UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________

FORM 10-Q

_________________________________________________________



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~2019



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35410

_________________________________________________________

Matador Resources Company

(Exact name of registrant as specified in its charter)

_________________________________________________________



Texas		27-4662601
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5400 LBJ Freeway,	Suite 1500 ~~Dallas, Texas~~	75240
Dallas,	Texas
(Address of principal executive offices)		(Zip Code)

~~(972)~~ (972) 371-5200

(Registrant’s telephone number, including area code)

_________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MTDR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒Yes¨☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x☒Yes¨☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x☒	Accelerated filer	¨☐

Non-accelerated filer	¨ ☐	Smaller reporting company	¨☐

		Emerging growth company	¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨☐ Yes x☒ No

As of ~~October~~July 31, ~~2018,~~2019, there were ~~116,333,766~~116,646,526 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

MATADOR RESOURCES COMPANY

FORM 10-Q

FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2018~~2019

TABLE OF CONTENTS



	Page
PART I — FINANCIAL INFORMATION	3
Item 1. Financial Statements — Unaudited	3
Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	3
Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4
Condensed Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity for the ~~Nine~~Three and Six Months Ended ~~September~~June 30, 2019 and 2018	5
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~	6
~~Notes to Condensed Consolidated Financial Statements~~2018	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	42
Item 4. Controls and Procedures	42
PART II — OTHER INFORMATION	43
~~PART II — OTHER INFORMATION~~Item 1. Legal Proceedings	4443
Item ~~1. Legal Proceedings~~1A. Risk Factors	4443
~~Item 1A. Risk Factors~~	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6. Exhibits	44
~~Item 6. Exhibits~~SIGNATURES	45
~~SIGNATURES~~	47

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements — Unaudited

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED

(In thousands, except par value and share data)


	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
ASSETS
Current assets
Cash	$	45,942		$	96,505		$	59,950		$	64,545
Restricted cash	7,066			5,977			24,812			19,439
Accounts receivable
Oil and natural gas revenues	81,422			65,962			66,921			68,161
Joint interest billings	55,390			67,225			61,872			61,831
Other	10,060			8,031			18,386			16,159
Derivative instruments	4			1,190			8,271			49,929
Lease and well equipment inventory	18,758			5,993			20,281			17,564
Prepaid expenses and other assets	6,790			6,287			12,891			8,057
Total current assets	225,432			257,170			273,384			305,685
Property and equipment, at cost
Oil and natural gas properties, full-cost method
Evaluated	3,506,479			3,004,770			4,094,417			3,780,236
Unproved and unevaluated	1,241,529			637,396			1,234,176			1,199,511
Midstream and other property and equipment	408,436			281,096
Midstream properties							492,420			428,025
Other property and equipment							25,170			22,041
Less accumulated depletion, depreciation and amortization	(2,234,470		)	(2,041,806		)	(2,462,840		)	(2,306,949		)
Net property and equipment	2,921,974			1,881,456			3,383,343			3,122,864
Other assets	6,796			7,064
Derivative instruments							2,202			—
Deferred income taxes							7,149			20,457
Other assets							85,373			6,512
Total other assets							94,724			26,969
Total assets	$	3,154,202		$	2,145,690		$	3,751,451		$	3,455,518
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	32,491		$	11,757		$	19,821		$	66,970
Accrued liabilities	178,830			174,348			191,608			170,855
Royalties payable	67,023			61,358			66,130			64,776
Amounts due to affiliates	12,998			10,302			10,200			13,052
Derivative instruments	19,740			16,429
Advances from joint interest owners	12,354			2,789			4,725			10,968
Amounts due to joint ventures	2,373			4,873			1,588			2,373
Other current liabilities	942			750			42,703			1,028
Total current liabilities	326,751			282,606			336,775			330,022
Long-term liabilities
Borrowings under Credit Agreement	325,000			—			205,000			40,000
Borrowings under San Mateo Credit Facility							240,000			220,000
Senior unsecured notes payable	740,063			574,073			1,038,625			1,037,837
Asset retirement obligations	28,706			25,080			30,686			29,736
Derivative instruments	4,996			—			189			83
Deferred income taxes							14,845			13,221
Other long-term liabilities	6,243			6,385			44,728			4,962
Total long-term liabilities	1,105,008			605,538			1,574,073			1,345,839
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 10)
Shareholders’ equity
Common stock - $0.01 par value, 160,000,000 shares authorized; 116,506,743 and 108,513,597 shares issued; and 116,348,548 and 108,510,160 shares outstanding, respectively	1,165			1,085
Common stock - $0.01 par value, 160,000,000 shares authorized; 116,866,013 and 116,374,503 shares issued; and 116,647,704 and 116,353,590 shares outstanding, respectively							1,169			1,164
Additional paid-in capital	1,923,030			1,666,024			1,955,504			1,924,408
Accumulated deficit	(372,990		)	(510,484		)	(216,472		)	(236,277		)
Treasury stock, at cost, 158,195 and 3,437 shares, respectively	(4,039		)	(69		)
Treasury stock, at cost, 218,309 and 20,913 shares, respectively							(3,724		)	(415		)
Total Matador Resources Company shareholders’ equity	1,547,166			1,156,556			1,736,477			1,688,880
Non-controlling interest in subsidiaries	175,277			100,990			104,126			90,777
Total shareholders’ equity	1,722,443			1,257,546			1,840,603			1,779,657
Total liabilities and shareholders’ equity	$	3,154,202		$	2,145,690		$	3,751,451		$	3,455,518

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED

(In thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenues
Oil and natural gas revenues	$	216,282		$	134,948		$	607,255		$	363,559		$	211,060		$	209,019		$	404,329		$	390,973
Third-party midstream services revenues	6,809			3,218			13,284			6,871			14,359			3,407			26,197			6,475
Sales of purchased natural gas													8,963			—			20,194			—
Realized gain (loss) on derivatives	5,424			485			(1,322		)	(1,176		)	1,165			(2,488		)	4,435			(6,746		)
Unrealized (loss) gain on derivatives	(21,337		)	(12,372		)	(9,492		)	21,449
Unrealized gain (loss) on derivatives													6,157			1,429			(39,562		)	11,845
Total revenues	207,178			126,279			609,725			390,703			241,704			211,367			415,593			402,547
Expenses
Production taxes, transportation and processing	20,215			15,666			58,116			40,348			21,542			20,110			41,207			37,901
Lease operating	22,531			16,689			69,685			48,486			26,351			25,006			57,514			47,154
Plant and other midstream services operating	7,291			3,096			17,187			8,379			8,422			5,676			17,738			9,896
Purchased natural gas													8,172			—			18,806			—
Depletion, depreciation and amortization	70,457			47,800			192,664			123,066			80,132			66,838			156,999			122,207
Accretion of asset retirement obligations	387			323			1,126			937			420			375			834			739
General and administrative	18,444			16,156			55,739			49,671			19,876			19,369			38,166			37,295
Total expenses	139,325			99,730			394,517			270,887			164,915			137,374			331,264			255,192
Operating income	67,853			26,549			215,208			119,816			76,789			73,993			84,329			147,355
Other income (expense)
Net (loss) gain on asset sales and inventory impairment	(196		)	16			(196		)	23
Inventory impairment													(368		)	—			(368		)	—
Interest expense	(10,340		)	(8,550		)	(26,835		)	(26,229		)	(18,068		)	(8,004		)	(35,997		)	(16,495		)
Prepayment premium on extinguishment of debt	(31,226		)	—			(31,226		)	—
Other (expense) income	(976		)	(36		)	(1,275		)	1,956
Other expense													(423		)	(352		)	(532		)	(299		)
Total other expense	(42,738		)	(8,570		)	(59,532		)	(24,250		)	(18,859		)	(8,356		)	(36,897		)	(16,794		)
Income before income taxes													57,930			65,637			47,432			130,561
Income tax provision
Deferred													12,858			—			11,845			—
Total income tax provision													12,858			—			11,845			—
Net income	25,115			17,979			155,676			95,566			45,072			65,637			35,587			130,561
Net income attributable to non-controlling interest in subsidiaries	(7,321		)	(2,940		)	(18,182		)	(8,034		)	(8,320		)	(5,831		)	(15,782		)	(10,861		)
Net income attributable to Matador Resources Company shareholders	$	17,794		$	15,039		$	137,494		$	87,532		$	36,752		$	59,806		$	19,805		$	119,700
Earnings per common share
Basic	$	0.15		$	0.15		$	1.22		$	0.87		$	0.32		$	0.53		$	0.17		$	1.08
Diluted	$	0.15		$	0.15		$	1.21		$	0.87		$	0.31		$	0.53		$	0.17		$	1.08
Weighted average common shares outstanding
Basic	116,358			100,365			112,659			100,141			116,571			112,706			116,469			110,809
Diluted	116,912			100,504			113,208			100,580			116,903			113,056			116,839			111,280

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

(In thousands)

For the ~~Nine~~Three and Six Months Ended ~~September~~June 30, ~~2018~~2019


																			Total shareholders’ equity attributable to Matador Resources Company																															Total shareholders’ equity attributable to Matador Resources Company


