Matador Resources Company Provides Operational Update

Matador Resources Company Provides Operational Update

DALLAS--(BUSINESS WIRE)-- Matador Resources Company (NYS: MTDR) ("Matador" or the "Company"), an independent energy company currently focused on the oil and liquids rich portion of the Eagle Ford shale play in South Texas, today provided an update on various aspects of its operations.

Matador released today a summary of the 24-hour Initial Potential (IP) test results for wells it has drilled and completed in 2012, including the eleven most recent Eagle Ford wells it has completed and placed on production since its operational update providing similar information on September 27, 2012. This data is summarized in the table shown below. These results are from wells for which Matador has filed, or will soon be filing, IP test results with the Texas Railroad Commission. With the exception of the number of frac stages, the results of these tests are a matter of public information via W-2 and G-1 forms filed by the Company with and available from the Texas Railroad Commission. Such results are provided as both an update and a convenience to the Company's investors who may not have easy access to the information provided by the Company to the Texas Railroad Commission. This data is summarized in the table shown below, which also includes test results from the fourteen wells previously released in September. The summary specifies the name of the well, the county where the well is located, the completion date, the lateral length, the measured depth of the top perforation, the number of frac stages, the oil IP per day, the gas IP per day, the barrels of oil equivalent potential per day, the choke size and the flowing pressure.


As noted in the August 14, 2012 earnings release and the September 27, 2012 operational update, Matador has begun flowing back wells on smaller chokes after stimulation than it did initially, which appears to provide for better bottomhole pressure management, should keep the wells flowing longer before requiring artificial lift and may improve their long-term performance. The Company is pleased with the initial productivity of these recent wells, most of which have met or exceeded its expectations. As would be anticipated, flowing the wells back on smaller chokes typically results in lower flow rates but higher flowing pressures on these IP tests as compared to similar IP tests on earlier wells drilled in the same areas. Nevertheless, the results from several of these wells are particularly noteworthy. As a group, the Company's six recent wells drilled and completed in DeWitt County have averaged 1,775 BOE per day at an average flowing pressure of approximately 5,800 psi, and as a specific example, in Karnes County, the Sickenius Orca 2H (completed September 16, 2012) had an IP rate of 944 BOE per day at 2,000 psi flowing pressure on a 16/64 inch choke compared to an IP rate of 875 BOE per day at 820 psi flowing pressure on a 26/64 inch choke on the Sickenius Orca 1H well (completed March 16, 2012), suggesting a significant increase in well productivity for the Sickenius Orca 2H well. Although still early in the life of these wells, the Company attributes the improved performance of these more recent wells to a combination of improved stimulation design, better reservoir pressure maintenance and improved completion techniques, which appear to be arresting initial decline rates and may lead to better long-term performance and increased value for its Eagle Ford wells.

IP data points should not be used alone to make an investment decision, but these points are provided in an effort to show the overall results of the Company's Eagle Ford drilling program in 2012. As to future releases, Matador does not expect to release IP data as each well is drilled but rather once or twice a year in an effort to provide more comprehensive information and perspective about its overall drilling program.

The Company is also pleased to announce that its average production rate during the month of December 2012 was approximately 5,800 barrels of oil per day and 34.6 million cubic feet of gas per day, or approximately 11,500 BOE per day. The average oil rate for December of 5,800 barrels per day was about 10% higher than the midpoint of the Company's 2012 exit rate guidance of 5,000 to 5,500 barrels per day. The December 2012 average daily oil rate is up about 75% from Matador's third quarter 2012 average daily oil production of approximately 3,300 barrels and up almost 13-fold compared to its fourth quarter 2011 average daily oil production of approximately 450 barrels.

As discussed in its December 6, 2012 Analyst Day presentation, the Company anticipates that it will be necessary to shut-in 15% to 20% of its current production capacity during 2013 as it resumes the drilling and completion of development wells on certain properties where wells have previously been drilled. Currently producing wells will be shut-in from time to time as a precautionary measure to reduce possible hydraulic interference between these wells and the stimulation operations associated with newly drilled offsetting wells. The majority of the shut-in periods will occur during the first and second quarters of 2013. The Company will continue to evaluate these shut-in periods in order to determine an optimized shut-in schedule for producing wells within close proximity to ongoing stimulation operations.

