Matador (MTDR) Down 73.9% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Matador Resources (MTDR). Shares have lost about 73.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Matador due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Matador Resources’ Q4 Earnings & Sales Top Estimates

Matador Resources reported fourth-quarter 2019 adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate of 28 cents. Also, the bottom line rose from the year-ago figure of 37 cents per share.

Revenues of $288.7 million marginally fell from the year-ago level of $289.9 million. However, the metric beat the Zacks Consensus Estimate of $254 million.

The better-than-expected results were supported by higher oil and gas production volumes, and increased oil price realization. This was partially offset by weak natural gas price realization.

Proved Reserves

Total proved oil and gas reserves of Matador grew 17% through 2019 to 252.5 million barrels of oil equivalent (BOE). Of the total amount, 59% was oil and 92% were located in the Delaware Basin. Investors should note that 42% of the 2019 estimated proved reserves were developed.

Production Rises

In fourth-quarter 2019, total production volume averaged 6,785 thousand barrels of oil equivalent (MBOE) (comprising 57.1% oil), higher than 5,109 MBOE a year ago.

The average production volume of oil was 42,087 barrels per day (Bbls/d), up from 33,479 Bbls/d in fourth-quarter 2018. Natural gas production was 190 million cubic feet per day (MMcf/d), up from 132.3 MMcf/d a year ago.

Price Realization

Average realized price for oil (excluding realized derivatives) was $56.36 per barrel, up from $49.09 in the year-ago quarter. However, natural gas price of $2.31 per thousand cubic feet was lower than $3.47 in the prior-year quarter.

Operating Expenses

The company’s production taxes, transportation and processing costs increased to $3.88 per BOE from $3.53 in the year-ago quarter. Moreover, plant and other midstream services operating expenses rose to $1.51 per BOE in the quarter from the year-earlier number of $1.45. However, lease operating costs decreased from $4.56 per BOE in fourth-quarter 2018 to $4.43. Total operating expenses per BOE in the quarter was recorded at $27.88, higher than the year-ago level of $26.39.

Balance Sheet

As of Dec 31, 2019, Matador had cash and restricted cash of $65.1 million. Long-term debt totaled $1,582.4 million, which included $255 million of borrowings under its credit agreement. The debt-to-capitalization ratio was 44.6%.

Yearly Capital Spending

The company spent $748 million during 2019, excluding acquisitions and seismic data. Matador allocated $671 million of the total amount to drill, equip and complete wells, and $77 million toward midstream operations.

Guidance

The company expects 2020 oil equivalent production within 27-28.3 million barrels, indicating an increase from 24.2 million BOE in 2019. Notably, it expects 2020 capital expenditure for drilling, completing and equipping wells in the range of $690-$750 million, suggesting growth from the 2019 level of $671 million. San Mateo midstream capital expenditure for the year is expected in the band of $85-$105 million, implying a rise from $77 million in 2019.

Moreover, the company expects 13 wells from the Stateline asset area to come online in September, which will boost production. Additionally, in the same month, its San Mateo cryogenic natural gas processing plant is expected to start processing half billion cubic feet of natural gas per day.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -35.9% due to these changes.

VGM Scores

At this time, Matador has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Matador has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.