Matador Resources Company Announces 2021 Operating Plan and Market Guidance

DALLAS–(BUSINESS WIRE)–Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today announced its full year 2021 operating plan and market guidance. A slide presentation summarizing the highlights of Matador’s 2021 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 press release issued today, Matador also reported its financial and operating results for the fourth quarter and full year 2020.

Full Year 2021 Guidance Summary

Matador’s full year 2021 guidance estimates are summarized in the table below.

 

Guidance Metric

Actual

2020 Results

2021 Guidance

% YoY

Change(1)

Total Oil Production

15.9 million Bbl

17.2 to 17.8 million Bbl

+10%

Total Natural Gas Production

69.5 Bcf

76.0 to 79.0 Bcf

+12%

Total Oil Equivalent Production

27.5 million BOE

29.9 to 31.0 million BOE

+11%

D/C/E CapEx(2)

$450 million

$525 to $575 million

+22%

Midstream CapEx(3)

$89 million

$20 to $30 million

-72%

Total D/C/E and Midstream CapEx

$539 million

$545 to $605 million

+7%

 

(1) Represents percentage change from 2020 actual results to the midpoint of 2021 guidance.

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

(3) Primarily reflects Matador’s share of capital expenditures for San Mateo Midstream, LLC (“San Mateo”).

 

The full year 2021 guidance estimates presented in the table above are based upon the following key assumptions for 2021 drilling and completions activity and capital expenditures.

  • Matador estimates 2021 capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) of $525 to $575 million, inclusive of an estimated $58 million for non-operated well opportunities, $38 million for artificial lift and other production-related capital expenditures, $18 million of capitalized general and administrative and interest expenses and an average 10% increase in drilling and completion costs in anticipation of increased service costs beginning in the second quarter of 2021. Matador anticipates continued improvement in its capital efficiency in 2021, with drilling and completion costs for operated horizontal wells turned to sales in 2021 expected to average approximately $730 per completed lateral foot.
  • Matador began 2021 operating three drilling rigs in the Delaware Basin but plans to add a fourth operated drilling rig beginning in March. The Company then expects to operate four drilling rigs in the Delaware Basin throughout the remainder of 2021.
  • Matador expects 49 gross (45.6 net) operated horizontal wells, with an average completed lateral length of 10,400 feet, should be turned to sales during 2021. Matador estimates that 48 wells, or 98%, will have lateral lengths of two miles or greater. Matador anticipates that it will have 83 gross (76.8 net) operated wells in progress at varying times during 2021, 82 of which are expected to have lateral lengths of two miles or greater.
  • Matador expects to participate in 76 gross (7.0 net) non-operated well opportunities during 2021, including 68 gross (6.7 net) non-operated wells anticipated to be completed and turned to sales in the Delaware Basin and eight gross (0.3 net) non-operated wells anticipated to be completed and turned to sales in the Haynesville shale. Matador estimates that 72 of these non-operated wells, or 95%, will have lateral lengths greater than one mile, including 51 wells, or 67%, that are expected to have lateral lengths of two miles or greater.
  • Matador estimates 2021 midstream capital expenditures of $20 to $30 million. This estimate reflects Matador’s 51% share of San Mateo’s 2021 estimated capital expenditures of $39 to $59 million.

Management Comments Regarding 2021 Operating Plan

Joseph Wm. Foran, Matador’s Chairman and CEO, commented, “The Board, the staff and I are pleased today to provide our 2021 operating plan and market guidance. We believe this year should be particularly exciting for Matador and its shareholders, as we work to continue developing our excellent Delaware Basin assets, transition to free cash flow, pay down debt and institute a dividend to augment our returns to our shareholders.

