Matador Resources Co [MTDR] Filings

10-Q 1 mtdr-20240630.htm 10-Q mtdr-20240630

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, 2024


☐			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 23, 2024, there were 124,816,171 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, 2024

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION			3
Item 1. Financial Statements — Unaudited			3
Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023			3
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2024 and 2023			4
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023			5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023			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			41
Item 4. Controls and Procedures			42
PART II — OTHER INFORMATION			43
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Repurchase of Equity by the Company or Affiliates			43
Item 5. Other Information			44
Item 6. Exhibits			45
SIGNATURES			46

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, 2024		December 31, 2023
ASSETS
Current assets
Cash	$	15,242	$	52,662

Restricted cash	48,661		53,636
Accounts receivable
Oil and natural gas revenues	294,019		274,192
Joint interest billings	204,931		163,660
Other	29,090		35,102
Derivative instruments	5,590		2,112


Lease and well equipment inventory	38,046		41,808
Prepaid expenses and other current assets	102,861		92,700
Total current assets	738,440		715,872
Property and equipment, at cost
Oil and natural gas properties, full-cost method
Evaluated	10,376,411		9,633,757
Unproved and unevaluated	1,478,247		1,193,257
Midstream properties	1,448,343		1,318,015
Other property and equipment	41,995		40,375
Less accumulated depletion, depreciation and amortization	(5,667,208)		(5,228,963)
Net property and equipment	7,677,788		6,956,441
Other assets
Derivative instruments	2,030		558

Other long-term assets	100,133		54,125
Total other assets	102,163		54,683
Total assets	$	8,518,391	$	7,726,996
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	96,241	$	68,185
Accrued liabilities	388,353		365,848
Royalties payable	195,795		161,983

Amounts due to affiliates	19,576		28,688
Derivative instruments	14,704		—
Advances from joint interest owners	56,439		19,954




Other current liabilities	85,433		40,617
Total current liabilities	856,541		685,275
Long-term liabilities
Borrowings under Credit Agreement	95,000		500,000
Borrowings under San Mateo Credit Facility	512,000		522,000
Senior unsecured notes payable	1,374,596		1,184,627
Asset retirement obligations	93,952		87,485


Deferred income taxes	673,955		581,439

Other long-term liabilities	56,742		38,482
Total long-term liabilities	2,806,245		2,914,033
Commitments and contingencies (Note 10)
Shareholders’ equity

Common stock - $0.01 par value, 160,000,000 shares authorized; 124,885,730 and 119,478,282 shares issued; and 124,811,349 and 119,458,674 shares outstanding, respectively	1,249		1,194
Additional paid-in capital	2,483,075		2,133,172
Retained earnings	2,150,292		1,776,541
Treasury stock, at cost, 74,381 and 19,608 shares, respectively	(2,990)		(45)
Total Matador Resources Company shareholders’ equity	4,631,626		3,910,862
Non-controlling interest in subsidiaries	223,979		216,826
Total shareholders’ equity	4,855,605		4,127,688
Total liabilities and shareholders’ equity	$	8,518,391	$	7,726,996

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

Table of Contents

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME — UNAUDITED

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues
Oil and natural gas revenues	$	776,279	$	587,917	$	1,479,819	$	1,090,826
Third-party midstream services revenues	32,651		30,075		65,008		56,586
Sales of purchased natural gas	46,265		31,898		95,711		66,152

Realized gain (loss) on derivatives	3,770		(3,148)		4,045		521
Unrealized loss on derivatives	(11,829)		(8,659)		(9,754)		(15,726)
Total revenues	847,136		638,083		1,634,829		1,198,359
Expenses
Production taxes, transportation and processing	76,812		61,991		146,965		117,477
Lease operating	79,030		61,043		155,325		105,450
Plant and other midstream services operating	37,258		30,657		76,881		61,702
Purchased natural gas	35,240		27,103		74,672		55,551
Depletion, depreciation and amortization	225,934		177,514		438,245		303,839
Accretion of asset retirement obligations	1,329		792		2,602		1,491

