November 24, 2020

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Matador Resources Company Reports First Quarter 2020 Results and Updates Full Year 2020 Operational Plans and Guidance

DALLAS--(BUSINESS WIRE)--Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today reported financial and operating results for the first quarter of 2020 and updated its full year 2020 operational plans and guidance. A short slide presentation summarizing the highlights of Matador’s first quarter 2020 earnings release is also included on the Company’s website at www.matadorresources.com on the Events and Presentations page under the Investor Relations tab. First Quarter 2020 Management Comments Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “We are trying something new in this quarterly release. On both our website and on the webcast planned for tomorrow’s earnings conference call is a set of five slides identified as ‘Chairman’s Remarks’ (Slides A through E) to add color and detail to my remarks. Please let me know if this additional information is helpful to you. “If you will look at Slide A, you will see that the first quarter of 2020 was another good quarter for Matador. The Board and I would like to commend once again the Matador team for their focused and professional response to the dual crises of the novel coronavirus and the abrupt decline in oil prices. Since early March, we have worked together to identify ways that Matador can reduce capital spending and operating expenses while increasing revenues and cash flows to weather these challenging times. At a meeting of Matador’s Board on March 10, 2020, I volunteered to take a 25% pay cut. The Board joined me in taking a 25% pay cut, too. Matador’s President and its Executive Vice Presidents then took a 20% pay cut, the other Vice Presidents took a 10% pay cut and the rest of the staff took a 5% pay cut. According to one prominent energy industry compensation study, Matador was the first company to announce any such cuts. Among the other first steps we took were to hedge 90% of our anticipated oil production for the remainder of the year, including all of our forecasted oil production in the second quarter, at oil prices ranging from $35 to $48 per barrel and to cut our capital spending by roughly 35% by reducing our rig count from six to three. We are prepared to take additional steps to further reduce spending if necessary. “If you will now look at Slide B, throughout the first quarter, the operations group led the way to our goal of achieving lower-than-expected capital spending and operating expenses. Our capital expenditures for drilling, completing and equipping wells this past quarter were $25 million less than our original estimates for the first quarter of 2020, and we estimate that $15 million of these savings were attributable to improved operational efficiencies and lower-than-expected drilling and completion costs. Drilling and completion costs for all operated horizontal wells completed and turned to sales in the first quarter of 2020 averaged just over $1,000 per completed lateral foot, a decrease of 13% from average drilling and completion costs of $1,165 per completed lateral foot achieved in 2019. We expect drilling and completion costs per completed lateral foot to continue to decline throughout 2020, reflecting improved operational efficiencies, reduced service costs and the impact of drilling longer laterals, with most being two-mile laterals. These results bring us to Slide C, which indicates by the fourth quarter Matador could be approaching cash flow neutrality. “At the end of this quarter, we also achieved the first of four important production milestones we set for Matador in 2020. Matador had previously predicted in early 2020 a significant surge in production when the first six Rodney Robinson wells in the western portion of the Antelope Ridge asset area were turned to sales in late March. As recently reported in a separate press release, the Rodney Robinson wells achieved record 24-hour initial potential test results for Matador from all three formations tested, collectively testing at rates of approximately 15,000 barrels of oil per day and 25 million cubic feet of natural gas per day. The other three production milestones should occur when the five Ray wells in the Rustler Breaks asset area and the five Leatherneck wells in the Greater Stebbins Area are turned to sales during the summer and when the 13 Boros wells in the Stateline asset area are turned to sales beginning in September and October. These Boros wells are likely to be even better than the Rodney Robinson wells. Collectively, these four groups of wells make up almost 60% of our expected completions in 2020 and should account for more than 60% of our incremental production this year. “As we move forward in 2020, our priorities are to protect our balance sheet and our liquidity and to strengthen our exploration and production and midstream businesses. We will do whatever is required to protect our balance sheet and preserve the necessary liquidity to meet our goals. Many of you have wondered about our bank relationships. If you will look at Slide D, you will see that we had approximately $340 million of our ‘elected commitment’ available at the end of the first quarter and another $200 million available under the total ‘borrowing base’ of our reserves-based loan. We wish to express here our sincere appreciation for the support and encouragement we have always received from our bank group and especially this year. “These are obviously challenging times for all of us, but challenging times can also bring unexpected opportunities, and we will remain open to all such possibilities as we navigate the remainder of 2020 and position ourselves for 2021 and beyond. We consider Matador’s current stock price to be a good buying opportunity. Matador’s assets include two successful