On Thursday, JPMorgan (NYSE:JPM) updated its outlook on Matador Resources Company (NYSE:MTDR) shares, increasing the price target to $83.00 from the previous $80.00, while reaffirming an Overweight rating on the stock. The firm's analysis suggests that Matador Resources is poised to achieve a higher oil production forecast for the fiscal year 2024 (FY24) than previously estimated.
The firm's updated model indicates that Matador Resources is expected to deliver FY24 oil production of 100.5 thousand barrels of oil per day (MBo/d), which is driven by a capital expenditure (capex) of $1.51 billion.
This production estimate surpasses the Street's expectation (STe) of 99.3 MBo/d and the $1.47 billion capex forecast. For the fourth quarter of 2024, the analyst projects that Matador will reach oil volumes of 123.9 MBo/d, outpacing the STe of 118.9 MBo/d and JPMorgan's previous estimate of 119.2 MBo/d.
Looking ahead to 2025, JPMorgan anticipates that Matador Resources will sustain its oil production at 123.9 MBo/d, matching the exit rate of the fourth quarter of 2024, with a projected capex of $1.56 billion. This projection is higher than the STe of 119.9 MBo/d and JPMorgan's earlier estimate of 121.2 MBo/d.
Furthermore, the firm estimates that Matador Resources will generate approximately $1,080 million in free cash flow (FCF) in fiscal year 2025. This represents a 13.9% FCF yield and a 10.8% free cash flow to enterprise value (FCF/EV) ratio, marking an increase of $143 million or 15% compared to the previous model.
In light of these projections and the second quarter of 2024 financials, along with updated guidance, JPMorgan has chosen to maintain its Overweight rating and adjust its December 2024 price target for Matador Resources to the new figure of $83.00.
In other recent news, Matador Resources reported significant production growth in its second quarter of 2024 earnings call, rising from 3,300 barrels per day in 2012 to over 95,000 barrels per day.
The company also noted an increase in proved reserves, which are anticipated to rise further following the completion of the Ameredev acquisition. Additionally, Matador revised their drilling and completion costs downwards, attributing this to efficiency gains and cost deflation.
In terms of future developments, the company is constructing a cryogenic gas processing facility at the Marlan plant, expected to be operational in the first half of the next year. However, no specific guidance for 2025 production levels was provided, with decisions to be based on evaluating the impact of reduced cycle times and rig efficiency.
The company's midstream segment is expected to grow, maintaining flow assurance and supporting increased drilling activity. The Ameredev acquisition is also likely to bring additional efficiencies and reduce cycle times with the addition of a ninth rig. Lastly, the addition of Susan Ward to the board was highlighted as a significant step for the company.
InvestingPro Insights
In addition to JPMorgan's optimistic outlook on Matador Resources Company (NYSE:MTDR), recent data from InvestingPro further enriches the investment narrative. With a current market cap of approximately $7.7 billion and a trailing P/E ratio of 8.23, Matador Resources is trading at a valuation that reflects its robust financial performance. Notably, the company has experienced a significant revenue growth of 17.89% over the last twelve months as of Q2 2024, with an impressive gross profit margin of 79.6%.
InvestingPro Tips indicate that Matador Resources has raised its dividend for three consecutive years, showcasing a commitment to returning value to shareholders. This is complemented by a dividend yield of 1.3% as of the latest data. Moreover, analysts have revised their earnings estimates upwards for the upcoming period, signaling confidence in the company's future performance.
For investors seeking more detailed analysis and additional insights, InvestingPro offers a range of tips, with a total of 8 tips available for Matador Resources, which can be accessed on the InvestingPro platform. Using the coupon code PRONEWS24, investors can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, further empowering their investment decisions with comprehensive data and expert analysis.
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