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Matador Resources Company Announces Initial Rodney Robinson Well Results, Improves Hedging Protection and Provides Operational Update

Apr 13, 2020

DALLAS--(BUSINESS WIRE)--Apr. 13, 2020-- Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today announced the results from its first six “Rodney Robinson” wells in the Antelope Ridge菠萝蜜影视频 asset area and provided updates to its 2020 operational plan and hedging program.

Key Highlights

Key highlights of this release include the following:

  • Rodney Robinson wells achieve Matador record 24-hour initial potential (“IP”) test results from all three formations tested and are expected to contribute 8 to 10% of Company’s total production for the remainder of 2020;
  • Restructured 2020 oil hedges now cover 75 to 80% of anticipated oil production at $35 per barrel or above for remainder of 2020; and
  • Recent actions taken by Matador 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 capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) and $40 million in operating expenses, in particular lease operating and general and administrative expenses.

Rodney Robinson Well Results

Matador is pleased today to announce the results from the first six wells completed and turned to sales on the Rodney Robinson tract in the western portion of its Antelope Ridge asset area in Lea County, New Mexico, all of which are two-mile laterals. Matador acquired this 1,200 gross and net acre tract in the September 2018Bureau of Land Management lease sale (the “BLM Acquisition”), and these six Rodney Robinson wells are the first wells drilled and completed on the 8,400 gross and net acres the Company acquired in the BLM Acquisition.

菠萝蜜影视频 The following table highlights the 24-hour IP test results from each of these wells.

 

Completion

 

24-hr IP

 

BOE/d /

 

Oil

 

 

Asset Area/Well Name

Interval

 

(BOE/d)

 

1,000 ft.(1)

 

(%)

 

Comments

Antelope Ridge, Lea County, NM

 

 

 

 

 

 

 

 

 

Rodney Robinson Federal #102H

Upper
Avalon

 

2,706

 

271

 

80%

Record IPs for Avalon wells drilled and completed to date by Matador in the Delaware Basin菠萝蜜影视频. Rodney Robinson Federal #101H still cleaning up, and flow rates continue to increase.

Rodney Robinson Federal #101H

Lower
Avalon

 

1,525

 

154

 

81%

Rodney Robinson Federal #121H

Second
Bone Spring

 

2,751

 

276

 

82%

Record IPs for Second Bone Spring wells drilled and completed to date by Matador in the Delaware Basin.

菠萝蜜影视频 Rodney Robinson Federal #122H

Second
Bone Spring

 

2,803

 

278

 

80%

Rodney Robinson Federal #201H

Wolfcamp
A-XY

 

4,800

 

503

 

77%

Record IPs for Wolfcamp A-XY wells drilled and completed to date by Matador in the Delaware Basin.

菠萝蜜影视频 Rodney Robinson Federal #202H

Wolfcamp
A-XY

 

4,651

 

462

 

76%

TOTAL

 

 

19,236

 

 

 

79%

 


(1) 24-hr IP per 1,000 feet of completed lateral length.

Matador is clearly very pleased with these IP test results from all six Rodney Robinson wells, which totaled 19,236 barrels of oil equivalent (“BOE”) per day (79% oil), including approximately 15,100 barrels of oil per day and 24.8 million cubic feet of natural gas per day. These IP test results exceeded the Company’s expectations, particularly in the Second Bone Spring and Wolfcamp A-XY formations. Notably, these results include the best IP test results that Matador has achieved to date for wells completed and turned to sales in the Avalon, Second Bone Spring and Wolfcamp A-XY formations throughout the Delaware Basin.

Matador drilled these six gross (6.0 net) Rodney Robinson wells from two, three-well pads. Matador has a 100% working interest and an 87.5% net revenue interest in each of these six wells. This “higher than normal” net revenue interest should substantially increase the economic returns from these wells, especially as these wells are expected to average 1.5 million BOE or better each. In addition, Matador is pleased to report that the costs to drill and complete these Rodney Robinson wells were 10 to 15% less than originally estimated, ranging from $800 to $1,000 per completed lateral foot. These costs are among the lowest drilling and completion costs per lateral foot that Matador has achieved to date in the Delaware Basin.

