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Matador Resources Company Reports Third Quarter 2017 Results, Provides Operational Update and Increases 2017 Guidance Estimates

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Matador Resources Company (NYSE:MTDR) ("Matador" or the "Company")
today reported financial and operating results for the third quarter of
2017. This release is divided into two parts—first, a "Summary and
Highlights" section that summarizes key production and financial results
for the three months ended September 30, 2017, and second, a section
providing additional details related to the Company's third quarter 2017
results and a detailed operations update.

Part I - Summary and Highlights

Third Quarter 2017 Highlights

Sequential Results

  • Average daily oil production increased 21% sequentially from
    approximately 19,400 barrels per day in the second quarter of 2017 to
    approximately 23,500 barrels per day in the third quarter of 2017.
    This 21% average daily oil production growth significantly exceeded
    the Company's previous guidance expectations of 5 to 7% sequential oil
    production growth in the third quarter of 2017. Matador's
    third quarter 2017 average daily oil production was the best quarterly
    result in the Company's history.
  • Average daily natural gas production increased 5% sequentially from
    approximately 105.0 million cubic feet per day in the second quarter
    of 2017 to approximately 110.5 million cubic feet per day in the third
    quarter of 2017. This 5% average daily natural gas production growth
    also exceeded the Company's previous guidance expectations of 2 to 4%
    sequential natural gas production growth in the third quarter of 2017. Matador's
    third quarter 2017 average daily natural gas production was the best
    quarterly result in the Company's history.
  • Average daily oil equivalent production increased 14% sequentially
    from approximately 36,900 barrels of oil equivalent ("BOE") per day
    (53% oil) in the second quarter of 2017 to approximately 42,000 BOE
    per day (56% oil) in the third quarter of 2017. This 14% average daily
    oil equivalent production growth significantly exceeded the Company's
    previous guidance expectations of 4 to 6% sequential oil equivalent
    production growth in the third quarter of 2017. Matador's percentage
    of oil production increased sequentially from 53% in the second
    quarter of 2017 to 56% in the third quarter of 2017. Matador's
    third quarter 2017 average daily oil equivalent production (BOE basis)
    was the best quarterly result in the Company's history.
  • Delaware Basin average daily oil equivalent production exceeded 30,000
    BOE per day for the first time in the Company's history during the
    third quarter of 2017. Delaware Basin average daily oil equivalent
    production increased 11% sequentially from approximately 27,600 BOE
    per day (consisting of 16,600 barrels of oil per day and 65.9 million
    cubic feet of natural gas per day) in the second quarter of 2017 to
    approximately 30,700 BOE per day (consisting of 18,700 barrels of oil
    per day and 72.1 million cubic feet of natural gas per day) in the
    third quarter of 2017. The Delaware Basin contributed 79% of Matador's
    daily oil production, 65% of daily natural gas production and 73% of
    daily oil equivalent production in the third quarter of 2017.
  • Matador's net income (GAAP basis) decreased 47% sequentially from
    $28.5 million, or earnings of $0.28 per diluted common share, in the
    second quarter of 2017, to net income (GAAP basis) of $15.0
    million, or earnings of $0.15 per diluted common share
    , in the
    third quarter of 2017. This sequential decrease in net income was
    primarily attributable to changes in certain non-cash items, including
    an unrealized loss on derivatives in the third quarter of 2017 of
    approximately $12.4 million, as compared to an unrealized gain on
    derivatives of approximately $13.2 million in the second quarter of
    2017, primarily due to an increase in oil prices during the third
    quarter.
  • Matador's adjusted net income (a non-GAAP financial measure) increased
    63% sequentially from $10.9 million, or adjusted earnings of $0.11 per
    diluted common share, in the second quarter of 2017, to adjusted net
    income (non-GAAP) of $17.8 million, or adjusted earnings of $0.18
    per diluted common share
    , in the third quarter of 2017. This
    sequential increase in adjusted net income was primarily attributable
    to increased oil and natural gas production in the third quarter of
    2017, as compared to the second quarter of 2017.
  • Adjusted earnings before interest expense, income taxes, depletion,
    depreciation and amortization and certain other items ("Adjusted
    EBITDA," a non-GAAP financial measure) increased 17% sequentially from
    $72.7 million in the second quarter of 2017 to $84.8 million in
    the third quarter of 2017.

