Matador Resources (MTDR) Assigned 'B' Rating by S&P; Outlook Stable

Standard & Poor's Ratings Services today assigned its 'B' corporate credit rating to Dallas-based Matador Resources Co. (NYSE: MTDR). The outlook is stable. At the same time, we assigned our 'B-' issue-level rating to Matador Resources' proposed $350 million senior unsecured notes due 2023. The recovery rating on the notes is '5', indicating our expectations of modest (10% to 30%; at the upper end of the range) recovery to creditors in the event of a payment default.

"The ratings on Matador Resources reflect our view of the company's 'vulnerable' business risk and 'significant' financial risk profiles," said Standard & Poor's credit analyst Christine Besset.

Matador Resources is a small E&P company with three key operating areas: the oil-rich Eagle Ford shale (South Texas), the oil-rich Permian Basin (West Texas and South East New Mexico), and the dry gas Haynesville shale/Cotton Valley (East Texas and North Louisiana). Matador Resources has transitioned over the past three years from a natural gas focused entity to one more balanced between oil and gas, as it directed drilling activity toward the liquids-rich Eagle Ford shale and de-emphasized activity in the gassy Haynesville/Cotton Valley.

We view Matador's liquidity as "adequate," based on our estimate that liquidity sources will exceed uses by at least 1.2x for the next 12 months, and that sources would exceed uses even if forecasted EBITDA declined by 15%.

The stable outlook reflects our view that Matador Resources will continue to grow its reserves and production while maintaining FFO/debt above 20% and debt/EBITDA below 4x.

We could lower the rating if we expected FFO/debt to fall below 20% or debt/EBITDA to exceed 4x with no near-term remedy, or if liquidity deteriorated. This would most likely occur if commodity prices were to significantly weaken further, the company did not meet our oil production growth expectations, or if capital spending exceeded cash flows by significantly more than currently contemplated.

An upgrade would be possible if Matador Resources continues to improve is operational performance such that the scale of its reserves and production are more consistent with a "weak" business risk profile, while maintaining "adequate" liquidity and FFO/debt above 30%.

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