We began 2021 operating three drilling rigs in the Delaware Basin and had planned to operate these three rigs there throughout 2021. As a result of recent actions taken by the newly inaugurated Biden administration, we have elected to pick up a fourth operated drilling rig beginning in March to ensure the orderly development of our federal leasehold in the Delaware Basin going forward. As you are most likely aware, in late January 2021, following President Biden’s inauguration, the United States Department of the Interior ordered a 60-day pause limiting the authority of local offices of the Bureau of Land Management (“BLM”) to grant federal drilling permits and certain extensions, sundries, rights-of-way and other necessary approvals for the development of federal oil and natural gas leases. This order did not impact operations on existing valid federal leases, and we have continued active operations on our existing federal properties, such as the Stateline asset area and the Rodney Robinson leasehold, without any difficulties since this order was issued. While we remain optimistic that the BLM will resume its timely approval of such requests on federal leases in late March following this 60-day pause, we cannot be sure as to what, if any, changes may be forthcoming regarding operations on federal properties and our ability to develop our federal leasehold. Thus, we believe it is a prudent action on our part to add a fourth drilling rig, for now, to our 2021 operating plan to accelerate the development of our existing federal permits. Beginning in March 2021, we expect to begin operating four drilling rigs in the Delaware Basin and plan to do so throughout the remainder of 2021, with an increased focus on the development of our federal properties in New Mexico.

We were pleased to announce yesterday that Matador’s Board of Directors adopted a dividend policy and declared Matador’s first quarterly cash dividend of $0.025 per share, amounting to $0.10 per share, or approximately $12 million, on an annualized basis. Initiation of the dividend policy marks a significant step for Matador in returning value to our shareholders and also indicates our confidence in Matador’s financial strength and ability to generate free cash flow going forward. During the fourth quarter of 2020, Matador achieved adjusted free cash flow, and we expect to generate adjusted free cash flow in aggregate in 2021 as well, even in light of adding the fourth operated drilling rig, given the current outlook for oil and natural gas prices in 2021.

Matador’s 2021 drilling program will focus on our federal properties, which include some of the best acreage in the Delaware Basin, including the continued development of our Stateline asset area in southern Eddy County, New Mexico, continued drilling of the Rodney Robinson federal leasehold in western Antelope Ridge and further development of the Greater Stebbins Area in the southern portion of our Arrowhead asset area, where all wells we turn to sales in 2021 are anticipated to be two-mile or longer laterals. In fact, the transition to drilling and completing longer laterals throughout our various asset areas in the Delaware Basin, which we began in 2019 and continued in 2020, has been fully realized. In 2021, 98%, or all but one, of the operated horizontal laterals we complete and turn to sales are expected to have lateral lengths of two miles or greater, as compared to 74% in 2020, 9% in 2019 and only one two-mile lateral in 2018. These longer laterals are delivering better well performance and economic returns. In 2021, Matador should also begin receiving performance incentives from our joint venture partner in San Mateo as we execute our operational plan in the Stateline asset area and the Greater Stebbins Area and connect to San Mateo’s gathering and transportation systems. This will further enhance the returns from these wells and provide an additional source of free cash flow to Matador in 2021.

We are anticipating a number of key milestones in 2021, as we did in 2020, that are expected to add significant value to Matador and its midstream affiliate, San Mateo, while positioning Matador for continued growth and free cash flow in the coming years. The first of these milestones should occur in March 2021 when production from four new Rodney Robinson wells in the western portion of our Antelope Ridge asset area and two wells in our Ranger asset area is turned to sales. The second milestone should be realized in April and May when we turn to sales production from the first 13 Voni wells in our Stateline asset area, all of which are expected to have completed lateral lengths of approximately 12,000 feet, or about 2.3 miles. Given the strong early performance from the first 13 Boros wells turned to sales in September 2020 in the Stateline asset area, we are particularly excited to get this first group of Voni wells on production. During the summer, we expect to reach a third milestone when we turn to sales production from the first four of 13 wells we expect to drill and complete in the Greater Stebbins Area during 2021. The fourth and final key milestone for 2021 should occur in late October and through November when the remaining nine wells in the Greater Stebbins Area, along with the next 13 Boros wells in the Stateline asset area, are expected to be turned to sales. As a result of our operated and non-operated drilling activities in 2021, we anticipate 10 to 12% growth in our oil equivalent production and should exit 2021 well positioned for further growth in 2022. This will not be ‘growth for growth’s sake’ but profitable growth at a measured pace that results from our decision to preserve and bring forward the value of our federal properties for all of Matador’s stakeholders at a time of increasing federal uncertainty and increasing commodity prices.