Finally, the Company announced an increase in its borrowing base to $215 million based on its lenders' review of the Company's proved oil and natural gas reserves at September 30, 2012. At January 7, 2013, the Company has outstanding borrowings of $150 million. Matador expects additional increases to its borrowing base as the result of anticipated increases in its proved oil and natural gas reserves at year-end 2012 and throughout 2013. Please click the link below for Exhibit A, which shows the growth in PV-10 value (present value discounted at 10%) for the Company's proved oil and natural gas reserves from 2008 to September 30, 2012. For a reconciliation of Standardized Measure (GAAP) to PV-10 (non-GAAP), please see "PV-10 Reconciliation" below.

There are no other changes to the Company's guidance for its 2012 or 2013 results. Please click the link below for Exhibit B, which shows oil and natural gas revenues and Adjusted EBITDA for the years ended 2007 through 2011 and estimated oil and natural gas revenues and Adjusted EBITDA for the years ended 2012 and 2013 announced at the Company's Analyst Day on December 6, 2012. For a definition of Adjusted EBITDA and a reconciliation of net income (GAAP) and net cash provided by operating activities (GAAP) to Adjusted EBITDA (non-GAAP), please see "Adjusted EBITDA Reconciliation" below.

Click here for Exhibit A and Exhibit B.

Matador Operated Eagle Ford Completion Results

24 Hour IP Tests

Well Name

County

Completion Date

Perforated Length(1)

Top Perf(2)

Frac Stages

Oil IP(3)(4)

Gas IP(3)(4)

Oil Equiv IP(5)

Choke

Pressure

Total (ft.)

(ft.)

(Bbl/day)

(Mcf/day)

(BOE/day)

(inch)

(psi)

