New Mexico and West Texas — Delaware Basin

On February 17, 2017, the company announced the formation of San Mateo, a strategic joint venture with Five Point. The midstream assets that were contributed to San Mateo included (i) San Mateo’s Black River cryogenic natural gas processing plant in Eddy County, New Mexico (the ‘Black River Processing Plant’) (before its expansions); (ii) one salt water disposal well and a related commercial salt water disposal facility in the Rustler Breaks asset area; (iii) three salt water disposal wells and related commercial salt water disposal facilities in the West Texas asset area; and (iv) substantially all related oil, natural gas and produced water gathering systems and pipelines in both the Rustler Breaks asset area and in Loving County, Texas (collectively, the ‘Delaware Midstream Assets’).

On February 25, 2019, the company announced the formation of San Mateo Midstream II, LLC (‘San Mateo II’), a strategic joint venture with Five Point designed to expand the company’s midstream operations in the Delaware Basin, specifically in Eddy County, New Mexico.

On June 30, 2022, the company acquired the Marlan Processing Plant, three compressor stations and approximately 45 miles of natural gas gathering pipelines in Lea and Eddy counties, New Mexico as part of the Pronto Acquisition.

Natural Gas Gathering and Processing Assets

The Black River Processing Plant and associated gathering system were originally built to support the company’s ongoing and future development efforts in the Rustler Breaks asset area and to provide the company with firm takeaway and processing services for the company’s Rustler Breaks natural gas production. The company had previously completed the installation and testing of a 12-inch natural gas trunk line and associated gathering lines running throughout the length of the company’s Rustler Breaks acreage position, and these natural gas gathering lines are being used to gather almost all of the company’s operated natural gas production at Rustler Breaks.

In 2020, San Mateo completed the construction and successful start-up of the expansion of the Black River Processing Plant to add an incremental designed inlet capacity of 200 MMcf of natural gas per day to the existing designed inlet capacity of 260 MMcf of natural gas per day, bringing the total designed inlet capacity to 460 MMcf of natural gas per day. The expanded Black River Processing Plant supports the company’s exploration and development activities in the Delaware Basin and, at December 31, 2023, was gathering and processing natural gas from the Stateline asset area and from the Greater Stebbins Area. The Black River Processing Plant also processes natural gas from the company’s Rustler Breaks asset area and provides natural gas processing services for other San Mateo customers in the area.

At December 31, 2023, San Mateo had approximately 43 miles of large diameter natural gas gathering pipelines between the Black River Processing Plant and the Stateline asset area (approximately 24 miles) and the Greater Stebbins Area (approximately 19 miles). At December 31, 2023, San Mateo was gathering or transporting almost all the company’s operated natural gas production via pipeline in the Stateline asset area, the Greater Stebbins Area, the Rustler Breaks asset area and the Wolf portion of the company’s West Texas asset area.

In addition, at December 31, 2023, San Mateo had an NGL pipeline connection at the Black River Processing Plant to the NGL pipelines owned by EPIC Y-Grade Pipeline LP and Enterprise Products Partners LP.

In the Wolf portion of the West Texas asset area in Loving County, Texas, San Mateo gathers the company’s natural gas production with the natural gas gathering system the company retained following the sale of the company’s wholly-owned subsidiary that owned certain natural gas gathering and processing assets in the West Texas asset area, including a cryogenic natural gas processing plant and approximately six miles of high-pressure gathering pipelines.

At December 31, 2023, San Mateo’s natural gas gathering systems included natural gas gathering pipelines and related compression and treating systems. During the year ended December 31, 2023, San Mateo gathered an average of approximately 358 MMcf of natural gas per day, an increase of 25% as compared to 287 MMcf of natural gas per day gathered during the year ended December 31, 2022. In addition, during the year ended December 31, 2023, San Mateo processed approximately 381 MMcf of natural gas per day at the Black River Processing Plant, an increase of 32%, as compared to 289 MMcf of natural gas per day processed during the year ended December 31, 2022. Natural gas gathering and processing volumes for the years ended December 31, 2023 and 2022 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 both years), but for which San Mateo recognized revenues.