																						Non-controlling interest in subsidiaries				Total shareholders’ equity																											Non-controlling interest in subsidiaries				Total shareholders’ equity
	Common Stock			Additional paid-in capital				Accumulated deficit				Treasury Stock													Common Stock							Additional paid-in capital				Accumulated deficit				Treasury Stock
	Shares	Amount					Shares	Accumulated deficit					Amount				Total shareholders’ equity attributable to Matador Resources Company	Non-controlling interest in subsidiaries							Shares					Amount									Shares			Amount			Total shareholders’ equity attributable to Matador Resources Company	Non-controlling interest in subsidiaries
Balance at January 1, 2018	108,514	$	1,085	Additional paid-in capital		$	1,666,024			$	(510,484	)		3							$	(69	)		$				1,156,556		$	Additional paid-in capital	100,990		$	Accumulated deficit		1,257,546
Balance at January 1, 2019																												116,375			$	1,164			$	1,924,408			$	(236,277	)		21				$	(415	)	$	1,688,880		$	90,777		$	1,779,657
Issuance of common stock pursuant to employee stock compensation plan	736	7		(7		)		—				—			—							—			—				—			6			—				—				—					—		—				—			—				—
Issuance of common stock	7,000	70		226,542				—				—			—						226,612			—					226,612
Cost to issue equity	—	—		(146		)		—				—			—						(146		)	—				(146		)
Issuance of common stock pursuant to directors’ and advisors’ compensation plan	79	1		(1		)		—				—			—					—				—				—			3			—				—				—				—			—			—				—				—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—		17,174				—				—			—				17,174				—				17,174			—			—				5,802				—			—				—			5,802				—				5,802
Stock options exercised, net of options forfeited in net share settlements	178	2		(1,256		)		—				—			—				(1,254		)		—				(1,254		)	210			2				3,109				—			—				—			3,111				—				3,111
Restricted stock forfeited	—	—		—				—				155			(3,970		)		(3,970		)		—				(3,970		)	—			—				—				—			184			(3,170		)	(3,170		)		—				(3,170		)
Contributions related to formation of Joint Venture (see Note 6)	—	—		14,700				—				—			—				14,700				—				14,700
Contribution related to formation of San Mateo I, net of tax of $3.1 million (see Note 7)																														—			—				11,613				—			—			—			11,613				—				11,613
Contribution of property related to formation of San Mateo II (see Note 7)																														—			—				(506		)		—			—			—			(506		)		506				—
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries																														—			—				2,040				—			—			—			2,040				10,291				12,331
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries																														—			—				—				—			—			—			—				(8,330		)		(8,330		)
Current period net (loss) income																														—			—				—				(16,947		)	—			—			(16,947		)		7,462				(9,485		)
Balance at March 31, 2019																														116,594			1,166				1,946,466				(253,224		)	205			(3,585		)	1,690,823				100,706				1,791,529
Issuance of common stock pursuant to employee stock compensation plan																														220			2				(2		)		—			—			—			—				—				—
Issuance of common stock pursuant to directors’ and advisors’ compensation plan																														42			1				(1		)		—			—			—			—				—				—
Stock-based compensation expense related to equity-based awards including amounts capitalized																														—			—				5,762				—			—			—			5,762				—				5,762
Stock options exercised, net of options forfeited in net share settlements																														10			—				189				—			—			—			189				—				189
Restricted stock forfeited																														—			—				—				—			13			(139		)	(139		)		—				(139		)
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—				—				—			—				—				73,500				73,500			—			—				3,090				—			—			—			3,090				4,410				7,500
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—				—				—			—				—				(17,395		)		(17,395		)	—			—				—				—			—			—			—				(9,310		)		(9,310		)
Current period net income	—	—		—				137,494				—			—				137,494				18,182				155,676			—			—				—				36,752			—			—			36,752				8,320				45,072
Balance at September 30, 2018	116,507	$	1,165	$	1,923,030			$	(372,990	)		158			$	(4,039	)		$	1,547,166			$	175,277			$	1,722,443
Balance at June 30, 2019																														116,866			$	1,169			$	1,955,504			$	(216,472	)	218			$	(3,724	)	$	1,736,477			$	104,126			$	1,840,603

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY — UNAUDITED

(in thousands)

For the Three and Six Months Ended June 30, 2018



														Total shareholders’ equity attributable to Matador Resources Company


																	Non-controlling interest in subsidiaries			Total shareholders’ equity
	Common Stock			Additional paid-in capital			Accumulated deficit			Treasury Stock
	Shares	Amount		Additional paid-in capital			Accumulated deficit			Shares	Amount
Balance at January 1, 2018	108,514	$	1,085	$	1,666,024		$	(510,484	)	3	$	(69	)	$	1,156,556		$	100,990		$	1,257,546
Issuance of common stock pursuant to employee stock compensation plan	697	7		(7		)	—			—	—			—			—			—
Issuance of common stock pursuant to directors’ and advisors’ compensation plan	6	1		(1		)	—			—	—			—			—			—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—		5,390			—			—	—			5,390			—			5,390
Stock options exercised, net of options forfeited in net share settlements	130	1		(1,918		)	—			—	—			(1,917		)	—			(1,917		)
Restricted stock forfeited	—	—		—			—			82	(2,377		)	(2,377		)	—			(2,377		)
Contributions related to formation of San Mateo I (see Note 7)	—	—		14,700			—			—	—			14,700			—			14,700
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—			—			—	—			—			29,400			29,400
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—			—			—	—			—			(4,900		)	(4,900		)
Current period net income	—	—		—			59,894			—	—			59,894			5,030			64,924
Balance at March 31, 2018	109,347	1,094		1,684,188			(450,590		)	85	(2,446		)	1,232,246			130,520			1,362,766
Issuance of common stock pursuant to employee stock compensation plan	20	—		—			—			—	—			—			—			—
Issuance of common stock	7,000	70		226,542			—			—	—			226,612			—			226,612
Cost to issue equity	—	—		(146		)	—			—	—			(146		)	—			(146		)
Issuance of common stock pursuant to directors’ and advisors’ compensation plan	70	—		—			—			—	—			—			—			—
Stock-based compensation expense related to equity-based awards including amounts capitalized	—	—		5,937			—			—	—			5,937			—			5,937
Stock options exercised, net of options forfeited in net share settlements	24	1		300			—			—	—			301			—			301
Restricted stock forfeited	—	—		—			—			18	(224		)	(224		)	—			(224		)
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—			—			—	—			—			24,500			24,500
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	—	—		—			—			—	—			—			(5,635		)	(5,635		)
Current period net income	—	—		—			59,806			—	—			59,806			5,831			65,637
Balance at June 30, 2018	116,461	$	1,165	$	1,916,821		$	(390,784	)	103	$	(2,670	)	$	1,524,532		$	155,216		$	1,679,748

Matador Resources Company and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

(In thousands)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2018			2017			2019			2018
Operating activities
Net income	$	155,676		$	95,566		$	35,587		$	130,561
Adjustments to reconcile net income to net cash provided by operating activities
Unrealized loss (gain) on derivatives	9,492			(21,449		)	39,562			(11,845		)
Depletion, depreciation and amortization	192,664			123,066			156,999			122,207
Accretion of asset retirement obligations	1,126			937			834			739
Stock-based compensation expense	13,787			12,488			9,076			8,945
Prepayment premium on extinguishment of debt	31,226			—
Deferred income tax provision							11,845			—
Amortization of debt issuance cost	851			103			1,189			411
Net loss (gain) on asset sales and inventory impairment	196			(23		)
Inventory impairment							368			—
Changes in operating assets and liabilities
Accounts receivable	(5,654		)	(50,343		)	(378		)	(9,321		)
Lease and well equipment inventory	(15,347		)	(1,666		)	(3,456		)	(8,611		)
Prepaid expenses	(502		)	(2,224		)	(4,834		)	(2,167		)
Other assets	—			217			(415		)	(149		)
Accounts payable, accrued liabilities and other current liabilities	20,823			35,068			(48,746		)	(883		)
Royalties payable	5,665			29,651			1,353			8,393
Advances from joint interest owners	9,565			2,646			(6,243		)	16,025
Other long-term liabilities	(250		)	(1,521		)	1,756			(97		)
Net cash provided by operating activities	419,318			222,516			194,497			254,208
Investing activities
Oil and natural gas properties capital expenditures	(1,106,556		)	(517,270		)	(349,915		)	(421,595		)
Expenditures for midstream and other property and equipment	(122,239		)	(80,560		)
Midstream capital expenditures							(64,106		)	(78,302		)
Expenditures for other property and equipment							(2,206		)	(1,258		)
Proceeds from sale of assets	8,267			977			21,533			7,593
Net cash used in investing activities	(1,220,528		)	(596,853		)	(394,694		)	(493,562		)
Financing activities
Repayments of borrowings	(45,000		)	—			—			(45,000		)
Borrowings under Credit Agreement	370,000			—			165,000			45,000
Proceeds from issuance of senior unsecured notes	750,000			—
Cost to issue senior unsecured notes	(9,531		)	—
Purchase of senior unsecured notes	(605,780		)	—
Borrowings under San Mateo Credit Facility							20,000			—
Cost to amend credit facilities							(415		)	—
Proceeds from issuance of common stock	226,612			—			—			226,612
Cost to issue equity	(146		)	—			—			(73		)
Proceeds from stock options exercised	827			2,920			3,298			464
Contributions related to formation of Joint Venture	14,700			171,500
Contributions related to formation of San Mateo I							14,700			14,700
Contributions from non-controlling interest owners of less-than-wholly-owned subsidiaries	73,500			29,400			19,831			53,900
Distributions to non-controlling interest owners of less-than-wholly-owned subsidiaries	(17,395		)	(5,635		)	(17,640		)	(10,535		)
Taxes paid related to net share settlement of stock-based compensation	(6,051		)	(4,415		)	(3,309		)	(4,683		)
Purchase of non-controlling interest of less-than-wholly-owned subsidiary	—			(2,653		)
Cash paid under financing lease obligations							(490		)	—
Net cash provided by financing activities	751,736			191,117			200,975			280,385
Decrease in cash and restricted cash	(49,474		)	(183,220		)
Increase in cash and restricted cash							778			41,031
Cash and restricted cash at beginning of period	102,482			214,142			83,984			102,482
Cash and restricted cash at end of period	$	53,008		$	30,922		$	84,762		$	143,513

Supplemental disclosures of cash flow information (Note 10)
Supplemental disclosures of cash flow information (Note 11)

The accompanying notes are an integral part of these financial statements.

