Matador Resources Prices 7.5M Share Offer - Analyst Blog

On May 23, Dallas, TX-based Matador Resources Co. MTDR announced the pricing of its 7.5 million share offering. The company expects to garner about $182 million from the offering, before taking into consideration the related expenses

The oil and natural gas explorer plans to use the net proceeds from this offering to partially fund its 2014 capital budget for operating an additional rig in the Permian Basin, pay for targeted acquisitions and for corporate purposes. Any leftover amount will be targeted toward repaying the debts under the company's revolving credit facility.

Post this announcement, shares of the company fell 5.8% to close at $24.65.

While the proceeds from the offering would help Matador Resources sail though its 2014 capital plans, it would also result in share dilution, which would ultimately reflect on its earnings report card. Investors seemed to be aware and concerned about this fact as reflected in the fall in share price.

Matador Resources, which recently reported upbeat first-quarter results on the back of strong production growth, is an independent exploration and production company engaged in the acquisition, finding and development of unconventional onshore oil and gas properties. The company's operations are concentrated primarily in the Eagle Ford in South Texas and Permian Basin in Southeast New Mexico and West Texas.

However, as is the case with other independent exploration and production firms, Matador Resources' results are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces.

Shares of Matador Resources have gained over 32% year-to-date. However, any further uptrend seems unlikely as reflected by its Zacks Rank #4 (Sell).

Meanwhile, some better-ranked domestic upstream energy stocks include Athlon Energy Inc. ATHL, Encana Corp. ECA and RSP Permian, Inc. RSPP. All the firms sport a Zacks Rank #1 (Strong Buy).