Matador Resources Co [MTDR] Filings

10-Q 1 mtdr-20230630.htm 10-Q mtdr-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________

FORM 10-Q

_________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35410

_________________________________________________________

Matador Resources Company

(Exact name of registrant as specified in its charter)

_________________________________________________________


Texas			27-4662601
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5400 LBJ Freeway, Suite 1500 Dallas, Texas			75240
(Address of principal executive offices)			(Zip Code)

(972) 371-5200

(Registrant’s telephone number, including area code)

_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

MTDR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of July 25, 2023, there were 119,148,250 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

Table of Contents

MATADOR RESOURCES COMPANY

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2023

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3
Item 1. Financial Statements — Unaudited			3
Condensed Consolidated Balance Sheets at June 30, 2023 and December 31, 2022			3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022			4
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022			5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			43
PART II — OTHER INFORMATION			44
Item 1. Legal Proceedings			44
Item 1A. Risk Factors			44
Item 2. Repurchase of Equity by the Company or Affiliates			44
Item 5. Other Information			44
Item 6. Exhibits			45
SIGNATURES			48

Table of Contents

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements — Unaudited

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED

(In thousands, except par value and share data)


	June 30, 2023		December 31, 2022
ASSETS
Current assets
Cash	$	22,303	$	505,179

Restricted cash	43,535		42,151
Accounts receivable
Oil and natural gas revenues	201,612		224,860
Joint interest billings	220,126		180,947
Other	39,013		48,011
Derivative instruments	—		3,930


Lease and well equipment inventory	30,848		15,184
Prepaid expenses and other current assets	76,966		51,570
Total current assets	634,403		1,071,832
Property and equipment, at cost
Oil and natural gas properties, full-cost method
Evaluated	8,857,450		6,862,455
Unproved and unevaluated	1,207,186		977,502
Midstream properties	1,153,915		1,057,668
Other property and equipment	36,810		32,847
Less accumulated depletion, depreciation and amortization	(4,816,115)		(4,512,275)
Net property and equipment	6,439,246		4,418,197
Other assets


Other long-term assets	58,689		64,476

Total assets	$	7,132,338	$	5,554,505
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	75,275	$	58,848
Accrued liabilities	350,343		261,310
Royalties payable	137,795		117,698

Amounts due to affiliates	17,163		32,803
Derivative instruments	11,796		—
Advances from joint interest owners	47,378		52,357




Other current liabilities	47,222		52,857
Total current liabilities	686,972		575,873
Long-term liabilities
Borrowings under Credit Agreement	560,000		—
Borrowings under San Mateo Credit Facility	460,000		465,000
Senior unsecured notes payable	1,182,718		695,245
Asset retirement obligations	63,246		52,985


Deferred income taxes	545,415		428,351

Other long-term liabilities	16,557		19,960
Total long-term liabilities	2,827,936		1,661,541
Commitments and contingencies (Note 10)
Shareholders’ equity

Common stock - $0.01 par value, 160,000,000 shares authorized; 119,272,719 and 118,953,381 shares issued; and 119,147,205 and 118,948,624 shares outstanding, respectively	1,192		1,190
Additional paid-in capital	2,106,987		2,101,999
Retained earnings	1,299,753		1,007,642
Treasury stock, at cost, 125,514 and 4,757 shares, respectively	(5,076)		(34)
Total Matador Resources Company shareholders’ equity	3,402,856		3,110,797
Non-controlling interest in subsidiaries	214,574		206,294
Total shareholders’ equity	3,617,430		3,317,091
Total liabilities and shareholders’ equity	$	7,132,338	$	5,554,505

The accompanying notes are an integral part of these financial statements.

Table of Contents

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues
Oil and natural gas revenues	$	587,917	$	892,769	$	1,090,826	$	1,519,284
Third-party midstream services revenues	30,075		21,886		56,586		39,192
Sales of purchased natural gas	31,898		60,008		66,152		79,347

Realized (loss) gain on derivatives	(3,148)		(61,163)		521		(83,602)
Unrealized (loss) gain on derivatives	(8,659)		30,430		(15,726)		(44,599)
Total revenues	638,083		943,930		1,198,359		1,509,622
Expenses
Production taxes, transportation and processing	61,991		85,658		117,477		145,477
Lease operating	61,043		39,857		105,450		73,812
Plant and other midstream services operating	30,657		22,014		61,702		41,475
Purchased natural gas	27,103		56,440		55,551		73,461
Depletion, depreciation and amortization	177,514		120,024		303,839		215,877
Accretion of asset retirement obligations	792		517		1,491		1,060

General and administrative	26,715		24,431		49,148		54,164
Total expenses	385,815		348,941		694,658		605,326
Operating income	252,268		594,989		503,701		904,296
Other income (expense)
Net loss on impairment	(202)		—		(202)		(198)
Interest expense	(34,229)		(18,492)		(50,405)		(34,744)

Other income (expense)	16,564		(4,342)		16,903		(4,486)
Total other expense	(17,867)		(22,834)		(33,704)		(39,428)
Income before income taxes	234,401		572,155		469,997		864,868
Income tax provision (benefit)
Current	(4,929)		36,261		—		51,670
Deferred	62,235		99,699		113,978		152,818
Total income tax provision	57,306		135,960		113,978		204,488
Net income	177,095		436,195		356,019		660,380
Net income attributable to non-controlling interest in subsidiaries	(12,429)		(20,477)		(28,223)		(37,538)
Net income attributable to Matador Resources Company shareholders	$	164,666	$	415,718	$	327,796	$	622,842
Earnings per common share
Basic	$	1.38	$	3.52	$	2.75	$	5.28
Diluted	$	1.37	$	3.47	$	2.73	$	5.20
Weighted average common shares outstanding
Basic	119,183		118,103		119,109		118,027
Diluted	119,842		119,903		119,856		119,857

The accompanying notes are an integral part of these financial statements.