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED

NOTE 1 — NATURE OF OPERATIONS

Matador Resources Company, a Texas corporation (“Matador” and, collectively with its subsidiaries, the “Company”), 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. The Company’s 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. The Company also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. Additionally, the Company conducts midstream operations, primarily through its midstream joint ~~venture,~~ventures, San Mateo Midstream, LLC (“San Mateo I”) and San Mateo Midstream II, LLC (“San Mateo II” and, together with San Mateo I, “San Mateo” ~~or the “Joint Venture”~~), in support of the Company’s exploration, development and production operations and provides natural gas processing, oil transportation services, oil, natural gas and salt water gathering services and salt water disposal services to third parties.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements, Basis of Presentation, Consolidation and Significant Estimates

The interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) but do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 filed with the SEC on March 1, 2019 (the “Annual Report”) ~~filed with the SEC.~~. The Company consolidates certain subsidiaries and joint ventures that are less than wholly-owned and are not involved in oil and natural gas exploration, including San Mateo, and the net income and equity attributable to the non-controlling interest in these subsidiaries have been reported separately as required by Accounting Standards Codification (“ASC”), Consolidation (Topic 810). The Company proportionately consolidates certain joint ventures that are less than wholly-owned and are involved in oil and natural gas exploration. All intercompany accounts and transactions have been eliminated in consolidation. In management’s opinion, these interim unaudited condensed consolidated financial statements include all normal, recurring adjustments that are necessary for a fair presentation of the Company’s interim unaudited condensed consolidated financial statements as of ~~September~~June 30, ~~2018.~~2019. Amounts as of December 31, ~~2017~~2018 are derived from the Company’s audited consolidated financial statements included in the Annual Report. Certain reclassifications have been made to the December 31, 2018 financial statement amounts in order to conform them to the June 30, 2019 presentations.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s interim unaudited condensed consolidated financial statements are based on a number of significant estimates, including ~~accruals for~~ oil and natural gas revenues, accrued assets and liabilities, ~~primarily related to oil and natural gas and midstream operations,~~ stock-based compensation, valuation of derivative instruments, deferred tax assets and liabilities and oil and natural gas reserves. The estimates of oil and natural gas reserves quantities and future net cash flows are the basis for the calculations of depletion and impairment of oil and natural gas properties, as well as estimates of asset retirement obligations and certain tax accruals. While the Company believes its estimates are reasonable, changes in facts and assumptions or the discovery of new information may result in revised estimates. Actual results could differ from these estimates.

Change in Accounting Principles

Leases.During the first quarter of ~~2018,~~2019, the Company adopted Accounting Standards Update ~~2014-09,~~ ~~Revenue from Contracts with Customers~~(“ASU”) 2016-02, Leases (Topic ~~606)~~ ~~(“ASC 606”)~~842) and the amendments provided for in ASU 2018-11, Leases (Topic 842),which ~~specifies how~~require the recognition of lease assets and when to recognize revenue. This standard requires expanded disclosures surrounding revenue recognition and is intended to improve, and converge with international standards, the financial reporting requirementslease liabilities by lessees for ~~revenue from contracts with customers. The Company adopted the new guidance~~those leases classified as operating leases under previous U.S. GAAP using ~~the~~a modified retrospective approach. The ~~adoption did not require an adjustment~~modified retrospective approach includes a number of optional practical expedients that the Company chose to ~~opening accumulated deficit~~apply. These practical expedients relate to (i) the identification and classification of leases that commenced before the effective date, (ii) the treatment of initial direct costs for ~~any cumulative effect adjustment~~leases that commenced before the effective date, (iii) the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset and ~~did not have a material impact on~~(iv) the ~~Company’s consolidated balance sheets, statements of operations, statement of shareholders’ equity or statements of cash flows.~~

~~Prior~~ability to initially apply the new lease standard at the adoption date. During the first quarter of ~~ASC 606,~~2019, the Company ~~recorded oil~~also adopted ASU 2018-01, Leases (Topic 842), which is a land easement practical expedient, and, ~~natural gas revenues at~~as a result, the ~~time of physical transfer of such products~~Company began evaluating land easements that are entered into or modified after December 31, 2018. See Note 3 for additional disclosures related to the purchaser. The Company followed the sales method of accounting for oil and natural gas sales, recognizing revenues based on the Company’s actual proceeds from the oil and natural gas sold to purchasers.leases.

The Company enters into contracts with customers to sell its oil and natural gas production. With the adoption of ASC 606, revenue from these contracts is recognized in accordance with the five-step revenue recognition model prescribed in

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

~~ASC 606. Specifically, revenue is recognized when the Company’s performance obligations under~~The adoption of these contracts are satisfied, which generally occurs with the transfer of control of the oil and natural gas to the purchaser. Control is generally considered transferred when the following criteria are met: (i) transfer of physical custody, (ii) transfer of title, (iii) transfer of risk of loss and (iv) relinquishment of any repurchase rights or other similar rights. Given the nature of the products sold, revenue is recognized at a pointASUs resulted in ~~time based on the amount of consideration~~ the Company ~~expects to receive in accordance with the price specified~~recording in the ~~contract. Consideration under the oil and natural gas marketing contracts is typically received from the purchaser one to two months after production.~~

~~The majority~~condensed consolidated balance sheet beginning January 1, 2019 certain of the Company’s ~~oil marketing contracts transfer physical custody~~compressor leases, drilling rig leases and ~~title at or near~~office leases, which were previously considered operating leases and not reported on the ~~wellhead,~~Company’s condensed consolidated balance sheets. As such, upon adoption, the Company recorded (i) long-term right of use assets of $62.3 million, which is generally when control of the oil has been transferred to the purchaser. The majority of the oil produced is sold under contracts using market-based pricing, which price is then adjusted for differentials based upon delivery location and oil quality. To the extent the differentials are incurred at or after the transfer of control of the oil, the differentials are included in ~~oil sales on the statements~~“Other assets” and “Other property and equipment,” and (ii) net right of ~~operations as they represent part~~use liabilities of ~~the transaction price of the contract. If the differentials, or other related costs, are incurred prior to the transfer of control of the oil, those costs~~$62.3 million, which are included in ~~production taxes, transportation~~“Other current liabilities” and ~~processing expenses~~“Other long-term liabilities.” There was no cumulative-effect adjustment to the opening balance of accumulated deficit as a result of the adoption of these ASUs.

Stock Compensation. During the first quarter of 2019, the Company also adopted ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,which extends the scope of Topic 718 to include share-based payment transactions related to the acquisition of goods and services from nonemployees. Previously, the Company accounted for stock-based awards to special advisors and contractors under ASC 505-50 as liability instruments, and the fair value of the awards was recalculated each reporting period. Upon adoption, all such awards are now measured at fair value on the ~~Company’s consolidated statements of operations, as they represent payment for services performed outside of~~grant date and the ~~contract with the customer.~~

The Company’s natural gas is sold at the lease location, at the inlet or outlet of a natural gas plant or at an interconnect near a marketing hub following transportation from a processing plant. The majority of the Company’s natural gas is sold under fee-based contracts. When the natural gas is sold at the lease, the purchaser gathers the natural gas and transports the natural gas via pipeline to natural gas processing plants where, if necessary, natural gas liquid (“NGL”) products are extracted. The NGL products and remaining residue gas are then sold by the purchaser, or if the Company elects to repurchase the natural gas, the Company sells the natural gas to a third party. Under the fee-based contracts, the Company receives NGL and residue gas value, less the fee component, or is invoiced the fee component. To the extent control of the natural gas transfers upstream of the transportation and processing activities, revenue is recognized as the net amount received from the purchaser. To the extent that control transfers downstream of those services, revenueresulting expense is recognized on a ~~gross~~straight-line basis ~~and~~over the ~~related costs~~awards’ vesting periods. The transitional guidance requires entities to remeasure all unvested awards that are ~~included~~being accounted for under ASC 505-50 as liability instruments as of the beginning of the year in ~~production taxes, transportation and processing expenses~~which this ASU is adopted. Adoption of this ASU did not have a material impact on the Company’s condensed consolidated ~~statements of operations.~~financial statements.

Revenues

The ~~Company recognizes midstream services revenues at~~following table summarizes the time services have been rendered and the price is fixed and determinable. Third-party midstream services revenues are those revenues from midstream operations related to third parties, including working interest owners in the Company’s operated wells. All midstream services revenues related to the Company’s working interest are eliminated in consolidation. Since the Company has a right to payment from its customers in amounts that correspond directly to the value that the customer receives from the performance completed on each contract, the Company applies the practical expedient in ASC 606 that allows recognition of revenue in the amount for which there is a right to invoice the customer without estimating a transaction price for each contract and allocating that transaction price to the performance obligations within each contract.

The Company determined the impact on its consolidated financial statements as a result of adoption of ASC 606 was a $2.8 million and $7.6 million decrease in oil and natural gas revenues and a $2.8 million and $7.6 million decrease in production taxes, transportation and processing expenses for the three and nine months ended September 30, 2018, respectively, which was not material. As a result of adoption of this standard, the Company is now required to disclose the following information regarding total revenues and revenues from contracts with customers on a disaggregated basis for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 (in thousands).