San Mateo concluded a record quarter in the fourth quarter of 2020 and a record year in 2020 and is poised to have another record year in 2021. During the fourth quarter of 2020, San Mateo also achieved adjusted free cash flow, as it enjoyed the first full quarter of operations following the completion and successful startup of the expansion of the Black River Processing Plant and related pipeline infrastructure and began gathering and processing natural gas and gathering, transporting and handling oil and produced water from Matador’s Stateline asset area and the Greater Stebbins Area. San Mateo expects to generate adjusted free cash flow throughout 2021, given the current maintenance level of capital expenditures budgeted for 2021. The San Mateo team will be working hard in 2021 to add new non-Matador customers to its ‘three-pipe’ midstream system throughout Eddy County, New Mexico, which, if successful, could require additional capital expenditures in 2021.

As we execute our 2021 operating plan, Matador will continue to be mindful of our balance sheet as we have always been, and one of our key objectives for 2021 will be continuing to pay down debt under our reserves-based credit facility. As we reported in our fourth quarter 2020 earnings release issued today along with this 2021 guidance release, we have reduced the borrowings outstanding under our reserves-based credit facility by $45 million and under the San Mateo credit facility by $11 million since our previous earnings release in late October 2020. We ended 2020 with a leverage ratio under our reserves-based credit facility of 2.9x, below our expectations of 3.2x at the end of the third quarter and far below our expectations in March and April of 2020 of as high as 3.9x by year-end 2020. The Board and I would like to congratulate and commend the entire Matador team for all the hard work and professionalism they demonstrated in 2020 to allow Matador to successfully weather the many challenges faced by our society and the oil and natural gas industry in 2020 and to position ourselves well for further prosperity in 2021 and going forward.

The Board, the staff and I are confident in our abilities to execute this 2021 operating plan. We are excited about the milestones in front of us in 2021 and are off to a good start. In short, we believe this 2021 operating plan should generate substantial value growth for our stakeholders in the year ahead and for years to come.”

Federal Acreage and Permits

In light of the Company’s decision to add a fourth rig to its 2021 operated drilling program beginning in March to focus on development of its federal properties, Matador provides the following update on its federal acreage position and federal drilling permits.

Federal Acreage Update

At December 31, 2020, Matador held approximately 124,700 net leasehold and mineral acres in the Delaware Basin in Eddy and Lea Counties, New Mexico and in Loving County, Texas, of which approximately 34,500 net acres, or about 28%, were on federal lands. Approximately 90,200 net acres, or about 72%, of the Company’s Delaware Basin leasehold and mineral position are comprised of private (fee) and state leasehold. In addition, at December 31, 2020, Matador held approximately 26,300 net acres in the Eagle Ford shale play in South Texas and approximately 17,700 net acres in the Haynesville shale play in Northwest Louisiana, the vast majority of which were located on private (fee) and state lands. Including the Company’s South Texas and Northwest Louisiana acreage and mineral positions, at December 31, 2020, only about 21% of Matador’s total net leasehold and mineral acreage was on federal lands, giving the Company considerable options for oil and natural gas development across its acreage position and years of additional drilling inventory, including many “A+ locations,” outside of its federal leasehold position.

A more detailed breakdown of Matador’s federal leasehold position by asset area in the Delaware Basin is provided in the table below.

 

 

 

Delaware Basin

Federal

Federal, as % of

Delaware Basin Asset Area

County

Leasehold

Leasehold

Delaware Basin Leasehold

 

 

(net acres)

(net acres)

 

Antelope Ridge

Lea

16,000

7,300

6%

Rustler Breaks

Eddy

26,200

1,600

1%

Stateline

Eddy

2,800

2,800

2%

Arrowhead

Eddy

26,800

14,000

11%

Ranger

Lea

18,400

8,400

7%

Twin Lakes

Lea

23,200

400

Wolf/Jackson Trust

Loving

10,800

Other

500

TOTAL

 

124,700

34,500

28%

 

At December 31, 2020, Matador estimates that approximately 70% of its federal leasehold in the Delaware Basin was held by production, including all 1,200 net acres in the recently drilled Rodney Robinson leasehold and approximately 1,280 net acres in the Stateline asset area. Matador should soon have the entire Stateline asset area held by production when the first 13 Voni wells in the western portion of the Stateline asset area are turned to sales, which is expected to begin in April 2021. Once the Stateline asset area is fully held by production, Matador estimates that approximately 75% of its federal leasehold would then be held by production. Further, approximately 23%, or 7,800 net acres, of Matador’s federal acreage position in the Delaware Basin, or almost all the Company’s remaining federal leasehold in the Delaware Basin, is not subject to expiration before 2028.