Table of Contents

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

(In thousands)

For the Three and Six Months Ended June 30, 2023


												Total shareholders’ equity attributable to Matador Resources Company


														Non-controlling interest in subsidiaries		Total shareholders’ equity
	Common Stock			Additional paid-in capital	Retained earnings		Treasury Stock
	Shares	Amount							Shares	Amount
Balance at January 1, 2023	118,953	$	1,190		$	2,101,999	$	1,007,642	5	$	(34)	$	3,110,797	$	206,294	$	3,317,091
Dividends declared ($0.15 per share)	—	—			—		(17,768)		—	—		(17,768)		—		(17,768)
Issuance of common stock pursuant to employee stock compensation plan	264	2			(17,592)		—		—	—		(17,590)		—		(17,590)




Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			3,894		—		—	—		3,894		—		3,894
Stock options exercised, net of options forfeited in net share settlements	15	—			12		—		—	—		12		—		12



Restricted stock forfeited	—	—			—		—		21	(1,236)		(1,236)		—		(1,236)


Contribution related to formation of San Mateo, net of tax of $3.1 million (see Note 7)	—	—			11,613		—		—	—		11,613		—		11,613


Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(19,110)		(19,110)

Current period net income	—	—			—		163,130		—	—		163,130		15,794		178,924
Balance at March 31, 2023	119,232	$	1,192		$	2,099,926	$	1,153,004	26	$	(1,270)	$	3,252,852	$	202,978	$	3,455,830
Dividends declared ($0.15 per share)	—	—			—		(17,917)		—	—		(17,917)		—		(17,917)
Issuance of common stock pursuant to employee stock compensation plan	27	—			950		—		—	—		950		—		950



Issuance of common stock pursuant to directors’ and advisors’ compensation plan	11	—			—		—		—	—		—		—		—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			6,097		—		—	—		6,097		—		6,097
Stock options exercised, net of options forfeited in net share settlements	2	—			14		—		—	—		14		—		14



Restricted stock forfeited	—	—			—		—		100	(3,806)		(3,806)		—		(3,806)



Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries (see Note 7)	—	—			—		—		—	—		—		24,500		24,500
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(25,333)		(25,333)


Current period net income	—	—			—		164,666		—	—		164,666		12,429		177,095
Balance at June 30, 2023	119,272	$	1,192		$	2,106,987	$	1,299,753	126	$	(5,076)	$	3,402,856	$	214,574	$	3,617,430

The accompanying notes are an integral part of these financial statements.

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Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

(In thousands)

For the Three and Six Months Ended June 30, 2022


												Total shareholders’ equity attributable to Matador Resources Company


														Non-controlling interest in subsidiaries		Total shareholders’ equity
	Common Stock			Additional paid-in capital	Retained earnings (accumulated deficit)		Treasury Stock
	Shares	Amount							Shares	Amount
Balance at January 1, 2022	117,862	$	1,179		$	2,077,592	$	(171,318)	12	$	(243)	$	1,907,210	$	220,178	$	2,127,388
Dividends declared ($0.05 per share)	—	—			—		(5,866)		—	—		(5,866)		—		(5,866)
Issuance of common stock pursuant to employee stock compensation plan	205	2			(11,536)		—		—	—		(11,534)		—		(11,534)

Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			4,344		—		—	—		4,344		—		4,344
Stock options exercised, net of options forfeited in net share settlements	24	—			(585)		—		—	—		(585)		—		(585)




Restricted stock forfeited	—	—			—		—		12	(66)		(66)		—		(66)
Contribution related to formation of San Mateo, net of tax of $4.8 million (see Note 7)	—	—			17,973		—		—	—		17,973		—		17,973


Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(18,375)		(18,375)
Current period net income	—	—			—		207,124		—	—		207,124		17,061		224,185
Balance at March 31, 2022	118,091	$	1,181		$	2,087,788	$	29,940	24	$	(309)	$	2,118,600	$	218,864	$	2,337,464
Dividends declared ($0.05 per share)	—	—			—		(5,878)		—	—		(5,878)		—		(5,878)
Issuance of common stock pursuant to employee stock compensation plan	10	—			—		—		—	—		—		—		—
Issuance of common stock pursuant to director' and advisors' compensation plan	25	—			—		—		—	—		—		—		—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			5,383		—		—	—		5,383		—		5,383
Stock options exercised, net of options forfeited in net share settlements	75	1			(2,607)		—		—	—		(2,606)		—		(2,606)
Restricted stock forfeited	—	—			—		—		47	(2,047)		(2,047)		—		(2,047)
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(26,460)		(26,460)
Current period net income	—	—			—		415,718		—	—		415,718		20,477		436,195
Balance at June 30, 2022	118,201	$	1,182		$	2,090,564	$	439,780	71	$	(2,356)	$	2,529,170	$	212,881	$	2,742,051

The accompanying notes are an integral part of these financial statements.

