Dj Matador Resources Company, Inst Holders, 3Q 2024 (Mtdr)

ConocoPhillips COP, a leading upstream energy firm in terms of production and reserves, is well-positioned to capitalize on handsome crude prices. Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Working in Favor of COP

West Texas Intermediate crude price, trading close to $70 per barrel, is highly favorable for upstream activities.

COP secured a solid production outlook thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, the Permian Basin and Bakken shale. COP boasted that its drilling and completion activities are becoming more efficient in all key U.S. basins.

Compared with composite stocks belonging to the industry, the leading upstream energy company has considerably lower exposure to debt capital. This reflects that COP is better positioned to rely on its strong balance sheet to withstand any adverse business scenario.

Risks to the COP’s Business

Being an upstream energy player, the company’s overall operations are exposed to oil and natural gas price volatility. Other exploration and production players that are also exposed to commodity price volatility are EOG Resources EOG, Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.

In the United States, EOG Resources is one of the foremost explorers and producers of oil and gas, with crude reserves across the United States and Trinidad.

Diamondback Energy, a leading pure-play Permian operator, reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company will likely continue witnessing increased production volumes.

Matador Resources is a well-known exploration and production company with a strong footprint in the prolific Wolfcamp and Bone Spring plays in the oil-rich Delaware Basin.

Zacks Investment Research

A month has gone by since the last earnings report for Matador Resources (MTDR). Shares have added about 16.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Matador due for a pullback? 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 catalysts.

Matador Q3 Earnings Beat Estimates, Raises '24 Output Guidance

Matador Resources Company reported third-quarter 2024 adjusted earnings of $1.89 per share, which beat the Zacks Consensus Estimate of $1.73. The bottom line also improved from the year-ago quarter’s $1.86.

Total revenues of $899.8 million beat the Zacks Consensus Estimate of $839 million. The top line also increased from the year-ago quarter’s $772.3 million.

The strong third-quarter results were driven by Matador’s high total production volume and a decrease in the total operating expenses per barrel of oil equivalent (BOE).

Upstream Business in Q3

Since MTDR is engaged in oil and gas exploration and production activities, the fate of its overall business primarily depends on the oil and gas pricing scenario. Most of Matador’s production comprises oil (58.5% of total production in the third quarter), making this commodity’s price the prime factor in determining the company’s earnings.

Matador achieved a record average daily oil production in the third quarter of 2024, surpassing its anticipated average by 3%.

Let us take a look at Matador’s average commodity sales price, along with production.

Average Sales Price of Commodities

MTDR reported average sales price for oil (without realized derivatives) at $75.67 per barrel, down from $82.49 a year ago. The commodity price was also lower than our projection of $78.96 per barrel. The price of natural gas was $1.83 per thousand cubic feet (Mcf), down from $3.56 in the year-ago quarter. It was also below our estimate of $2.17 Mcf.

Increasing Production

Matador reported oil production of 100,315 barrels per day (B/D), up from 77,529 B/D in the prior-year quarter. The figure also beat our estimate of 97,345 B/D. Natural gas production was recorded at 427 million cubic feet per day (MMcf/D), up from 345.4 MMcf/D recorded a year ago. The reported figure also outpaced our estimate of 400.5 MMcf/D.

The rise in total average production can be attributed to stronger-than-expected initial output from new wells drilled by Matador in the third quarter, along with the consistent strong performance of existing wells. This includes the 21 gross (19 net) Dagger Lake South wells, acquired through the Advance acquisition in 2023, brought online in the second quarter of 2024.

Total oil equivalent production in the third quarter was 171,480 BOE/D, which surged from the year-ago quarter’s level of 135,096 BOE/D. The figure was also above our projection of 164,094.7 BOE/D.

Operating Expenses

MTDR’s plant and other midstream services’ operating expenses increased to $2.77 per BOE from the year-earlier level of $2.48. Our estimate for the same was pinned at $2.48.

Lease operating costs increased to $5.50 per BOE from $5.34 a year ago. Our projection for the metric was pinned at $5.44 per BOE. However, production taxes, transportation and processing costs decreased to $4.61 per BOE from $5.77 in the year-ago quarter.

Total operating expenses per BOE were $30.09, lower than the prior-year figure of $31.65 and below our estimate of $31.95.

Balance Sheet & Capital Spending

As of Sept. 30, 2024, Matador had cash and restricted cash of $77.02 million, and a long-term debt of $3,596.2 million. The company spent $293.7 million for the drilling, completion and equipment of wells in the third quarter.