Matador completed and turned the Rodney Robinson wells to sales at the very end of March 2020. These wells did not contribute to first quarter oil and natural gas production but are expected to contribute approximately 8 to 10% of Matador’s total production for the remainder of 2020. Matador is currently producing these wells into its operated facilities and intends to produce the wells at restricted flow rates during this period of low oil prices below $30菠萝蜜影视频 per barrel. Oil, natural gas and salt water production from these wells is already being transported by pipeline.

The six Rodney Robinson wells are expected to favorably impact the Company’s oil and natural gas production in the second quarter of 2020, despite being produced at restricted flow rates. Matador anticipates that these wells may exhibit shallower initial production declines as compared to nearby one-mile laterals drilled by Matador (and other operators), consistent with the results the Company has observed from the early performance of other two-mile laterals it has drilled and completed in the Delaware Basin to date.

Completing and turning to sales these six Rodney Robinson wells marks the first of several key catalysts that Matador had outlined in prior updates as important milestones for its 2020 operational plan, even as the Company works to reduce its drilling activities from six to three operated rigs by the end of the second quarter of 2020. The next milestone should be reached in mid-summer 2020 when Matador expects to turn to sales five two-mile laterals – the Ray wells – in the Rustler Breaks asset area, and five two-mile laterals – the Leatherneck wells – in the southern portion of its Arrowhead asset area, also referred to as the Greater Stebbins area. In the third quarter of 2020, San Mateo Midstream II, LLC (together with San Mateo Midstream, LLC, “San Mateo”), the Company’s midstream joint venture, plans to complete and place in service its 200 million cubic feet per day expansion of the Black River cryogenic natural gas processing plant (the “Black River Processing Plant”) and associated natural gas trunk lines in Eddy County, New Mexico菠萝蜜影视频. This expansion project is currently on time and on budget.

After the Black River Processing Plant expansion is completed, beginning in September 2020菠萝蜜影视频, the fourth and most significant milestone should be reached, when Matador anticipates it will begin production from the first 13 wells being drilled in the Stateline asset area (the “Boros” wells). Matador expects that the Boros wells should be comparable to or better than the Rodney Robinson wells.

Management Comments

Joseph Wm菠萝蜜影视频. Foran, Matador’s Chairman and CEO, commented, “We believe that the actions described in this press release should have the effect of strengthening our balance sheet and liquidity, validating the capital efficiency and rock quality of the BLM Acquisition and helping to preserve a proven management team and a talented and experienced staff in our offices and in the field for our stakeholders going forward.

“We are very excited, of course, by the results from our first six Rodney Robinson wells. These results represent the culmination of more than 18 months of careful planning, preparation and execution by the Matador team, and it is gratifying to all of us to see this hard work result in six of the best wells we have drilled to date in the Delaware Basin菠萝蜜影视频. We look forward to drilling additional wells on the Rodney Robinson tract in the future, as well as to completing and testing the first Boros wells in the Stateline asset area later this year. In fact, we have a large, multi-year inventory of wells to drill that we believe should have ultimate recoveries of more than one million BOE.

菠萝蜜影视频 “The Board and I would also like to commend Matador’s office and field personnel for their professional response to the dual crises of the Coronavirus and the abrupt decline in oil prices. We deeply appreciate all the Matador team has done in recent weeks to identify ways that Matador can not only reduce capital spending and operating expenses but also increase revenues and cash flows to weather these challenging and unprecedented times in our nation and our industry. We look forward to providing further updates to our 2020 operational plan and to discussing our first quarter operating and financial results with our shareholders and bondholders in the next few weeks.”

Operational Update

On March 11, 2020, Matador announced its plans to reduce its operated drilling program from six to three rigs by June 30, 2020. Matador released the first of these operated rigs in late March as planned. This rig was 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.

