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Matador Resources Company Announces 2019 Operating Plan and Market Guidance

DALLAS–(BUSINESS WIRE)–Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”)
today announced its full year 2019 operating plan and market guidance. A
short slide presentation summarizing the highlights of Matador’s 2019
operating plan and market guidance is also included on the Company’s
website at www.matadorresources.com
on the Events and Presentations page under the Investor Relations tab. In
a separate, simultaneous press release issued today, Matador also
reported its financial and operating results for the fourth quarter and
full year 2018.

Full Year 2019 Guidance Summary

Matador’s full year 2019 guidance estimates are summarized in the table
below.

Guidance Metric Actual

2018 Results

2019 Guidance % YoY

Change(1)

Total Oil Production 11.1 million Bbl 12.9 to 13.3 million Bbl +18 %
Total Natural Gas Production 47.3 Bcf 55.0 to 57.0 Bcf +18 %
Total Oil Equivalent Production 19.0 million BOE 22.0 to 22.8 million BOE +18 %
Adjusted EBITDA(2) $553 million $520 to $550 million -3%
D/C/E CapEx(3) $686 million $640 to $680 million -4%
Midstream CapEx(4) $85 million $55 to $75 million -24%
Commodity Prices Actual

2018 Results

2019 Projections % YoY

Change

Realized Unhedged Oil Price(2) $57.04 per barrel $49.80 per barrel -13%
Realized Unhedged Natural Gas Price(2) $3.49 per Mcf $2.88 per Mcf -17%

(1) Represents percentage change from 2018 actual results to the
midpoint of 2019 guidance.

(2) Adjusted EBITDA is a non-GAAP financial measure. For full year 2019,
Adjusted EBITDA was estimated using strip prices for oil and natural gas
as of mid-February 2019. The weighted average unhedged realized oil
price used to estimate Adjusted EBITDA for the period January through
December 2019 was $49.80 per barrel, which represents an average West
Texas Intermediate (WTI) oil price of $53.94 per barrel less an
estimated weighted average oil price differential, including
transportation costs, of $4.14 per barrel. The average unhedged realized
natural gas price used to estimate Adjusted EBITDA for the period
January through December 2019 was $2.88 per thousand cubic feet (“Mcf”),
which represents an average Henry Hub natural gas price of $2.72 per
Mcf, plus an estimated uplift of approximately $0.16 per Mcf primarily
attributable to revenues from natural gas liquids (“NGLs”), which are
included in the Company’s weighted average unhedged realized natural gas
price. For a definition of Adjusted EBITDA and a reconciliation of
Adjusted EBITDA (non-GAAP) to net income (GAAP) and net cash provided by
operating activities (GAAP), please see “Supplemental Non-GAAP Financial
Measures.”

(3) Capital expenditures associated with drilling, completing and
equipping wells.

(4) Primarily reflects Matador’s proportionate share of capital
expenditures for San Mateo and accounts for portions of the $50 million
capital carry an affiliate of Five Point Energy LLC (“Five Point”) is
expected to provide as part of the recently announced San Mateo
expansion.

The full year 2019 guidance estimates presented in the table above are
based upon the following key assumptions for 2019 drilling and
completions activity, commodity prices, capital expenditures and
operating expenses:

  • Six drilling rigs operating in the Delaware Basin, including 73 gross
    (54.9 net) wells anticipated to be completed and turned to sales
    during 2019 and the drilling and completion of at least three salt
    water disposal wells, one in the Stebbins area and two in the Rustler
    Breaks asset area during 2019, including one salt water disposal well
    placed into service in the Rustler Breaks asset area in mid-February
    2019, by the Company’s midstream affiliate, San Mateo;
  • One drilling rig operating in South Texas until its release in early
    February 2019, including eight gross (8.0 net) wells anticipated to be
    completed and turned to sales during 2019;
  • Matador’s participation in a significant number of non-operated well
    opportunities, including 69 gross (4.6 net) non-operated wells
    anticipated to be completed and turned to sales in the Delaware Basin
    and 16 gross (1.7 net) non-operated wells anticipated to be completed
    and turned to sales in the Haynesville shale during 2019;
  • Oil and natural gas prices based on commodity futures strip prices as
    of mid-February 2019, resulting in an estimated realized weighted
    average oil price of approximately $49.80 per barrel and an estimated
    realized weighted average natural gas price of $2.88 per Mcf,
    inclusive of the Company’s estimates for oil and natural gas price
    differentials, transportation costs and uplifts attributable to NGL
    revenues;
  • Capital expenditures for drilling, completing and equipping wells
    (“D/C/E capital expenditures”) of $640 to $680 million, a decrease of
    4% at the midpoint of 2019 guidance, as compared to full year 2018,
    and inclusive of an estimated $70 million in equipping and facilities
    costs and an estimated $29 million of capitalized general and
    administrative and interest expenses; and
  • Midstream capital expenditures of $55 to $75 million, a decrease of
    24% at the midpoint of 2019 guidance, as compared to full year 2018.
    This estimate primarily reflects Matador’s proportionate share of San
    Mateo’s 2019 estimated capital expenditures of $180 to $220 million
    and also accounts for portions of the $50 million capital carry that
    Five Point is expected to provide to Matador as part of the recently
    announced San Mateo expansion in Eddy County, New Mexico. As a result,
    Matador has agreed to pay $25 million and Five Point has agreed to pay
    $125 million of the first $150 million in capital expenditures related
    to this expansion.

