On Wednesday, KeyBanc made changes to its outlook on Matador Sources Firm (NYSE:), decreasing the value goal to $72.00 from the earlier $76.00. The agency maintained its Chubby score on the inventory. The revision comes because the analyst anticipates additional particulars concerning the mixing of Ameredev, which Matador just lately acquired.
The corporate changed Ameredev’s drilling rig with a high-spec Patterson rig instantly after the acquisition’s completion, aligning with Matador’s present fleet. The analyst is in search of readability on the 2025 manufacturing and capital expenditure forecasts, anticipating a 9-10 rig program. Nonetheless, the trajectory of the manufacturing ramp is unsure, particularly contemplating the 13 Ameredev drilled however uncompleted wells (DUCs) that had been a part of the deal.
The up to date estimates from KeyBanc replicate modifications within the forecasted costs for oil, , and pure fuel liquids (NGLs). Moreover, the monetary mannequin now consists of the anticipated $150 million in internet proceeds from Matador’s share of the sale of the Pinon midstream belongings, anticipated within the fourth quarter of 2024. The influence of the Ameredev acquisition, which closed on September 19, 2024, sooner than the beforehand modeled finish of the third quarter, has additionally been factored into the revised estimates.
The analyst has made slight changes to the third-quarter 2024 projections, elevating the oil differential to a $0.50 per barrel premium, according to historic differentials, and decreasing the pure fuel differential to $0.05 per thousand cubic toes beneath the Henry Hub benchmark. This accounts for Matador’s publicity to weaker Waha pure fuel pricing through the third quarter of 2024. Lastly, depreciation, depletion, and amortization (DD&A) bills have been elevated from the third quarter of 2024 by the second quarter of 2025 to replicate the upper DD&A related to the Ameredev belongings.
In different current information, Matador Sources Firm has made a number of strategic strikes. The corporate has hiked its quarterly money dividend by 25%, from $0.20 to $0.25 per share, reflecting its monetary development and operational outlook. Moreover, Matador accomplished a personal providing of $750 million in 6.25% senior unsecured notes due in 2033, primarily aimed toward repaying present debt.
In different developments, Matador finalized the acquisition of Ameredev, anticipated to boost operational capabilities and lengthen its asset portfolio. Analysts from JPMorgan and Stephens have responded positively to those strikes, elevating their worth targets for Matador Sources to $79.00 and $76.00, respectively, whereas sustaining an Chubby score on the inventory.
Matador can also be setting up a cryogenic fuel processing facility on the Marlan plant, anticipated to be operational within the first half of the subsequent yr, and has welcomed Susan Ward to its board.
InvestingPro Insights
To enrich KeyBanc’s evaluation of Matador Sources Firm (NYSE:MTDR), current information from InvestingPro gives further context. As of the final twelve months ending Q2 2024, Matador’s income stood at $3.02 billion, with a notable income development of 16.81%. The corporate’s profitability is obvious, with a gross revenue margin of 80.33% and an working earnings margin of 46.02%.
InvestingPro Ideas spotlight that Matador has raised its dividend for 3 consecutive years, which can attraction to income-focused traders. The corporate’s P/E ratio of 6.54 suggests it could be undervalued in comparison with its friends, though it is buying and selling at a excessive P/E ratio relative to its near-term earnings development. This might point out that the market has already priced in some future development expectations.
It is value noting that 9 analysts have revised their earnings downwards for the upcoming interval, which aligns with KeyBanc’s cautious method in decreasing the value goal. Nonetheless, analysts nonetheless predict the corporate shall be worthwhile this yr, supporting KeyBanc’s maintained Chubby score.
For traders in search of a extra complete evaluation, InvestingPro gives 5 further suggestions that might present additional insights into Matador’s monetary well being and market place.
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