Since its March 11, 2020 announcement, Matador has undertaken a number of specific initiatives to protect is balance sheet in 2020, in addition to reducing its operated drilling program from six to three rigs. The Company believes these initiatives should save or cause the Company to receive a sum approaching $340 million菠萝蜜影视频 in 2020, all as compared to its original 2020 estimates, primarily as follows:

  • Operated and non-operated D/C/E capital expenditures are expected to be reduced by approximately $250 million, inclusive of anticipated service cost reductions, or a reduction of 35%, as compared to approximately $720 million in D/C/E capital expenditures at the midpoint of the Company’s original 2020 guidance as provided on February 25, 2020;
  • Operating costs, particularly lease operating and general and administrative expenses, are expected to be reduced by approximately $40 million. Most of these reductions are attributable to general and administrative expenses, resulting primarily from (1) anticipated reductions in 2020 compensation (including salary reductions across the Company and particularly at the officer and Board levels), (2) transitioning certain full-time staff to replace contract labor in the Company’s field operations and (3) no expected increases in headcount in 2020;
  • Discretionary land and seismic expenditures, inclusive of third-party contractor costs, are expected to be reduced by approximately $13 million and pending Eagle Ford and Haynesville transactions are expected to add approximately $7 million in cash receipts;
  • Miscellaneous items including pending tax refunds, third party audits and interest payment reductions, among others, are expected to improve cash flows by approximately $15 million; and
  • Incentive payments of approximately $15 million attributable to the formation of San Mateo were received from Five Point Energy, LLC in March 2020.

菠萝蜜影视频 Matador believes that these initiatives, combined with its cash flow from production, its access to borrowing availability under its reserves-based revolving credit facility and the restructuring of its hedging positions described in the following section, should provide the Company with ample liquidity to operate efficiently during the final three quarters of 2020 and into 2021, while remaining in full compliance with the terms of its reserves-based revolving credit facility. Should future market disruptions occur, however, such as temporary market or regulatory imposed production shut-ins, Matador is prepared to take whatever additional steps may be necessary to protect its balance sheet as well as its exploration and production and midstream businesses going forward.

菠萝蜜影视频 Matador is continuing to evaluate multiple options to optimize its drilling and completion activities for the remainder of 2020. The Company expects to provide more specific details regarding its 2020 operational plan and rig activity and to revise and update its 2020 market guidance along with its first quarter 2020 earnings release. Furthermore, Matador is pleased with the continuing progress of its environmental, social and governance (“ESG”) initiatives, especially with its safety programs and its continuing efforts to transport more of its produced liquids on pipeline rather than by truck.

Hedging Positions Improved and Extended

菠萝蜜影视频 Matador continues to proactively manage its hedging position in this lower commodity price environment. Beginning in the second quarter of 2020, Matador restructured a portion 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. As a result of these modifications, Matador increased its oil volumes hedged during the period

from April through December 2020 by more than 80% as detailed below. The Company recently began adding new WTI oil hedges for 2021 to provide similar protections next year.

Matador currently has approximately 9.5 million barrels of oil hedged (representing approximately 75 to 80% of anticipated oil production) for the period from April through December 2020. These hedges include approximately 6.5 million barrels of fixed-price oil swaps at $35.00 per barrel and 2.7 million barrels of oil collars with a weighted average floor price of approximately $48.00 per barrel and a weighted average ceiling price of approximately $66.00 per barrel. The Company also has approximately 0.3 million barrels in bought puts at $48.00 per barrel for the period from April through June 2020.

Matador also has in place Midland-Cushing oil basis differential swaps for the remainder of 2020 and for full years 2021 and 2022 for approximately 7.3 million barrels at +$0.61 per barrel, 8.4 million barrels at +$0.87 per barrel and 5.5 million barrels at +$0.95 per barrel, respectively. These basis swaps have become increasingly important, particularly in the near term, as the Midland-Cushing oil basis differential has widened considerably in recent weeks, with April 2020 futures for this differential currently trading at approximately -$6.00菠萝蜜影视频 per barrel.

The following is a summary of the Company’s open derivative financial instruments through 2022 at March 31, 2020, pro forma for all transactions completed in early April 2020.