General and administrative	27,913		26,715		57,566		49,148
Total expenses	483,516		385,815		952,256		694,658
Operating income	363,620		252,268		682,573		503,701
Other income (expense)
Net loss on impairment	—		(202)		—		(202)
Interest expense	(35,986)		(34,229)		(75,548)		(50,405)

Other (expense) income	(2,121)		16,564		(1,544)		16,903
Total other expense	(38,107)		(17,867)		(77,092)		(33,704)
Income before income taxes	325,513		234,401		605,481		469,997
Income tax provision (benefit)
Current	30,104		(4,929)		47,376		—
Deferred	47,882		62,235		97,388		113,978
Total income tax provision	77,986		57,306		144,764		113,978
Net income	247,527		177,095		460,717		356,019
Net income attributable to non-controlling interest in subsidiaries	(18,758)		(12,429)		(38,219)		(28,223)
Net income attributable to Matador Resources Company shareholders	$	228,769	$	164,666	$	422,498	$	327,796
Earnings per common share
Basic	$	1.83	$	1.38	$	3.46	$	2.75
Diluted	$	1.83	$	1.37	$	3.45	$	2.73
Weighted average common shares outstanding
Basic	124,786		119,183		122,253		119,109
Diluted	124,896		119,842		122,438		119,856

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, 2024


												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, 2024	119,478	$	1,194		$	2,133,172	$	1,776,541	20	$	(45)	$	3,910,862	$	216,826	$	4,127,688
Dividends declared ($0.20 per share)	—	—			—		(23,858)		—	—		(23,858)		—		(23,858)
Issuance of common stock pursuant to employee stock compensation plan	100	1			(11,382)		—		—	—		(11,381)		—		(11,381)
Issuance of common stock pursuant to public offering	5,250	53			344,610		—		—	—		344,663		—		344,663
Cost to issue equity	—	—			(53)		—		—	—		(53)		—		(53)


Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			5,149		—		—	—		5,149		—		5,149
Stock options exercised, net of options forfeited in net share settlements	7	—			—		—		—	—		—		—		—



Restricted stock forfeited	—	—			—		—		35	(2,046)		(2,046)		—		(2,046)


Contribution related to formation of San Mateo, net of tax of $0.3 million (see Note 7)	—	—			1,185		—		—	—		1,185		—		1,185

Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		7,350		7,350
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(25,725)		(25,725)

Current period net income	—	—			—		193,729		—	—		193,729		19,461		213,190
Balance at March 31, 2024	124,835	$	1,248		$	2,472,681	$	1,946,412	55	$	(2,091)	$	4,418,250	$	217,912	$	4,636,162
Dividends declared ($0.20 per share)	—	—			—		(24,889)		—	—		(24,889)		—		(24,889)
Issuance of common stock pursuant to employee stock compensation plan	33	1			1,027		—		—	—		1,028		—		1,028


Cost to issue equity	—	—			(2,513)		—		—	—		(2,513)		—		(2,513)
Issuance of common stock pursuant to directors’ compensation plan	18	—			—		—		—	—		—		—		—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—			4,967		—		—	—		4,967		—		4,967




Restricted stock forfeited	—	—			—		—		19	(899)		(899)		—		(899)


Contribution related to formation of San Mateo, net of tax of $1.8 million (see Note 7)	—	—			6,913		—		—	—		6,913		—		6,913
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		11,760		11,760
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—			—		—		—	—		—		(24,451)		(24,451)


Current period net income	—	—			—		228,769		—	—		228,769		18,758		247,527
Balance at June 30, 2024	124,886	$	1,249		$	2,483,075	$	2,150,292	74	$	(2,990)	$	4,631,626	$	223,979	$	4,855,605

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' 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	—	—			—		—		—	—		—		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.

