Matador Resources Company (MTDR) Q3 2026 earnings review
Matador gas revenue rebounds, while acquisition debt nears $5 billion
Matador Resources, a Texas oil and gas producer and pipeline operator, pumped record volumes and ended its natural gas pricing slump, while debt from its buying spree climbed. Total production rose 10% from a year ago, and the new Hugh Brinson pipeline lifted natural gas revenue from negative $39 million last quarter to $162 million. Chief executive Joseph Wm. Foran raised the full-year production plan, though by our math fourth-quarter output excluding new acquisitions stays flat from the third quarter.
| Total daily production | 230,470 BOE/d +10% from a year ago; 3% above plan |
|---|---|
| Natural gas price before hedges | $2.99/Mcf -$0.79/Mcf last quarter |
| Profit per share, excluding one-offs | $2.08 +53% from a year ago; -20% from last quarter |
| Full-year production outlook | Raised middle of the range: 223,500 BOE/d (+1.1%) |
⚖️ Verdict: 🟢 Bullish
The story got better because the two main operational worries from last quarter reversed. The new pipeline ended negative natural gas prices, and the midstream business lifted cash profit to a record $101 million while signing a major third-party customer for a new plant. The bad news: total debt rose by $1.57 billion from year-end to nearly $5 billion before the October acquisitions even closed, and San Mateo's $647 million term loan is now due within a year.
The question now is whether cash flow from the enlarged asset base can pay down the acquisition debt as fast as management plans. One side sees a decade of drilling inventory and expanding pipeline fees; the other sees nearly $5 billion of debt and a midstream loan due next summer if oil prices weaken. The fourth-quarter balance sheet and the 2027 capital budget in February will settle it.
🐂 Bull Case
New Pipeline Turned Natural Gas Prices Positive
For three quarters, pipeline bottlenecks at the Waha hub in West Texas forced Matador to pay buyers to take its natural gas or shut in wells. On September 1, the company began shipping gas on the new Hugh Brinson pipeline to Gulf Coast markets. That access lifted its average gas price before hedges to $2.99 per thousand cubic feet (Mcf), up from negative $0.79 in the second quarter.
Natural gas revenue reached $162 million after a negative $39 million reading last quarter, and daily gas output rose 10% from the second quarter to 590.7 million cubic feet. Chief executive Joseph Wm. Foran expects further price gains "when its long-term gas sales agreements with liquefaction companies on the Gulf Coast become effective in the first quarter of 2027." With both the pipeline running and Q4 gas volume planned up another 4.6%, the takeaway bottleneck has eased.
What to watch: realized natural gas prices against the Henry Hub benchmark in the first quarter of 2027. A narrower gap will show how much extra cash the Gulf Coast liquefied natural gas contracts add.
Midstream Cash Profit Reached a Record
Matador runs pipelines and processing plants through its 51%-owned San Mateo joint venture and wholly owned systems. Last quarter, midstream profit margins slipped even as volumes grew. In the third quarter, San Mateo closed its Cardinal Midstream purchase and lifted natural gas processing volume 30% from a year ago to 695 million cubic feet per day. Combined midstream Adjusted EBITDA (earnings before interest, taxes, depreciation and one-offs) rose 17.6% to $101.4 million.
Foran also signed new gathering and processing commitments "with a large, financially strong producer in the Delaware Basin" to back a new 300 million cubic feet per day plant at the Marlan complex. He expects that expansion to "solidify San Mateo’s position as the largest private natural gas processor in the Northern Delaware Basin" and raised the full-year combined midstream Adjusted EBITDA forecast to approaching $400 million.
What to watch: fourth-quarter combined midstream Adjusted EBITDA. By our math, reaching $400 million for the year requires about $126.5 million in the fourth quarter, a 25% jump from the third quarter.
Acquisitions Lifted Reserves and Closed on Time
The Texas oil and gas producer spent 2026 buying drilling land across New Mexico and West Texas. By November 1, it completed all four major deals, including the Paloma and Ridge Runner purchases in October. Including those two deals, proved reserves (oil and gas in the ground that Matador can profitably recover) rose 16% from year-end 2025 to 771 million barrels of oil equivalent (BOE).