At December 31, 2023, Pronto owned (i) the Marlan Processing Plant, (ii) three compressor stations and (iii) approximately 70 miles of natural gas gathering pipelines in Lea and Eddy counties, New Mexico. During the year ended December 31, 2023, Pronto processed an average of approximately 41 MMcf of natural gas per day.

Crude Oil Gathering and Transportation Assets

San Mateo and Plains have entered into a strategic relationship to gather and transport crude oil for upstream producers in Eddy County, New Mexico and have agreed to work together through a joint tariff arrangement and related transactions to offer producers located within a joint development area crude oil transportation services from the wellhead to Midland, Texas with access to other end markets.

At December 31, 2023, San Mateo had (i) a crude oil gathering and transportation system in the Greater Stebbins Area that was connected to the existing interconnect in the Rustler Breaks asset area totaling approximately 80 miles of various diameter crude oil pipelines and (ii) a crude oil gathering system in the Stateline asset area. With these oil gathering and transportation systems (collectively with the crude oil gathering and transportation system in the Rustler Breaks asset area and the crude oil gathering system in the West Texas asset area, the ‘San Mateo Oil Pipeline Systems’) in service, at December 31, 2023, the company estimated almost all of the company’s oil production from the Stateline, West Texas and Rustler Breaks asset areas and the Greater Stebbins Area was transported by pipeline.

At December 31, 2023, the San Mateo Oil Pipeline Systems included crude oil gathering and transportation pipelines from points of origin in Eddy County, New Mexico and Loving County, Texas to interconnects with Plains and two trucking facilities. During the year ended December 31, 2023, the San Mateo Oil Pipeline Systems had throughput of approximately 43,600 Bbl of oil per day.

Produced Water Gathering and Disposal Assets

During 2023, San Mateo placed into service one commercial salt water disposal well in the Greater Stebbins Area, bringing San Mateo’s commercial salt water disposal well count in the Greater Stebbins Area to four. In addition to its four commercial salt water disposal wells and associated facilities in the Greater Stebbins Area, at February 20, 2024, San Mateo had nine commercial salt water disposal wells and associated facilities in the Rustler Breaks asset area, three commercial salt water disposal wells and associated facilities in the West Texas asset area and produced water gathering systems in the Stateline, Rustler Breaks and West Texas asset areas and the Greater Stebbins Area. At February 20, 2024, San Mateo had designed disposal capacity of approximately 475,000 Bbl of produced water per day.

During the year ended December 31, 2023, San Mateo handled approximately 376,000 Bbl of produced water per day.

South Texas / Northwest Louisiana

In South Texas, the company owns a natural gas gathering system that gathers natural gas production from certain of the company’s operated Eagle Ford leases. In Northwest Louisiana, the company has midstream assets that gather natural gas from most of the company’s operated leases. The company’s midstream assets in South Texas and Northwest Louisiana are not part of San Mateo or Pronto.

Marketing and Customers

The company’s crude oil is sold under both long-term and short-term oil purchase agreements with unaffiliated purchasers.

The company’s natural gas is sold under both long-term and short-term natural gas purchase agreements. Natural gas produced by the company is sold at various delivery points to both unaffiliated independent marketing companies and unaffiliated midstream companies.

Regulation

The company’s activities are subject to a variety of environmental laws and regulations, including but not limited to the Oil Pollution Act of 1990 (the OPA 90), the Clean Water Act (the CWA), the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Resource Conservation and Recovery Act (RCRA), the Clean Air Act (the CAA), the Safe Drinking Water Act (the SDWA) and the Occupational Safety and Health Act (OSHA), as well as comparable state statutes and regulations.

The company is subject to the requirements of OSHA and comparable state statutes. The OSHA Hazard Communication Standard, the ‘community right-to-know’ regulations under Title III of the federal Superfund Amendments and Reauthorization Act and similar state statutes require the company to organize information about hazardous materials used, released or produced in its operations.

History

Matador Resources Company, a Texas corporation, was founded in 2003 by Joseph Wm. Foran. The company was incorporated in 2010.