Table of Contents

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(In thousands)


	Six Months Ended June 30,
	2023		2022
Operating activities
Net income	$	356,019	$	660,380
Adjustments to reconcile net income to net cash provided by operating activities
Unrealized loss on derivatives	15,726		44,599
Depletion, depreciation and amortization	303,839		215,877
Accretion of asset retirement obligations	1,491		1,060

Stock-based compensation expense	6,221		7,077

Deferred income tax provision	113,978		152,818
Amortization of debt issuance cost and other debt-related costs	2,895		1,206
Other non-cash changes	(15,682)		198

Changes in operating assets and liabilities
Accounts receivable	56,407		(211,023)
Lease and well equipment inventory	(7,237)		(829)
Prepaid expenses and other current assets	(24,124)		(14,717)
Other long-term assets	2,072		227
Accounts payable, accrued liabilities and other current liabilities	(28,232)		30,492
Royalties payable	10,085		56,539
Advances from joint interest owners	(4,979)		857


Income taxes payable	(1,677)		38,170
Other long-term liabilities	1,709		(7,675)
Net cash provided by operating activities	788,511		975,256
Investing activities
Drilling, completion and equipping capital expenditures	(539,511)		(389,893)
Acquisition of Advance	(1,608,427)		—
Acquisition of oil and natural gas properties	(55,897)		(73,114)
Midstream capital expenditures	(32,871)		(28,310)
Acquisition of midstream assets	—		(75,816)
Expenditures for other property and equipment	(2,478)		(283)
Proceeds from sale of assets	451		46,412





Net cash used in investing activities	(2,238,733)		(521,004)
Financing activities
Purchase of senior unsecured notes	—		(142,404)
Repayments of borrowings under Credit Agreement	(2,190,000)		(300,000)
Borrowings under Credit Agreement	2,750,000		200,000
Repayments of borrowings under San Mateo Credit Facility	(108,000)		(70,000)
Borrowings under San Mateo Credit Facility	103,000		105,000
Cost to amend credit facilities	(8,645)		(506)
Proceeds from issuance of senior unsecured notes	494,800		—
Cost to issue senior unsecured notes	(8,255)		—




Dividends paid	(35,685)		(11,744)
Contributions related to formation of San Mateo	14,700		22,750
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	24,500		—
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	(44,443)		(44,835)
Taxes paid related to net share settlement of stock-based compensation	(22,790)		(16,852)

Other	(452)		(298)
Net cash provided by (used in) financing activities	968,730		(258,889)
Change in cash and restricted cash	(481,492)		195,363
Cash and restricted cash at beginning of period	547,330		86,920
Cash and restricted cash at end of period	$	65,838	$	282,283

Supplemental disclosures of cash flow information (Note 11)

The accompanying notes are an integral part of these financial statements.

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Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED

NOTE 1 — NATURE OF OPERATIONS

Matador Resources Company, a Texas corporation (“Matador” and, collectively with its subsidiaries, the “Company”), 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. The Company’s 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. The Company also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. Additionally, the Company conducts midstream operations in support of the Company’s exploration, development and production operations and provides natural gas processing, oil transportation services, oil, natural gas and produced water gathering services and produced water disposal services to third parties.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements, Basis of Presentation, Consolidation and Significant Estimates

The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) but do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023 (the “Annual Report”). The Company consolidates certain subsidiaries and joint ventures that are less than wholly-owned and are not involved in oil and natural gas exploration, including its midstream joint venture, San Mateo Midstream, LLC (collectively with its subsidiaries, “San Mateo”), and the net income and equity attributable to the non-controlling interest in these subsidiaries have been reported separately as required by Accounting Standards Codification, Consolidation (Topic 810). The Company proportionately consolidates certain joint ventures that are less than wholly-owned and are involved in oil and natural gas exploration. All intercompany accounts and transactions have been eliminated in consolidation. In management’s opinion, these interim unaudited condensed consolidated financial statements include all normal, recurring adjustments that are necessary for a fair presentation of the Company’s interim unaudited condensed consolidated financial statements as of June 30, 2023. Amounts as of December 31, 2022 are derived from the Company’s audited consolidated financial statements included in the Annual Report.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s interim unaudited condensed consolidated financial statements are based on a number of significant estimates, including oil and natural gas revenues, accrued assets and liabilities, stock-based compensation, valuation of derivative instruments, deferred tax assets and liabilities, purchase price allocations and oil and natural gas reserves. The estimates of oil and natural gas reserves quantities and future net cash flows are the basis for the calculations of depletion and impairment of oil and natural gas properties, as well as estimates of asset retirement obligations and certain tax accruals. While the Company believes its estimates are reasonable, changes in facts and assumptions or the discovery of new information may result in revised estimates. Actual results could differ from these estimates.

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Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

Revenues

The following table summarizes the Company’s total revenues and revenues from contracts with customers on a disaggregated basis for the three and six months ended June 30, 2023 and 2022 (in thousands).


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues from contracts with customers	$	649,890	$	974,663	$	1,213,564	$	1,637,823

Realized (loss) gain on derivatives	(3,148)		(61,163)		521		(83,602)
Unrealized (loss) gain on derivatives	(8,659)		30,430		(15,726)		(44,599)
Total revenues	$	638,083	$	943,930	$	1,198,359	$	1,509,622


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Oil revenues	$	510,364	$	650,233	$	912,141	$	1,110,355
Natural gas revenues	77,553		242,536		178,685		408,929
Third-party midstream services revenues	30,075		21,886		56,586		39,192
Sales of purchased natural gas	31,898		60,008		66,152		79,347
Total revenues from contracts with customers	$	649,890	$	974,663	$	1,213,564	$	1,637,823

Property and Equipment

The Company uses the full-cost method of accounting for its investments in oil and natural gas properties. Under this method, the Company is required to perform a ceiling test each quarter that determines a limit, or ceiling, on the capitalized costs of oil and natural gas properties based primarily on the after-tax estimated future net cash flows from oil and natural gas properties using a 10% discount rate and the arithmetic average of first-day-of-the-month oil and natural gas prices for the prior 12-month period. For each of the three and six months ended June 30, 2023 and 2022, the cost center ceiling was higher than the capitalized costs of oil and natural gas properties, and, as a result, no impairment charge was necessary.

