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On Thursday, JPMorgan maintained an Overweight rating on Matador Resources Company (NYSE:MTDR) and slightly increased the price target from $75.00 to $76.00. The adjustment came after Matador’s fourth-quarter earnings report, which showed the company’s first oil production miss in recent history, with production volumes just below the guidance range. According to InvestingPro data, 4 analysts have recently revised their earnings estimates upward for the upcoming period, suggesting continued confidence in the company’s prospects despite the recent miss. For deeper insights into Matador’s valuation and growth potential, investors can access the comprehensive Pro Research Report, which provides detailed analysis of the company’s fundamentals and market position. Despite higher-than-expected capital expenditures (capex) for the quarter and a forecasted sequential decline in first-quarter oil production, JPMorgan’s analyst remains positive on the stock.
Matador’s fourth-quarter oil volumes reached 118.4 thousand barrels of oil per day (MBo/d), marginally missing the lower end of the company’s 118.5-119.5 MBo/d guidance. This ended a streak of consistently surpassing the high end of quarterly guidance. The shortfall was attributed to third-party midstream constraints in the Antelope Ridge area, which have now been largely resolved. Matador’s capex for the quarter was reported at $392 million, well above the guided midpoint of approximately $307 million, due to non-operational spending and facility upgrades on recently acquired Ameredev properties.
Despite these challenges, Matador raised its base dividend by 25% to $1.25 per share annually, following a similar increase in October 2024. This move reflects the company’s confidence in its ability to deliver growing free cash flow (FCF) and production growth. InvestingPro analysis reveals that Matador has consistently raised its dividend for 4 consecutive years, demonstrating a strong commitment to shareholder returns. The company has remained profitable over the last twelve months, supporting its ability to maintain these dividend increases. For the first quarter, Matador has guided oil production to 115 MBo/d at the upper end, which is below pre-call consensus estimates by 5%.
CEO Joseph Foran highlighted the timing of turn-in-lines (TILs) as the reason for the expected decline in first-quarter oil production, emphasizing a focus on year-over-year growth over sequential growth. It was noted that with around 35 wells coming online in the latter half of the first quarter, second-quarter volumes are expected to increase, potentially leading to year-over-year growth of 29-30%.
JPMorgan’s updated model predicts that Matador will achieve oil production of 123.5 MBo/d by FY25, which is an improvement over previous estimates and slightly above the Street’s expectation. The firm also anticipates that Matador will continue to see reductions in drilling and completion (D&C) costs, with FY25 costs projected to decrease by an additional 3% to approximately $880 per foot.
Matador’s strategic use of advanced completion techniques, such as Simul-frac or Trimul-frac, is expected to be employed on over 80% of 2025 completions. With recent strip pricing taken into account, JPMorgan forecasts a substantial $967 million of FY25 FCF for Matador, translating to a 13.5% FCF yield. The updated price target reflects JPMorgan’s confidence in Matador’s long-term growth and capital efficiency, despite near-term operational setbacks.
In other recent news, Matador Resources Company has reported a strong fourth-quarter performance in 2024, surpassing consensus estimates for earnings and adjusted free cash flow, according to Truist Securities. The company has also provided guidance for 2025, with projections for oil and total production exceeding previous analyst expectations, while planning to lower its annual capital expenditure. Mizuho (NYSE:MFG) Securities has increased its price target for Matador Resources to $77, maintaining an Outperform rating, despite some concerns over first-quarter volume guidance for 2025. JPMorgan has raised its price target to $75, citing anticipated positive operational performance and an Overweight rating, although cash flow per share and EBITDA estimates are slightly below expectations. TD Cowen has also increased its price target to $75, maintaining a Buy rating, following discussions with company executives about efficiency gains and well productivity. Stephens has raised its price target to $80, maintaining an Overweight rating, following Matador Resources’ strategic sale of Pronto Midstream assets, which generated nearly $300 million in cash. These developments reflect a generally optimistic outlook from analysts regarding Matador Resources’ financial health and strategic direction.
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