businesses, 152 million barrels and 646 Bcf of proved oil and natural gas reserves, respectively, and 128,000 net acres in the Delaware Basin for its 117 million shares outstanding. Slide E shows the steady growth in our proved reserves and the amount of reserves each shareholder proportionately owns. The Board, the staff and I remain confident that the outlook for Matador is very positive when you combine these assets with Matador’s financial position, proven management team and operating staff.” Financial and Operational Highlights Oil Equivalent Production First quarter 2020 average daily oil equivalent production decreased 4% sequentially to 71,200 barrels of oil equivalent (“BOE”) per day (57% oil), as compared to 73,700 BOE per day in the fourth quarter of 2019, and increased 19% year-over-year, as compared to 59,900 BOE per day in the first quarter of 2019. The 4% sequential decline in average daily oil equivalent production was better than expected as the Company had originally projected a sequential decline of 5 to 7% in the first quarter of 2020. Net Income, Earnings Per Share and Adjusted EBITDA First quarter 2020 net income (GAAP basis) was $125.7 million, or $1.08 per diluted common share, a five-fold sequential increase from net income of $24.0 million in the fourth quarter of 2019 and a significant year-over-year increase from a net loss of $16.9 million in the first quarter of 2019, due primarily to a $136.4 million non-cash, unrealized gain on derivatives in the first quarter of 2020, as compared to a non-cash, unrealized loss on derivatives of $24.0 million in the fourth quarter of 2019 and a non-cash, unrealized loss on derivatives of $45.7 million in the first quarter of 2019. First quarter 2020 adjusted net income (a non-GAAP financial measure) was $23.1 million, or $0.20 per diluted common share, a 50% sequential decrease from $46.1 million in the fourth quarter of 2019, and a 5% year-over-year increase from $21.9 million in the first quarter of 2019. The sequential decline in adjusted net income was primarily attributable to lower first quarter 2020 realized oil and natural gas prices of $45.87 per barrel and $1.70 per thousand cubic feet, respectively, that were 19% and 26% below fourth quarter 2019 realized oil and natural gas prices of $56.36 per barrel and $2.31 per thousand cubic feet, respectively. First quarter 2020 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) were $140.6 million, a 22% sequential decrease from $181.0 million in the fourth quarter of 2019, and a 13% year-over-year increase from $124.8 million in the first quarter of 2019. The sequential decline in Adjusted EBITDA was also primarily attributable to lower oil and natural gas prices realized in the first quarter of 2020, as compared to the fourth quarter of 2019. Third-Party Midstream Services Revenues Third-party midstream services revenues were $15.8 million in the first quarter of 2020, a 10% sequential decrease from $17.7 million in the fourth quarter of 2019, and a 34% year-over-year increase from $11.8 million in the first quarter of 2019. The sequential decline in third-party midstream services revenues was in line with the Company’s expectations and was primarily attributable to a decrease in third-party natural gas gathering and processing revenues in the first quarter of 2020 as market conditions have changed. Record Low Operating and General and Administrative Unit Costs Lease operating expenses (“LOE”) in the first quarter of 2020 were $4.77 per BOE, an 8% sequential increase from $4.43 per BOE in the fourth quarter of 2019, but a 17% year-over-year decrease from $5.78 per BOE in the first quarter of 2019. This result was the lowest first quarter LOE per BOE since Matador became a public company and was approximately 20% less than average first quarter LOE per BOE in recent years. General and administrative expenses (“G&A”) per BOE in the first quarter of 2020 were $2.51 per BOE, a 21% sequential decrease from $3.17 per BOE in the fourth quarter of 2019, and a 26% year-over-year decrease from $3.39 per BOE in the first quarter of 2019. This result was the lowest G&A per BOE in the Company’s history and should trend lower as the aforementioned G&A cost reductions take effect as the year progresses. Lower Capital Expenditures and Improved Capital Efficiency Matador incurred capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) of approximately $169 million in the first quarter of 2020, or 13% below the Company’s estimate for D/C/E capital expenditures of $194 million. Matador estimates that $15 million of these savings were attributable to improved operational efficiencies and lower-than-expected drilling and completion costs in the Delaware Basin. Drilling and completion costs for all operated horizontal wells completed and turned to sales in the first quarter of 2020 averaged just over $1,000 per completed lateral foot, a decrease of 13% from average drilling and completion costs of $1,165 per completed lateral foot achieved in full year 2019. Increased and Improved Hedging Positions Since the beginning of the second quarter of 2020, Matador has restructured portions of its then-existing 2020 West Texas Intermediate (“WTI”) oil hedges, providing additional revenue protection should oil prices remain at currently depressed levels for the remainder of 2020 or should further market disruptions occur. At April 29, 2020, Matador had approximately 10.3 million barrels of oil, or approximately 90% of its anticipated oil production (including all of its anticipated oil production in April through June 2020), hedged for the period April through December 2020 based on the midpoint of its updated 2020 production guidance detailed below. These hedges are at weighted average oil prices of approximately $38.00 to $39.00 per barrel for the period from April through December 2020. The Company also recently began