Management Comments

Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “The Board, the
staff and I are pleased today to provide our 2019 operating plan and
market guidance. This year is off to a fast start for Matador, as
evidenced by the announcement yesterday of our second strategic
transaction with Five Point to expand San Mateo’s operations in the
Delaware Basin and increase San Mateo’s footprint in Eddy County, New
Mexico. This latest midstream transaction is a key component in what we
believe to be a tightly integrated strategy for Matador in 2019 and
beyond, focusing not only on increasing the value of our oil and natural
gas leasehold and mineral assets, but also on building and enhancing the
value of San Mateo, which may now exceed $500 million net to Matador.
The San Mateo transaction provides a creative deal structure that
leverages Matador’s capital resources in 2019, while also providing
Matador with significant future performance incentives that will help to
cover capital expenditures in future years if Matador meets certain
performance measures.

“As noted in our fourth quarter and full year 2018 earnings release
provided today simultaneously with this release, we plan to focus on
executing the highest rate of return opportunities across our Delaware
Basin properties during 2019, while working to narrow the anticipated
spending gap. As a result, we will continue to direct almost all of our
capital expenditures in 2019 to the Delaware Basin throughout our
various asset areas, while working to prepare for drilling operations on
the 8,400 gross and net acres we acquired in New Mexico in September
2018 as part of the Bureau of Land Management lease sale. We expect to
begin drilling on this acreage in the western portion of the Antelope
Ridge asset area during the latter part of 2019, and we look forward to
developing the acreage in the Stateline asset area beginning in early
2020. Production growth from the Stateline asset area and the greater
Stebbins area, including our Stebbins and SST leasehold areas and other
acreage in our Arrowhead asset area, over the next few years should
provide the cornerstones of both Matador’s and San Mateo’s growth.

“We see 2019 as a year of transition for Matador. Over the past several
years, we have built a high-quality Delaware Basin acreage position for
an all-in cost of about $11,000 per acre, tested and delineated as many
as 16 different intervals between the Brushy Canyon and the Morrow
formations across our acreage, improved the efficiency of our drilling
and completion operations and built a significant midstream business. In
2019, we expect to build upon our past accomplishments to increase our
capital efficiency by continuing to innovate and focusing on increased
multi-well pad drilling, enhancing stimulation designs, including by
increasing the use of in-basin sand, and drilling and completing
additional longer laterals greater than one mile. For example, in 2018,
9% of our gross operated wells completed and turned to sales had lateral
lengths greater than one mile. In 2019, this number should increase to
30% and in 2020, we expect that approximately 70% of our gross operated
wells completed and turned to sales will have lateral lengths greater
than one mile, with many being two miles or longer.

“As we build upon the success in our various asset areas in the northern
Delaware Basin, move forward with the development of the acreage we
acquired in the BLM acquisition and continue to expand our San Mateo
footprint, both we and our stakeholders have much to be excited about in
the coming year and beyond as we continue to build the value of Matador
together.”

2019 Operating Plan

The table below provides Matador’s estimates for operated and
non-operated wells to be completed and turned to sales during 2019.
Additional details regarding our drilling and completions program for
2019 are provided in the sections that follow and in the slide
presentation accompanying this release.

