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Why Is Matador (MTDR) Down 19.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Matador Resources (MTDR - Free Report) . Shares have lost about 19.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Matador due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Matador Resources Q3 Earnings Top Estimates, Rises Y/Y

Matador Resources Company recently reported third-quarter 2018 adjusted earnings of 48 cents per share, beating the Zacks Consensus Estimate of 37 cents and also improving from the year-ago profit of 18 cents. Delaware Basin production and increased realized commodity prices backed the strong third-quarter earnings of the company.

Revenues of $207.2 million rose from the year-ago quarter’s $126.3 million, but marginally missed the Zacks Consensus Estimate of $208 million.

Production & Price Realization

During third-quarter 2018, total production volumes averaged 5,025 thousand barrels of oil equivalent (MBOE) (comprising 59.2% oil), higher than 3,860 MBOE recorded a year ago.

The average production volumes of oil were recorded at 32,317 barrels per day (Bbls/d), up from 23,538 Bbls/d in third-quarter 2017. Natural gas production was recorded at 133.8 million cubic feet per day (MMcf/d), up from 110.5 MMcf/d in the year-ago period.

Record oil-equivalent production in the Delaware Basin aided the quarterly volumes.

Realized price for oil (including derivatives) was recorded at $58.97 per barrel, up from $46.47 in the year-ago quarter. Also, natural gas price of $3.77 per thousand cubic feet (Mcf) was higher than $3.42 in the prior-year quarter.  

Balance Sheet

As of Sep 30, 2018, the company reported cash and restricted cash of $53 million. The company recorded a long-term debt of $1,065.1 million, which includes $325 million in its borrowing under credit agreement. Its debt-to-capitalization ratio stands at 38.2%.

Capital Spending

The company spent $185.3 million through the third quarter of 2018. Matador Resources allocated $161.7 million of the total amount to drill, equip and complete wells while $23.6 million was expended for midstream operations.

Guidance

Matador Resources raised its 2018 production guidance to 18.8-19 million barrels of oil equivalent (BOE) from the prior guided range of 18.3-18.7 million BOE, which represents a 33% year-over-year increase. Total oil production for the full year is expected in the range of 11-11.1 million Bbls, which translates into a year-over-year surge of 41%.

The company maintained its capital spending for midstream activities at $70-$90 million through 2018. However, for drilling, completing and equipping wells, Matador is planning to spend $645-$680 million, higher than its prior guided range of $620-$650 million.

Through 2018, the company expects to complete and bring 154 gross wells online, higher than previous projection of 151 wells.

Along with the earnings release, Matador Resources announced that in September, the company acquired around 8,400 leasehold acres for about $387 million in New Mexico’s Lea and Eddy counties from the Bureau of Land Management of New Mexico. The move further bolsters the company’s presence in the region and should increase its output capacity in the future.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 13.91% due to these changes.

VGM Scores

Currently, Matador has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Matador has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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