adding new WTI oil hedges for 2021, as well as natural gas hedges for late 2020 and early 2021. Note: All references to Matador’s net income (loss), adjusted net income (loss) and Adjusted EBITDA reported throughout this earnings release are those values attributable to Matador Resources Company shareholders after giving effect to any net income, net loss or Adjusted EBITDA, respectively, attributable to third-party non-controlling interests, including in San Mateo Midstream, LLC (“San Mateo I”) and San Mateo Midstream II, LLC (“San Mateo II,” and, together with San Mateo I, “San Mateo”). Matador owns 51% of San Mateo. For a definition of adjusted net income (loss), adjusted earnings (loss) per diluted common share and Adjusted EBITDA and reconciliations of such non-GAAP financial metrics to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below. Sequential and year-over-year quarterly comparisons of selected financial and operating items are shown in the following table: Three Months Ended March 31, 2020 December 31, 2019 March 31, 2019 Net Production Volumes:(1) Oil (MBbl)(2) 3,697 3,872 3,107 Natural gas (Bcf)(3) 16.7 17.5 13.7 Total oil equivalent (MBOE)(4) 6,476 6,785 5,395 Average Daily Production Volumes:(1) Oil (Bbl/d)(5) 40,626 42,087 34,517 Natural gas (MMcf/d)(6) 183.2 190.0 152.5 Total oil equivalent (BOE/d)(7) 71,161 73,749 59,941 Average Sales Prices: Oil, without realized derivatives (per Bbl) $ 45.87 $ 56.36 $ 49.64 Oil, with realized derivatives (per Bbl) $ 48.81 $ 56.78 $ 50.72 Natural gas, without realized derivatives (per Mcf)(8) $ 1.70 $ 2.31 $ 2.85 Natural gas, with realized derivatives (per Mcf) $ 1.70 $ 2.31 $ 2.84 Revenues (millions): Oil and natural gas revenues $ 197.9 $ 258.6 $ 193.3 Third-party midstream services revenues $ 15.8 $ 17.7 $ 11.8 Realized gain on derivatives $ 10.9 $ 1.7 $ 3.3 Operating Expenses (per BOE): Production taxes, transportation and processing $ 3.35 $ 3.88 $ 3.65 Lease operating $ 4.77 $ 4.43 $ 5.78 Plant and other midstream services operating $ 1.54 $ 1.51 $ 1.73 Depletion, depreciation and amortization $ 14.01 $ 14.89 $ 14.25 General and administrative(9) $ 2.51 $ 3.17 $ 3.39 Total(10) $ 26.18 $ 27.88 $ 28.80 Other (millions): Net sales of purchased natural gas(11) $ 2.5 $ 0.7 $ 0.6 Net income (loss) (millions)(12) $ 125.7 $ 24.0 $ (16.9 ) Earnings (loss) per common share (diluted)(12) $ 1.08 $ 0.21 $ (0.15 ) Adjusted net income (millions)(12)(13) $ 23.1 $ 46.1 $ 21.9 Adjusted earnings per common share (diluted)(12)(14) $ 0.20 $ 0.39 $ 0.19 Adjusted EBITDA (millions)(12)(15) $ 140.6 $ 181.0 $ 124.8 San Mateo net income (millions) $ 19.1 $ 19.6 $ 15.2 San Mateo Adjusted EBITDA (millions)(15) $ 26.2 $ 26.5 $ 20.8 (1) Production volumes reported in two streams: oil and natural gas, including both dry and liquids-rich natural gas. (2) One thousand barrels of oil. (3) One billion cubic feet of natural gas. (4) One thousand barrels of oil equivalent, estimated using a conversion ratio of one barrel of oil per six thousand cubic feet of natural gas. (5) Barrels of oil per day. (6) Millions of cubic feet of natural gas per day. (7) Barrels of oil equivalent per day, estimated using a conversion ratio of one barrel of oil per six thousand cubic feet of natural gas. (8) Per thousand cubic feet of natural gas. (9) Includes approximately $0.59, $0.70 and $0.85 per BOE of non-cash, stock-based compensation expense in the first quarter of 2020, the fourth quarter of 2019 and the first quarter of 2019, respectively. (10) Total does not include the impact of purchased natural gas or immaterial accretion expenses. (11) Net sales of purchased natural gas refers to residue natural gas and natural gas liquids (“NGL”) that are purchased from customers and subsequently resold. Such amounts reflect revenues from sales of purchased natural gas of $10.5 million, $34.7 million and $11.2 million less expenses of $8.1 million, $34.0 million and $10.6 million in the first quarter of 2020, the fourth quarter of 2019 and the first quarter of 2019, respectively. (12) Attributable to Matador Resources Company shareholders. (13) Adjusted net income is a non-GAAP financial measure. For a definition of adjusted net income and a reconciliation of adjusted net income (non-GAAP) to net income (loss) (GAAP), please see “Supplemental Non-GAAP Financial Measures.” (14) Adjusted earnings per diluted common share is a non-GAAP financial measure. For a definition of adjusted earnings per diluted common share and a reconciliation of adjusted earnings per diluted common share (non-GAAP) to earnings (loss) per diluted common share (GAAP), please see “Supplemental Non-GAAP Financial Measures.” (15) Adjusted EBITDA is a non-GAAP financial measure. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA (non-GAAP) to net income (loss) (GAAP) and net cash provided by operating activities (GAAP), please see “Supplemental Non-GAAP Financial Measures.” Updated Full Year 2020 Guidance A series of unprecedented events impacting the oil and natural gas industry has occurred since the beginning of 2020, including the worldwide destruction of demand for crude oil resulting from the outbreak of the novel coronavirus, or COVID-19, and, on March 6, 2020, from the actions of Saudi Arabia, other members of the Organization of Petroleum Exporting Countries and Russia. In response, on March 11, 2020, Matador announced its plans to reduce its operated drilling program from six to three rigs by the end of the second quarter of 2020. Matador released the first of these operated rigs in late March, and the second operated rig was released in late April. At April 29, 2020, Matador is operating four drilling rigs in the Delaware Basin. Matador intends to release one of those operated rigs by the end of the second quarter of 2020. On April 13, 2020, Matador announced that recent actions taken by the Company should save or cause the