Note: All references to net income, adjusted net income and
Adjusted EBITDA reported throughout this earnings release are those
values attributable to Matador Resources Company shareholders after
giving effect to any net income, net loss or Adjusted EBITDA
attributable to its third-party non-controlling interest in Matador's
midstream affiliate, San Mateo Midstream, LLC ("San Mateo").

Year-Over-Year Results

  • Matador's net income (GAAP basis) increased 26% from $11.9 million, or
    earnings of $0.13 per diluted common share, in the third quarter of
    2016 to net income (GAAP basis) of $15.0 million, or earnings of $0.15
    per diluted common share, in the third quarter of 2017.
  • Matador's adjusted net income (a non-GAAP financial measure) increased
    231% from adjusted net income (non-GAAP) of $5.4 million, or adjusted
    earnings of $0.06 per diluted common share, in the third quarter of
    2016 to adjusted net income (non-GAAP) of $17.8 million, or adjusted
    earnings of $0.18 per diluted common share, in the third quarter of
    2017.
  • Matador's Adjusted EBITDA (a non-GAAP financial measure) increased 80%
    year-over-year from $47.3 million in the third quarter of 2016 to
    $84.8 million in the third quarter of 2017.
  • Year-over-year, from the third quarter of 2016 to the third quarter of
    2017:
    • Average daily oil production increased 57% from approximately
      15,000 barrels per day to approximately 23,500 barrels per day;
    • Average daily natural gas production increased 28% from
      approximately 86.5 million cubic feet per day to approximately
      110.5 million cubic feet per day; and
    • Average daily oil equivalent production increased 43% from
      approximately 29,400 BOE per day to approximately 42,000 BOE per
      day. In the Delaware Basin, average daily oil equivalent
      production increased 66% from approximately 18,500 BOE per day
      (consisting of 11,800 barrels of oil per day and 40.5 million
      cubic feet of natural gas per day) to approximately 30,700 BOE per
      day (consisting of 18,700 barrels of oil per day and 72.1 million
      cubic feet of natural gas per day).

Lease Operating Expenses

  • Lease operating expenses on a unit-of-production basis decreased 9%
    sequentially from $4.77 per BOE in the second quarter of 2017 to $4.32
    per BOE in the third quarter of 2017, and decreased 20% year-over-year
    from $5.40 per BOE in the third quarter of last year. Lease operating
    expenses of $4.32 per BOE in the third quarter of 2017 were the lowest
    lease operating expenses on a unit-of-production basis that Matador
    has achieved since becoming a public company in February 2012.

Proved Reserves at September 30, 2017

  • Oil, natural gas and total proved reserves at
    September 30, 2017 were each all-time highs for Matador.
    Matador's
    total proved oil and natural gas reserves increased 38% in the
    first nine months of 2017 from 105.8 million BOE (consisting of 57.0
    million barrels of oil and 292.6 billion cubic feet of natural gas) at
    December 31, 2016 to 145.9 million BOE (consisting of 83.0
    million barrels of oil and 377.1 billion cubic feet of natural gas) at
    September 30, 2017. At September 30, 2017, approximately 57% of
    Matador's total proved oil and natural gas reserves were oil and
    approximately 41% were proved developed reserves. At September 30,
    2017, the Delaware Basin accounted for approximately 84% of the
    Company's total proved oil and natural gas reserves.

Acreage Acquisitions

  • During the third quarter of 2017 and through November 6, 2017, Matador
    acquired approximately 9,700 net acres in the Delaware Basin, mostly
    in and around its existing acreage positions. At November 6, 2017,
    Matador had closed all but one of the transactions that were pending
    at the time of its October 2017 equity offering, with the last
    transaction expected to close this month. From January 1 through
    November 6, 2017, Matador acquired approximately 25,000 net acres in
    the Delaware Basin, including a small volume of associated production,
    for a total acquisition cost of approximately $224 million. Excluding
    the value of the production acquired, this acreage was added for a
    weighted average cost of between $7,000 and $8,000 per net acre.