~~Table of Contents~~

~~Matador Resources Company and Subsidiaries~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —~~

~~UNAUDITED — CONTINUED~~

~~NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued~~


							Three Months Ended June 30,					Six Months Ended June 30,
	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018			2019		2018			2019			2018
Revenues from contracts with customers	$	223,091		$	620,539		$	234,382	$	212,426		$	450,720		$	397,448
Realized gain (loss) on derivatives	5,424			(1,322		)	1,165		(2,488		)	4,435			(6,746		)
Unrealized loss on derivatives	(21,337		)	(9,492		)
Unrealized gain (loss) on derivatives							6,157		1,429			(39,562		)	11,845
Total revenues	$	207,178		$	609,725		$	241,704	$	211,367		$	415,593		$	402,547



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Oil revenues	$	189,085	$	166,271	$	343,288	$	314,430
Natural gas revenues	21,975		42,748		61,041		76,543
Third-party midstream services revenues	14,359		3,407		26,197		6,475
Sales of purchased natural gas	8,963		—		20,194		—
Total revenues from contracts with customers	$	234,382	$	212,426	$	450,720	$	397,448

Three Months Ended
September 30, 2018 Nine Months Ended
September 30, 2018
Oil revenues $ 169,913
$ 484,343
Natural gas revenues 46,369
122,912
Third-party midstream services revenues 6,809
13,284
Total revenues from contracts with customers $ 223,091
$ 620,539

The Company does not disclose the value of unsatisfied performance obligations under its contracts with customers as it applies the practical expedient in accordance with ASC 606. The expedient, as described in ASC 606-10-50-14(a), applies to variable consideration that is recognized as control of the product is transferred to the customer. Since each unit of product represents a separate performance obligation, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

~~During the first quarter of 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-18,~~ ~~Statement of Cash Flows (Topic 230)~~, which specifies that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted ASU 2016-18 effective January 1, 2018 and determined that the adoption of this ASU changed the presentation of its beginning and ending cash balances and eliminated the presentation of changes in restricted cash balances from investing activities in its consolidated statements of cash flows. The Company adopted the new guidance using the retrospective transition method; as a result, approximately $6.0 million and $1.3 million of restricted cash was added to the beginning cash balance for the nine months ended September 30, 2018 and 2017, respectively.

~~During the first quarter of 2018, the Company adopted ASU 2017-01,~~ ~~Business Combinations (Topic 805)~~, which specifies the minimum inputs and processes required for an integrated set of assets and activities to meet the definition of a business. The Company adopted ASU 2017-01 prospectively, which did not have a material impact on its consolidated financial statements.

Property and Equipment

The Company uses the full-cost method of accounting for its investments in oil and natural gas properties. Under this method, the Company is required to perform a ceiling test each quarter that determines a limit, or ceiling, on the capitalized costs of oil and natural gas properties based primarily on the after-tax estimated future net cash flows from oil and natural gas properties using a 10% discount rate and the arithmetic average of first-day-of-the-month oil and natural gas prices for the prior 12-month period. For both the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, the cost center ceiling was higher than the capitalized costs of oil and natural gas properties, and, as a result, no impairment charge was necessary.

The Company capitalized approximately ~~$8.5~~$8.4 million and ~~$6.1~~$6.8 million of its general and administrative costs ~~for the three months ended September 30, 2018 and 2017, respectively,~~ and approximately ~~$1.7~~$2.6 million and ~~$2.1~~$2.6 million of its interest expense for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The Company capitalized approximately ~~$22.6~~$16.8 million and ~~$16.9~~$14.1 million of its general and administrative costs ~~for the nine months ended September 30, 2018 and 2017, respectively,~~ and approximately ~~$6.2~~$4.2 million and ~~$5.2~~$4.5 million of its interest expense for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

On September 12, 2018, the Company announced the successful acquisition of 8,400 gross (8,400 net) leasehold acres in Lea and Eddy Counties, New Mexico for approximately $387 million in the Bureau of Land Management New Mexico Oil and Gas Lease Sale on September 5 and 6, 2018 (the “BLM Acquisition”).

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

Earnings (Loss) Per Common Share

The Company reports basic earnings attributable to Matador ~~Resources Company~~ shareholders per common share, which excludes the effect of potentially dilutive securities, and diluted earnings attributable to Matador ~~Resources Company~~ shareholders per common share, which includes the effect of all potentially dilutive securities unless their impact is anti-dilutive.

The following table sets forth the computation of diluted weighted average common shares outstanding for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands).



	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Weighted average common shares outstanding
Basic	116,571	112,706	116,469	110,809
Dilutive effect of options and restricted stock units	332	350	370	471
Diluted weighted average common shares outstanding	116,903	113,056	116,839	111,280

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
Weighted average common shares outstanding
Basic 116,358
100,365
112,659
100,141
Dilutive effect of options and restricted stock units 554
139
549
439
Diluted weighted average common shares outstanding 116,912
100,504
113,208
100,580

~~Recent Accounting Pronouncements~~

~~Leases. In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02,~~ ~~Leases (Topic 842)~~,~~which requires the recognition~~A total of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. This ASU will become effective for fiscal years beginning after December 15, 2018 with early adoption permitted. Entities are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date and the ability to use hindsight in evaluating lessee2.8 million options to ~~extend or terminate a lease or to~~ purchase shares of Matador’s common stock were excluded from the ~~underlying asset. In January 2018,~~diluted weighted average common shares outstanding for both the ~~FASB issued ASU 2018-01,~~ ~~Leases (Topic 842), which is a land easement practical expedient. The Company plans to use this practical expedient,~~three and ~~as a result, the Company will evaluate new or modified land easements under this ASU beginning at the date of adoption. In July 2018, the FASB issued ASU 2018-11,~~ ~~Leases (Topic 842)~~, which is a targeted improvement for comparative reporting requirements for initial adoption of ASU 2016-02. The Company plans to use the optional transition method to adopt ASU 2016-02, and the amendments provided for in ASU 2018-11 will allow the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Adoption of ASU 2016-02 will result in increased reported assets and liabilities. The quantitative impact of the new lease standard will depend on the leases in force at the time of adoption. The Company is currently evaluating the impact of the adoption of these ASUs on its consolidated financial statements, including identifying all leases, as defined under the new lease standard, and quantifying the impact of the new lease standard on existing leases. The Company expects to adopt these ASUs as of January 1, 2019.six months ended June 30, 2019 because their effects were anti-dilutive.

~~Stock Compensation~~.~~In June 2018, the FASB issued ASU 2018-07,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting~~. This ASU extends the scope of Topic 718 to include share-based payment transactions related to the acquisition of goods and services from nonemployees. Currently, the Company accounts for stock-based awards to special advisors and contractors under ASC 505-50 as liability instruments, and the fair value of the awards is recalculated each reporting period. Upon adoption, all such awards will be measured at fair value on the grant date and the resulting expense will be recognized on a straight-line basis over the awards’ vesting period. This ASU is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The transitional guidance requires entities to remeasure all unvested awards that are being accounted for under ASC 505-50 as liability instruments as of the beginning of the year in which this ASU is adopted. The Company expects to adopt this ASU as of January 1, 2019 and does not anticipate this ASU will have a material impact on the Company’s consolidated financial statements.

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 3 — LEASES

The Company determines if an arrangement is a lease at inception of the contract. If an arrangement is a lease, the present value of the related lease payments is recorded as a liability and an equal amount is capitalized as a right of use asset on the Company’s interim unaudited condensed consolidated balance sheet. Right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s estimated incremental borrowing rate, determined at the lease commencement date using the Company’s average secured borrowing rate, is used to calculate present value. The weighted average estimated incremental borrowing rate used for the three months ended June 30, 2019 was 3.73%. For these purposes, the lease term includes options to extend the lease when it is reasonably certain that the Company will exercise such option. Leases with terms of 12 months or less at inception are not recorded on the interim unaudited condensed consolidated balance sheet unless there is a significant cost to terminate the lease, including the cost of removal of the leased asset. As the Company is the responsible party under these arrangements, the Company records the resulting assets and liabilities on a gross basis in its interim unaudited condensed consolidated balance sheets.

The following table presents supplemental interim unaudited condensed consolidated statement of operations information related to lease expenses, on a gross basis, for the three and six months ended June 30, 2019 (in thousands). Lease payments represent gross payments to vendors, which, for certain of our operating assets, are partially offset by amounts received from other working interest owners in our operated wells.



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating leases
Lease operating	$	2,965	$	5,207
Plant and other midstream services	30		61
General and administrative	665		1,474
Total operating leases⁽¹⁾	3,660		6,742
Short-term leases
Lease operating	3,392		5,601
Plant and other midstream services	1,131		2,751
General and administrative	5		17
Total short-term leases⁽²⁾⁽³⁾	4,528		8,369
Financing leases
Depreciation of assets	231		440
Interest on lease liabilities	33		64
Total financing leases	264		504
Total lease expense	$	8,452	$	15,615

_____________________


(1)	Does not include gross payments related to drilling rig leases of $8.2 million and $13.5 million for the three and six months ended June 30, 2019, respectively, that were capitalized and recorded in “Oil and natural gas properties, full-cost method” in the interim unaudited condensed consolidated balance sheet at June 30, 2019.


(2)	These costs are related to leases that are not recorded as right of use assets or lease liabilities in the interim unaudited condensed consolidated balance sheet as they are short-term leases.