Company to receive a sum approaching $340 million in 2020, as compared to its original 2020 estimates, including reductions of $250 million in D/C/E capital expenditures and $40 million in operating expenses, in particular LOE and G&A expenses. Today, Matador has updated its full year 2020 guidance estimates as highlighted in the table below, each as compared to the Company’s original guidance as provided on February 25, 2020. These updated guidance estimates include Matador’s plans to shut in or curtail portions of its Delaware Basin and Eagle Ford production in May 2020 and likely again in June 2020, as described later in this release. Further, these updated guidance estimates assume Matador operates four drilling rigs in the Delaware Basin for the remainder of the second quarter of 2020 and operates three drilling rigs in the Delaware Basin throughout the second half of 2020. These estimates also assume the Company completes and turns to sales all remaining wells in its revised 2020 drilling program as described in this earnings release, including, in particular, the 13 “Boros” wells currently being drilled in the Stateline asset area. Matador plans to complete and turn to sales the 13 Boros wells in a staggered fashion at various times during September and early October 2020. 2020 Guidance Estimates Guidance Metric Actual 2019 Results Original 2020(1) % YoY Change(2) Updated 2020(3) % YoY Change(4) Total Oil Production, million Bbl 14.0 16.0 to 16.5 +16% 15.1 to 15.5 +9% Total Natural Gas Production, Bcf 61.1 66.0 to 71.0 +12% 62.0 to 66.0 +5% Total Oil Equivalent Production, million BOE 24.2 27.0 to 28.3 +14% 25.4 to 26.5 +7% D/C/E CapEx(5), million $ $671 $690 to $750 +7% $440 to $500 -30% San Mateo Midstream CapEx(6), million $ $77 $85 to $105 +23% $85 to $105 +23% (1) Original full year 2020 guidance, as provided on February 25, 2020. (2) Represents percentage change from 2019 actual results to the midpoint of original 2020 guidance, as provided on February 25, 2020. (3) As of and as updated on April 29, 2020. (4) Represents percentage change from 2019 actual results to the midpoint of updated 2020 guidance, as provided on April 29, 2020. (5) Capital expenditures associated with drilling, completing and equipping wells. (6) Primarily reflects Matador’s share of 2020 estimated capital expenditures for San Mateo and accounts for remaining portions of the $50 million capital carry an affiliate of Five Point Energy LLC (“Five Point”) agreed to provide as part of the ongoing San Mateo II expansion in Eddy County, New Mexico. San Mateo’s capital expenditures (and Matador’s share of those expenditures) are expected to decline significantly in the fourth quarter of 2020, following the anticipated completion of the 200 million cubic feet per day expansion of the Black River Processing Plant (as defined below), the large diameter pipelines and other related infrastructure in September 2020. Drilling and Completion Activity Guidance Matador released one operated drilling rig in late March, and a second operated drilling rig was released in late April. The first rig released had been drilling in the Company’s Wolf asset area in Loving County, Texas, and Matador plans to complete and turn to sales all wells drilled, but not yet completed, in the Wolf asset area during the second quarter of 2020. The second rig released had been drilling five wells in the Stebbins area and surrounding leaseholds in the southern portion of the Arrowhead asset area (the “Greater Stebbins Area”). These five wells are the “Leatherneck” wells mentioned in the Company’s April 13, 2020 press release, and Matador expects the Leatherneck wells to be completed and turned to sales in the summer of 2020. During the second half of 2020, Matador expects to have all three of its drilling rigs operating in the Delaware Basin. Two of these rigs are expected to operate in the Stateline asset area with the third rig operating primarily in the Rustler Breaks and Antelope Ridge asset areas. Matador plans to begin drilling its next four wells on the Rodney Robinson tract in the western portion of the Antelope Ridge asset area in the fourth quarter of 2020, but these wells are not expected to be completed and turned to sales until early in the second quarter of 2021. The tables below present our original and updated guidance estimates for wells to be completed and turned to sales in 2020. 2020 Estimated Wells Turned to Sales - Original Guidance 2020 Estimated Wells Turned to Sales - Updated Guidance Gross Net Gross Net Operated 69 58.0 Operated 53 45.9 Non-Operated 81 5.6 Non-Operated 43 2.7 Total 150 63.6 Total 96 48.6 As of and as provided on February 25, 2020. As of and as updated on April 29, 2020. During the first quarter of 2020, Matador completed and turned to sales 39 gross (15.9 net) operated and non-operated wells, including 17 gross (15.6 net) operated and 22 gross (0.3 net) non-operated wells. These first quarter 2020 completions are included in the estimated totals for wells to be completed and turned to sales in the full year 2020 updated guidance provided above. Of the 53 operated horizontal wells expected to be completed and turned to sales in 2020, 44, or 83%, are expected to have lateral lengths greater than one mile and 39, or 74%, are expected to be two-mile laterals. The average completed lateral length of these 53 operated horizontal wells is anticipated to be 8,700 feet, as compared to an average completed lateral length of 5,700 feet for operated horizontal wells completed and turned to sales in 2019. Second Quarter 2020 Updated Completions and Production Cadence Second Quarter 2020 Drilling and Completion Activity During the remainder of the second quarter of 2020, Matador expects to operate four drilling rigs in the Delaware Basin.Contacts Mac Schmitz Capital Markets Coordinator (972) 371-5225 [email protected] Read full story here

