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JPMorgan has adjusted its price target on Matador Resources Company (NYSE: NYSE:MTDR), increasing it to $79.00 from the previous $76.00, while maintaining an Overweight rating on the stock.
The firm anticipates a positive operational update from Matador, although their cash flow per share (CFPS) and EBITDA estimates remain below the sell-side consensus after adjustments to market conditions.
Matador is in the process of integrating its recent acquisition of Ameredev and has commenced drilling with a rig on the newly acquired properties.
Matador had previously signaled at a June conference that Ameredev's production volumes would likely see an increase in the fourth quarter compared to the third. However, the company has revised its expectations, now forecasting a slight quarter-over-quarter decline due to changes in the timing of when new wells are brought into production. Notably, Ameredev's production volume at the time of acquisition was about 26 thousand barrels of oil equivalent per day (MBoe/d), slightly surpassing the anticipated 25.5 MBoe/d.
The integration of Ameredev's assets includes 13 drilled but uncompleted wells (DUCs), some of which were brought online just before the acquisition was finalized. The remaining DUCs are scheduled to be completed in early 2025.
Matador's third-quarter production guidance did not account for Ameredev's output, but the acquisition's completion on September 19 is expected to provide a modest increase to the company's production figures. JPMorgan estimates Matador's third-quarter oil production at 99.5 MBoe/d, which is higher than the sell-side consensus of 98.1 MBoe/d and above Matador's own guidance of 96.5-97.5 MBoe/d.
Additionally, updates on cost deflation and the potential for reducing expenses on the Ameredev assets are of interest, especially since management had previously indicated the possibility of service cost deflation in the second half of the year.
In other recent news, Matador Resources Company recently completed a private offering of $750 million in 6.25% senior unsecured notes due in 2033, a move aimed at repaying existing debt, including a full amount of $250 million from its term loan.
In addition, Matador Resources finalized the acquisition of Ameredev, a step that is expected to enhance the company's operational capabilities and expand its asset portfolio. The company's presence in the Delaware Basin is projected to grow to over 190,000 net acres due to this acquisition.
Analysts from financial services firms Stephens and JPMorgan have responded to these developments by raising their price targets for Matador Resources, with JPMorgan projecting the company to generate approximately $1,080 million in free cash flow in fiscal year 2025.
In other company developments, Matador Resources is constructing a cryogenic gas processing facility at the Marlan plant, expected to be operational in the first half of the next year, and has welcomed Susan Ward to the board.
InvestingPro Insights
Matador Resources Company's recent acquisition of Ameredev and its integration efforts align with the company's strong financial performance, as reflected in the latest InvestingPro data. The company's revenue growth of 16.81% over the last twelve months and an impressive 31.71% quarterly growth in Q2 2024 underscore its expansion strategy. This growth is complemented by a robust gross profit margin of 80.33%, indicating efficient operations even as the company scales up.
InvestingPro Tips highlight that Matador has raised its dividend for 3 consecutive years, which is particularly noteworthy given the company's recent acquisitions and expansion efforts. This consistent dividend growth, coupled with a current dividend yield of 1.48%, suggests that Matador is balancing shareholder returns with its growth initiatives.
However, investors should note that 9 analysts have revised their earnings downwards for the upcoming period, which may reflect caution regarding the integration of new assets and market conditions. Despite this, Matador remains profitable, with a P/E ratio of 6.96, indicating that the stock may be undervalued relative to its earnings.
For readers interested in a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Matador's financial health and market position.
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