Table of Contents

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(In thousands)


	Six Months Ended June 30,
	2024		2023
Operating activities
Net income	$	460,717	$	356,019
Adjustments to reconcile net income to net cash provided by operating activities
Unrealized loss on derivatives	9,754		15,726
Depletion, depreciation and amortization	438,245		303,839
Accretion of asset retirement obligations	2,602		1,491

Stock-based compensation expense	5,812		6,221

Deferred income tax provision	97,388		113,978
Amortization of debt issuance cost and other debt-related costs	9,586		2,895
Other non-cash changes	(664)		(15,682)

Changes in operating assets and liabilities
Accounts receivable	(55,086)		56,407
Lease and well equipment inventory	(7,380)		(7,237)
Prepaid expenses and other current assets	320		(24,124)
Other long-term assets	(156)		2,072
Accounts payable, accrued liabilities and other current liabilities	14,832		(28,232)
Royalties payable	33,811		10,085
Advances from joint interest owners	36,485		(4,979)


Income taxes payable	13,846		(1,677)
Other long-term liabilities	1,377		1,709
Net cash provided by operating activities	1,061,489		788,511
Investing activities
Drilling, completion and equipping capital expenditures	(611,715)		(539,511)
Acquisition of Advance	—		(1,608,427)
Acquisition of Ameredev	(95,250)		—
Acquisition of oil and natural gas properties	(256,110)		(55,897)
Midstream capital expenditures	(157,201)		(32,871)

Expenditures for other property and equipment	(771)		(2,478)
Proceeds from sale of assets	900		451





Net cash used in investing activities	(1,120,147)		(2,238,733)
Financing activities

Repayments of borrowings under Credit Agreement	(1,720,000)		(2,190,000)
Borrowings under Credit Agreement	1,315,000		2,750,000
Repayments of borrowings under San Mateo Credit Facility	(136,000)		(108,000)
Borrowings under San Mateo Credit Facility	126,000		103,000
Cost to amend credit facilities	(11,424)		(8,645)
Proceeds from issuance of senior unsecured notes	900,000		494,800
Cost to issue senior unsecured notes	(15,621)		(8,255)
Purchase of senior unsecured notes	(699,191)		—
Proceeds from issuance of common stock	344,663		—
Cost to issue equity	(2,566)		—

Dividends paid	(48,747)		(35,685)
Contributions related to formation of San Mateo	10,250		14,700
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	19,110		24,500
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	(50,176)		(44,443)
Taxes paid related to net share settlement of stock-based compensation	(14,440)		(22,790)

Other	(595)		(452)
Net cash provided by financing activities	16,263		968,730
Change in cash and restricted cash	(42,395)		(481,492)
Cash and restricted cash at beginning of period	106,298		547,330
Cash and restricted cash at end of period	$	63,903	$	65,838

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 primarily through its midstream joint venture, San Mateo Midstream, LLC and its subsidiaries (“San Mateo”), and Pronto Midstream, LLC and its subsidiary (“Pronto”) 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, 2023 filed with the SEC on February 27, 2024 (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 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 balances 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, 2024. Amounts as of December 31, 2023 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, 2024 and 2023 (in thousands).


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues from contracts with customers	$	855,195	$	649,890	$	1,640,538	$	1,213,564

Realized gain (loss) on derivatives	3,770		(3,148)		4,045		521
Unrealized loss on derivatives	(11,829)		(8,659)		(9,754)		(15,726)
Total revenues	$	847,136	$	638,083	$	1,634,829	$	1,198,359


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Oil revenues	$	705,550	$	510,364	$	1,304,064	$	912,141
Natural gas revenues	70,729		77,553		175,755		178,685
Third-party midstream services revenues	32,651		30,075		65,008		56,586
Sales of purchased natural gas	46,265		31,898		95,711		66,152
Total revenues from contracts with customers	$	855,195	$	649,890	$	1,640,538	$	1,213,564

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, 2024 and 2023, 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 $15.1 million and $14.5 million of its general and administrative costs for the three months ended June 30, 2024 and 2023, respectively, and $32.2 million and $27.1 million of its general and administrative costs for the six months ended June 30, 2024 and 2023, respectively. The Company capitalized approximately $9.3 million and $5.3 million of its interest expense for the three months ended June 30, 2024 and 2023, respectively, and $15.2 million and $8.7 million of its interest expense for the six months ended June 30, 2024 and 2023, 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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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, 2024 and 2023 (in thousands).


