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MR

Matador Resources Co (MTDR)·Q2 2025 Earnings Summary

Executive Summary

  • Record Q2 2025 production at 209,013 BOE/d (oil 122,875 Bbl/d), with adjusted free cash flow of $133M and Adjusted EBITDA of $594M; midstream affiliate San Mateo delivered record net income ($66M) and Adjusted EBITDA ($85.5M) .
  • EPS beat but revenue missed vs S&P Global consensus: Adjusted EPS $1.53 vs 1.41 consensus (beat), revenue $861.2M vs $910.8M consensus (miss); # of estimates: EPS 17, revenue 8. The EPS beat reflects non-GAAP adjusted EPS and favorable operations despite weaker commodity prices*.
  • FY 2025 production guidance raised across total, oil and gas without changing capex; Q3 production guided down slightly on batch co-development cadence (before re-accelerating in Q4) .
  • Lower expected 2025 cash tax payments (to 0–5% of pre-tax book net income) following enactment of the OBBBA tax law; leverage <1.0x and liquidity >$1.8B; continued capital returns via $0.3125 dividend and opportunistic buybacks .

What Went Well and What Went Wrong

What Went Well

  • Record upstream output and midstream financials: “Record quarterly production of 209,013 BOE/d… San Mateo… record quarterly net income of $66 million and record quarterly Adjusted EBITDA of $85.5 million” .
  • Cost efficiency execution: “Better-than-expected drilling and completions costs of approximately $825 per completed lateral foot and lease operating expenses of $5.56 per BOE” .
  • Strategic midstream expansion: “San Mateo Midstream increased its processing capacity 38%… to 720 MMcf/d with the startup of the… Marlan Plant expansion” .

What Went Wrong

  • Pricing headwinds pressured GAAP earnings: realized oil price down 11% sequential and 21% YoY; gas down 42% sequential, leading to lower diluted EPS ($1.21, -37% seq, -34% YoY) despite record volumes .
  • Sequential decline in net cash from operations (-31% vs Q1) and adjusted free cash flow (-7%), reflecting commodity pricing and working capital timing .
  • Q3 guide implies near-term volume dip as larger batch developments cause quarterly lumpiness (199–201K BOE/d midpoint) before expected ramp in Q4 .

Financial Results

Core P&L and Cash Metrics

MetricQ2 2024Q1 2025Q2 2025
Total Revenues ($USD Millions)$847.1 $1,014.0 $895.3
Net Income ($USD Millions)$228.8 $240.1 $150.2
Diluted EPS (GAAP) ($USD)$1.83 $1.92 $1.21
Adjusted Net Income ($USD Millions)$255.9 $249.3 $190.9
Adjusted EPS (Non-GAAP) ($USD)$2.05 $1.99 $1.53
Adjusted EBITDA ($USD Millions)$578.1 $644.2 $594.2
Net Cash from Operating Activities ($USD Millions)$592.9 $727.9 $501.0
Adjusted Free Cash Flow ($USD Millions)$167.0 $141.9 $132.7

Q2 2025 vs S&P Global Consensus

MetricConsensus Mean# of EstimatesActual (S&P-defined)Beat/Miss
EPS ($USD)1.41*17*1.53*Beat*
Revenue ($USD Millions)910.8*8*861.2*Miss*

Values retrieved from S&P Global.

Segment/Drivers

MetricQ2 2024Q1 2025Q2 2025
Oil & Natural Gas Revenues ($USD Millions)$776.3 $909.9 $815.8
Third-Party Midstream Services Revenues ($USD Millions)$32.7 $33.5 $42.0
Sales of Purchased Natural Gas ($USD Millions)$46.3 $62.8 $67.9
Realized Gain on Derivatives ($USD Millions)$3.8 $2.7 $6.9