Through the end of 2027, management plans to start drilling 35 to 40 gross wells on the Federal lease and Paloma land, plus up to 15 gross wells in the newly discovered Woodford shale formation. Those additions give the company enough drilling locations to forecast mid-single-digit or better production growth in 2027. However, by our math, stripping out the 10,000 BOE per day from Paloma and Ridge Runner leaves fourth-quarter underlying production flat from the third quarter.
What to watch: full-year 2027 production and capital spending plans in February, plus well results from the 15 planned Woodford wells. Those disclosures will test whether the new land grows output per dollar spent.
🐻 Bear Case
Debt Reached $5 Billion Before Q4 Closings
"We now expect our leverage ratio to approach 1.5x by year-end 2026," Foran said, noting that Matador repaid $150 million of borrowings in October toward its $350 million to $400 million fourth-quarter paydown goal. Yet the balance sheet shows the heavy cost of this year's buying spree before the October closings of Paloma and Ridge Runner even appear.
- Total debt at September 30: $4.97 billion by our math, up $1.57 billion from year-end 2025
- San Mateo term loan: $647.3 million, now classified as a current liability due within one year
- Quarterly interest expense: $80.0 million, up 58% from $50.6 million a year ago
- San Mateo operating cash flow: negative $25.9 million in Q3, down from positive $99.4 million a year ago
The $150 million October paydown represents less than a tenth of the debt added during the first nine months of the year, and the $1.28 billion Paloma deal closed in October on top of that. Moving San Mateo's term loan into current liabilities also means the midstream venture must refinance or repay $647 million by next summer.
What to watch: year-end total debt on the fourth-quarter balance sheet and the refinancing plan for San Mateo's term loan. They will show the true debt peak after all four acquisitions.
CapEx Beat Was Timing While Costs Rose
"The Company's third quarter results beat our expectations handily," Foran said, pointing to $381.4 million of capital spending that came in 10% below the middle of the plan. Drilling and completion costs fell 6% from a year ago to $804 per lateral foot, and Foran noted that "well-level capital discipline and efficiencies achieved continue to offset oilfield service inflation." However, the company said the spending beat was "primarily driven by timing shifts in both the upstream and midstream businesses."
About $28 million to $35 million of third-quarter spending simply moved into the fourth quarter, and Matador raised its full-year capital budget by $25 million at the middle of the range to $1.70 billion. Meanwhile, GAAP operating margin fell 2.2 percentage points from a year ago to 30.4%. Midstream operating costs rose 1.8 percentage points of revenue "primarily due to the Cardinal Midstream acquisition and certain non-recurring costs during the quarter," and production taxes rose 1.3 points.
What to watch: fourth-quarter midstream operating expenses per barrel of oil equivalent. A drop back toward the $3.30 full-year target would confirm that third-quarter integration costs were temporary.
Lower Oil Prices and Hedges Cut Profit
After an oil price jump lifted second-quarter earnings, crude prices pulled back in the third quarter and Matador's price hedges took a larger bite. The company's realized oil price before hedges fell 11% from the second quarter to $87.25 per barrel. Realized losses on derivative contracts more than doubled from last quarter to $160.2 million, cutting the net oil price after hedges by $12.41 per barrel to $74.84.
Because lower oil prices and hedge settlements outweighed the rebound in natural gas and record production, profit per share excluding one-offs fell 20% from the second quarter to $2.08. GAAP net income dropped from $390.7 million in the second quarter to $172.1 million, also hurt by $67.7 million of non-cash derivative losses.
What to watch: fourth-quarter realized derivative settlements and 2027 hedge ceiling prices. Those figures will show whether Matador can keep more of the upside when oil prices rise.
👓 Other Themes
Dividend Raised 17% While Buybacks Stay Small
Matador raised its annual cash dividend by 17%, from $1.50 to $1.75 per share, marking its eighth increase in five years. In contrast, share buybacks remained small as the driller directed cash toward land deals and debt reduction. The company spent $12 million to repurchase 253,603 shares at an average price of $47.64, keeping its diluted share count nearly unchanged from a year ago.
