Matador Resources Company (NYSE: MTDR) (“Matador”) today announced that it has executed a definitive agreement whereby Matador would contribute Pronto Midstream, LLC (“Pronto”), Matador’s wholly-owned midstream subsidiary, to San Mateo Midstream, LLC, Matador’s midstream joint venture (“San Mateo”), for a total implied valuation of Pronto of approximately $600 million. At the closing of the transaction, Matador will receive an up-front cash payment of approximately $220 million for the contribution of Pronto to San Mateo. In addition, Matador may earn up to $75 million in incentive payments from Five Point Energy LLC (“Five Point”) as Matador executes its operational plans in northern Lea County, New Mexico over the next five years. San Mateo will continue to be owned 51% by Matador and 49% by an affiliate of Five Point.

Matador intends to use the up-front cash payment to repay borrowings outstanding under its revolving credit facility. Following the closing of this transaction, Matador expects its leverage ratio to be approximately 1.1 times at December 31, 2024. The transaction is expected to close prior to December 31, 2024, and is subject to customary closing conditions, including Five Point’s receipt of debt financing in accordance with its commitment letter from its lender.

In connection with the transaction, Pronto and Matador will enter into certain natural gas gathering and processing agreements whereby Pronto will gather, treat and process natural gas produced from Matador’s operated wells in northern Lea County, New Mexico. In addition, Pronto will enter into certain agreements with Northwind Midstream Partners LLC (“Northwind”), an affiliate of Five Point, whereby Northwind will treat certain sour gas gathered and delivered by Pronto in northern Lea County, New Mexico providing a sour gas solution for Matador’s northern Lea County acreage. Under these agreements, Northwind will redeliver the treated sweet gas from Pronto and other third-party customers to Pronto for processing.

Pronto currently owns and operates the Marlan cryogenic natural gas processing plant (the “Marlan Processing Plant”), which has a designed inlet capacity of 60 million cubic feet of natural gas per day. Pronto is currently expanding the Marlan Processing Plant to add an additional plant with a designed inlet capacity of 200 million cubic feet of natural gas per day increasing the total capacity of the Marlan Processing Plant complex to 260 million cubic feet of natural gas per day.

Joseph Wm. Foran, Matador’s Founder, Chairman and CEO, commented, “We are excited about the opportunity to combine San Mateo and Pronto. Importantly, Matador will continue to operate and own 51% of San Mateo following this transaction. This combination will provide San Mateo with additional scale and expansion of its operations into Lea County, New Mexico where Matador and third-party customers are increasing their focus and production. Pronto’s Marlan Processing Plant expansion remains on time and on budget and is expected to come online in the first half of 2025. We expect that this transaction, as well as other third-party opportunities, will fill up much of this new plant as early as 2026.

“Matador’s midstream team continues to provide flow assurance and create additional value for Matador’s customers and shareholders. The approximate $220 million up-front payment, which Matador will receive in connection with this transaction, will allow Matador to repay debt under its credit facility. Matador also expects to receive up to $75 million in performance incentive payments from Five Point as Matador executes its operational plans in northern Lea County, New Mexico over the next five years.

“This transaction also provides Matador with a long-term sour gas solution in northern Lea County, New Mexico. Northwind has been one of our service providers that has gathered and treated sour gas in other areas of the Delaware Basin, and we are pleased with this opportunity to expand our working relationship with Northwind. A majority of the acreage dedicated as part of the transaction is just north of the Advance acreage we acquired in 2023. The additional flow assurance for our natural gas provided by both San Mateo and Northwind allows us to accelerate our development plans in an area of northern Lea County, New Mexico where we have experienced encouraging well results.

“Matador wishes to express its appreciation to Five Point for their professionalism and investment as a partner in San Mateo over the last seven years. We also express our appreciation to the Matador midstream team as well as our vendors, banks, partners and shareholders that have been instrumental in building additional shareholder value while growing Matador’s midstream business.

“San Mateo has grown from a startup company with only approximately $26 million in net income and approximately $31 million in Adjusted EBITDA in 2017. Now, seven years later in 2024, San Mateo expects to have over $170 million in net income and over $250 million in Adjusted EBITDA. San Mateo’s ability to offer midstream services across all three production streams—crude oil, natural gas and water—makes it one of the few full-service midstream companies in the northern Delaware Basin.”