The Company capitalized approximately $14.5 million and $10.4 million of its general and administrative costs for the three months ended June 30, 2023 and 2022, respectively, and $27.1 million and $23.6 million of its general and administrative costs for the six months ended June 30, 2023 and 2022, respectively. The Company capitalized approximately $5.3 million and $0.8 million of its interest expense for the three months ended June 30, 2023 and 2022, respectively, and $8.7 million and $4.4 million of its interest expense for the six months ended June 30, 2023 and 2022, respectively.

Earnings Per Common Share

The Company reports basic earnings attributable to Matador shareholders per common share, which excludes the effect of potentially dilutive securities, and diluted earnings attributable to Matador shareholders per common share, which includes the effect of all potentially dilutive securities unless their impact is anti-dilutive.

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Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

The following table sets forth the computation of diluted weighted average common shares outstanding for the three and six months ended June 30, 2023 and 2022 (in thousands).


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Weighted average common shares outstanding
Basic	119,183	118,103	119,109	118,027
Dilutive effect of options and restricted stock units	659	1,800	747	1,830
Diluted weighted average common shares outstanding	119,842	119,903	119,856	119,857

NOTE 3 — BUSINESS COMBINATIONS

On April 12, 2023, a wholly-owned subsidiary of the Company completed the acquisition of Advance Energy Partners Holdings, LLC (“Advance”) from affiliates of EnCap Investments L.P., including certain oil and natural gas producing properties, undeveloped acreage and midstream assets located primarily in Lea County, New Mexico and Ward County, Texas (the “Advance Acquisition”). The Advance Acquisition had an effective date of January 1, 2023 and an aggregate purchase price consisting of (i) an amount in cash equal to approximately $1.61 billion (which amount is subject to certain customary post-closing adjustments) (the “Cash Consideration”) and (ii) potential additional cash consideration of $7.5 million for each month of 2023 in which the average oil price (as defined in the securities purchase agreement) exceeds $85 per barrel (all such payments for the 12 months in 2023, the “Contingent Consideration”). The Cash Consideration was paid upon the closing of the Advance Acquisition and was funded by a combination of cash on hand and borrowings under the Company’s reserves-based revolving credit facility (the “Credit Agreement”).

The Advance Acquisition was accounted for under the acquisition method of accounting as a business combination in accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC Topic 805”). Under ASC Topic 805, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values as of the respective acquisition date, with any excess purchase price allocated to goodwill. As the Company acquired 100% of the membership interests of Advance, the acquisition was treated as an asset acquisition for tax purposes.

The Company recorded the Contingent Consideration at fair value on the date of the business combination and will record the change in the fair value in future periods as “Other income (expense)” in its unaudited condensed consolidated statements of operations. The fair value of the Contingent Consideration was $21.2 million at April 12, 2023. The fair value of the Contingent Consideration decreased by $15.9 million between April 12, 2023 and June 30, 2023, and this decrease was recorded as “Other income” for the three and six months ended June 30, 2023. The Company used the Monte Carlo simulation method to measure the fair value of the Contingent Consideration, which has unobservable inputs and is thus classified at Level 3 in the fair value hierarchy (see Note 9 for discussion of the fair value hierarchy).

The preliminary allocation of the total purchase price for the Advance Acquisition is set forth below (in thousands). The Company anticipates that the allocation of the purchase price should be finalized during 2023 upon determination of the final purchase price adjustments.

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Consideration	Allocation
Cash	$	1,608,427
Working capital adjustments	(8,405)
Fair value of Contingent Consideration at April 12, 2023	21,151
Total consideration given	$	1,621,173
Allocation of purchase price
Current assets	$	74,689
Oil and natural gas properties
Evaluated	1,362,533
Unproved and unevaluated	202,396
Midstream assets	63,644
Current liabilities	(73,763)
Asset retirement obligations	(8,326)
Net assets acquired	$	1,621,173

The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of oil and gas properties and asset retirement obligations were measured using the discounted cash flow technique of valuation.

Significant inputs to the valuation of oil and gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) future plugging and abandonment costs, (v) estimated future cash flows, (vi) recent market comparable transactions for unproved acreage, and (vii) a market-based weighted average cost of capital rate. These inputs require significant judgments and estimates and are the most sensitive and subject to change.

Estimated production from the Advance wells averaged approximately 25,450 BOE per day during the first quarter of 2023 based upon Advance’s production records. The results of operations for the Advance Acquisition since the closing date have been included in the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2023. The oil and natural gas production from Advance increased the Company’s revenues and net income for the period from April 12, 2023 through June 30, 2023 by $92.1 million and $40.3 million, respectively.

Pro Forma Information

The following unaudited pro forma financial information represents a summary of the condensed consolidated results of operations for the three and six months ended June 30, 2023 and 2022, assuming the Advance Acquisition had been completed as of January 1, 2022. The pro forma financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been had the Advance Acquisition occurred on the dates noted above, nor is it necessarily indicative of the future results of operations or consolidated financial position of the Company. Future results may vary significantly from the results reflected because of various factors.

The information below reflects certain nonrecurring pro forma adjustments that were directly related to the business combination based on currently available information and certain estimates and assumptions that the Company believes provide a reasonable basis for presenting the significant effects of the Advance Acquisition, including (i) the increase in depletion reflecting the relative fair values and production volumes attributable to Advance’s properties and the revision to the depletion rate reflecting the reserve volumes acquired, (ii) adjustments to interest expense as a result of the incremental borrowings necessary to finance the Advance Acquisition and (iii) the estimated tax impacts of the pro-forma adjustments. The pro forma financial information does not reflect the benefits of projected synergies, potential cost savings or the costs that may be necessary to achieve such savings, opportunities to increase revenue generation or other factors that may result from the Advance Acquisition and, accordingly, does not attempt to predict or suggest future results. Management cannot identify the timing, nature and amount of such savings, costs or other factors, any of which could affect the future consolidated results of operations or consolidated financial position of the Company.