Operated Non-Operated Total

Gross Operated

Asset/Operating Area

Gross Net Gross Net Gross Net

Well Completion Intervals

Rustler Breaks 17 11.3 28 2.9 45 14.2 1-BC, 1-1BS, 6-WC A-XY,

2-WC A-Lower,

6-WC B-Blair, 1-WC D

Arrowhead 8 5.2 5 0.2 13 5.4 4-2BS, 1-3BS, 2-WC A-XY, 1-WC B
Ranger 7 4.4 4 0.4 11 4.8 1-1BS, 1-2BS, 4-3BS, 1-WC A-XY
Wolf/Jackson Trust 12 9.0 12 9.0 2-2BS, 6-WC A-XY, 2-WC A-Lower,
2-WC B
Twin Lakes 2 1.6 2 1.6 1-Morrow, 1-WC-Carb
Antelope Ridge 27 23.4 32 1.1 59 24.5 6-1BS, 1-2BS, 6-3BS, 3-WC A-XY,

10-WC A-Lower, 1-WC B

Delaware Basin 73 54.9 69 4.6 142 59.5
Eagle Ford Shale 8 8.0 8 8.0
Haynesville Shale 16 1.7 16 1.7
Total 81 62.9 85 6.3 166 69.2

Note: BC = Brushy Canyon; WC = Wolfcamp; BS = Bone Spring. For example,
2-2BS indicates two Second Bone Spring completions and 8-WC A-XY
indicates eight Wolfcamp A-XY completions.

Delaware Basin

Matador began 2019 operating six drilling rigs in the Delaware Basin and
expects to operate these six drilling rigs there throughout 2019. The
Company anticipates these six operated drilling rigs will be deployed
across the Company’s Delaware Basin asset areas, with two rigs in the
Rustler Breaks asset area, two rigs in the Antelope Ridge asset area,
one rig in the Wolf and Jackson Trust asset areas and one rig in the
Arrowhead, Ranger and Twin Lakes asset areas. In the Delaware Basin,
Matador estimates it should have 94 gross (70.2 net) operated wells in
progress during 2019, with an anticipated 73 gross (54.9 net) wells
being completed and turned to sales, as compared to 83 gross (67.8 net)
operated wells completed and turned to sales in 2018.

In 2019, Matador expects to continue transitioning its operations to an
increased use of multi-well pad drilling, enhanced stimulation designs,
including an increased use of in-basin sand, and the drilling and
completion of additional longer laterals (greater than one mile). The
fewer number of operated wells that the Company anticipates being
completed and turned to sales in the Delaware Basin in 2019 reflects
this transition in operations and, given the mix of wells selected to be
drilled, a somewhat lower average working interest of about 75%, as
compared to approximately 81% in 2018. This transition in Matador’s
operations during 2019 is also expected to result in more uneven
production growth and capital expenditures than the Company has
experienced in recent years, as evidenced by the fact Matador expects to
have 21 gross (15.3 net) Delaware Basin wells in progress, but not
turned to sales, at year end 2019. Most of these Delaware Basin wells in
progress at year end 2019 should be completed and turned to sales late
in the first quarter or early in the second quarter of 2020, as many are
associated with multi-well pads expected to be in progress at year end
2019.

In 2019, Matador estimates 30% of its gross operated wells completed and
turned to sales will have lateral lengths greater than one mile, as
compared to 9% in 2018. Matador estimates 70% of its gross operated
wells will have lateral lengths greater than one mile in 2020. These
longer laterals should be more capital efficient and should begin to
impact and further improve Matador’s well returns in the Delaware Basin
starting in the second half of 2019 and continuing into 2020 and beyond.

Rustler Breaks and Antelope Ridge Asset Areas –
Eddy and Lea Counties, New Mexico

During 2019, Matador plans to continue to operate four drilling rigs
between the Rustler Breaks and Antelope Ridge asset areas, but the
Company has shifted its activity early in the year from Rustler Breaks
to Antelope Ridge in order to further delineate its Antelope Ridge
leasehold position and to hold by production more of its high quality
acreage position there. Further, in late 2019, Matador anticipates two
of its operated drilling rigs will begin drilling operations on one of
the key tracts Matador acquired in the Bureau of Land Management (“BLM”)
New Mexico Oil and Gas Lease Sale in September 2018 (the “BLM
Acquisition”) in western Antelope Ridge. Matador anticipates drilling
its first six wells on this tract, all two-mile laterals, from two
separate three-well pads during the last few months of 2019. These wells
are scheduled to be completed and turned to sales late in the first
quarter of 2020, and as a result, will not contribute to Matador’s 2019
production.