Significant Well Results

Significant well results included in this earnings release include the
following:

Rustler Breaks Asset Area

  • The Joe Coleman 13-23S-27E RB #208H, Tom Walters 12-23S-27E RB #208H
    and Michael Collins 11-23S-27E RB #208H wells, all Wolfcamp A-XY
    completions in the northwestern portion of the Rustler Breaks asset
    area in Eddy County, New Mexico, flowed 1,779 BOE per day (75% oil),
    1,498 BOE per day (75% oil) and 1,534 BOE per day (76% oil),
    respectively, during 24-hour initial potential tests. These wells,
    along with other wells drilled and completed earlier in the year,
    continue to confirm the prospectivity of the Wolfcamp A-XY across the
    Rustler Breaks asset area.
  • The Anne Com 15-24S-28E RB #201H well, a Wolfcamp A-XY completion in
    the southeastern portion of the Rustler Breaks asset area, flowed
    1,730 BOE per day (77% oil) during a 24-hour initial potential test.

Arrowhead and Ranger Asset Area

  • The Stebbins 20 Federal #133H well, Matador's first operated Third
    Bone Spring completion in its Arrowhead asset area in Eddy County, New
    Mexico, tested 1,202 BOE per day (70% oil) during a 24-hour initial
    potential test. This well marked another strong result for the
    Stebbins area following the Stebbins 20 Federal #123H well, Matador's
    first operated Second Bone Spring completion in the Arrowhead asset
    area, which tested 1,010 BOE per day (82% oil) during a 24-hour
    initial potential test as reported last quarter.
  • The Airstrip 31-18S-35E RN State Com #132H well, a Third Bone Spring
    completion in the Ranger asset area in Lea County, New Mexico, tested
    1,263 BOE per day (93% oil) during a 24-hour initial potential test.

Wolf Asset Area

  • The Barnett 90-TTT-B01 WF #224H well, Matador's first Wolfcamp B test
    in the Wolf asset area, flowed 1,803 BOE per day (28% oil) during a
    24-hour initial potential test. This Wolfcamp B test performed
    similarly to tests of the Wolfcamp B-Blair in the Rustler Breaks asset
    area and validates the Wolfcamp B as another viable completion target
    in the Wolf asset area.

Borrowing Base Increase

  • On October 25, 2017, Matador's lenders unanimously approved an
    increase in the borrowing base under the Company's revolving credit
    facility from $450 million to $525 million based on the lenders'
    review of the Company's proved oil and natural gas reserves at June
    30, 2017. Matador chose to keep its "elected borrowing commitment"
    under the revolving credit facility at $400 million. At November 6,
    2017, the Company continued to have no outstanding borrowings under
    its credit facility.

Equity Offering

  • On October 10, 2017, Matador completed a public offering of 8.0
    million shares of its common stock, receiving proceeds of
    approximately $208.7 million (before expenses). A portion of the
    proceeds from this offering were and are being used to acquire
    approximately 6,600 net acres of additional leasehold and minerals in
    the Delaware Basin at a total acquisition cost of approximately $38
    million and to fund certain midstream initiatives and opportunities,
    including the acceleration of the drilling of commercial salt water
    disposal wells in the Rustler Breaks asset area on behalf of San
    Mateo. The remaining proceeds will be used for other midstream
    development, acreage acquisitions and general corporate purposes,
    including to fund a portion of the Company's current and future
    capital expenditures.

2017 Updated Guidance Estimates, Including
Increased Production Estimates

  • On November 6, 2017, Matador provided updated 2017 guidance estimates,
    including increased production estimates. These updated guidance
    estimates assumed five operated drilling rigs drilling oil and natural
    gas wells in the Delaware Basin throughout the fourth quarter of 2017,
    with a sixth operated rig drilling commercial salt water disposal
    wells in the Rustler Breaks asset area and one oil and natural gas
    test well in the Antelope Ridge asset area in the fourth quarter of
    2017. Matador expects to focus its capital expenditures in the
    Delaware Basin for the rest of 2017, with the exception of small
    amounts of capital to maintain or extend leases or to participate in
    non-operated well opportunities that may become available in the Eagle
    Ford and Haynesville shales.

Updated full-year 2017 guidance estimates, as of November 6, 2017, are
as follows.