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	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(In thousands, except per share data)
Total revenue	$	658,084	$	1,138,174	$1,354,640		$	1,871,007
Net income attributable to Matador Resources Company shareholders	$	166,174	$	490,951	$	356,681	$	756,239

Earnings per share:
Basic	$	1.39	$	4.16	$	2.99	$	6.41
Diluted	$	1.39	$	4.09	$	2.98	$	6.31

NOTE 4 — ASSET RETIREMENT OBLIGATIONS

The following table summarizes the changes in the Company’s asset retirement obligations for the six months ended June 30, 2023 (in thousands).


Beginning asset retirement obligations	$	53,741
Liabilities incurred during period	2,535
Liabilities settled during period	(782)

Acquisitions during period	8,326
Divestitures during period	(652)
Accretion expense	1,491
Ending asset retirement obligations	64,659
Less: current asset retirement obligations(1)	(1,413)
Long-term asset retirement obligations	$	63,246

_______________

(1)Included in accrued liabilities in the Company’s interim unaudited condensed consolidated balance sheet at June 30, 2023.

NOTE 5 — DEBT

At June 30, 2023, the Company had (i) $699.2 million of outstanding senior notes due 2026 (the “2026 Notes”), (ii) $500.0 million of outstanding senior notes due 2028 (the “2028 Notes”), (iii) $560.0 million in borrowings outstanding under the Credit Agreement and (iv) approximately $45.4 million in outstanding letters of credit issued pursuant to the Credit Agreement.

At June 30, 2023, San Mateo had $460.0 million in borrowings outstanding under its revolving credit facility (the “San Mateo Credit Facility”) and approximately $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility. Between June 30, 2023 and July 25, 2023, San Mateo repaid $25.0 million of borrowings under the San Mateo Credit Facility.

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Credit Agreements

MRC Energy Company

The borrowing base under the Credit Agreement is determined semi-annually as of May 1 and November 1 by the lenders based primarily on the estimated value of the Company’s proved oil and natural gas reserves at December 31 and June 30 of each year, respectively. The Company and the lenders may each request an unscheduled redetermination of the borrowing base once between scheduled redetermination dates. On March 31, 2023, the lenders completed their review of the Company’s proved oil and natural gas reserves, and, as a result, the Company and its lenders entered into a Second Amendment to the Fourth Amended and Restated Credit Agreement, which amended the Credit Agreement to, among other things: (i) reaffirm the borrowing base at $2.25 billion, (ii) increase the elected commitment from $775.0 million to $1.25 billion and (iii) maintain the maximum facility amount at $1.50 billion. This reaffirmation of the borrowing base constituted the regularly scheduled May 1 redetermination. The Credit Agreement matures October 31, 2026.

The Credit Agreement requires the Company to maintain (i) a current ratio, which is defined as (x) total consolidated current assets plus the unused availability under the Credit Agreement divided by (y) total consolidated current liabilities less current maturities under the Credit Agreement, of not less than 1.0 to 1.0 at the end of each fiscal quarter and (ii) a debt to EBITDA ratio, which is defined as debt outstanding (net of up to $75.0 million of cash or cash equivalents), divided by a rolling four quarter EBITDA calculation, of 3.5 to 1.0 or less. The Company believes that it was in compliance with the terms of the Credit Agreement at June 30, 2023.

San Mateo Midstream, LLC

The San Mateo Credit Facility is non-recourse with respect to Matador and its wholly-owned subsidiaries but is guaranteed by San Mateo’s subsidiaries and secured by substantially all of San Mateo’s assets, including real property. The San Mateo Credit Facility matures December 9, 2026 and lender commitments under the revolving credit facility were $485.0 million at June 30, 2023 (subject to San Mateo’s compliance with the covenants noted below). The San Mateo Credit Facility includes an accordion feature, which provides for potential increases in lender commitments of up to $735.0 million.

The San Mateo Credit Facility requires San Mateo to maintain a debt to EBITDA ratio, which is defined as total consolidated funded indebtedness outstanding (as defined in the San Mateo Credit Facility) divided by a rolling four quarter EBITDA calculation, of 5.0 or less, subject to certain exceptions. The San Mateo Credit Facility also requires San Mateo to maintain an interest coverage ratio, which is defined as a rolling four quarter EBITDA calculation divided by San Mateo’s consolidated interest expense for such period, of 2.5 or more. The San Mateo Credit Facility also restricts the ability of San Mateo to distribute cash to its members if San Mateo’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility. The Company believes that San Mateo was in compliance with the terms of the San Mateo Credit Facility at June 30, 2023.

Senior Unsecured Notes

At June 30, 2023, the Company had $699.2 million of outstanding 2026 Notes, which have a 5.875% coupon rate. The 2026 Notes mature September 15, 2026, and interest is payable on the 2026 Notes semi-annually in arrears on each March 15 and September 15. The 2026 Notes are jointly and severally guaranteed on a senior unsecured basis by certain subsidiaries of the Company (the “Guarantor Subsidiaries”).

On April 11, 2023, the Company completed the sale of $500.0 million in aggregate principal amount of the 2028 Notes, which have a 6.875% coupon rate and mature April 15, 2028. Interest is payable on the 2028 Notes semi-annually in arrears on each April 15 and October 15, and the first interest payment date for the 2028 Notes will be October 15, 2023. The 2028 Notes are jointly and severally guaranteed on a senior unsecured basis by the Guarantor Subsidiaries.