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Weighted average common shares outstanding
Basic	124,786	119,183	122,253	119,109
Dilutive effect of options and restricted stock units	110	659	185	747
Diluted weighted average common shares outstanding	124,896	119,842	122,438	119,856

Recent Accounting Pronouncements

Segments. In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. This ASU is effective retrospectively for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on its disclosures.

Income Taxes. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this standard provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid. This ASU is effective for the Company prospectively to all annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on its disclosures.

Climate-Related Disclosures. On March 6, 2024, the SEC adopted a new set of rules that require a wide range of climate-related disclosures, including material climate-related risks, information on any climate-related targets or goals that are material to the registrant’s business, results of operations or financial condition, Scope 1 and Scope 2 greenhouse gas emissions on a phased-in basis by certain larger registrants when those emissions are material and the filing of an attestation report covering the same, and disclosure of the financial statement effects of severe weather events and other natural conditions including costs and losses. Compliance dates under the final rule are phased in by registrant category. Multiple lawsuits have been filed challenging the SEC’s new climate rules, which have been consolidated and will be heard in the U.S. Court of Appeals for the Eighth Circuit. On April 4, 2024, the SEC issued an order staying the final rules until judicial review is complete. The Company is currently evaluating the impact of the final rules on its disclosures.

NOTE 3 — BUSINESS COMBINATIONS

Ameredev Acquisition

On June 12, 2024, a wholly-owned subsidiary of the Company entered into a definitive agreement to acquire a subsidiary of Ameredev II Parent, LLC (“Ameredev”) from affiliates of EnCap Investments L.P., including certain oil and natural gas producing properties and undeveloped acreage located in Lea County, New Mexico and Loving and Winkler Counties, Texas (the “Ameredev Acquisition”). The Ameredev Acquisition also includes an approximate 19% stake in Piñon Midstream, LLC, which has midstream assets in southern Lea County, New Mexico. The consideration for the Ameredev Acquisition will consist of a cash payment of $1.905 billion, subject to customary closing adjustments. The consummation of the Ameredev Acquisition is subject to customary closing conditions, including regulatory approval, and is expected to close late in the third quarter of 2024 with an effective date of June 1, 2024.

Q1 2024 Acquisition

On February 15, 2024, a wholly-owned subsidiary of the Company acquired oil and natural gas producing properties and undeveloped acreage located in Lea County, New Mexico (the “Q1 2024 Acquisition”). The Q1 2024 Acquisition had an effective date of October 1, 2023 and consideration for the acquisition consisted of an amount in cash equal to approximately $155.1 million (which amount was subject to certain customary post-closing adjustments).

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NOTE 3 — BUSINESS COMBINATIONS — Continued

The Q1 2024 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 acquisition date, with any excess purchase price allocated to goodwill.

The preliminary allocation of the total purchase price for the Q1 2024 Acquisition is set forth below (in thousands). The Company anticipates that the allocation of the purchase price should be finalized during 2024 upon determination of the final purchase price adjustments.


Consideration	Allocation


Cash consideration given	$	155,054
Allocation of purchase price
Current assets	$	3,358
Oil and natural gas properties
Evaluated	45,778
Unproved and unevaluated	107,072

Asset retirement obligations	(1,154)
Net assets acquired	$	155,054

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) future production volumes, (ii) future commodity prices and (iii) recent market comparable transactions for unproved acreage. These inputs require significant judgments and estimates and are the most sensitive and subject to change.

The results of operations for the Q1 2024 Acquisition since the closing date have been included in the Company’s interim unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024. The pro forma impact of this business combination to revenues and net income for 2024 would not be material to the Company’s 2024 revenues and net income as reported.

Advance Acquisition

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 “Initial Advance Acquisition”). The Initial 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 $1.60 billion (which amount was 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) exceeded $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 Initial 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”). In the fourth quarter of 2023, the Company paid Contingent Consideration of $15.0 million, as the average oil price for the months of September and October 2023 exceeded $85 per barrel.