DALLAS–(BUSINESS WIRE)–Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today reported financial and operating results for the first quarter of 2020 and updated its full year 2020 operational plans and guidance. A short slide presentation summarizing the highlights of Matador’s first quarter 2020 earnings release is also included on the Company’s website at www.matadorresources.com on the Events and Presentations page under the Investor Relations tab.

First Quarter 2020 Management Comments

Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “We are trying something new in this quarterly release. On both our website and on the webcast planned for tomorrow’s earnings conference call is a set of five slides identified as ‘Chairman’s Remarks’ (Slides A through E) to add color and detail to my remarks. Please let me know if this additional information is helpful to you.

“If you will look at Slide A, you will see that the first quarter of 2020 was another good quarter for Matador. The Board and I would like to commend once again the Matador team for their focused and professional response to the dual crises of the novel coronavirus and the abrupt decline in oil prices. Since early March, we have worked together to identify ways that Matador can reduce capital spending and operating expenses while increasing revenues and cash flows to weather these challenging times. At a meeting of Matador’s Board on March 10, 2020, I volunteered to take a 25% pay cut. The Board joined me in taking a 25% pay cut, too. Matador’s President and its Executive Vice Presidents then took a 20% pay cut, the other Vice Presidents took a 10% pay cut and the rest of the staff took a 5% pay cut. According to one prominent energy industry compensation study, Matador was the first company to announce any such cuts. Among the other first steps we took were to hedge 90% of our anticipated oil production for the remainder of the year, including all of our forecasted oil production in the second quarter, at oil prices ranging from $35 to $48 per barrel and to cut our capital spending by roughly 35% by reducing our rig count from six to three. We are prepared to take additional steps to further reduce spending if necessary.

“If you will now look at Slide B, throughout the first quarter, the operations group led the way to our goal of achieving lower-than-expected capital spending and operating expenses. Our capital expenditures for drilling, completing and equipping wells this past quarter were $25 million less than our original estimates for the first quarter of 2020, and we estimate that $15 million of these savings were attributable to improved operational efficiencies and lower-than-expected drilling and completion costs. Drilling and completion costs for all operated horizontal wells completed and turned to sales in the first quarter of 2020 averaged just over $1,000 per completed lateral foot, a decrease of 13% from average drilling and completion costs of $1,165 per completed lateral foot achieved in 2019. We expect drilling and completion costs per completed lateral foot to continue to decline throughout 2020, reflecting improved operational efficiencies, reduced service costs and the impact of drilling longer laterals, with most being two-mile laterals. These results bring us to Slide C, which indicates by the fourth quarter Matador could be approaching cash flow neutrality.

“At the end of this quarter, we also achieved the first of four important production milestones we set for Matador in 2020. Matador had previously predicted in early 2020 a significant surge in production when the first six Rodney Robinson wells in the western portion of the Antelope Ridge asset area were turned to sales in late March. As recently reported in a separate press release, the Rodney Robinson wells achieved record 24-hour initial potential test results for Matador from all three formations tested, collectively testing at rates of approximately 15,000 barrels of oil per day and 25 million cubic feet of natural gas per day. The other three production milestones should occur when the five Ray wells in the Rustler Breaks asset area and the five Leatherneck wells in the Greater Stebbins Area are turned to sales during the summer and when the 13 Boros wells in the Stateline asset area are turned to sales beginning in September and October. These Boros wells are likely to be even better than the Rodney Robinson wells. Collectively, these four groups of wells make up almost 60% of our expected completions in 2020 and should account for more than 60% of our incremental production this year.

“As we move forward in 2020, our priorities are to protect our balance sheet and our liquidity and to strengthen our exploration and production and midstream businesses. We will do whatever is required to protect our balance sheet and preserve the necessary liquidity to meet our goals. Many of you have wondered about our bank relationships. If you will look at Slide D, you will see that we had approximately $340 million of our ‘elected commitment’ available at the end of the first quarter and another $200 million available under the total ‘borrowing base’ of our reserves-based loan. We wish to express here our sincere appreciation for the support and encouragement we have always received from our bank group and especially this year.

“These are obviously challenging times for all of us, but challenging times can also bring unexpected opportunities, and we will remain open to all such possibilities as we navigate the remainder of 2020 and position ourselves for 2021 and beyond. We consider Matador’s current stock price to be a good buying opportunity. Matador’s assets include two successful businesses, 152 million barrels and 646 Bcf of proved oil and natural gas reserves, respectively, and 128,000 net acres in the Delaware Basin for its 117 million shares outstanding. Slide E shows the steady growth in our proved reserves and the amount of reserves each shareholder proportionately owns. The Board, the staff and I remain confident that the outlook for Matador is very positive when you combine these assets with Matador’s financial position, proven management team and operating staff.”

Financial and Operational Highlights

Oil Equivalent Production

  • First quarter 2020 average daily oil equivalent production decreased 4% sequentially to 71,200 barrels of oil equivalent (“BOE”) per day (57% oil), as compared to 73,700 BOE per day in the fourth quarter of 2019, and increased 19% year-over-year, as compared to 59,900 BOE per day in the first quarter of 2019. The 4% sequential decline in average daily oil equivalent production was better than expected as the Company had originally projected a sequential decline of 5 to 7% in the first quarter of 2020.