💲 Other KPIs
Cash left after capital spending rose more than threefold from $93.4 million a year ago, when oil prices were lower and capital spending was 19% higher. It slipped 5% from $303.2 million in the second quarter as oil prices pulled back. The release did not update the $900 million full-year cash flow target set in August.
Money owed by commodity buyers more than doubled from $286.2 million at the end of 2025, outpacing the 51% rise in oil and gas revenue from a year ago. That build in unpaid bills pulled $211.5 million of working capital out of operating cash flow during the third quarter, causing GAAP operating cash flow to fall 18% from a year ago to $594.4 million.
The average number of diluted shares shrank 0.4% from 124.4 million a year ago and 0.2% from the second quarter. Modest share buybacks of $24.2 million over the first nine months of 2026 slightly outweighed employee stock awards.
🔮 Guidance
Raised. The middle of the full-year daily oil and gas production plan moved up by 2,500 barrels of oil equivalent per day, to 7% growth from year-end 2025. The energy producer said 1,600 BOE per day of the increase came from the third-quarter beat and 900 BOE per day from a higher fourth-quarter outlook. It is the third raise this year: +1,000, +7,750, and +2,500 BOE per day.
Raised. The middle of the full-year crude oil production range rose by 750 barrels per day. It is the third raise of the year, following increases of 1,000 and 4,250 barrels per day in May and August.
Raised. The middle of the full-year natural gas production plan increased by 10.5 million cubic feet per day, or 1.9%, as the Hugh Brinson pipeline removed the need for price-related shut-ins.
Raised. Drilling and completion spending stayed at a $1.52 billion middle of the range, while pipeline and plant spending rose by $25 million to a $180 million middle to fund the Marlan processing plant expansion. Total planned spending of $1.70 billion matches 2025 levels.
Cut against the prior sequential growth rate, though higher in barrels. The middle of the fourth-quarter plan (240,000 BOE per day) is up 4.1% from the third quarter, below the 5% to 6% sequential rise projected in August because the third quarter beat expectations. The plan includes about 10,000 BOE per day from the Paloma and Ridge Runner deals; by our math, underlying volume is flat (-0.2%) from the third quarter.
New. The plan calls for about 137,000 barrels of oil per day at the middle of the range, up 3.8% from the third quarter and 12.9% from a year ago. Paloma and Ridge Runner contribute about 5,700 barrels per day by our math, leaving underlying oil output down 0.5% from the third quarter. If the four-quarter average beat of 2.0% holds, fourth-quarter oil output would reach about 139,750 barrels per day.
New. The middle of the range (618.0 million cubic feet per day) represents 4.6% growth from the third quarter and 14.5% growth from a year ago, aided by acquired wells and full access to the Hugh Brinson pipeline.
New. Planned fourth-quarter spending of $455 million at the middle of the range is up 19% from $381.4 million in the third quarter. It includes $340 million to $380 million for wells and $85 million to $105 million for midstream projects, reflecting the $28 million to $35 million of work delayed from the third quarter.
Unchanged. Cash income taxes remained minimal at $0.6 million in the third quarter and $0.8 million for the first nine months of 2026.
Unchanged. Third-quarter well costs averaged $804 per completed lateral foot, inside the full-year target range that the driller has held steady since February.
❓ Key Questions
What is the year-end debt balance after Paloma closed?
Total debt reached $4.97 billion on September 30 before the $1.28 billion Paloma and Ridge Runner deals closed in October. Investors need the post-closing debt total and the exact definition of the 1.5x year-end leverage target.
How will San Mateo refinance its $647 million loan?
San Mateo's term loan moved into current liabilities this quarter, meaning it comes due within a year, while San Mateo's operating cash flow turned negative in the third quarter. Management has not said whether it will refinance or extend the loan.
What capital budget will 2027 production growth require?
Management forecast mid-single-digit or better production growth for 2027 and plans to drill 35 to 40 gross wells on its newly acquired acreage plus up to 15 Woodford wells. It has not given the capital budget needed to fund that program.
Does the $900 million free cash flow outlook still stand?
Last quarter Matador projected about $900 million of adjusted free cash flow for 2026, requiring $483 million in the second half. After generating $287.6 million in the third quarter and raising midstream spending by $25 million, the release omitted an updated full-year figure.