Federal Permits Update

The table below summarizes the Company’s undrilled federal drilling permits, approved and in progress, at February 23, 2021.

 

 

 

Undrilled Permits

Undrilled Permits

Delaware Basin Asset Area

County

Approved and Received

in Progress

Antelope Ridge (Rodney Robinson)(1)

Lea

18

1

Antelope Ridge (All other)

Lea

30

13

Arrowhead

Eddy

32

45

Ranger(1)

Lea

21

6

Rustler Breaks

Eddy

22

33

Stateline (Boros)(1)

Eddy

23

Stateline (Voni)(1)

Eddy

31

TOTAL

 

177

98

 

(1) Does not include permits approved for 10 Rodney Robinson, 21 Boros, 13 Voni and two Ranger wells (46 wells) that were drilled in 2020 or are currently in progress in early 2021.

 

At February 23, 2021, Matador had secured 177 approved and undrilled federal drilling permits and had 98 additional permits under review by the BLM for future drilling on federal lands across its various asset areas in the Delaware Basin. In addition, at February 23, 2021, Matador had a total of 19 wells undergoing completion operations on its federal leasehold, including 13 Voni wells in the Stateline asset area, four wells on the Rodney Robinson leasehold and two wells in the Ranger asset area, as well as eight (soon to be 13) new Boros wells currently being drilled in the Stateline asset area. These 27 wells are excluded from the 177 approved and undrilled federal permits noted above, although these wells have yet to be turned to sales. Since the Company’s last update of its federal permit status on October 27, 2020, Matador has drilled wells using a total of 12 federal permits—two in its Ranger asset area, two additional permits in its Rodney Robinson leasehold and eight (soon to be 13) Boros permits in the Stateline asset area. A total of 24 federal permits in the Rustler Breaks and Arrowhead asset areas were also allowed to expire prior to December 31, 2020, as these permits were for shorter lateral wells (primarily one-mile laterals) or wells that are not expected to be drilled within the next several years given Matador’s current expectations for its operated drilling program. Matador also received federal permits for three new wells in its Arrowhead asset area during the fourth quarter of 2020.

At February 23, 2021, Matador had received approved drilling permits for all of its planned Boros and Voni wells in the Stateline asset area and all but one of its planned wells on the Rodney Robinson leasehold. The Company also believes that it has secured all necessary surface disturbance, facilities and right-of-way permits necessary to complete its planned development of these asset areas. Matador expects to continue submitting requests for new federal drilling permits, sundries, extensions to existing permits, rights of way and other necessary federal approvals for the development of its federal leases and remains optimistic that the BLM will resume its approval of these requests on existing federal leases in late March following the 60-day pause imposed by the United States Department of the Interior in late January 2021.

2021 Operating Plan

The table below provides Matador’s expectations for operated and non-operated wells to be completed and turned to sales during 2021. Additional details regarding Matador’s drilling and completions program for 2021 are provided in the sections that follow and in the slide presentation accompanying this press release.

 

 

Operated

 

Non-Operated

 

Total

Gross Operated

Asset/Operating Area

Gross

Net

 

Gross

Net

 

Gross

Net

Well Completion Intervals

Western Antelope Ridge

(Rodney Robinson)

4

3.8

 

 

4

3.8

2-3BS, 2-WC A-XY

Antelope Ridge

(All Other)

 

20

1.4

 

20

1.4

No operated completions in 2021

Arrowhead

13

11.4

 

12

1.2

 

25

12.6

4-2BS, 4-3BS, 4-WC A-XY, 1-WC B

Ranger

4

2.7

 

8

1.3

 

12

4.0

4-2BS

Rustler Breaks

 

28

2.8

 

28

2.8

No operated completions in 2021

Stateline

26

26.0

 

 

26

26.0

3-AVLN, 3-1BS, 6-2BS, 4-3BSC,

4-WC A-XY, 4-WC A-Lower, 2-WC B

Twin Lakes

 

 

No completions in 2021

Wolf/Jackson Trust

2

1.7

 

 

2

1.7

2-2BS

Delaware Basin

49

45.6

 

68

6.7

 

117

52.3

 

Eagle Ford Shale

 

 

No completions in 2021

Haynesville Shale

 

8

0.3

 

8

0.3

No operated completions in 2021

Total

49

45.6

 

76

7.0

 

125

52.6

 

 

Note: AVLN = Avalon; WC = Wolfcamp; BS = Bone Spring; BSC = Bone Spring Carbonate. For example, 2-3BS indicates two Third Bone Spring completions and 2-WC A-XY indicates two Wolfcamp A-XY completions for full year 2021.