For a definition of Adjusted EBITDA and a reconciliation of such non-GAAP financial metric to its comparable GAAP metrics, please see “Supplemental Non-GAAP Financial Measures” below.

About Matador Resources Company

Matador is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Its current operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. Additionally, Matador conducts midstream operations in support of its exploration, development and production operations and provides natural gas processing, oil transportation services, natural gas, oil and produced water gathering services and produced water disposal services to third parties.

For more information, visit Matador Resources Company at www.matadorresources.com.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking statements” are statements related to future, not past, events. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as “could,” “believe,” “would,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “should,” “continue,” “plan,” “predict,” “potential,” “project,” “hypothetical,” “forecasted” and similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements include, but are not limited to, statements about the anticipated benefits, opportunities and results with respect to the contribution of Pronto to San Mateo, as well as the anticipated timing of the closing of such transaction, guidance, projected or forecasted financial and operating results, future liquidity, the payment of dividends, results in certain basins, objectives, project timing, expectations and intentions, regulatory and governmental actions and other statements that are not historical facts. Actual results and future events could differ materially from those anticipated in such statements, and such forward-looking statements may not prove to be accurate. These forward-looking statements involve certain risks and uncertainties, including, but not limited to, disruption from Matador’s acquisitions or dispositions, including the Pronto contribution, making it more difficult to maintain business and operational relationships; significant transaction costs associated with Matador’s acquisitions or dispositions, including the Pronto contribution; the risk of litigation and/or regulatory actions related to Matador’s acquisitions or dispositions, including the Pronto contribution, as well as the following risks related to financial and operational performance: general economic conditions; Matador’s ability to execute its business plan, including whether its drilling program is successful; changes in oil, natural gas and natural gas liquids prices and the demand for oil, natural gas and natural gas liquids; its ability to replace reserves and efficiently develop current reserves; the operating results of Matador’s midstream oil, natural gas and water gathering and transportation systems, pipelines and facilities, the acquiring of third-party business and the drilling of any additional salt water disposal wells; costs of operations; delays and other difficulties related to producing oil, natural gas and natural gas liquids; delays and other difficulties related to regulatory and governmental approvals and restrictions; impact on Matador’s operations due to seismic events; its ability to make acquisitions on economically acceptable terms; its ability to integrate acquisitions; availability of sufficient capital to execute its business plan, including from future cash flows, available borrowing capacity under its revolving credit facilities and otherwise; the operating results of and the availability of any potential distributions from our joint ventures; weather and environmental conditions; and the other factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. For further discussions of risks and uncertainties, you should refer to Matador’s filings with the Securities and Exchange Commission (“SEC”), including the “Risk Factors” section of Matador’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Matador undertakes no obligation to update these forward-looking statements to reflect events or circumstances occurring after the date of this press release, except as required by law, including the securities laws of the United States and the rules and regulations of the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.

Supplemental Non-GAAP Financial Measures

Adjusted EBITDA

This press release includes the non-GAAP financial measure of Adjusted EBITDA. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of Matador’s consolidated financial statements, such as securities analysts, investors, lenders and rating agencies. “GAAP” means Generally Accepted Accounting Principles in the United States of America. Matador believes Adjusted EBITDA helps it evaluate its operating performance and compare its results of operations from period to period without regard to its financing methods or capital structure. Matador defines, on a consolidated basis and for San Mateo, Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, non-recurring transaction costs for certain acquisitions, certain other non-cash items and non-cash stock-based compensation expense and net gain or loss on asset sales and impairment. Adjusted EBITDA is not a measure of net income or net cash provided by operating activities as determined by GAAP.

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or net cash provided by operating activities as determined in accordance with GAAP or as an indicator of Matador’s or San Mateo’s operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure. Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner. The following table presents the calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income and net cash provided by operating activities, respectively, that are of a historical nature. The table does not provide a reconciliation with respect to forward-looking Adjusted EBITDA, which is not based on historical fact. Matador could not provide such reconciliation without undue hardship because such Adjusted EBITDA amount is an estimation. In addition, it would be difficult for Matador to present a detailed reconciliation on account of many unknown variables for Adjusted EBITDA, including future income taxes, future interest expense, timing of the closing of the contribution of Pronto to San Mateo and gains or losses on asset sales and impairment. For the same reasons, Matador is unable to address the probable significance of the unavailable information, which could be material to future results.

Adjusted EBITDA – San Mateo

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