On December 1, 2023, the Company acquired additional interests from affiliates of EnCap Investments L.P., including overriding royalty interests and royalty interests in certain oil and natural gas properties located primarily in Lea County, New Mexico, most of which were included in the Initial Advance Acquisition (the “Advance Royalty Acquisition”). The Advance Royalty Acquisition had an effective date of October 1, 2023 and an aggregate purchase price of approximately $81.0 million (which amount is subject to certain customary post-closing adjustments), and was funded by cash on hand.

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NOTE 3 — BUSINESS COMBINATIONS — Continued

The Initial Advance Acquisition and Advance Royalty Acquisition (collectively, the “Advance Acquisition”) were accounted for under the acquisition method of accounting as a business combination in accordance with 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 dates, with any excess purchase price allocated to goodwill. The Advance Acquisition was treated as an asset acquisition for tax purposes, as the Company acquired 100% of the membership interests of Advance in the Initial Advance Acquisition and acquired additional overriding royalty interests and royalty interests in the Advance Royalty Acquisition.

The final allocation of the total purchase price for the Advance Acquisition is set forth below (in thousands).


Consideration	Allocation
Cash	$	1,676,132
Working capital adjustments	(4,060)
Fair value of Contingent Consideration at April 12, 2023	21,151
Total consideration given	$	1,693,223
Allocation of purchase price
Current assets	$	79,287
Oil and natural gas properties
Evaluated	1,418,668
Unproved and unevaluated	213,835
Midstream assets	63,644
Current liabilities	(73,885)
Asset retirement obligations	(8,326)
Net assets acquired	$	1,693,223

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, 2024 (in thousands).


Beginning asset retirement obligations	$	92,090
Liabilities incurred during period	4,661
Liabilities settled during period	(192)


Divestitures during period	(326)
Accretion expense	2,602
Ending asset retirement obligations	98,835
Less: current asset retirement obligations(1)	(4,883)
Long-term asset retirement obligations	$	93,952

_______________

(1)Included in accrued liabilities in the Company’s interim unaudited condensed consolidated balance sheet at June 30, 2024.

NOTE 5 — DEBT

At June 30, 2024, the Company had (i) $500.0 million of outstanding senior notes due 2028 (the “2028 Notes”), (ii) $900.0 million of outstanding senior notes due 2032 (the “2032 Notes”), (iii) $95.0 million in borrowings outstanding under the Credit Agreement and (iv) approximately $52.8 million in outstanding letters of credit issued pursuant to the Credit Agreement. Between June 30, 2024 and July 23, 2024, the Company repaid all $95.0 million of borrowings outstanding under the Credit Agreement.

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UNAUDITED — CONTINUED

NOTE 5 — DEBT — Continued

At June 30, 2024, San Mateo had $512.0 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, 2024 and July 23, 2024, San Mateo repaid $26.0 million of borrowings under the San Mateo Credit Facility.

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 22, 2024, the Company and its lenders entered into an amendment to the Fourth Amended and Restated Credit Agreement, which amended the Credit Agreement to, among other things: (i) reaffirm the borrowing base at $2.50 billion, (ii) increase the elected borrowing commitments from $1.325 billion to $1.50 billion, (iii) increase the maximum facility amount from $2.00 billion to $3.50 billion, (iv) extend the maturity date from October 31, 2026 to March 22, 2029, (v) appoint PNC Bank, National Association as administrative agent thereunder and (vi) add five new banks to the lending group. This March 2024 reaffirmation of the borrowing base constituted the regularly scheduled May 1 redetermination.

On June 12, 2024, in connection with the Ameredev Acquisition, the Company entered into a commitment letter with PNC Capital Markets LLC and PNC Bank, National Association, which commitment letter provides commitments for an amendment to the Credit Agreement to incorporate an up to $250.0 million term loan and increase the elected commitment from $1.50 billion to $2.25 billion.

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 cash or cash equivalents of up to the greater of (a) $150.0 million and (b) 10% of the elected commitment), 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, 2024.