Arrowhead and Ranger Asset Areas – Eddy and Lea
Counties, New Mexico

In the Arrowhead and Ranger asset areas, Matador intends to continue
operating one drilling rig in 2019. This rig is currently drilling
several wells in the Ranger asset area, but beginning early in the
second quarter of 2019, this rig is scheduled to move to the Stebbins
leasehold area in the Arrowhead asset area and is expected to remain
there through most of the remainder of 2019 and for the foreseeable
future. Given (i) Matador’s recent success with wells drilled and
completed in the Second and Third Bone Spring formations in the Stebbins
and SST leasehold areas over the past two years, (ii) the Company’s
expectations regarding the prospectivity of the Wolfcamp formation in
this area and (iii) the efforts of Matador’s land department to execute
a series of trades and small acquisitions to block up this acreage
position, the Company expects to initiate a multi-year drilling program
on this acreage position, with the vast majority of wells expected to
have longer laterals with completed lateral lengths of up to two miles
in many instances. The Stebbins and SST leasehold areas, along with
other acreage in the Arrowhead asset area (the “Greater Stebbins Area”),
were part of the 25,500 gross acres dedicated to San Mateo as part of
the recently announced San Mateo expansion in Eddy County, New Mexico.

To support Matador’s multi-year drilling program in the Greater Stebbins
Area, San Mateo, as part of this expansion during 2019 and 2020, expects
to construct a large diameter natural gas pipeline from its cryogenic
natural gas processing plant in the Rustler Breaks asset area in Eddy
County, New Mexico (the “Black River Processing Plant”) to gather the
natural gas produced in the Greater Stebbins Area for processing at the
Black River Processing Plant. Further, San Mateo expects to build local
oil and salt water gathering systems and to drill at least one
commercial salt water disposal well in the Greater Stebbins Area in
support of Matador’s operations there.

Wolf and Jackson Trust Asset Areas – Loving
County, Texas

Matador plans to continue operating one drilling rig in the Wolf and
Jackson Trust asset areas during 2019. The Company plans to continue to
drill longer laterals on these properties in 2019, particularly in the
Wolf asset area, where Matador achieved strong results from the longer
laterals drilled in the southern portion of the Wolf asset area in 2018.
The Company intends to continue focusing its drilling and completion
efforts on the Wolfcamp A-XY, Wolfcamp A-Lower and Wolfcamp B intervals
in the Wolf and Jackson Trust asset areas in 2019, but expects to
complete and turn to sales two longer laterals (approximately 7,200
feet) targeting the Second Bone Spring formation in the Wolf asset area
as well.

Stateline Asset Area – Eddy County, New Mexico

Matador’s Stateline asset area includes 2,800 gross and net acres
acquired as part of the BLM Acquisition. Matador believes that the
Stateline asset area includes some of the best reservoir rock in the
Delaware Basin, with the potential for as many as nine producing zones
from the Brushy Canyon through the Wolfcamp D. The Company has begun
working with the BLM on its plans for developing this acreage and
anticipates it should be able to begin drilling operations there in
early 2020.

In early 2020, Matador intends to move two of its operated drilling rigs
to the Stateline asset area and initiate a multi-year drilling program
there. Matador currently plans to develop this acreage block drilling
two-mile laterals on the eastern side of the leasehold and approximately
2.5-mile laterals on the western side of the leasehold. Matador
initially expects to drill four wells on each of the eastern and western
tracts from two separate four-well pads. These eight wells are expected
to be completed and turned to sales during the third quarter of 2020
after the expected completion of San Mateo’s expansion of the Black
River Processing Plant.

As in the Greater Stebbins Area, to support Matador’s multi-year
drilling program in the Stateline asset area, San Mateo expects during
2019 and 2020 to construct a large diameter natural gas pipeline from
its Black River Processing Plant to gather the natural gas produced in
the Stateline asset area for processing at the Black River Processing
Plant. Further, San Mateo expects to build local oil and salt water
gathering systems and to drill at least one commercial salt water
disposal well in the Stateline asset area in support of Matador’s
operations there.

In addition, in order to have sufficient processing capacity for the
additional natural gas volumes expected to be produced from both the
Greater Stebbins Area and the Stateline asset area, San Mateo, as part
of its newly announced expansion, expects to construct a 200 million
cubic feet per day expansion of the Black River Processing Plant,
bringing the total designed inlet capacity of the Black River Processing
Plant to 460 million cubic feet of natural gas per day. This expansion
of the Black River Processing Plant is expected to be operational in
mid-2020.