At any time prior to April 15, 2025, the Company may redeem up to 35% in aggregate principal amount of 2028 Notes at a redemption price of 106.875% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, in an amount not greater than the net proceeds of certain equity offerings so long as the redemption occurs within 180 days of completing such equity offering and at least 65% of the aggregate principal amount of the 2028 Notes remains outstanding after such redemption. In addition, at any time prior to April 15, 2025, the Company may redeem all or part of the 2028 Notes for cash at a redemption price equal to 100% of their principal amount plus an applicable make-whole premium and accrued and unpaid interest.

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NOTE 5 — DEBT — Continued

On or after April 15, 2025, the Company may redeem all or a part of the 2028 Notes at any time or from time to time at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on April 15 of the years indicated below:


Year						Redemption Price

2025						103.438%
2026						101.719%
2027						100.000%

Debt Maturities

The outstanding borrowings of $560.0 million at June 30, 2023 under the Credit Agreement mature on October 31, 2026. The outstanding borrowings of $460.0 million at June 30, 2023 under the San Mateo Credit Facility mature on December 9, 2026. The $699.2 million of outstanding 2026 Notes at June 30, 2023 mature on September 15, 2026. The $500.0 million of outstanding 2028 Notes at June 30, 2023 mature on April 15, 2028.

NOTE 6 — INCOME TAXES

The Company recorded a current income tax benefit of $4.9 million for the three months ended June 30, 2023 and a deferred income tax provision of $62.2 million and $114.0 million, respectively, for the three and six months ended June 30, 2023. The Company recorded no current income tax provision for the six months ended June 30, 2023. For the three and six months ended June 30, 2022, the Company recorded a current income tax provision of $36.3 million and $51.7 million, respectively, and a deferred income tax provision of $99.7 million and $152.8 million, respectively.

As of March 31, 2023, the Company expected to pay federal income taxes and state income taxes in New Mexico during 2023 based upon the Company’s projections of taxable income for 2023 at that time and the utilization of substantially all of the Company’s federal and state net operating loss carryforwards in 2022. On April 12, 2023, the Company completed the Advance Acquisition, which was treated as an asset acquisition for tax purposes. At June 30, 2023, the additional deductions the Company expects to utilize in 2023 from the Advance Acquisition, in excess of projected increased revenues from the Advance Acquisition, are expected to fully offset the taxable income the Company otherwise is projected to generate for 2023. As a result, the Company does not expect to pay federal income taxes or state income taxes in 2023 at this time. The Company’s effective income tax rate of 26% for both the three and six months ended June 30, 2023, and 25% for both the three and six months ended June 30, 2022, differed from the U.S. federal statutory rate due primarily to permanent differences between book and taxable income and state taxes, primarily in New Mexico.

NOTE 7 — EQUITY

Stock-based Compensation

During the six months ended June 30, 2023, the Company granted awards to certain of its employees of 228,100 service-based restricted stock units to be settled in cash, which are liability instruments, and 143,500 performance-based stock units and 269,000 service-based shares of restricted stock, which are equity instruments. The performance-based stock units vest in an amount between zero and 200% of the target units granted based on the Company’s relative total shareholder return over the three-year period ending December 31, 2025, as compared to a designated peer group. The service-based restricted stock and restricted stock units vest over a three-year period. The fair value of these awards was approximately $32.7 million on the grant date.

Common Stock Dividend

The Board of Directors (the “Board”) declared a quarterly cash dividend of $0.15 per share of common stock in each of the first and second quarters of 2023. The first quarter dividend, which totaled $17.8 million, was paid on March 9, 2023 to shareholders of record as of February 27, 2023. The second quarter dividend, which totaled $17.9 million, was paid on June 1, 2023 to shareholders of record as of May 11, 2023. In July 2023, the Board declared a quarterly cash dividend of $0.15 per share of common stock payable on September 1, 2023 to shareholders of record as of August 11, 2023.

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San Mateo Distributions and Contributions

During the three months ended June 30, 2023 and 2022, San Mateo distributed $26.4 million and $27.5 million, respectively, to the Company and $25.3 million and $26.5 million, respectively, to a subsidiary of Five Point Energy LLC (“Five Point”), the Company’s joint venture partner in San Mateo. During the six months ended June 30, 2023 and 2022, San Mateo distributed $46.3 million and $46.7 million, respectively, to the Company and $44.4 million and $44.8 million, respectively, to Five Point. During the three and six months ended June 30, 2023, the Company contributed $25.5 million and Five Point contributed $24.5 million of cash to San Mateo. During the three and six months ended June 30, 2022, there were no contributions to San Mateo by either the Company or Five Point.

Performance Incentives

No performance incentives were paid by Five Point to the Company during each of the three months ended June 30, 2023 and 2022. Five Point paid to the Company $14.7 million and $22.8 million of performance incentives during the six months ended June 30, 2023 and 2022, respectively. These performance incentives are recorded when received, net of the $3.1 million and $4.8 million deferred tax impact to Matador for the six months ended June 30, 2023 and 2022, respectively, in “Additional paid-in capital” in the Company’s interim unaudited condensed consolidated balance sheets. These performance incentives for the six months ended June 30, 2023 and 2022 are also denoted as “Contributions related to formation of San Mateo” under “Financing activities” in the Company’s interim unaudited condensed consolidated statements of cash flows and changes in shareholders’ equity.

NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS

At June 30, 2023, the Company had one natural gas basis swap contract open and in place to mitigate its exposure to natural gas price volatility, with a specific term (calculation period), notional quantity (volume hedged) and fixed price. At June 30, 2023, the contract was set to expire during the fourth quarter of 2023. The Company had no open contracts associated with oil or natural gas liquids prices at June 30, 2023.