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 outstanding borrowings under the San Mateo Credit Facility mature on December 9, 2026, and lender commitments under the facility were $535.0 million at June 30, 2024. 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, 2024.

Senior Unsecured Notes

2026 Notes Tender Offer and Redemption

On April 2 and April 4, 2024, the Company completed the repurchase of an aggregate principal amount of approximately $556.3 million of the $699.2 million of outstanding senior notes due 2026 (the “2026 Notes”) pursuant to the Company’s cash tender offer for the 2026 Notes announced on March 26, 2024 (the “2026 Notes Tender Offer”). On April 2, 2024, the Company exercised its optional right, under the indenture governing the 2026 Notes, to redeem the remaining aggregate principal amount of approximately $142.9 million of 2026 Notes outstanding on September 15, 2024 (the “2026 Notes Redemption”) and, in connection therewith, to satisfy and discharge the Company’s obligations under such indenture with

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UNAUDITED — CONTINUED

NOTE 5 — DEBT — Continued

respect to the 2026 Notes. In connection with the 2026 Notes Tender Offer and 2026 Notes Redemption, the Company incurred a loss of approximately $3.0 million included in interest expense for the three and six months ended June 30, 2024.

2028 Senior Notes

At June 30, 2024, the Company had $500.0 million of outstanding 2028 Notes, which have a 6.875% coupon rate. The 2028 Notes mature April 15, 2028, and interest is payable on the 2028 Notes semi-annually in arrears on each April 15 and October 15. The 2028 Notes are jointly and severally guaranteed on a senior unsecured basis by the Guarantor Subsidiaries. Neither San Mateo nor Pronto is a guarantor of the 2028 Notes.

2032 Senior Notes

On April 2, 2024, the Company completed the sale of $900.0 million in aggregate principal amount of the 2032 Notes, which have a 6.50% coupon rate and mature on April 15, 2032. Interest on the 2032 Notes is payable in arrears on each April 15 and October 15 and the first interest payment date for the 2032 Notes will be October 15, 2024. The 2032 Notes are guaranteed on a senior unsecured basis by the Guarantor Subsidiaries. Neither San Mateo nor Pronto is a guarantor of the 2032 Notes.

At any time prior to April 15, 2027, the Company may redeem up to 40% in aggregate principal amount of 2032 Notes at a redemption price of 106.500% of the principal amount thereof, plus accrued and unpaid interest, if any, 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 60% of the aggregate principal amount of the 2032 Notes remains outstanding after such redemption. In addition, at any time prior to April 15, 2027, the Company may redeem all or part of the 2032 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, if any, to the applicable redemption date.

On or after April 15, 2027, the Company may redeem all or a part of the 2032 Notes at any time or from time to time at the following redemption prices (expressed as percentages of the principal amount) plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning April 15 of the years indicated below:


Year						Redemption Price
2027						103.250%
2028						101.625%
2029 and thereafter						100.000%

Debt Maturities

The outstanding borrowings of $95.0 million at June 30, 2024 under the Credit Agreement mature on March 22, 2029. The outstanding borrowings of $512.0 million at June 30, 2024 under the San Mateo Credit Facility mature on December 9, 2026. The $500.0 million of outstanding 2028 Notes at June 30, 2024 mature on April 15, 2028. The $900.0 million of outstanding 2032 Notes at June 30, 2024 mature on April 15, 2032.

NOTE 6 — INCOME TAXES

The Company recorded a current income tax provision of $30.1 million and $47.4 million and a deferred income tax provision of $47.9 million and $97.4 million for the three and six months ended June 30, 2024, respectively. 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 for the three and six months ended June 30, 2023, respectively.

The Company’s effective income tax rate of 25% and 26% for the three months ended June 30, 2024 and 2023, respectively, and 26% for each of the six months ended June 30, 2024 and 2023 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.

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 7 — EQUITY

Equity Offering

On March 28, 2024, the Company completed an underwritten public offering of 5,250,000 shares of its common stock. After deducting underwriting discounts and offering expenses, the Company received net proceeds of approximately $342.1 million. The net proceeds from this offering were used for general corporate purposes, including the funding of acquisitions and the repayment of borrowings outstanding under the Credit Agreement.