(3)	Does not include gross payments related to short-term drilling rig leases and other equipment rentals of $10.7 million and $37.2 million for the three and six months ended June 30, 2019, respectively, that were capitalized and recorded in “Oil and natural gas properties, full-cost method” in the interim unaudited condensed consolidated balance sheet at June 30, 2019.

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 3 — LEASES — Continued

The following table presents supplemental interim unaudited condensed consolidated balance sheet information related to leases as of June 30, 2019 (in thousands).



	June 30, 2019
Operating leases
Other assets	$	78,845
Other current liabilities	$	(40,870	)
Other long-term liabilities	(43,012		)
Total operating lease liabilities	$	(83,882	)

Financing leases
Other property and equipment, at cost	$	2,846
Accumulated depreciation	(865		)
Net property and equipment	$	1,981
Other current liabilities	$	(1,108	)
Other long-term liabilities	(1,146		)
Total financing lease liabilities	$	(2,254	)

The following table presents supplemental interim unaudited condensed consolidated cash flow information related to lease payments for the six months ended June 30, 2019 (in thousands).



	Six Months Ended June 30, 2019
Cash paid related to lease liabilities
Operating cash payments for operating leases	$	6,790
Investing cash payments for operating leases	$	13,509
Financing cash payments for financing leases	$	490

Right of use assets obtained in exchange for lease obligations entered into during the period
Operating leases	$	28,884
Financing leases	$	471

The following table presents the maturities of lease liabilities at June 30, 2019 (in years).



Weighted-Average Remaining Lease Term		June 30, 2019
Operating leases		3.0
Financing leases		2.6

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 3 — LEASES — Continued

The following table presents a schedule of future minimum lease payments required under all lease agreements as of June 30, 2019 and December 31, 2018, respectively (in thousands).



	June 30, 2019
	Operating Leases			Financing Leases
2019	$	22,075		$	493
2020	32,051			747
2021	19,981			581
2022	3,989			504
2023	3,234			—
Thereafter	7,679			—
Total lease payments	89,009			2,325
Less imputed interest	(5,127		)	(71		)
Total lease obligations	83,882			2,254
Less current obligations	(40,870		)	(1,108		)
Long-term lease obligations	$	43,012		$	1,146



	December 31, 2018
	Operating Leases			Financing Leases
2019	$	39,457		$	1,240
2020	12,009			913
2021	3,513			534
2022	3,209			455
2023	3,234			—
Thereafter	7,680			—
Total lease payments	69,102			3,142
Less imputed interest	(4,300		)	(130		)
Total lease obligations	64,802			3,012
Less current obligations	(39,457		)	(1,240		)
Long-term lease obligations	$	25,345		$	1,772

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 34 — ASSET RETIREMENT OBLIGATIONS

The following table summarizes the changes in the Company’s asset retirement obligations for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 (in thousands).



Beginning asset retirement obligations	$	26,256		$	31,086
Liabilities incurred during period	2,473			1,427
Liabilities settled during period	(663		)	(154		)
Revisions in estimated cash flows	442
Divestitures during period				(951		)
Accretion expense	1,126			834
Ending asset retirement obligations	29,634			32,242
Less: current asset retirement obligations⁽¹⁾	(928		)	(1,556		)
Long-term asset retirement obligations	$	28,706		$	30,686

_______________


(1)	Included in accrued liabilities in the Company’s interim unaudited condensed consolidated balance sheet at ~~September~~June 30, ~~2018.~~2019.

NOTE 45 — DEBT

At ~~September~~June 30, 2018, the Company had $750.0 million of outstanding 5.875% senior notes due 2026 (the “Original 2026 Notes”), $325.0 million in borrowings outstanding under the Company’s revolving credit agreement (the “Credit Agreement”)2019 and ~~approximately $3.0 million in outstanding letters of credit issued pursuant to the Credit Agreement. At October~~July 31, ~~2018,~~2019, the Company had $1.05 billion of outstanding ~~Notes (as defined below)~~senior notes due 2026 (the “Notes”), ~~$25.0~~$205.0 million in borrowings outstanding under ~~the Credit Agreement~~its revolving credit facility (the “Credit Agreement”) and approximately ~~$3.0~~$13.6 million in outstanding letters of credit issued pursuant to the Credit Agreement.

At June 30, 2019 and July 31, 2019, San Mateo I had $240.0 million in borrowings outstanding under its revolving credit facility (the “San Mateo Credit ~~Agreement~~Facility”) and approximately $16.2 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility.

Credit Agreements

MRC Energy Company

The borrowing base under the Credit Agreement is determined semi-annually as of May 1 and November 1 by the lenders based primarily on the estimated value of the Company’s proved oil and natural gas reserves at December 31 and June 30 of each year, respectively. ~~Both the~~The Company and the lenders may each request an unscheduled redetermination of the borrowing base once ~~each~~ between scheduled redetermination dates. ~~During the first quarter of 2018,~~In April 2019, the lenders completed their review of the Company’s proved oil and natural gas reserves at December 31, ~~2017,~~2018, and, as a result, ~~in March 2018,~~ the borrowing base was increased to ~~$725.0~~$900.0 million. ~~This March 2018 redetermination constituted the regularly scheduled May 1 redetermination.~~ The Company elected to keep the borrowing commitment at ~~$400.0~~$500.0 million, and the maximum facility amount remained ~~at $500.0 million at September 30, 2018.~~

In October 2018, the lenders completed their review of the Company’s proved oil and natural gas reserves at June 30, 2018. In connection with such review, the Company amended the Credit Agreement to, among other items, increase the maximum facility amount to $1.5 billion, increase the borrowing base to $850.0 million, increase the elected borrowing commitment to $500.0 million, extend the maturity to October 31, 2023 and reduce borrowing rates by 0.25% per annum.billion. This ~~October 2018~~April 2019 redetermination constituted the regularly scheduled ~~November~~May 1 redetermination. Borrowings under the Credit Agreement are limited to the lowest of the borrowing base, the maximum facility amount and the elected ~~borrowing~~ commitment. The Credit Agreement matures on October 31, 2023.

The Company believes that it was in compliance with the terms of the Credit Agreement at ~~September 30, 2018.~~

~~Senior Unsecured Notes~~

~~As of~~ June 30, 2019.

San Mateo Midstream, LLC

On December 19, 2018, San Mateo I entered into the $250.0 million San Mateo Credit Facility, which matures December 19, 2023. The San Mateo Credit Facility includes an accordion feature, which could increase the lender commitments to up to $400.0 million. The San Mateo Credit Facility is non-recourse with respect to Matador and its wholly-owned subsidiaries, as well as San Mateo II, but is guaranteed by San Mateo I’s subsidiaries and secured by substantially all of San Mateo I’s assets, including real property. On June 12, 2019, pursuant to the accordion feature, the lender commitments under the San Mateo Credit Facility were increased to $325.0 million.

The Company ~~had $575.0 million of outstanding 6.875% senior notes due 2023 (the “2023 Notes”). On August 21, 2018, the Company issued $750.0 million of Original 2026 Notes~~believes that San Mateo I was in a private placement (the “2026 Notes Offering”). The Original 2026 Notes were issued at par value with a coupon rate of 5.875%, and the Company received net proceeds of approximately $740.0 million, after deducting the initial purchasers’ discounts and offering expenses. In conjunctioncompliance with the ~~2026 Notes Offering, in August and September 2018, respectively, the Company completed a tender offer to purchase for cash and subsequent redemption of all~~terms of the Company’s $575.0 million aggregate principal amount of 2023 Notes (the “2023 Notes Tender Offer and Redemption”). The Company used a portion of the net proceeds from the 2026 Notes Offering to fund the 2023 Notes Tender Offer and Redemption. In connection with the 2023 Notes Tender Offer and Redemption, the Company incurred a loss of $31.2 million, including total payments of $30.4 million to holders of the 2023San Mateo Credit Facility at June 30, 2019.

1114

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 45 — DEBT — Continued

Senior Unsecured Notes ~~as a result of the tender premium~~

In August and ~~the required 105.156% redemption price payable pursuant to the 2023 Notes indenture.~~

On October 4, 2018, the Company issued ~~an additional~~$750.0 million and $300.0 million, respectively, of Notes, which have a 5.875% senior unsecured notes due 2026 (the “Additional 2026 Notes” and, collectively with the Original 2026 Notes, the “Notes”). The Additional 2026 Notes were issued pursuant to, and are governed by, the same indenture governing the Original 2026 Notes (the “Indenture”). The Additional 2026 Notes were issued at 100.5% of par, plus accrued interest from August 21, 2018. The Company received net proceeds from this offering of approximately $297.6 million, after deducting the initial purchasers’ discounts and estimated offering expenses but excluding accrued interest from August 21, 2018 paid by the initial purchasers of the Additional 2026 Notes. The proceeds from this offering were used to repay a portion of the outstanding borrowings under the Credit Agreement, which were incurred in connection with the BLM Acquisition.coupon rate. The Notes will mature September 15, 2026, and interest is payable on the Notes semi-annually in arrears on each March 15 and September 15. The Notes are guaranteed on a senior unsecured basis by certain subsidiaries of the ~~Company (the “Guarantors”).~~

On or after September 15, 2021, the Company may redeem all or a part of the Notes at any time or from time to time at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below:

Year Redemption Price
2021 104.406%
2022 102.938%
2023 101.469%
2024 and thereafter 100.000%

At any time prior to September 15, 2021, the Company may redeem up to 35% of the aggregate principal amount of the Notes with net proceeds from certain equity offerings at a redemption price of 105.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, provided that (i) at least 65% in aggregate principal amount of the Notes (including any additional notes) originally issued remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its subsidiaries) and (ii) each such redemption occurs within 180 days of the date of the closing of the related equity offering.