The following is a summary of the Company’s open basis swap contract at June 30, 2023.


Commodity	Calculation Period	Notional Quantity (MMBtu)	Fixed Price ($/MMBtu)		Fair Value of Asset (Liability) (thousands)

Natural Gas Basis	07/01/2023 - 12/31/2023	9,200,000	$	(1.85)	$	(11,796)
Total open basis swap contracts					$	(11,796)

The Company’s derivative financial instruments are subject to master netting arrangements, and the Company’s counterparties allow for cross-commodity master netting provided the settlement dates for the commodities are the same. The Company does not present different types of commodities with the same counterparty on a net basis in its interim unaudited condensed consolidated balance sheets.

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NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS — Continued

The following table presents the gross asset and liability fair values of the Company’s commodity price derivative financial instruments and the location of these balances in the interim unaudited condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022 (in thousands).


Derivative Instruments	Gross amounts recognized		Gross amounts netted in the condensed consolidated balance sheets		Net amounts presented in the condensed consolidated balance sheets
June 30, 2023


Current liabilities	$	(11,796)	$	—	$	(11,796)

Total	$	(11,796)	$	—	$	(11,796)
December 31, 2022
Current assets	$	3,931	$	—	$	3,931



Total	$	3,931	$	—	$	3,931

The following table summarizes the location and aggregate gain (loss) of all derivative financial instruments recorded in the interim unaudited condensed consolidated statements of operations for the periods presented (in thousands).


		Three Months Ended June 30,				Six Months Ended June 30,
Type of Instrument	Location in Condensed Consolidated Statement of Operations	2023		2022		2023		2022
Derivative Instrument
Oil	Revenues: Realized loss on derivatives	$	—	$	(34,237)	$	—	$	(52,403)
Natural Gas	Revenues: Realized (loss) gain on derivatives	(3,148)		(26,926)		521		(31,199)

Realized (loss) gain on derivatives		(3,148)		(61,163)		521		(83,602)
Oil	Revenues: Unrealized gain (loss) on derivatives	—		10,636		—		(34,363)
Natural Gas	Revenues: Unrealized (loss) gain on derivatives	(8,659)		19,794		(15,726)		(10,236)

Unrealized (loss) gain on derivatives		(8,659)		30,430		(15,726)		(44,599)
Total		$	(11,807)	$	(30,733)	$	(15,205)	$	(128,201)

NOTE 9 — FAIR VALUE MEASUREMENTS

The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Fair value measurements are classified and disclosed in one of the following categories.

Level 1 Unadjusted quoted prices for identical, unrestricted assets or liabilities in active markets.

Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that are valued with industry standard models that consider various inputs, including: (i) quoted forward prices for commodities, (ii) time value of money and (iii) current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument and can be derived from observable data or supported by observable levels at which transactions are executed in the marketplace.

Level 3 Unobservable inputs that are not corroborated by market data that reflect a company’s own market assumptions.

Financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires

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NOTE 9 — FAIR VALUE MEASUREMENTS — Continued

judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The following tables summarize the valuation of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis in accordance with the classifications provided above as of June 30, 2023 and December 31, 2022 (in thousands).


	Fair Value Measurements at June 30, 2023 using
Description	Level 1		Level 2		Level 3		Total
Assets (Liabilities)

Natural gas basis swaps	$	—	$	(11,796)	$	—	$	(11,796)
Contingent consideration related to business combination	—		—		(5,267)		(5,267)
Total	$	—	$	(11,796)	$	(5,267)	$	(17,063)


	Fair Value Measurements at December 31, 2022 using
Description	Level 1		Level 2		Level 3		Total
Assets (Liabilities)

Natural gas derivatives	$	—	$	3,931	$	—	$	3,931

Total	$	—	$	3,931	$	—	$	3,931

Additional disclosures related to derivative financial instruments are provided in Note 8.

Other Fair Value Measurements

At June 30, 2023 and December 31, 2022, the carrying values reported on the interim unaudited condensed consolidated balance sheets for accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, royalties payable, amounts due to affiliates, advances from joint interest owners and other current liabilities approximated their fair values due to their short-term maturities.

At June 30, 2023 and December 31, 2022, the carrying value of borrowings under the Credit Agreement and the San Mateo Credit Facility approximated their fair value as both are subject to short-term floating interest rates that reflect market rates available to the Company at the time and are classified at Level 2 in the fair value hierarchy.

At June 30, 2023 and December 31, 2022, the fair value of the 2026 Notes was $679.1 million and $675.7 million, respectively, based on quoted market prices, which represent Level 1 inputs in the fair value hierarchy.

At June 30, 2023, the fair value of the 2028 Notes was $493.1 million based on quoted market prices, which represent Level 1 inputs in the fair value hierarchy.

Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets and liabilities acquired in a business combination, lease and well equipment inventory when the market value is determined to be lower than the cost of the inventory and other property and equipment that are reduced to fair value when they are impaired or held for sale. See Note 3 for discussion of the fair value measurement of assets acquired and liabilities assumed as part of the Advance Acquisition.

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NOTE 10 — COMMITMENTS AND CONTINGENCIES

Processing, Transportation and Produced Water Disposal Commitments

Firm Commitments

From time to time, the Company enters into agreements with third parties whereby the Company commits to deliver anticipated natural gas and oil production and produced water from certain portions of its acreage for transportation, gathering, processing, fractionation, sales and disposal. The Company paid approximately $11.4 million and $12.8 million for deliveries under these agreements during the three months ended June 30, 2023 and 2022, respectively, and $22.1 million and $23.8 million for deliveries under these agreements during the six months ended June 30, 2023 and 2022, respectively. Certain of these agreements contain minimum volume commitments. If the Company does not meet the minimum volume commitments under these agreements, it will be required to pay certain deficiency fees. If the Company ceased operations in the areas subject to these agreements at June 30, 2023, the total deficiencies required to be paid by the Company under these agreements would be approximately $586.0 million.