 

Delaware Basin

Matador began 2021 operating three drilling rigs in the Delaware Basin but has recently contracted a fourth operated drilling rig, which is expected to begin drilling operations in the Company’s Stebbins area and surrounding leasehold in the Arrowhead asset area (the “Greater Stebbins Area”) in March 2021. Matador then expects to operate four drilling rigs in the Delaware Basin throughout the remainder of 2021. Two of these rigs are expected to operate full time in the Stateline asset area. The other two rigs are expected to operate in certain of the Company’s other asset areas, including the Greater Stebbins Area, the Wolf asset area, the Ranger asset area and the Rodney Robinson leasehold in the western portion of the Antelope Ridge asset area.

Matador expects to complete and turn to sales 49 gross (45.6 net) operated wells in the Delaware Basin in 2021, as follows.

  • Six gross (5.1 net) wells in the first quarter, including four wells in the Rodney Robinson leasehold and two wells in the Ranger asset area;
  • 15 gross (14.7 net) wells in the second quarter, including the first 13 Voni wells in the Stateline asset area and two wells in the Wolf asset area;
  • Four gross (3.5 net) wells in the third quarter, all in the Greater Stebbins Area; and
  • 24 gross (22.3 net) wells in the fourth quarter, including nine wells in the Greater Stebbins Area, 13 additional Boros wells in the Stateline asset area and two wells in the Ranger asset area.

Additional key features of Matador’s 2021 Delaware Basin operating program are noted below.

  • 98% of Matador’s gross operated horizontal wells completed and turned to sales in 2021 are expected to have lateral lengths of two miles or greater, as compared to 74% in 2020 and just 9% in 2019. Only one well in the Wolf asset area is expected to be a 1.5-mile lateral. Matador estimates its average completed lateral length for operated wells turned to sales in 2021 should be approximately 10,400 feet, an increase of 18%, as compared to an average completed lateral length of approximately 8,800 feet in 2020.
  • Matador expects to complete and turn to sales approximately 508,000 gross lateral feet in its operated horizontal wells in 2021, an increase of 9%, as compared to 465,000 gross lateral feet in 2020. These projected results reflect improvements the Company continues to make in its operating efficiency and overall rig productivity.
  • Matador anticipates continued improvement in its capital efficiency, with drilling and completion costs for operated horizontal wells turned to sales in 2021 estimated to average approximately $730 per completed lateral foot. This represents a 14% decline in average drilling and completion costs per completed lateral foot, as compared to $850 per completed lateral foot in 2020, and a decline of 37% from $1,165 per completed lateral foot in 2019. Matador anticipates this continued improvement in capital efficiency in 2021, despite its expectations of an average 10% increase in drilling and completions costs beginning in the second quarter of 2021.
  • In addition to the capital efficiencies generated using multi-well pads and other techniques, co-development of formations in Matador’s Stateline asset area, the Rodney Robinson leasehold in western Antelope Ridge and the Greater Stebbins Area should continue to boost the well returns in those areas, as Matador believes this approach should minimize the impact of reservoir drainage, as well as shut-ins and downtime associated with hydraulic fracturing operations in future wells.
  • The average working interest of operated wells expected to be completed and turned to sales in the Delaware Basin in 2021 is estimated to be 93%, as compared to 86% in 2020.
  • Production growth and capital expenditures are expected to continue to be uneven or “lumpy” on a quarterly basis, similar to what Matador experienced in 2020. Capital expenditures are expected to be highest in the first and third quarters of 2021, as most of the Company’s completion activities for 2021 should occur during those quarters.

Contacts

Mac Schmitz

Capital Markets Coordinator

(972) 371-5225

[email protected]

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