On Wednesday, KeyBanc made adjustments to its outlook on Matador Resources Company (NYSE:MTDR), lowering the price target to $72.00 from the previous $76.00. The firm maintained its Overweight rating on the stock. The revision comes as the analyst anticipates further details regarding the integration of Ameredev, which Matador recently acquired.
The company replaced Ameredev's drilling rig with a high-spec Patterson rig immediately after the acquisition's completion, aligning with Matador's existing fleet. The analyst is seeking clarity on the 2025 production and capital expenditure forecasts, expecting a 9-10 rig program. However, the trajectory of the production ramp is uncertain, especially considering the 13 Ameredev drilled but uncompleted wells (DUCs) that were part of the deal.
The updated estimates from KeyBanc reflect changes in the forecasted prices for oil, natural gas, and natural gas liquids (NGLs). Additionally, the financial model now includes the expected $150 million in net proceeds from Matador's share of the sale of the Pinon midstream assets, anticipated in the fourth quarter of 2024. The impact of the Ameredev acquisition, which closed on September 19, 2024, earlier than the previously modeled end of the third quarter, has also been factored into the revised estimates.
The analyst has made slight adjustments to the third-quarter 2024 projections, raising the oil differential to a $0.50 per barrel premium, in line with historical differentials, and lowering the natural gas differential to $0.05 per thousand cubic feet below the Henry Hub benchmark. This accounts for Matador's exposure to weaker Waha natural gas pricing during the third quarter of 2024. Lastly, depreciation, depletion, and amortization (DD&A) expenses have been increased from the third quarter of 2024 through the second quarter of 2025 to reflect the higher DD&A associated with the Ameredev assets.
In other recent news, Matador Resources Company has made several strategic moves. The company has hiked its quarterly cash dividend by 25%, from $0.20 to $0.25 per share, reflecting its financial growth and operational outlook. Additionally, Matador completed a private offering of $750 million in 6.25% senior unsecured notes due in 2033, primarily aimed at repaying existing debt.
In other developments, Matador finalized the acquisition of Ameredev, expected to enhance operational capabilities and extend its asset portfolio. Analysts from JPMorgan and Stephens have responded positively to these moves, raising their price targets for Matador Resources to $79.00 and $76.00, respectively, while maintaining an Overweight rating on the stock.
Matador is also constructing a cryogenic gas processing facility at the Marlan plant, expected to be operational in the first half of the next year, and has welcomed Susan Ward to its board.
InvestingPro Insights
To complement KeyBanc's analysis of Matador Resources Company (NYSE:MTDR), recent data from InvestingPro offers additional context. As of the last twelve months ending Q2 2024, Matador's revenue stood at $3.02 billion, with a notable revenue growth of 16.81%. The company's profitability is evident, with a gross profit margin of 80.33% and an operating income margin of 46.02%.
InvestingPro Tips highlight that Matador has raised its dividend for 3 consecutive years, which may appeal to income-focused investors. The company's P/E ratio of 6.54 suggests it might be undervalued compared to its peers, although it's trading at a high P/E ratio relative to its near-term earnings growth. This could indicate that the market has already priced in some future growth expectations.
It's worth noting that 9 analysts have revised their earnings downwards for the upcoming period, which aligns with KeyBanc's cautious approach in lowering the price target. However, analysts still predict the company will be profitable this year, supporting KeyBanc's maintained Overweight rating.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Matador's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.