San Mateo Commitments

The Company dedicated to San Mateo its current and certain future leasehold interests in the Rustler Breaks and Wolf asset areas and acreage in the southern portion of the Arrowhead asset area (the “Greater Stebbins Area”) and the Stateline asset area pursuant to 15-year, fixed-fee oil transportation, oil, natural gas and produced water gathering and produced water disposal agreements. In addition, the Company dedicated to San Mateo its current and certain future leasehold interests in the Rustler Breaks asset area and acreage in the Greater Stebbins Area and Stateline asset area pursuant to 15-year, fixed-fee natural gas processing agreements (collectively with the transportation, gathering and produced water disposal agreements, the “Operational Agreements”). San Mateo provides the Company with firm service under each of the Operational Agreements in exchange for certain minimum volume commitments. The remaining minimum contractual obligation under the Operational Agreements at June 30, 2023 was approximately $253.5 million.

Legal Proceedings

The Company is a party to several legal proceedings encountered in the ordinary course of its business. While the ultimate outcome and impact on the Company cannot be predicted with certainty, in the opinion of management, it is remote that these legal proceedings will have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

NOTE 11 — SUPPLEMENTAL DISCLOSURES

Accrued Liabilities

The following table summarizes the Company’s current accrued liabilities at June 30, 2023 and December 31, 2022 (in thousands).


	June 30, 2023		December 31, 2022
Accrued evaluated and unproved and unevaluated property costs	$	202,251	$	112,766
Accrued midstream properties costs	10,696		11,623


Accrued lease operating expenses	53,623		46,975
Accrued interest on debt	22,249		10,461
Accrued asset retirement obligations	1,413		756
Accrued partners’ share of joint interest charges	31,295		42,199

Accrued payable related to purchased natural gas	7,629		11,158
Other	21,187		25,372
Total accrued liabilities	$	350,343	$	261,310

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Supplemental Cash Flow Information

The following table provides supplemental disclosures of cash flow information for the six months ended June 30, 2023 and 2022 (in thousands).


	Six Months Ended June 30,
	2023		2022
Cash paid for income taxes	$	1,677	$	13,500
Cash paid for interest expense, net of amounts capitalized	$	65,757	$	37,254

Increase (decrease) in asset retirement obligations related to mineral properties	$	8,787	$	(4,094)
Increase in asset retirement obligations related to midstream properties	$	641	$	—
Increase (decrease) in liabilities for drilling, completion and equipping capital expenditures	$	89,760	$	(50,283)
Decrease in liabilities for acquisition of oil and natural gas properties	$	(346)	$	(2,510)
(Decrease) increase in liabilities for midstream properties capital expenditures	$	(929)	$	7,226



Stock-based compensation expense recognized as a liability	$	3,628	$	17,521

Increase in liabilities for accrued cost to issue senior notes	$	248	$	—
Transfer of inventory from (to) oil and natural gas properties	$	725	$	(162)

The following table provides a reconciliation of cash and restricted cash recorded in the interim unaudited condensed consolidated balance sheets to cash and restricted cash as presented on the interim unaudited condensed consolidated statements of cash flows (in thousands).


	Six Months Ended June 30,
	2023		2022
Cash	$	22,303	$	230,394
Restricted cash	43,535		51,889
Total cash and restricted cash	$	65,838	$	282,283

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UNAUDITED — CONTINUED

NOTE 12 — SEGMENT INFORMATION

The Company operates in two business segments: (i) exploration and production and (ii) midstream. The exploration and production segment is engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States and is currently 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. The Company also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. The midstream segment conducts midstream operations in support of the Company’s exploration, development and production operations and provides natural gas processing, oil transportation services, oil, natural gas and produced water gathering services and produced water disposal services to third parties. The majority of the Company’s midstream operations in the Rustler Breaks, Wolf and Stateline asset areas and the Greater Stebbins Area in the Delaware Basin, which comprise most of the Company’s midstream operations, are conducted through San Mateo. In addition, at June 30, 2023, the Company operated a cryogenic gas processing plant, compressor stations and a natural gas gathering pipeline system in Lea and Eddy Counties, New Mexico through Pronto Midstream, LLC (“Pronto”), which is a wholly-owned subsidiary of the Company. Neither San Mateo nor Pronto is a guarantor of the 2026 Notes or the 2028 Notes.

The following tables present selected financial information for the periods presented regarding the Company’s business segments on a stand-alone basis, corporate expenses that are not allocated to a segment and the consolidation and elimination entries necessary to arrive at the financial information for the Company on a consolidated basis (in thousands). On a consolidated basis, midstream services revenues consist primarily of those revenues from midstream operations related to third parties, including working interest owners in the Company’s operated wells. All midstream services revenues associated with Company-owned production are eliminated in consolidation. In evaluating the operating results of the exploration and production and midstream segments, the Company does not allocate certain expenses to the individual segments, including general and administrative expenses. Such expenses are reflected in the column labeled “Corporate.”


	Exploration and Production						Consolidations and Eliminations		Consolidated Company
			Midstream		Corporate
Three Months Ended June 30, 2023
Oil and natural gas revenues	$	586,732	$	1,185	$	—	$	—	$	587,917
Midstream services revenues	—		79,214		—		(49,139)		30,075
Sales of purchased natural gas	5,544		26,354		—		—		31,898

Realized loss on derivatives	(3,148)		—		—		—		(3,148)
Unrealized loss on derivatives	(8,659)		—		—		—		(8,659)
Expenses(1)