  1. An increase in oil production to 7.7 to 7.75 million barrels, the
    Company's third increase in its oil production guidance this year.
    Matador's full-year 2017 oil production estimate of 7.725 million
    barrels at the midpoint of updated 2017 guidance represents an
    increase of 10% from 7.05 million barrels at the midpoint of guidance
    on March 23, 2017 (the Company's Analyst Day), and an increase of 7%
    from 7.2 million barrels at the midpoint of guidance on August 2,
    2017. This updated oil production guidance of 7.7 to 7.75 million
    barrels also represents an increase of 52% at the midpoint of
    guidance, as compared to 5.1 million barrels produced in 2016.
  2. An increase in natural gas production to 37.0 to 37.5 billion cubic
    feet, the Company's second increase in its natural gas production
    guidance this year. Matador's full-year 2017 natural gas production
    estimate of 37.25 billion cubic feet at the midpoint of updated 2017
    guidance represents an increase of 10% from 34.0 billion cubic feet at
    the midpoint of guidance on March 23, 2017, and an increase of 3% from
    36.0 billion cubic feet at the midpoint of guidance on August 2, 2017.
    This updated natural gas production guidance of 37.0 to 37.5 billion
    cubic feet also represents an increase of 22% at the midpoint of
    guidance, as compared to 30.5 billion cubic feet produced in 2016.
  3. An increase in total oil equivalent production to 13.9 to 14.0 million
    BOE, the Company's third increase in its oil equivalent production
    guidance this year. Matador's full-year 2017 oil equivalent production
    estimate of 13.95 million BOE at the midpoint of updated 2017 guidance
    represents an increase of 10% from 12.7 million BOE at the midpoint of
    guidance on March 23, 2017, and an increase of 6% from 13.2 million
    BOE at the midpoint of guidance on August 2, 2017. This updated oil
    equivalent production guidance of 13.9 to 14.0 million BOE also
    represents an increase of 37% at the midpoint of guidance, as compared
    to 10.2 million BOE produced in 2016.
  4. An increase in Adjusted EBITDA (a non-GAAP financial measure) to $300
    to $310 million. Matador's full-year 2017 Adjusted EBITDA estimate of
    $305 million at the midpoint of updated 2017 guidance represents an
    increase of 15% from $265 million at the midpoint of guidance on March
    23, 2017, and an increase of 13% from $270 million at the midpoint of
    guidance on August 2, 2017. This Adjusted EBITDA of $300 to $310
    million at the midpoint of updated 2017 guidance also represents an
    increase of 93%, as compared to 2016 Adjusted EBITDA of $157.9
    million. Updated Adjusted EBITDA guidance is based on estimated
    average realized prices for the fourth quarter of 2017 of $50.50 per
    barrel for oil (West Texas Intermediate average oil price of $53.00
    per barrel per oil, less $2.50 per barrel of estimated price
    differentials, using the forward strip for oil prices as of late
    October 2017, and including year-to-date results) and $2.87 per
    thousand cubic feet for natural gas (NYMEX Henry Hub average natural
    gas price using the forward strip for natural gas as of late October
    2017 and assuming regional price differentials and uplifts from
    natural gas processing roughly offset, and including year-to-date
    results). These 2017 estimates reflect Matador's 51% ownership in San
    Mateo.
  5. Drilling and completions capital expenditures (including equipping
    wells for production) of $440 to $465 million, an increase of 10% at
    the midpoint from $400 to $420 million at March 23, 2017, including
    capital expenditures associated with non-operated well opportunities.
    The increase in drilling and completion capital expenditures is
    primarily attributable to a number of factors, including, among
    others, (1) one gross, but 2.7 net, additional operated wells drilled
    and completed in the Delaware Basin through the third quarter of 2017
    than originally anticipated, along with an accelerated pace of
    drilling activity in the fourth quarter of 2017, primarily in the
    Rustler Breaks asset area, (2) increased working interests acquired on
    certain operated wells through purchase, non-consent by third parties
    or forced pooling of interests, (3) certain modifications to the
    Company's 2017 drill schedule, primarily in the Wolf asset area,
    resulting in the drilling of several additional wells with longer
    laterals (6,000 to 8,000 feet) in the fourth quarter of 2017 than
    originally planned, (4) the use of a sixth drilling rig, which was
    contracted to drill commercial salt water disposal wells, to drill one
    additional Rustler Breaks well in July 2017 and the Company's upcoming
    first test well in the Antelope Ridge asset area during the fourth
    quarter of 2017, (5) changes in fracture treatment designs resulting
    in closer perforation cluster spacing, more proppant and additional
    fracture stages in more wells than originally planned for 2017 and (6)
    the Company's participation in an estimated 2.2 net additional
    non-operated well opportunities in 2017 than originally anticipated,
    including non-operated wells in the Rustler Breaks, Ranger, Arrowhead
    and Twin Lakes asset areas. Matador anticipates this projected
    increase in estimated drilling and completion capital expenditures
    will largely be funded by the Company's anticipated increased cash
    flows as noted by the increase in the Company's Adjusted EBITDA
    guidance for full-year 2017 as described above.
  6. Midstream capital expenditures of $66 to $74 million, an increase of
    17% at the midpoint from $56 to $64 million as provided on March 23,
    2017. Midstream capital expenditures of $66 to $74 million primarily
    represent Matador's 51% share of an updated 2017 capital expenditure
    budget of $125 to $140 million for San Mateo. This increase in
    midstream capital expenditures of approximately $10 million net to
    Matador results from San Mateo's decision to continue drilling at
    least five commercial salt water disposal wells opportunistically in
    the Rustler Breaks asset area by mid-2018 to provide additional
    capacity for both Matador's and other third party customers' salt
    water disposal needs. Matador expects this projected increase in
    estimated midstream capital expenditures to be funded by the
    approximately $15 million in San Mateo first year performance
    incentives the Company expects to receive in the first quarter of 2018.

