Matador Resources (NYSE: MTDR) reported Q1 EPS of $0.19, $0.02 better than the analyst estimate of $0.17. Revenue for the quarter came in at $173.89 million versus the consensus estimate of $200.44 million.

Management Comments

Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “The first quarter of 2019 was another well executed quarter for Matador, evidenced by strong operational and financial results and highlighted by the announcement of a second strategic midstream transaction with our joint venture partner, Five Point, to expand San Mateo’s natural gas gathering and processing, salt water gathering and disposal and oil gathering operations in the Delaware Basin. Notably, our asset teams continued to deliver strong well results across each of our asset areas in the Delaware Basin during the first quarter, and as a result, our Delaware Basin average daily oil equivalent production exceeded 50,000 BOE per day for the first time, reaching 52,600 BOE per day. Matador’s total oil, natural gas and oil equivalent production were all at record highs in the first quarter, with our average daily oil equivalent production at just under 60,000 BOE per day. In addition, during the first quarter of 2019, Matador announced a 28% increase in its Delaware Basin inventory to approximately 2,300 net operated drilling locations at December 31, 2018, and, consistent with our prior estimates, these estimated future drilling locations were based almost entirely on a 160-acre well spacing pattern to mitigate potential “parent-child” well interference problems.

“We continued to make progress with our various capital discipline and capital efficiency initiatives during the first quarter of 2019, as we seek to more closely balance capital spending with cash flows and other sources of capital. As previously reported, we completed our nine-well South Texas drilling program during the first quarter and released the related rig in early February. Five of these wells were completed and turned to sales as of the end of the first quarter, and the remaining four wells have been or are expected to be turned to sales during the second quarter. As noted above, we entered into a capital efficient transaction for the expansion of San Mateo, whereby Matador expects to receive a $50 million capital carry from Five Point. We are also working to implement practices to improve the capital efficiency of our drilling and completion operations and are pleased to report that capital expenditures associated with drilling, completing and equipping certain of our operated wells in the Delaware Basin and South Texas were approximately $10 million less during the first quarter than we had originally estimated, primarily attributable to lower-than-expected stimulation costs, including from the use of increased quantities of regional sand in our stimulation operations.

“As promised, we also continued working to narrow any spending gap for 2019 by converting certain non-cash assets to cash and by divesting portions of our non-core assets, particularly in South Texas and in the Haynesville shale. As reported in our fourth quarter 2018 earnings release on February 26, 2019, our initial efforts were expected to result in approximately $50 to $55 million in cash to Matador’s balance sheet from a number of transactions closed or under contract to close, not including the $50 million in capital carry we expect from Five Point as part of the San Mateo expansion. Today, we are pleased to report that we have closed or have under contract to sell and have received or expect to receive shortly the proceeds from most of these initial efforts, which include specifically, among others, (i) $14.7 million in performance incentives received from Five Point in March 2019 attributable to the formation of San Mateo I and (ii) approximately $18 million attributable to the sale of portions of our Eagle Ford and Haynesville properties. We continue to receive offers from other operators on our various properties in South Texas and Northwest Louisiana and East Texas, and we expect to report progress in future periods toward divesting additional portions of these assets as we identify and complete satisfactory transactions.

“We are encouraged by the recent increase in oil prices and have taken advantage of this uptick in prices to increase our oil hedging position such that approximately 70% of our anticipated oil production is now hedged for the remainder of 2019. Of course, should oil prices remain at their current levels or increase further, the additional cash flows we may receive above our original expectations for 2019 should also help to narrow any spending gap. In addition, we look forward to the improvements in capital efficiency we expect to achieve as Matador begins to drill more one and a half to two mile laterals during the remainder of 2019 and into 2020. As a result of our continuing land efforts to make small acreage acquisitions and execute strategic acreage trades, Matador now expects that approximately 85% of the wells we plan to complete and turn to sales in 2020 will have lateral lengths greater than one mile. Please review the short slide presentation accompanying this earnings release for additional information on our continuing efforts to improve capital efficiency throughout 2019 and 2020.

“We remain confident in the plan we provided to investors on February 26, 2019 to methodically grow the per share value of Matador by drilling better wells, improving our capital efficiencies and coordinating our highly complementary exploration, production and midstream activities. In this manner, we are committed to continuing to build value for Matador shareholders.”

For earnings history and earnings-related data on Matador Resources (MTDR) click here.