South Texas

Matador also began 2019 operating one drilling rig in South Texas that
recently concluded a nine-well drilling program, primarily in the Eagle
Ford shale, but including one test of the Austin Chalk formation. The
Company began this short-term South Texas drilling program in October
2018 to drill up to 10 wells, primarily in the Eagle Ford shale, to take
advantage of higher oil and natural gas prices in South Texas, to
conduct at least one test of the Austin Chalk formation and to validate
and to hold by production almost all of its remaining undeveloped Eagle
Ford acreage. When drilling operations were concluded on the ninth well
in early February 2019, this rig was released and was not moved to the
Delaware Basin as the Company had previously anticipated. At December
31, 2018, Matador had completed and turned to sales one gross (1.0 net)
of these nine wells. The remaining eight gross (8.0 net) South Texas
wells, including the Austin Chalk test, are expected to be completed and
turned to sales late in the first quarter and during the second quarter
of 2019.

Non-Operated Activity

Matador also anticipates an active non-operated drilling and completions
program in 2019. In 2019, the Company expects to participate in 69 gross
(4.6 net) non-operated wells completed and turned to sales in the
Delaware Basin, as compared to 59 gross (7.0 net) non-operated wells
completed and turned to sales in 2018. Most of these non-operated wells
are expected to be drilled and completed in Matador’s Rustler Breaks and
Antelope Ridge asset areas again in 2019.

Matador also expects to participate in 16 gross (1.7 net) non-operated
wells in the Haynesville shale in 2019, as compared to eight gross (0.2
net) non-operated wells in the Haynesville shale in 2018. Several of
these wells will be operated by an affiliate of Chesapeake Energy
Corporation (“Chesapeake”) in 2019. Two of these Chesapeake-operated
wells, in particular, are planned to be two-mile laterals that include
Matador’s LA Wildlife leasehold position in northern Red River Parish,
Louisiana. This acreage, which was not included in Matador’s 2008
Haynesville shale transaction with Chesapeake, is in the southern part
of the Company’s Elm Grove asset area and is located in the core area of
the Haynesville shale play. Matador expects to have a 45 to 50% working
interest in both of these non-operated wells, which are expected to be
completed and turned to sales in the third quarter of 2019. These wells
are expected to result in a significant increase in the Company’s
natural gas production beginning in the third quarter of 2019 and are
significant factors in the 26% increase in natural gas production that
Matador has forecasted between the fourth quarter of 2018 and the fourth
quarter of 2019.

The Company does not expect to participate in any significant
non-operated activity in the Eagle Ford shale during 2019.

2019 Production Estimates and Cadence

Matador’s estimated 2019 total oil equivalent production of 22.4 million
barrels of oil equivalent (“BOE”), or an average daily oil equivalent
production of 61,400 BOE per day (58% oil), at the midpoint of 2019
guidance, reflects a year-over-year increase of 18%, as compared to 19.0
million BOE (59% oil), or 52,100 BOE per day, produced in 2018. The
Company anticipates its average daily oil equivalent production should
increase 17% from 55,500 BOE per day in the fourth quarter of 2018 to
65,200 BOE per day in the fourth quarter of 2019.

Matador’s estimated 2019 total oil production of 13.1 million barrels,
or an average daily oil production of 35,900 barrels per day, at the
midpoint of 2019 guidance, reflects an increase of 18%, as compared to
11.1 million barrels, or 30,500 barrels of oil per day, produced in
2018. The Company anticipates its average daily oil production should
increase 12% from 33,500 barrels of oil per day in the fourth quarter of
2018 to 37,500 barrels of oil per day in the fourth quarter of 2019.

Matador’s estimated 2019 total natural gas production of 56.0 billion
cubic feet, or an average daily natural gas production of 153.4 million
cubic feet per day, at the midpoint of 2019 guidance, reflects a
year-over-year increase of 18%, as compared to 47.3 billion cubic feet
of natural gas produced in 2018. The Company anticipates its average
daily natural gas production should increase 26% from 132.3 million
cubic feet per day in the fourth quarter of 2018 to 166.5 million cubic
feet per day in the fourth quarter of 2019. A significant portion of the
expected increase in natural gas production during 2019 is associated
with a significant increase in natural gas production from the
Haynesville shale beginning in the third quarter of 2019 in connection
with Matador’s anticipated participation in two, long-lateral,
non-operated wells in the Elm Grove asset area, as discussed above.

Contacts

Mac Schmitz
Capital Markets Coordinator
(972) 371-5225
[email protected]

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