~~In addition, at any time prior to September 15, 2021, the Company may redeem all or part of the Notes at a redemption price equal to the sum of:~~

~~(i) the principal amount thereof, plus~~

(ii) the excess, if any, of (a) the present value at such time of (1) the redemption price of such Notes at September 15, 2021 plus (2) any required interest payments due on such Notes through September 15, 2021, discounted to the redemption date on a semi-annual basis using a discount rate equal to the Treasury Rate (as defined in the Indenture) plus 50 basis points, over (b) the principal amount of such Notes, plus

~~(iii) accrued and unpaid interest, if any, to the redemption date.~~

~~Subject to certain exceptions, the Indenture contains various covenants that limit the Company’s ability to take certain actions, including, but not limited to, the following:~~

~~incur additional indebtedness;~~

~~sell assets;~~

~~pay dividends or make certain investments;~~

~~create liens that secure indebtedness;~~

~~enter into transactions with affiliates; and~~

~~merge or consolidate with another company.~~

~~Table of Contents~~

~~Matador Resources Company and Subsidiaries~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —~~

~~UNAUDITED — CONTINUED~~

~~NOTE 4 — DEBT — Continued~~

In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to Matador, any Restricted Subsidiary (as defined in the Indenture) that is a Significant Subsidiary (as defined in the Indenture) or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Events of default include, but are not limited to, the following events:

~~default for 30 days in the payment when due of interest on the Notes;~~

~~default in the payment when due of the principal of, or premium, if any, on the Notes;~~

failure by the Company to comply with its obligations to offer to purchase or purchase notes pursuant to the change of control or asset sale covenants of the Indenture or to comply with the covenant relating to mergers;

~~failure by the Company for 180 days after notice to comply with its reporting obligations under the Indenture;~~

~~failure by the Company for 60 days after notice to comply with any of the other agreements in the Indenture;~~

~~payment defaults and accelerations with respect to other indebtedness of the Company and its Restricted Subsidiaries in the aggregate principal amount of $50.0 million or more;~~

~~failure by the Company or any Restricted Subsidiary to pay certain final judgments aggregating in excess of $50.0 million within 60 days;~~

~~any subsidiary guarantee by a Guarantor ceases to be in full force and effect, is declared null and void in a judicial proceeding or is denied or disaffirmed by its maker; and~~

certain events of bankruptcy or insolvency with respect to the Company or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.Company.

NOTE 56 — INCOME TAXES

The Company’s effective tax rate for the three and six months ended June 30, 2019 was 26% and 37%, respectively. The Company’s total income tax provision for the three and six months ended June 30, 2019 differed from amounts computed by applying the U.S. federal statutory tax rates to pre-tax income due primarily to the impact of permanent differences between book and tax income at June 30, 2019.

Due to a variety of factors, including the Company’s significant net income in 2017 and 2018, the Company’s federal valuation allowance and a portion of the Company’s state valuation allowance were reversed at December 31, 2018 as the deferred tax assets were determined to be more likely than not to be utilized. As a portion of the Company’s state net operating loss carryforwards are not expected to be utilized before expiration, a valuation allowance will continue to be recognized until the state deferred tax assets are more likely than not to be utilized.

The Company’s deferred tax assets exceeded its deferred tax liabilities at ~~September~~June 30, 2018 due to the deferred tax assets generated by full-cost ceiling impairment charges ~~recorded~~ in prior periods. The Company established a valuation allowance against most of the deferred tax assets beginning in the third quarter of 2015 and retained a full valuation allowance at ~~September~~June 30, 2018 due to uncertainties regarding the future realization of its deferred tax assets. ~~The valuation allowance will continue~~

NOTE 7 — EQUITY

Stock-based Compensation

In February 2019, the Company granted awards to certain of its employees of 428,006 service-based restricted stock units to be ~~recognized until~~settled in cash, which are liability instruments, and 428,006 performance-based stock units, which are equity instruments. The performance-based stock units vest in an amount between zero and 200% of the ~~realization~~target units granted based on the Company’s relative total shareholder return over the three-year period ending December 31, 2021, as compared to a designated peer group. The service-based restricted stock units vest ratably over three years, and the performance-based stock units are eligible to vest after completion of ~~future deferred tax benefits is more likely than not~~the three-year performance period. The fair value of these awards was approximately $16.8 million on the grant date. In April 2019, the Company granted awards to certain of its employees of 259,038 service-based restricted stock units to be ~~utilized.~~settled in cash, which are liability instruments, and 205,361 shares of service-based restricted stock, which are equity instruments. Both the liability instruments and the equity instruments vest ratably over three years. The fair value of these awards was approximately $9.2 million on the grant date.

San Mateo II

On February 25, 2019, the Company announced the formation of San Mateo II, a strategic joint venture with a subsidiary of Five Point Energy LLC (“Five Point”) designed to expand the Company’s midstream operations in the Delaware Basin, specifically in Eddy County, New Mexico. San Mateo II is owned 51% by the Company and 49% by Five Point. In addition, Five Point has committed to pay $125 million of the first $150 million of capital expenditures incurred by San Mateo II to develop facilities in the Stebbins area and surrounding leaseholds in the southern portion of the Arrowhead asset area (the “Greater Stebbins Area”) and the Stateline asset area. The Company also has the ability to earn up to $150 million in deferred performance incentives over the next five years related to the formation of San Mateo II, plus additional performance incentives for securing volumes from third-party customers. During the first quarter of 2019, the Company contributed $1.0 million of property to San Mateo II. During the three and six months ended June 30, 2019, the Company contributed $1.5 million and $1.5 million of cash and Five Point contributed $7.5 million and $11.5 million of cash to San Mateo II, respectively.

1315

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 67 — EQUITY — Continued

~~Equity Offering~~

On May 17, 2018, the Company completed a public offering of 7,000,000 shares of its common stock. After deducting offering costs totaling approximately $0.1 million, the Company received net proceeds of approximately $226.5 million. The proceeds from this offering were used to acquire additional leasehold and mineral acres in the Delaware Basin, to fund certain midstream initiatives in the Delaware Basin and for general corporate purposes, including to fund a portion of the Company’s capital expenditures. Pending such uses, the Company used a portion of the proceeds from the offering to repay the $45.0 million in borrowings then outstanding under the Credit Agreement and invested the remaining funds in short-term marketable securities.

~~Stock-based Compensation~~

In February 2018, the Company granted awards of 667,488 shares of restricted stock and options to purchase 563,408 shares of the Company’s common stock at an exercise price of $29.68 per share to certain of its employees. The fair value of these awards was approximately $26.9 million. All of these awards vest ratably over three years.

Performance Incentives

In connection with the formation of San Mateo I in 2017, the Company has the ability to earn a total of $73.5 million in performance incentives to be paid by ~~its joint venture partner, a subsidiary of~~ Five Point ~~Energy LLC (“Five Point”),~~ over a five-year period. The Company earned, and Five Point paid to the Company, $14.7 million in performance incentives during each of the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, and the Company may earn up to an additional ~~$58.8~~$44.1 million in performance incentives over the next ~~four~~three years. These performance incentives are recorded as an increase to additional paid-in capital when received. These performance incentives for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018 are also denoted as “Contributions related to formation of ~~Joint Venture”~~San Mateo I” under “Financing activities” in the Company’s interim unaudited condensed consolidated statements of cash ~~flows.~~flows and changes in shareholders’ equity.

~~Table of Contents~~

~~Matador Resources Company and Subsidiaries~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —~~

~~UNAUDITED — CONTINUED~~

NOTE 78 — DERIVATIVE FINANCIAL INSTRUMENTS

At ~~September~~June 30, ~~2018,~~2019, the Company had various costless collar, three-way costless collar and swap contracts open and in place to mitigate its exposure to oil and natural gas price volatility, each with a specific term (calculation period), notional quantity (volume hedged) and price floor and ceiling and fixed price for the swaps. Each contract is set to expire at varying times during ~~2018~~2019 and ~~2019.~~2020.

The following is a summary of the Company’s open costless collar contracts for oil and natural gas at ~~September~~June 30, ~~2018.~~2019.


Commodity	Calculation Period	Notional Quantity (Bbl or MMBtu)	Weighted Average Price Floor ($/Bbl or $/MMBtu)		Weighted Average Price Ceiling ($/Bbl or $/MMBtu)		Fair Value of Asset (Liability) (thousands)				Calculation Period	Notional Quantity (Bbl or MMBtu)	Weighted Average Price Floor ($/Bbl or $/MMBtu)		Weighted Average Price Ceiling ($/Bbl or $/MMBtu)		Fair Value of Asset (Liability) (thousands)
Oil - WTI⁽¹⁾	10/01/2018 - 12/31/2018	720,000	$	44.27	$	60.29	$	(9,240	)
Oil - WTI⁽¹⁾	01/01/2019 - 12/31/2019	2,400,000	$	50.00	$	64.75	(21,287		)
Oil - LLS⁽²⁾	10/01/2018 - 12/31/2018	180,000	$	45.00	$	63.05	(2,973		)
Oil											07/01/2019 - 12/31/2019	3,900,000	$	50.26	$	70.94	$	3,354
Oil											01/01/2020 - 12/31/2020	2,640,000	$	48.50	$	69.50	4,555
Natural Gas	10/01/2018 - 12/31/2018	4,200,000	$	2.58	$	3.67	(18		)		07/01/2019 - 12/31/2019	1,200,000	$	2.50	$	3.80	272
Total open costless collar contracts	Total open costless collar contracts						$	(33,518	)	Total open costless collar contracts							$	8,181

~~_____________________~~

~~(1) NYMEX West Texas Intermediate crude oil.~~

~~(2) Argus Louisiana Light Sweet crude oil.~~

The following is a summary of the Company’s open three-way costless collar contracts for oil and natural gas at ~~September~~June 30, ~~2018.~~2019. Open three-way costless collars consist of a long put (the floor), a short call (the ceiling) and a long call that limits losses on the upside.