Net Income, Earnings Per Share and Adjusted EBITDA

  • First quarter 2020 net income (GAAP basis) was $125.7 million, or $1.08 per diluted common share, a five-fold sequential increase from net income of $24.0 million in the fourth quarter of 2019 and a significant year-over-year increase from a net loss of $16.9 million in the first quarter of 2019, due primarily to a $136.4 million non-cash, unrealized gain on derivatives in the first quarter of 2020, as compared to a non-cash, unrealized loss on derivatives of $24.0 million in the fourth quarter of 2019 and a non-cash, unrealized loss on derivatives of $45.7 million in the first quarter of 2019.
  • First quarter 2020 adjusted net income (a non-GAAP financial measure) was $23.1 million, or $0.20 per diluted common share, a 50% sequential decrease from $46.1 million in the fourth quarter of 2019, and a 5% year-over-year increase from $21.9 million in the first quarter of 2019. The sequential decline in adjusted net income was primarily attributable to lower first quarter 2020 realized oil and natural gas prices of $45.87 per barrel and $1.70 per thousand cubic feet, respectively, that were 19% and 26% below fourth quarter 2019 realized oil and natural gas prices of $56.36 per barrel and $2.31 per thousand cubic feet, respectively.
  • First quarter 2020 adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA,” a non-GAAP financial measure) were $140.6 million, a 22% sequential decrease from $181.0 million in the fourth quarter of 2019, and a 13% year-over-year increase from $124.8 million in the first quarter of 2019. The sequential decline in Adjusted EBITDA was also primarily attributable to lower oil and natural gas prices realized in the first quarter of 2020, as compared to the fourth quarter of 2019.

Third-Party Midstream Services Revenues

  • Third-party midstream services revenues were $15.8 million in the first quarter of 2020, a 10% sequential decrease from $17.7 million in the fourth quarter of 2019, and a 34% year-over-year increase from $11.8 million in the first quarter of 2019. The sequential decline in third-party midstream services revenues was in line with the Company’s expectations and was primarily attributable to a decrease in third-party natural gas gathering and processing revenues in the first quarter of 2020 as market conditions have changed.

Record Low Operating and General and Administrative Unit Costs

  • Lease operating expenses (“LOE”) in the first quarter of 2020 were $4.77 per BOE, an 8% sequential increase from $4.43 per BOE in the fourth quarter of 2019, but a 17% year-over-year decrease from $5.78 per BOE in the first quarter of 2019. This result was the lowest first quarter LOE per BOE since Matador became a public company and was approximately 20% less than average first quarter LOE per BOE in recent years.
  • General and administrative expenses (“G&A”) per BOE in the first quarter of 2020 were $2.51 per BOE, a 21% sequential decrease from $3.17 per BOE in the fourth quarter of 2019, and a 26% year-over-year decrease from $3.39 per BOE in the first quarter of 2019. This result was the lowest G&A per BOE in the Company’s history and should trend lower as the aforementioned G&A cost reductions take effect as the year progresses.

Lower Capital Expenditures and Improved Capital Efficiency

  • Matador incurred capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) of approximately $169 million in the first quarter of 2020, or 13% below the Company’s estimate for D/C/E capital expenditures of $194 million. Matador estimates that $15 million of these savings were attributable to improved operational efficiencies and lower-than-expected drilling and completion costs in the Delaware Basin.
  • Drilling and completion costs for all operated horizontal wells completed and turned to sales in the first quarter of 2020 averaged just over $1,000 per completed lateral foot, a decrease of 13% from average drilling and completion costs of $1,165 per completed lateral foot achieved in full year 2019.

Increased and Improved Hedging Positions

  • Since the beginning of the second quarter of 2020, Matador has restructured portions of its then-existing 2020 West Texas Intermediate (“WTI”) oil hedges, providing additional revenue protection should oil prices remain at currently depressed levels for the remainder of 2020 or should further market disruptions occur. At April 29, 2020, Matador had approximately 10.3 million barrels of oil, or approximately 90% of its anticipated oil production (including all of its anticipated oil production in April through June 2020), hedged for the period April through December 2020 based on the midpoint of its updated 2020 production guidance detailed below. These hedges are at weighted average oil prices of approximately $38.00 to $39.00 per barrel for the period from April through December 2020. The Company also recently began adding new WTI oil hedges for 2021, as well as natural gas hedges for late 2020 and early 2021.

Note: All references to Matador’s net income (loss), adjusted net income (loss) and Adjusted EBITDA reported throughout this earnings release are those values attributable to Matador Resources Company shareholders after giving effect to any net income, net loss or Adjusted EBITDA, respectively, attributable to third-party non-controlling interests, including in San Mateo Midstream, LLC (“San Mateo I”) and San Mateo Midstream II, LLC (“San Mateo II,” and, together with San Mateo I, “San Mateo”). Matador owns 51% of San Mateo. For a definition of adjusted net income (loss), adjusted earnings (loss) per diluted common share and Adjusted EBITDA and reconciliations of such non-GAAP financial metrics to their comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.