KPIs

KPIQ2 2024Q1 2025Q2 2025
Avg Daily Total Production (BOE/d)160,305 198,631 209,013
Avg Daily Oil Production (Bbl/d)95,488 115,030 122,875
Avg Daily Natural Gas Production (MMcf/d)388.9 501.6 516.8
LOE ($/BOE)$5.42 $5.96 $5.56
Cash Operating Costs ($/BOE)—$15.84 $13.76
D/C/E Capital Expenditures ($USD Millions)$314.5 $394.4 $345.3
Midstream Capital Expenditures ($USD Millions)$45.3 $46.4 $56.2
Adjusted Free Cash Flow ($USD Millions)$167.0 $141.9 $132.7
Wells Turned to Sales (Gross/Net)—40 / 33.5 32 / 22.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Production (BOE/d)FY 2025198,000–202,000 200,000–205,000 Raised (+1.3% midpoint)
Oil Production (Bbl/d)FY 2025117,000–119,000 117,500–119,500 Raised (+0.4% midpoint)
Natural Gas (MMcf/d)FY 2025486–498 495–513 Raised (+2.4% midpoint)
D/C/E CapEx ($B)FY 2025$1.18–$1.37 $1.18–$1.37 Maintained
Midstream CapEx ($M)FY 2025$120–$180 $120–$180 Maintained
Cash Tax Rate (% of pre-tax book NI)FY 20255–10% 0–5% Lowered
Avg Daily Total Production (BOE/d)Q3 2025E—198,500–201,000 New
Avg Daily Oil (Bbl/d)Q3 2025E—116,500–118,000 New
Avg Daily Gas (MMcf/d)Q3 2025E—492–498 New
D/C/E CapEx ($M)Q3 2025E—300–370 Lower vs Q2
Midstream CapEx ($M)Q3 2025E—25–55 Lower vs Q2
Dividend per share ($)Quarterly$0.3125 $0.3125 (declared Jul 15) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
Midstream strategic alternatives (incl. IPO)Management evaluating options; highlighted potential IPO in prior materials Management reiterates value not fully reflected; exploring debt/equity options; patience to maximize shareholder value Evolving
Rig activity & production cadenceAdjusted 2025 drilling from 9→8 rigs to optimize capex; lumpy quarterly cadence expected Operating 8 rigs; decision to add back later tied to maintaining superior margins and FCF; Q3 dip then Q4 re-acceleration Stable (with near-term moderation)
Cost efficiency (U-Turn, Simul-/Trimul-frac)Efficiency gains cited; Trimul-frac adoption increasing D&C per foot below guide driven by faster cycle times, Trimul-frac, U-Turn; 10–15% faster vs Jan; ~$350K savings per Trimul-frac Strengthening
Hedging & basis managementLayered additional hedges; wider gas diffs hedged for 2026 2026 gas collars and Waha basis swaps in place; added protection amid capacity constraints Strengthening risk management
Cash taxes/OBBBA2025 cash taxes initially 5–10% OBBBA reduces 2025 cash taxes to 0–5%; AMT pushed out several years Improving
Flow assurance & water recyclingEmphasis on flow assurance and 99% runtime; water recycling benefits 720 MMcf/d capacity on-line; connector line enabling bidirectional gas flows; >50% water recycling Strengthening
Capital returns (buybacks/dividends)Authorized $400M buybacks; dividend increased to $0.3125 1.1M shares repurchased at $40.37 avg; dividend maintained at $0.3125; framework: post-dividend FCF allocated to buybacks, brick-by-brick land, and debt paydown Active/Opportunistic

Management Commentary

  • “Our plan… is to increase our production, but to also increase our free cash flow… in tandem… with a strong balance sheet… $1.8 billion available on our line of credit” — Joe Foran .
  • “San Mateo… increased its processing capacity… to 720 MMcf/d… about half full now… likely… full capacity or close to it [by year-end]” — Joe Foran .
  • “We achieved record production through outperformance… and base production… D&C costs ~$825/ft and LOE $5.56/BOE” — Company release .
  • “We’re saving… $1 million on chemical costs during the quarter… coordination between upstream and midstream” — Brian Willey .

Q&A Highlights

  • Midstream valuation and strategic path: Management believes midstream value underappreciated in MTDR stock; exploring both debt and equity alternatives; no urgency given FCF-positive profile .
  • Rig count and 2026 growth: Flexibility to add activity later while preserving margins; aim for relative growth in 2026, but decisions deferred to maintain superior FCF .
  • D&C cost drivers: Faster cycle times, U-Turn drilling, and Trimul-frac adoption drove costs below guidance; ~10–15% faster since Jan; ~$350K saved per Trimul-frac .
  • Hedging posture: Wider 2026 gas differentials hedged to mitigate capacity constraints; collar protection maintained .
  • Cash taxes: OBBBA reduces 2025 cash taxes; AMT pushed out several years per current analysis .

Estimates Context

  • Q2 2025 Adjusted EPS of $1.53 beat S&P Global consensus of $1.41; revenue of $861.2M missed $910.8M consensus. # of estimates: EPS 17, revenue 8*.
  • Drivers of mixed outcome: record volumes and cost control supported EPS; realized oil (-11% seq, -21% YoY) and gas (-42% seq) prices pressured GAAP earnings and revenue vs consensus .
  • Outlook: Raised FY volume guidance and lower cash taxes may prompt upward EPS estimate revisions; Q3 volume dip from batch cadence could temper near-term consensus until Q4 ramp .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Operations delivered record volumes and a non-GAAP EPS beat despite pricing headwinds; cost efficiency remains a structural advantage .
  • Midstream capacity expansion (720 MMcf/d) and record EBITDA enhance flow assurance and diversify cash flows; strategic alternatives could unlock value .
  • FY 2025 guidance raised without capex change signals improving capital efficiency; Q3 guide-down is cadence-related rather than asset quality-driven .
  • OBBBA reduces 2025 cash taxes to 0–5% of pre-tax book NI; expect stronger after-tax FCF beginning Q3 .
  • Capital return framework is active: $0.3125 dividend, opportunistic buybacks (1.1M shares repurchased at $40.37), and debt paydown; leverage <1.0x supports flexibility .
  • Near-term trading: Q3 volume dip and revenue miss vs consensus could be a headwind; EPS resilience and raised FY guidance are offsets; watch for midstream value catalysts and Q4 volume ramp .
  • Medium-term thesis: Integrated upstream/midstream, efficiency-driven D&C, and brick-by-brick inventory additions support durable growth and FCF through cycles .