Stock-based Compensation

During the six months ended June 30, 2024, the Company granted awards to certain of its employees of 137,100 service-based restricted stock units to be settled in cash, which are liability instruments, and 176,000 performance-based stock units and 112,700 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, 2026, 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 $25.8 million on the grant date.

Common Stock Dividend

Matador’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.20 per share of common stock in each of the first and second quarters of 2024. The first quarter dividend, which totaled $23.9 million, was paid on March 13, 2024 to shareholders of record as of February 23, 2024. The second quarter dividend, which totaled $24.9 million, was paid on June 7, 2024 to shareholders of record as of May 17, 2024. On July 18, 2024, the Board declared a quarterly cash dividend of $0.20 per share of common stock payable on September 5, 2024 to shareholders of record as of August 15, 2024.

San Mateo Distributions and Contributions

During the three months ended June 30, 2024 and 2023, San Mateo distributed $25.4 million and $26.4 million, respectively, to the Company and $24.5 million and $25.3 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, 2024 and 2023, San Mateo distributed $52.2 million and $46.3 million, respectively, to the Company and $50.2 million and $44.4 million, respectively, to a subsidiary of Five Point. During the three months ended June 30, 2024 and 2023, the Company contributed $12.2 million and $25.5 million, respectively, and Five Point contributed $11.8 million and $24.5 million, respectively, of cash to San Mateo. During the six months ended June 30, 2024 and 2023, the Company contributed $19.9 million and $25.5 million, respectively, and Five Point contributed $19.1 million and $24.5 million, respectively, of cash to San Mateo.

Performance Incentives

Five Point paid the Company $8.8 million of performance incentives during the three months ended June 30, 2024. No performance incentives were paid by Five Point to the Company during the three months ended June 30, 2023. Five Point paid the Company $10.3 million and $14.7 million of performance incentives during the six months ended June 30, 2024 and 2023, respectively. These performance incentives are recorded when received, net of the $1.8 million deferred tax impact to the Company for the three months ended June 30, 2024 and the $2.1 million and $3.1 million deferred tax impact to the Company for the six months ended June 30, 2024 and 2023, respectively, in “Additional paid-in capital” in the Company’s interim unaudited condensed consolidated balance sheets. These performance incentives for the three months ended June 30, 2024 and the six months ended June 30, 2024 and 2023 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, 2024, the Company had various costless collar contracts open and in place to mitigate its exposure to oil price volatility, each with an established price floor and ceiling. At June 30, 2024, the Company had natural gas basis differential swap contracts 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. The Company had no open contracts associated with natural gas liquids prices at June 30, 2024.

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NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS — Continued

The following is a summary of the Company’s open costless collar contracts at June 30, 2024.


Commodity	Calculation Period	Notional Quantity (Bbl)	Weighted Average Price Floor ($/Bbl)		Weighted Average Price Ceiling ($/Bbl)		Fair Value of Asset (Liability) (thousands)
Oil Costless Collar	7/01/2024 - 6/30/2025	16,425,000	$	60.00	$	86.26	$	(14,704)











Total open costless collar contracts							$	(14,704)

The following is a summary of the Company’s open basis differential swap contracts at June 30, 2024.


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

Natural Gas Basis Differential	7/01/2024 - 12/31/2025	16,470,000	$	(0.59)	$	7,620
Total open basis differential swap contracts					$	7,620

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.