Sequential and year-over-year quarterly comparisons of selected financial and operating items are shown in the following table:

Three Months Ended

March 31,

2020

December 31,

2019

March 31,

2019

Net Production Volumes:(1)

Oil (MBbl)(2)

3,697

3,872

3,107

Natural gas (Bcf)(3)

16.7

17.5

13.7

Total oil equivalent (MBOE)(4)

6,476

6,785

5,395

Average Daily Production Volumes:(1)

Oil (Bbl/d)(5)

40,626

42,087

34,517

Natural gas (MMcf/d)(6)

183.2

190.0

152.5

Total oil equivalent (BOE/d)(7)

71,161

73,749

59,941

Average Sales Prices:

Oil, without realized derivatives (per Bbl)

$

45.87

$

56.36

$

49.64

Oil, with realized derivatives (per Bbl)

$

48.81

$

56.78

$

50.72

Natural gas, without realized derivatives (per Mcf)(8)

$

1.70

$

2.31

$

2.85

Natural gas, with realized derivatives (per Mcf)

$

1.70

$

2.31

$

2.84

Revenues (millions):

Oil and natural gas revenues

$

197.9

$

258.6

$

193.3

Third-party midstream services revenues

$

15.8

$

17.7

$

11.8

Realized gain on derivatives

$

10.9

$

1.7

$

3.3

Operating Expenses (per BOE):

Production taxes, transportation and processing

$

3.35

$

3.88

$

3.65

Lease operating

$

4.77

$

4.43

$

5.78

Plant and other midstream services operating

$

1.54

$

1.51

$

1.73

Depletion, depreciation and amortization

$

14.01

$

14.89

$

14.25

General and administrative(9)

$

2.51

$

3.17

$

3.39

Total(10)

$

26.18

$

27.88

$

28.80

Other (millions):

Net sales of purchased natural gas(11)

$

2.5

$

0.7

$

0.6

Net income (loss) (millions)(12)

$

125.7

$

24.0

$

(16.9

)

Earnings (loss) per common share (diluted)(12)

$

1.08

$

0.21

$

(0.15

)

Adjusted net income (millions)(12)(13)

$

23.1

$

46.1

$

21.9

Adjusted earnings per common share (diluted)(12)(14)

$

0.20

$

0.39

$

0.19

Adjusted EBITDA (millions)(12)(15)

$

140.6

$

181.0

$

124.8

San Mateo net income (millions)

$

19.1

$

19.6

$

15.2

San Mateo Adjusted EBITDA (millions)(15)

$

26.2

$

26.5

$

20.8

(1) Production volumes reported in two streams: oil and natural gas, including both dry and liquids-rich natural gas.

(2) One thousand barrels of oil.

(3) One billion cubic feet of natural gas.

(4) One thousand barrels of oil equivalent, estimated using a conversion ratio of one barrel of oil per six thousand cubic feet of natural gas.

(5) Barrels of oil per day.

(6) Millions of cubic feet of natural gas per day.

(7) Barrels of oil equivalent per day, estimated using a conversion ratio of one barrel of oil per six thousand cubic feet of natural gas.

(8) Per thousand cubic feet of natural gas.

(9) Includes approximately $0.59, $0.70 and $0.85 per BOE of non-cash, stock-based compensation expense in the first quarter of 2020, the fourth quarter of 2019 and the first quarter of 2019, respectively.

(10) Total does not include the impact of purchased natural gas or immaterial accretion expenses.

(11) Net sales of purchased natural gas refers to residue natural gas and natural gas liquids (“NGL”) that are purchased from customers and subsequently resold. Such amounts reflect revenues from sales of purchased natural gas of $10.5 million, $34.7 million and $11.2 million less expenses of $8.1 million, $34.0 million and $10.6 million in the first quarter of 2020, the fourth quarter of 2019 and the first quarter of 2019, respectively.

(12) Attributable to Matador Resources Company shareholders.

(13) Adjusted net income is a non-GAAP financial measure. For a definition of adjusted net income and a reconciliation of adjusted net income (non-GAAP) to net income (loss) (GAAP), please see “Supplemental Non-GAAP Financial Measures.”

(14) Adjusted earnings per diluted common share is a non-GAAP financial measure. For a definition of adjusted earnings per diluted common share and a reconciliation of adjusted earnings per diluted common share (non-GAAP) to earnings (loss) per diluted common share (GAAP), please see “Supplemental Non-GAAP Financial Measures.”

(15) Adjusted EBITDA is a non-GAAP financial measure. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA (non-GAAP) to net income (loss) (GAAP) and net cash provided by operating activities (GAAP), please see “Supplemental Non-GAAP Financial Measures.”


Updated Full Year 2020 Guidance

A series of unprecedented events impacting the oil and natural gas industry has occurred since the beginning of 2020, including the worldwide destruction of demand for crude oil resulting from the outbreak of the novel coronavirus, or COVID-19, and, on March 6, 2020, from the actions of Saudi Arabia, other members of the Organization of Petroleum Exporting Countries and Russia. In response, on March 11, 2020, Matador announced its plans to reduce its operated drilling program from six to three rigs by the end of the second quarter of 2020. Matador released the first of these operated rigs in late March, and the second operated rig was released in late April. At April 29, 2020, Matador is operating four drilling rigs in the Delaware Basin. Matador intends to release one of those operated rigs by the end of the second quarter of 2020.

On April 13, 2020, Matador announced that recent actions taken by the Company should save or cause the Company to receive a sum approaching $340 million in 2020, as compared to its original 2020 estimates, including reductions of $250 million in D/C/E capital expenditures and $40 million in operating expenses, in particular LOE and G&A expenses.