2012 Wells

Martin Ranch A 8H

La Salle

1/28/2012

6,092

9,559

21

1,089

831

1,228

26/64

1,750

Martin Ranch A 6H

La Salle

2/8/2012

6,509

9,550

22

689

1,714

975

26/64

1,650

Martin Ranch A 7H

La Salle

2/12/2012

4,902

9,502

17

609

481

689

26/64

1,040

Martin Ranch B 4H

La Salle

2/18/2012

3,801

9,701

13

595

968

756

26/64

1,320

Matador Sickenius Orca 1H

Karnes

3/16/2012

5,712

10,897

19

785

540

875

26/64

820

Northcut A 1H

La Salle

3/23/2012

4,446

9,209

15

583

592

682

26/64

1,000

Matador Danysh Orca 1H

Karnes

4/1/2012

4,962

11,537

17

1,012

1,126

1,200

26/64

1,175

Northcut A 2H

La Salle

5/1/2012

4,503

9,273

15

758

761

885

24/64

950

Matador Pawelek Orca 1H

Karnes

6/5/2012

6,103

11,231

20

670

739

793

16/64

2,510

Matador Pawelek Orca 2H

Karnes

6/7/2012

6,202

11,240

28

861

755

987

16/64

2,460

Matador Danysh Orca 2H

Karnes

6/10/2012

5,115

11,331

17

750

746

874

16/64

2,675

Glasscock Ranch 1H

Zavala

6/27/2012

5,352

7,166

18

307

0

307

pump

140

Matador K. Love Orca 1H

DeWitt

8/10/2012

5,077

13,048

17

1,793

2,171

2,155

16/64

5,280

Matador K. Love Orca 2H

DeWitt

8/11/2012

4,871

12,830

17

1,757

2,126

2,111

16/64

5,900

Northcut B 2H

La Salle

9/6/2012

4,777

9,131

16

410

315

463

16/64

1,175

Northcut B 1H

La Salle

9/12/2012

4,798

9,085

16

423

169

451

16/64

1,500

Matador Sickenius Orca 2H

Karnes

9/16/2012

5,982

10,829

25

851

556

944

16/64

2,000

Martin Ranch A 12H

La Salle

10/4/2012

4,897

9,507

21

640

1,955

966

16/64

1,680

Matador K. Love Orca 4H

DeWitt

11/4/2012

4,012

12,611

14

1,509

841

1,649

16/64

4,900

Matador K. Love Orca 3H

DeWitt

11/6/2012

4,777

12,787

16

1,456

1,585

1,720

16/64

4,775

Martin Ranch B 13H

La Salle

11/22/2012

5,364

9,476

23

519

162

546

14/64

2,125

Martin Ranch B 9RH

La Salle

11/25/2012

5,364

9,428

23

482

240

522

14/64

2,000

Frances Lewton 2H

DeWitt

12/5/2012

6,277

13,072

21

1,178

4,203

1,879

14/64

6,150

Matador Cowey Orca 1H

DeWitt

12/9/2012

3,332

13,593

13

580

3,325

1,134

12/64

8,000

Northcut A 4H

La Salle

12/18/2012

4,592

9,069

16

395

139

418

14/64

1,580

Average

5,113

18.4

828 Bbl/day

1,082 Mcf/day

1,008 BOE/day

1) Total length of perforated lateral from the first perforation to the last perforation

2) Top perf is measured depth

3) Rates as reported to the Texas Railroad Commission via W-2 or G-1 form

4) Rates are based on actual, stabilized, 24 hour production on a constant choke size

5) Oil equivalent rates are based on a 6:1 ratio of six Mcf gas per one Bbl oil

PV-10 Reconciliation

PV-10 is a non-GAAP financial measure and generally differs from Standardized Measure, the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net revenues. PV-10 is not an estimate of the fair market value of our properties. Matador and others in the industry use PV-10 as a measure to compare the relative size and value of proved reserves held by companies and of the potential return on investment related to the companies' properties without regard to the specific tax characteristics of such entities. The PV-10 at December 31, 2008, December 31, 2009, December 31, 2010, December 31, 2011 and September 30, 2012 may be reconciled to the Standardized Measure of discounted future net cash flows at such dates by reducing PV-10 by the discounted future income taxes associated with such reserves. The PV-10 at December 31, 2008, December 31, 2009, December 31, 2010, December 31, 2011 and September 30, 2012 were, in millions, $44.1, $70.4, $119.9, $248.7 and $363.6, respectively. The discounted future income taxes at December 31, 2008, December 31, 2009, December 31, 2010, December 31, 2011 and September 30, 2012 were, in millions, $0.8, $5.3, $8.8, $33.2 and $29.7, respectively.

Adjusted EBITDA Reconciliation

This press release includes the non-GAAP financial measure of Adjusted EBITDA. We believe Adjusted EBITDA helps us evaluate our operating performance and compare our results of operation from period to period without regard to our financing methods or capital structure. We define Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, including stock option and grant expense and restricted stock and restricted stock units expense, and net gain or loss on asset sales and inventory impairment. Adjusted EBITDA is not a measure of net (loss) income or cash flows as determined by GAAP. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity.

The following table presents our calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively, that are of a historical nature. Where references are forward-looking or prospective in nature, and not based on historical fact, the table does not provide a reconciliation. We could not provide such reconciliations without undue hardship because the Adjusted EBITDA numbers included in this press release are estimations, approximations and/or ranges. In addition, it would be difficult for us to present a detailed reconciliation on account of many unknown variables for the reconciling items.

Year Ended December 31,

(In thousands)

2007

2008

2009

2010

2011

Unaudited Adjusted EBITDA reconciliation to Net Income (Loss):

Net (loss) income

($300

)

$

103,878

($14,425

)

$

6,377

($10,309

)

Interest expense

-

-

-

3

683

Total income tax provision (benefit)

-

20,023

(9,925

)

3,521

(5,521

)

Depletion, depreciation and amortization

7,889

12,127

10,743

15,596

31,754

Accretion of asset retirement obligations

70

92

137

155

209

Full-cost ceiling impairment

-

22,195

25,244

-

35,673

Unrealized loss (gain) on derivatives

211

(3,592

)

2,375

(3,139

)

(5,138

)

Stock option and grant expense

205

605

622

824

2,362

Restricted stock grants

15

60

34

74

44

Net loss (gain) on asset sales and inventory impairment

-

(136,977

)

379

224

154

Adjusted EBITDA

$

8,090

$

18,411

$

15,184

$

23,635

$

49,911

Year Ended December 31,

(In thousands)

2007

2008

2009

2010

2011

Unaudited Adjusted EBITDA reconciliation to Net Cash Provided by Operating Activities:

Net cash provided by operating activities

$

7,881

$

25,851

$

1,791

$

27,273

$

6