Dallas-based Matador Resources Co., whose focus is concentrated in the Permian Basin, reported stronger production in the third quarter, with natural gas climbing 22% sequentially in part on the ramp up of the 2 Bcf/d Gulf Coast Express system, which is moving supply to the Texas coast.
Average total output increased 14% sequentially to a record high of 69,600 boe/d, with oil at 39,800 b/d. Natural gas output reached 179.2 MMcf/d, versus year-ago volumes of 133.8 MMcf/d.
Improved gas prices in the Permian Delaware sub-basin “obviated the need to defer natural gas production from certain wells,” as the company did in the second quarter, management noted.
Beginning in late September, Matador began transporting most of its Delaware residue gas production to the Texas coast via GCX. Matador has secured firm natural gas transportation and sales on GCX for an average of 110,000-115,000 MMBtu/d at a price based on Houston Ship Channel pricing.
Management “expects to receive a higher realized natural gas price for its residue natural gas transported via the GCX Pipeline in the fourth quarter of 2019, as compared to residue natural gas sold at the Waha hub, despite the higher transportation charges incurred to transport this residue natural gas production to the Gulf Coast.”
Also credited with improving production performance in the latest period were wells in the Rustler Breaks and Antelope Ridge areas of the Delaware. Matador also was able to turn several wells to sales earlier than anticipated.
CEO Joseph Foran said the third quarter “was simply the best quarter in our company’s history. During the third quarter, we significantly exceeded our estimates for both oil and natural gas production as a result of continued improvements in operating efficiency and better-than-expected well results from a number of wells across our various asset areas.”
With the final quarter underway, Matador is transitioning to longer laterals across the Delaware, and “we anticipate that just over half of the wells we complete and turn to sales during the remainder of 2019 will be laterals longer than one mile, with about 30% of the total being two-mile laterals.”
Capital expenditures, excluding land and mineral acquisitions, were $213 million in the quarter. Matador estimated it achieved aggregate savings of $5 million on wells completed and turned to sales in the Delaware.
The independent now expects to complete and turn to sales 75.9 net operated and nonoperated wells this year, including 7.9 net additional operated wells resulting from an accelerated pace of drilling and completion activity, as well as increased working interests.
Full-year production is forecast to increase by 24% from 2018 to 23.65 million boe including a 23% gain in oil output to 13.65 million bbl and a 27% jump in gas production to 60.0 Bcf.
In the final three months of this year, Matador expects to operate six rigs in the Delaware. One of the six is also expected to drill two saltwater disposal wells.
Plans to sell the Eagle Ford Shale portfolio, along with Haynesville Shale, are advancing, said Foran. The company expects to complete “one or more of these opportunities before the end of the year.”
Net income was $44 million (38 cents/share) in 3Q2019, more than double year-ago profits of $17.8 million (15 cents). Total revenue increased to $279 million from $207 million. Third-party midstream services revenues via San Mateo Midstream LLC were $15.3 million, versus $6.8 million a year earlier.
Earlier in October as part of the fall redetermination process, lenders affirmed Matador’s borrowing base of $900 million, “despite lower commodity price assumptions,” management noted. The borrowing base “should provide the company with more-than-sufficient liquidity for conducting its current and anticipated future operations for the remainder of 2019 and 2020.”