Today, Matador has updated its full year 2020 guidance estimates as highlighted in the table below, each as compared to the Company’s original guidance as provided on February 25, 2020. These updated guidance estimates include Matador’s plans to shut in or curtail portions of its Delaware Basin and Eagle Ford production in May 2020 and likely again in June 2020, as described later in this release. Further, these updated guidance estimates assume Matador operates four drilling rigs in the Delaware Basin for the remainder of the second quarter of 2020 and operates three drilling rigs in the Delaware Basin throughout the second half of 2020.

These estimates also assume the Company completes and turns to sales all remaining wells in its revised 2020 drilling program as described in this earnings release, including, in particular, the 13 “Boros” wells currently being drilled in the Stateline asset area. Matador plans to complete and turn to sales the 13 Boros wells in a staggered fashion at various times during September and early October 2020.

2020 Guidance Estimates

Guidance Metric

Actual 2019

Results

Original

2020(1)

% YoY

Change(2)

Updated

2020(3)

% YoY

Change(4)

Total Oil Production, million Bbl

14.0

16.0 to 16.5

+16%

15.1 to 15.5

+9%

Total Natural Gas Production, Bcf

61.1

66.0 to 71.0

+12%

62.0 to 66.0

+5%

Total Oil Equivalent Production, million BOE

24.2

27.0 to 28.3

+14%

25.4 to 26.5

+7%

D/C/E CapEx(5), million $

$671

$690 to $750

+7%

$440 to $500

-30%

San Mateo Midstream CapEx(6), million $

$77

$85 to $105

+23%

$85 to $105

+23%

(1) Original full year 2020 guidance, as provided on February 25, 2020.

(2) Represents percentage change from 2019 actual results to the midpoint of original 2020 guidance, as provided on February 25, 2020.

(3) As of and as updated on April 29, 2020.

(4) Represents percentage change from 2019 actual results to the midpoint of updated 2020 guidance, as provided on April 29, 2020.

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

(6) Primarily reflects Matador’s share of 2020 estimated capital expenditures for San Mateo and accounts for remaining portions of the $50 million capital carry an affiliate of Five Point Energy LLC (“Five Point”) agreed to provide as part of the ongoing San Mateo II expansion in Eddy County, New Mexico. San Mateo’s capital expenditures (and Matador’s share of those expenditures) are expected to decline significantly in the fourth quarter of 2020, following the anticipated completion of the 200 million cubic feet per day expansion of the Black River Processing Plant (as defined below), the large diameter pipelines and other related infrastructure in September 2020.


Drilling and Completion Activity Guidance

Matador released one operated drilling rig in late March, and a second operated drilling rig was released in late April. The first rig released had been drilling in the Company’s Wolf asset area in Loving County, Texas, and Matador plans to complete and turn to sales all wells drilled, but not yet completed, in the Wolf asset area during the second quarter of 2020. The second rig released had been drilling five wells in the Stebbins area and surrounding leaseholds in the southern portion of the Arrowhead asset area (the “Greater Stebbins Area”). These five wells are the “Leatherneck” wells mentioned in the Company’s April 13, 2020 press release, and Matador expects the Leatherneck wells to be completed and turned to sales in the summer of 2020. During the second half of 2020, Matador expects to have all three of its drilling rigs operating in the Delaware Basin. Two of these rigs are expected to operate in the Stateline asset area with the third rig operating primarily in the Rustler Breaks and Antelope Ridge asset areas. Matador plans to begin drilling its next four wells on the Rodney Robinson tract in the western portion of the Antelope Ridge asset area in the fourth quarter of 2020, but these wells are not expected to be completed and turned to sales until early in the second quarter of 2021.

The tables below present our original and updated guidance estimates for wells to be completed and turned to sales in 2020.

2020 Estimated Wells Turned to Sales – Original Guidance

2020 Estimated Wells Turned to Sales – Updated Guidance

Gross

Net

Gross

Net

Operated

69

58.0

Operated

53

45.9

Non-Operated

81

5.6

Non-Operated

43

2.7

Total

150

63.6

Total

96

48.6

As of and as provided on February 25, 2020.

As of and as updated on April 29, 2020.

During the first quarter of 2020, Matador completed and turned to sales 39 gross (15.9 net) operated and non-operated wells, including 17 gross (15.6 net) operated and 22 gross (0.3 net) non-operated wells. These first quarter 2020 completions are included in the estimated totals for wells to be completed and turned to sales in the full year 2020 updated guidance provided above.

Of the 53 operated horizontal wells expected to be completed and turned to sales in 2020, 44, or 83%, are expected to have lateral lengths greater than one mile and 39, or 74%, are expected to be two-mile laterals. The average completed lateral length of these 53 operated horizontal wells is anticipated to be 8,700 feet, as compared to an average completed lateral length of 5,700 feet for operated horizontal wells completed and turned to sales in 2019.

Second Quarter 2020 Updated Completions and Production Cadence

Second Quarter 2020 Drilling and Completion Activity

During the remainder of the second quarter of 2020, Matador expects to operate four drilling rigs in the Delaware Basin.

Contacts

Mac Schmitz

Capital Markets Coordinator

(972) 371-5225

[email protected]

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