 

 

Q2 2020

 

Q3 2020

 

Q4 2020

 

FY 2021

 

FY 2022

Oil Collars - West Texas Intermediate

 

 

 

 

 

 

 

 

 

 

Costless Collars - Volumes Hedged (MBbl)

 

998

 

879

 

879

 

-

 

-

Weighted-average Price Ceiling ($/Bbl)

 

$65.90

 

$66.05

 

$66.05

 

-

 

-

菠萝蜜影视频 Weighted-average Price Floor ($/Bbl)

 

$48.03

 

$48.03

 

$48.03

 

-

 

-

WTI Swaps - Volumes Hedged (MBbl)

 

2,160

 

2,160

 

2,160

 

2,040

 

-

Swap Price ($/Bbl)

 

$35.00

 

$35.00

 

$35.00

 

$35.26

 

-

WTI Bought Puts - Volumes Hedged (MBbl)

 

272

 

-

 

-

 

-

 

-

菠萝蜜影视频 Put Price ($/Bbl)

 

$48.00

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

Oil Basis Swaps - Midland-Cushing Differential

 

 

 

 

 

 

 

 

 

 

Oil Basis Swaps - Volumes Hedged (MBbl)

 

2,439

 

2,448

 

2,448

 

8,400

 

5,520

菠萝蜜影视频 Weighted-average Price ($/Bbl)

 

+$0.61

 

+$0.61

 

+$0.61

 

+$0.87

 

+$0.95

About Matador Resources Company

Matador is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Its current operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. Additionally, Matador conducts midstream operations, primarily through its midstream joint venture, San Mateo, in support of its exploration, development and production operations and provides natural gas processing, oil transportation services, natural gas, oil and salt water gathering services and salt water disposal services to third parties.

For more information, visit Matador Resources Company at vtoplc.net.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking statements” are statements related to future, not past, events. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as “could,” “believe,” “would,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “should,” “continue,” “plan,” “predict,” “potential,” “project,” “hypothetical,” “forecasted” and similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements include, but are not limited to, statements about guidance, projected or forecasted financial and operating results, future liquidity, results in certain basins, objectives, project timing, expectations and intentions, regulatory and governmental actions and other statements that are not historical facts. Actual results and future events could differ materially from those anticipated in such statements, and such forward-looking statements may not prove to be accurate. These forward-looking statements involve certain risks and uncertainties, including, but not limited to, the following risks related to financial and operational performance: general economic conditions; the Company’s ability to execute its business plan, including whether its drilling program is successful; changes in oil, natural gas and natural gas liquids prices and the demand for oil, natural gas and natural gas liquids; its ability to replace reserves and efficiently develop current reserves; costs of operations; delays and other difficulties related to producing oil, natural gas and natural gas liquids; delays and other difficulties related to regulatory and governmental approvals and restrictions; its ability to make acquisitions on economically acceptable terms; its ability to integrate acquisitions; availability of sufficient capital to execute its business plan, including from future cash flows, increases in its borrowing base and otherwise; weather and environmental conditions; the operating results of the Company’s midstream joint venture’s expansion of the Black River cryogenic processing plant, including the timing of the further expansion of such plant; the timing and operating results of the buildout by the Company’s midstream joint venture of oil, natural gas and water gathering and transportation systems and the drilling of any additional salt water disposal wells, including in conjunction with the expansion of the midstream joint venture’s services and assets into new areas in Eddy County, New Mexico; and other important factors which could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. For further discussions of risks and uncertainties, you should refer to Matador’s filings with the Securities and Exchange Commission (“SEC”), including the “Risk Factors” section of Matador’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Matador undertakes no obligation to update these forward-looking statements to reflect events or circumstances occurring after the date of this press release, except as required by law, including the securities laws of the United States and the rules and regulations of the SEC菠萝蜜影视频. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.

Mac Schmitz
Capital Markets Coordinator
(972) 371-5225
investors@vtoplc.net

Source: Matador Resources Company

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