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, 2024 and December 31, 2023 (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, 2024
Current assets	$	23,461	$	(17,871)	$	5,590
Other assets	2,030		—		2,030
Current liabilities	(32,575)		17,871		(14,704)

Total	$	(7,084)	$	—	$	(7,084)
December 31, 2023
Current assets	$	2,573	$	(461)	$	2,112
Other assets	1,743		(1,185)		558


Total	$	4,316	$	(1,646)	$	2,670

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NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS — Continued

The following table summarizes the location and aggregate gain (loss) of all derivative financial instruments recorded in the interim unaudited condensed consolidated statements of income 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 Income	2024		2023		2024		2023
Derivative Instrument

Natural Gas	Revenues: Realized gain (loss) on derivatives	$	3,770	$	(3,148)	$	4,045	$	521

Realized gain (loss) on derivatives		$	3,770	$	(3,148)	$	4,045	$	521
Oil	Revenues: Unrealized loss on derivatives	$	(14,704)	$	—	$	(14,704)	$	—
Natural Gas	Revenues: Unrealized gain (loss) on derivatives	2,875		(8,659)		4,950		(15,726)

Unrealized loss on derivatives		$	(11,829)	$	(8,659)	$	(9,754)	$	(15,726)
Total		$	(8,059)	$	(11,807)	$	(5,709)	$	(15,205)

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 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, 2024 and December 31, 2023 (in thousands).


	Fair Value Measurements at June 30, 2024 using
Description	Level 1		Level 2		Level 3		Total
Assets (Liabilities)
Oil costless collars	$	—	$	(14,704)	$	—	$	(14,704)
Natural gas basis differential swaps	—		7,620		—		7,620

Total	$	—	$	(7,084)	$	—	$	(7,084)

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NOTE 9 — FAIR VALUE MEASUREMENTS — Continued


	Fair Value Measurements at December 31, 2023 using
Description	Level 1		Level 2		Level 3		Total
Assets (Liabilities)

Natural gas basis differential swaps	$	—	$	2,670	$	—	$	2,670

Total	$	—	$	2,670	$	—	$	2,670

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

Other Fair Value Measurements

At June 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, the fair value of the 2028 Notes was $508.6 million and $510.9 million, respectively, based on quoted market prices, which represent Level 1 inputs in the fair value hierarchy.

At June 30, 2024, the fair value of the 2032 Notes was $900.9 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 Q1 2024 Acquisition and the Advance Acquisition.

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 $16.3 million and $11.4 million for deliveries under these agreements during the three months ended June 30, 2024 and 2023, respectively, and $31.7 million and $22.1 million for deliveries under these agreements during the six months ended June 30, 2024 and 2023, 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, 2024, the total deficiencies required to be paid by the Company under these agreements would be approximately $593.0 million.

San Mateo Commitments

The Company dedicated to San Mateo its current and certain future leasehold interests in the Rustler Breaks asset area and the Wolf portion of the West Texas asset area 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, 2024 was approximately $164.4 million.

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Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 10 — COMMITMENTS AND CONTINGENCIES — Continued

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, 2024 and December 31, 2023 (in thousands).


	June 30, 2024		December 31, 2023
Accrued evaluated and unproved and unevaluated property costs	$	172,763	$	144,443
Accrued midstream properties costs	34,373		55,195


Accrued lease operating expenses	72,545		62,005
Accrued interest on debt	23,689		22,857
Accrued asset retirement obligations	4,883		4,605
Accrued partners’ share of joint interest charges	41,269		42,101

Accrued payable related to purchased natural gas	5,982		10,400
Other	32,849		24,242
Total accrued liabilities	$	388,353	$	365,848

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 11 — SUPPLEMENTAL DISCLOSURES — Continued

Supplemental Cash Flow Information

The following table provides supplemental disclosures of cash flow information for the six months ended June 30, 2024 and 2023 (in thousands).


	Six Months Ended June 30,
	2024		2023
Cash paid for income taxes	$	32,283	$	1,677
Cash paid for interest expense, net of amounts capitalized	$	75,213	$	65,757

Increase in asset retirement obligations related to mineral properties	$	3,990	$	8,787
Increase in asset retirement obligations related to midstream properties	$	154	$	641
Increase in liabilities for drilling, completion and equipping capital expenditures	$	43,052	$	89,760
Increase (decrease) in liabilities for acquisition of oil and natural gas properties	$	7,270	$	(346)
Decrease in liabilities for midstream properties capital expenditures	$	(20,836)	$	(929)



Stock-based compensation expense recognized as a liability	$	6,914	$	3,628

Increase in liabilities for accrued cost to issue senior notes	$	—	$