Outlook

For 2024, Matador raised its guidance for average daily oil equivalent production to 167,500-172,500 BOE/d. This implies a 6% increase from the previous projection. The company has narrowed its full-year 2024 lease operating expenses guidance to $5.55-$5.75 per BOE from the previously anticipated range of $5.25-$5.75.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -5.87% due to these changes.

VGM Scores

At this time, Matador has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Matador has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Zacks Investment Research

EOG Resources, Inc. EOG, a leading exploration and production company, has witnessed upward earnings estimate revisions for 2025 in the past seven days.

Factors Working in Favor of EOG

The price of West Texas Intermediate crude is approaching the $70 per barrel mark again, which is highly favorable for upstream operations. EOG Resources, currently carrying a Zacks Rank #3 (Hold), is well-placed to capitalize on the promising business scenario. It has significant undrilled premium locations, resulting in a brightened production outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EOG Resources is strongly committed to returning capital to shareholders. Since transitioning to premium drilling, the company has returned significant cash to its stockholders. The company has a rich history of dividend payments for 27 years. It has never suspended or lowered its dividend, even during business turmoil, reflecting solid underlying business.

With the employment of premium drilling, EOG will be able to reduce its cash operating costs per barrel of oil equivalent, aiding its bottom line.

EOG’s Vulnerability to Oil Price Volatility

However, being an upstream energy player, the company’s overall operations are exposed to oil and natural gas price volatility. Some other exploration and production players that are also exposed to commodity price volatility are ConocoPhillips COP, Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.

ConocoPhillips has secured a solid production outlook thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, the Permian Basin and Bakken shale.

Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company will likely continue witnessing increased production volumes.

Matador Resources is a well-known exploration and production company with a strong footprint in the prolific Wolfcamp and Bone Spring plays in the oil-rich Delaware Basin.

Zacks Investment Research

In its last weekly release, Baker Hughes Company BKR stated that the U.S. rig count was lower than the prior week’s figure. The rotary rig count, issued by BKR, is usually published in major newspapers and trade publications.

Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the week-ago figure indicates the demand trajectory for the company’s oilfield services from exploration and production companies.

With the decline in weekly rig count, should investors keep an eye on leading oil and gas exploration companies like EOG Resources Inc. EOG and Matador Resources Company MTDR? Before diving into that, let's explore the latest rig count data details.

Baker Hughes’ Data: Rig Count in Detail

Total U.S. Rig Count Falls: The number of rigs engaged in the exploration and production of oil and natural gas in the United States was 584 in the week ended Nov. 15, lower than the week-ago count of 585. Also, the current national rig count declined from the year-ago level of 618, reflecting the fact that there has been a slowdown in drilling activities. Some analysts see this downside as a sign of increased efficiency among shale producers, who may need fewer rigs. However, there are doubts among a few about whether certain producers have sufficient promising land for drilling.

Onshore rigs in the week that ended on Nov. 15 totaled 568, lower than the prior week's count of 569. In offshore resources, 14 rigs were operating, in line with the week-ago count.

U.S. Oil Rig Count Declines: The oil rig count was 478 in the week ended Nov. 15, lower than the week-ago figure of 479. The current number of oil rigs — far from the peak of 1,609 attained in October 2014 — was also down from the year-ago figure of 500.

U.S. Natural Gas Rig Count Falls: The natural gas rig count of 101 was lower than the week-ago figure of 102. The count of rigs exploring the commodity was also below the year-ago week’s tally of 114. Per the latest report, the number of natural gas-directed rigs is almost 94% lower than the all-time high of 1,606 recorded in 2008.

Rig Count by Type: The number of vertical drilling rigs totaled 16 units, in line with the week-ago count. However, the horizontal/directional rig count (encompassing new drilling technology with the ability to drill and extract gas from dense rock formations, also known as shale formations) of 568 was lower than the prior-week level of 569.

Rig Tally in the Most Prolific Basin

Permian — the most prolific basin in the United States — recorded a weekly oil and gas rig count of 303, in line with the week-ago figure. The count was, however, below the prior-year level of 311.

Oil Still Higher Than Breakeven Price: EOG, MTDR to Gain

West Texas Intermediate (WTI) crude is currently trading at more than $65 per barrel, presenting an advantageous landscape for exploration and production. Despite moderation in drilling activity as upstream companies prioritize stockholder returns over production growth, the favorable pricing environment remains beneficial for energy producers. This is because U.S. oil and gas companies gain from significantly lower breakeven WTI prices across all shale plays, particularly for existing wells. Furthermore, the average breakeven price for most new wells remains below current market levels, positioning upstream players for continued profitability in the current environment.

Breakeven WTI Price for US Producers