Commodity Calculation Period Notional Quantity (Bbl) Weighted Average Price Floor ($/Bbl) Weighted Average Price, Short Call ($/Bbl) Weighted Average Price, Long Call ($/Bbl) Fair Value of Asset (Liability) (thousands)
Oil - WTI⁽¹⁾
10/01/2018 - 12/31/2018 480,000
$ 50.08
$ 63.50
$ 66.68
$ (1,369 )
Total open three-way costless collar contracts $ (1,369 )

~~_____________________~~

~~(1) NYMEX West Texas Intermediate crude oil.~~



Commodity	Calculation Period	Notional Quantity (Bbl or MMBtu)	Weighted Average Price Floor ($/Bbl or $/MMBtu)		Weighted Average Price, Short Call ($/Bbl or $/MMBtu)		Weighted Average Price, Long Call ($/Bbl or $/MMBtu)		Fair Value of Asset (Liability) (thousands)
Oil	07/01/2019 - 12/31/2019	660,000	$	60.00	$	75.00	$	78.85	$	2,829
Natural Gas	07/01/2019 - 12/31/2019	2,400,000	$	2.50	$	3.00	$	3.24	528
Total open three-way costless collar contracts									$	3,357

The following is a summary of the Company’s open basis swap contracts for oil at ~~September~~June 30, ~~2018.~~2019.



Commodity	Calculation Period	Notional Quantity (Bbl)	Fixed Price ($/Bbl)		Fair Value of Asset (Liability) (thousands)
Oil Basis Swaps	08/1/2019 - 12/31/2019	1,377,000	$	0.33	$	(39	)
Oil Basis Swaps	01/01/2020 - 12/31/2020	4,494,000	$	0.42	(1,215		)
Total open swap contracts					$	(1,254	)

Commodity Calculation Period Notional Quantity (Bbl)
Fixed Price
($/Bbl)

Fair Value of
Asset
(Liability)
(thousands)
Oil Basis Swaps 10/01/2018 - 12/31/2018 1,305,000
$ (1.02 ) $ 10,155
Total open swap contracts $ 10,155

At ~~September~~June 30, ~~2018,~~2019, the Company had an aggregate ~~liability~~asset value for open derivative financial instruments of ~~$24.7~~$10.3 million.

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 8 — DERIVATIVE FINANCIAL INSTRUMENTS — Continued

The Company’s derivative financial instruments are subject to master netting arrangements, and ~~all but one counterparty~~the Company’s counterparties allow for cross-commodity master netting provided the settlement dates for the commodities are the same. The Company does not present different types of commodities with the same counterparty on a net basis in its interim unaudited condensed consolidated balance sheets.

~~Table of Contents~~

~~Matador Resources Company and Subsidiaries~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —~~

~~UNAUDITED — CONTINUED~~

~~NOTE 7 — DERIVATIVE FINANCIAL INSTRUMENTS — Continued~~

The following table presents the gross asset and liability fair values of the Company’s commodity price derivative financial instruments and the location of these balances in the interim unaudited condensed consolidated balance sheets as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands).



Derivative Instruments	Gross amounts recognized			Gross amounts netted in the condensed consolidated balance sheets			Net amounts presented in the condensed consolidated balance sheets
June 30, 2019
Current assets	$	12,671		$	(4,400	)	$	8,271
Other assets	4,710			(2,508		)	2,202
Current liabilities	(4,400		)	4,400			—
Long-term liabilities	(2,697		)	2,508			(189		)
Total	$	10,284		$	—		$	10,284
December 31, 2018
Current assets	$	53,136		$	(3,207	)	$	49,929
Current liabilities	(3,207		)	3,207			—
Long-term liabilities	(83		)	—			(83		)
Total	$	49,846		$	—		$	49,846

Derivative Instruments Gross
amounts
recognized Gross amounts
netted in the condensed
consolidated
balance sheets Net amounts presented in the condensed
consolidated
balance sheets
September 30, 2018
   Current assets $ 49,723
$ (49,719 ) $ 4
   Other assets 654
(654 ) —
   Current liabilities (69,459 ) 49,719
(19,740 )
   Long-term liabilities (5,650 ) 654
(4,996 )
      Total $ (24,732 ) $ —
$ (24,732 )
December 31, 2017
   Current assets $ 131,092
$ (129,902 ) $ 1,190
   Current liabilities (146,331 ) 129,902
(16,429 )
      Total $ (15,239 ) $ —
$ (15,239 )

The following table summarizes the location and aggregate ~~fair value~~gain (loss) of all derivative financial instruments recorded in the interim unaudited condensed consolidated statements of operations for the periods presented (in thousands). These derivative financial instruments are not designated as hedging instruments.



		Three Months Ended June 30,					Six Months Ended June 30,
Type of Instrument	Location in Condensed Consolidated Statement of Operations	2019		2018			2019			2018
Derivative Instrument
Oil	Revenues: Realized gain (loss) on derivatives	$	1,165	$	(2,488	)	$	4,531		$	(6,797	)
Natural Gas	Revenues: Realized (loss) gain on derivatives	—		—			(96		)	51
Realized gain (loss) on derivatives		1,165		(2,488		)	4,435			(6,746		)
Oil	Revenues: Unrealized gain (loss) on derivatives	5,365		1,829			(40,078		)	12,956
Natural Gas	Revenues: Unrealized gain (loss) on derivatives	792		(400		)	516			(1,111		)
Unrealized gain (loss) on derivatives		6,157		1,429			(39,562		)	11,845
Total		$	7,322	$	(1,059	)	$	(35,127	)	$	5,099

Three Months Ended
September 30, Nine Months Ended
September 30,
Type of Instrument Location in Condensed Consolidated Statement of Operations 2018 2017 2018 2017
Derivative Instrument
Oil Revenues: Realized gain (loss) on derivatives $ 5,424
$ 485
$ (1,373 ) $ (568 )
Natural Gas Revenues: Realized gain (loss) on derivatives —
—
51
(608 )
Realized gain (loss) on derivatives 5,424
485
(1,322 ) (1,176 )
Oil Revenues: Unrealized (loss) gain on derivatives (21,240 ) (12,479 ) (8,284 ) 15,949
Natural Gas Revenues: Unrealized (loss) gain on derivatives (97 ) 115
(1,208 ) 5,508
NGL Revenues: Unrealized loss on derivatives —
(8 ) —
(8 )
Unrealized (loss) gain on derivatives (21,337 ) (12,372 ) (9,492 ) 21,449
Total $ (15,913 ) $ (11,887 ) $ (10,814 ) $ 20,273

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 89 — FAIR VALUE MEASUREMENTS

The Company measures and reports certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Fair value measurements are classified and disclosed in one of the following categories.


Level 1	Unadjusted quoted prices for identical, unrestricted assets or liabilities in active markets.

Level 2

Quoted prices in markets that are not active, or inputs ~~which~~that are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that are valued with industry standard models that consider various inputs, including: (i) quoted forward prices for commodities, (ii) time value of money and (iii) current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these inputs are observable in the marketplace throughout the full term of the derivative instrument and can be derived from observable data or supported by observable levels at which transactions are executed in the marketplace.


Level 3	Unobservable inputs that are not corroborated by market data that reflect a company’s own market assumptions.

Financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The following tables summarize the valuation of the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis in accordance with the classifications provided above as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 (in thousands).



	Fair Value Measurements at June 30, 2019 using
Description	Level 1		Level 2		Level 3		Total
Assets (Liabilities)
Oil derivatives and basis swaps	$	—	$	9,484	$	—	$	9,484
Natural gas derivatives	—		800		—		800
Total	$	—	$	10,284	$	—	$	10,284


	Fair Value Measurements at September 30, 2018 using										Fair Value Measurements at December 31, 2018 using
Description	Level 1		Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total
Assets (Liabilities)
Oil derivatives and basis swaps											$	—	$	49,562	$	—	$	49,562
Natural gas derivatives	$	—	$	(18	)	$	—	$	(18	)	—		284		—		284
Oil derivatives and basis swaps	—		(24,714		)	—		(24,714		)
Total	$	—	$	(24,732	)	$	—	$	(24,732	)	$	—	$	49,846	$	—	$	49,846

Fair Value Measurements at
December 31, 2017 using
Description Level 1 Level 2 Level 3 Total
Assets (Liabilities)
Natural gas derivatives $ —
$ 1,190
$ —
$ 1,190
Oil derivatives and basis swaps —
(16,429 ) —
(16,429 )
Total $ —
$ (15,239 ) $ —
$ (15,239 )

Additional disclosures related to derivative financial instruments are provided in Note 7.8.

Other Fair Value Measurements

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the carrying values reported on the interim unaudited condensed consolidated balance sheets for accounts receivable, prepaid expenses and other assets, accounts payable, accrued liabilities, royalties payable, amounts due to affiliates, advances from joint interest owners, amounts due to joint ventures and other current liabilities approximated their fair values due to their short-term maturities.

At ~~September~~June 30, ~~2018,~~2019, the carrying value of borrowings under the Credit Agreement and the San Mateo Credit Facility approximated ~~its~~their fair value as ~~it is~~both are subject to short-term floating interest rates that reflect market rates available to the Company at the time and isare classified at Level 2.2 in the fair value hierarchy.