Fourth Quarter 2017 Production Estimates

Matador's sequential production growth—particularly its oil production
growth—was much higher than projected in the third quarter of 2017 due
to several factors, including (1) a number of new wells in the Company's
Rustler Breaks, Arrowhead and Ranger asset areas that exceeded
expectations for both oil and natural gas production, (2) better than
projected initial oil and natural gas production from several
non-operated wells in which the Company participated in the Delaware
Basin, (3) better than expected production response to the installation
of gas lift on the previously drilled Mallon wells in the Ranger asset
area and (4) strong initial well performance from the five Eagle Ford
wells the Company drilled and placed on production late in the second
quarter and early in the third quarter of 2017. As noted above, the
Company's oil production grew 21%, or just over 4,000 barrels of oil per
day, in the third quarter alone. This significant oil production growth
substantially exceeded the Company's expectations for both the third
quarter and the fourth quarter. In fact, in its oil production guidance
provided on August 2, 2017, the Company was estimating that oil
production of approximately 22,000 barrels of oil per day would not be
achieved until the fourth quarter of 2017. Matador was pleased to reach,
sustain and exceed that target earlier than expected.

Given the particularly strong oil production growth in the third quarter
and the timing of certain completions, Matador now anticipates that its
oil production will be essentially flat in the fourth quarter, as
compared to the third quarter of 2017, and this is reflected in its
updated full-year guidance estimates at November 6, 2017.

As noted in its August 2, 2017 earnings release, Matador's natural gas
production was expected to peak in the third quarter of 2017, as initial
production from the Haynesville shale wells completed earlier in the
year and the flush production from the associated offset wells began to
decline in the second half of 2017. Matador still anticipates a small
decline of 3 to 5% in its natural gas production during the fourth
quarter of 2017 (with natural gas production more in line with the
second quarter of 2017). This is also reflected in Matador's updated
full-year guidance estimates at November 6, 2017.

Matador currently anticipates providing its 2018 capital expenditures
program and production guidance in association with its year-end 2017
earnings release in late February 2018. Matador expects that its capital
expenditure program for 2018 will reflect the Company operating either
five or six drilling rigs. Matador's decision to operate five or six
drilling rigs in 2018 will depend primarily on oil and natural gas
prices, Matador's oil and natural gas hedging portfolio and other
economic factors, but will include considerations for opportunistic
midstream development and acreage acquisitions. Matador has the
operational flexibility to reduce its operated rig program by half in 60
to 90 days should the need arise but at this time, believes that a five
to six rig program is optimal for 2018.

Sequential and year-over-year quarterly comparisons of selected
financial and operating items are shown in the following table:

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