At June 30, 2019 and December 31, 2018, the fair value of the Notes was $1.07 billion and $0.97 billion, respectively, based on quoted market prices, which represent Level 1 inputs in the fair value hierarchy.

1718

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE ~~8 — FAIR VALUE MEASUREMENTS — Continued~~

At September 30, 2018 and December 31, 2017, the fair value of the Original 2026 Notes and the 2023 Notes was $761.3 million and $614.1 million, respectively, based on quoted market prices, which represent Level 1 inputs in the fair value hierarchy.

~~NOTE 9~~10 — COMMITMENTS AND CONTINGENCIES

Processing, Transportation and Salt Water Disposal Commitments

~~Delaware Basin — Loving County, Texas Natural Gas Processing~~Firm Commitments

~~In late 2015,~~From time to time, the Company ~~entered~~enters into ~~a 15-year, fixed-fee natural gas gathering and processing agreement~~agreements with third parties whereby the Company ~~committed~~commits to deliver ~~the~~ anticipated natural gas and oil production and salt water from ~~a significant portion~~certain portions of its ~~Loving County, Texas~~ acreage for gathering, transportation, processing, fractionation, sales and, in ~~West Texas through~~ the ~~counterparty’s gathering system~~case of salt water, disposal. The Company paid approximately $6.1 million and $5.1 million for ~~processing at~~deliveries under these agreements during the ~~counterparty’s facilities. Under this agreement, if~~three months ended June 30, 2019 and 2018, respectively, and $12.9 million and $9.1 million for deliveries under these agreements during the six months ended June 30, 2019 and 2018, respectively. Certain of these agreements contain minimum volume commitments. If the Company does not meet the minimum volume ~~commitment for transportation and processing at the facilities in a contract year,~~commitments under these agreements, it will be required to pay acertain deficiency fee per MMBtu of natural gas deficiency. At the end of each year of the agreement, the Company can elect to have the previous year’s actual transportation and processing volumes be the new minimum commitment for each of the remaining years of the contract. As such, the Company has the ability to unilaterally reduce the gathering and processing commitment if the Company’s production in the Loving County area is less than the Company’s minimum commitment.fees. If the Company ceased operations in ~~this area~~the areas subject to these agreements at ~~September~~June 30, ~~2018,~~2019, the total ~~deficiency fee~~deficiencies required to be paid by the Company under these agreements would be approximately ~~$12.5 million. In~~$163.4 million, in addition ~~if the Company elects to reduce the gathering and processing commitment in any year, the Company has the ability to elect to increase the committed volumes in any future year~~ to the originally agreed gathering and processing commitment. Any quantity in excess of the volume commitment delivered in a contract year can be carried over to the next contract year for purposes of calculating that year’s natural gas deficiency. The Company paid approximately $4.8 million and $4.0 million in natural gas processing and gathering fees under this agreement during the three months ended September 30, 2018 and 2017, respectively, and $12.2 million and $10.8 million in natural gas processing and gathering fees under this agreement during the nine months ended September 30, 2018 and 2017, respectively. The Company can elect to either sell the residue gas to the counterparty at the tailgate of its processing plants or have the counterparty deliver to the Company the residue gas in-kind to be sold to third parties downstream of the plants.commitments described below.

~~Delaware Basin — Eddy County, New Mexico Natural Gas Transportation~~Future Commitments

In late 2017, the Company entered into ~~an 18-year,~~a fixed-fee natural gas transportation agreement whereby the Company committed to deliver a portion of the residue natural gas production at the tailgate of San Mateo’s Black River cryogenic natural gas processing plant in the Rustler Breaks asset area (the “Black River Processing Plant”liquids (“NGL”) to transport through the counterparty’s pipeline. Under this agreement, if the Company does not meet the volume commitment for transportation in a contract year, the Company will owe the fees to transport the committed volume whether or not the committed volume is utilized. The minimum contractual obligation at September 30, 2018 was approximately $45.2 million. The Company paid approximately $1.0 million and $2.5 million in transportation fees under this agreement during the three and nine months ended September 30, 2018, respectively.

~~In late 2017, the Company also entered into a fixed-fee NGL transportation and fractionation~~sales agreement whereby the Company committed to deliver its NGL production at the tailgate of the Black River cryogenic natural gas processing plant in Eddy County, New Mexico (the “Black River Processing ~~Plant.~~Plant”) to a certain counterparty. The Company is committed to deliver a minimum amount of NGLs to the counterparty upon construction and completion of a pipeline ~~expansion~~extension and a fractionation facility by the counterparty, which is currently expected to be completed in ~~late 2019.~~2020. The Company has no rights to compel the counterparty to construct this pipeline extension or fractionation facility. If the counterparty does not construct the pipeline extension and fractionation facility, then the Company does not have any minimum volume commitments under the agreement. If the counterparty constructs the pipeline extension and fractionation facility on or prior to February 28, 2021, then the Company will have a commitment to deliver a minimum amount of NGLs for seven years following the completion of the pipeline extension and fractionation facility. If the Company does not meet its NGL volume commitment in any quarter during the seven-year commitment period, it will be required to pay a deficiency fee per gallon of NGL deficiency. Should the pipeline extension and fractionation facility be completed on or prior to February 28, 2021, the minimum contractual obligation during the seven-year period would be approximately $132.3 million.

In April 2018, the Company entered into a short-term natural gas transportation agreement whereby the Company committed to deliver a portion of the residue natural gas production at the tailgate of the Black River Processing Plant to transport through the counterparty’s pipeline. Under this short-term agreement, the Company will owe the fees to transport the committed volume whether or not the committed volume is transported through the counterparty’s pipeline. The minimum contractual obligation under this short-term contract at September 30, 2018 was approximately $3.6 million. This short-term

~~Table of Contents~~

~~Matador Resources Company and Subsidiaries~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —~~

~~UNAUDITED — CONTINUED~~

~~NOTE 9 — COMMITMENTS AND CONTINGENCIES — Continued~~

agreement ends on September 30, 2019. The Company paid approximately $0.9 million and $1.1 million in transportation fees under this agreement during the three and nine months ended September 30, 2018, respectively.

~~In April 2018, the Company~~ also entered into a 16-year, fixed-fee natural gas transportation agreement that begins on October 1, 2019, whereby the Company committed to deliver a portion of the residue ~~natural~~ gas production at the tailgate of the Black River Processing Plant to transport through the counterparty’s pipeline. The Company will owe the fees to transport the committed volume whether or not the committed volume is transported through the counterparty’s pipeline. The minimum contractual obligation at ~~September~~June 30, ~~2018~~2019 was approximately $56.8 million.

In May 2018, the Company also entered into a 10-year, fixed-fee natural gas sales agreement whereby the Company committed to deliver residue ~~natural~~ gas through the counterparty’s pipeline to the Texas Gulf Coast beginning on the in-service date of such pipeline, which is expected to be operational in ~~late~~the fourth quarter of 2019. If the Company does not meet the volume commitment specified in the natural gas sales agreement, it may be required to pay a deficiency fee per MMBtu of natural gas deficiency. The minimum contractual obligation at ~~September~~June 30, ~~2018~~2019 was approximately ~~$200.6~~$202.3 million.

Delaware Basin — San Mateo

In February 2017, the Company dedicated its current and future leasehold interests in the Rustler Breaks and Wolf asset areas pursuant to 15-year, fixed-fee natural gas, oil and salt water gathering agreements and salt water disposal agreements with subsidiaries of San ~~Mateo.~~Mateo I. In addition, the Company dedicated its current and future leasehold interests in the Rustler Breaks asset area pursuant to a 15-year, fixed-fee natural gas processing agreement (collectively with the gathering and salt water disposal agreements, the “Operational Agreements”). San Mateo I provides the Company with firm service under each of the Operational Agreements in exchange for certain minimum volume commitments. The minimum contractual obligation under the Operational Agreements at ~~September~~June 30, ~~2018~~2019 was approximately ~~$222.0~~$183.8 million.

~~Beginning~~In connection with the February 2019 formation of San Mateo II, the Company dedicated to San Mateo II acreage in ~~May 2017,~~the Greater Stebbins Area and the Stateline asset area pursuant to 15-year, fixed-fee agreements for oil, natural gas and salt water gathering, natural gas processing and salt water disposal (collectively, the “San Mateo II Operational Agreements”). San Mateo II will provide the Company with firm service under each of the San Mateo II Operational Agreements in exchange for certain minimum volume commitments. The minimum contractual obligation under the San Mateo II Operational Agreements at inception was approximately $363.8 million and begins in 2020.

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 10 — COMMITMENTS AND CONTINGENCIES — Continued

In June 2019, a subsidiary of San Mateo II entered into ~~certain agreements~~an agreement with third parties for the engineering, procurement, construction and installation of an expansion of the Black River Processing ~~Plant.~~Plant, including required compression. The expansion ~~was completed late~~is expected to be placed in ~~the first quarter of 2018. Since inception,~~service in 2020. San ~~Mateo’s~~Mateo II’s total commitments under ~~these agreements totaled $55.3~~this agreement are $80.1 million. ~~The subsidiary of~~ San Mateo II paid approximately ~~$2.0 million and $5.6~~$8.3 million under ~~these agreements~~this agreement during the three ~~and nine~~ months ended ~~September~~June 30, ~~2018.~~2019. As of ~~September~~June 30, ~~2018, there was no remaining obligation under these agreements.~~

During the first quarter of 2018, a subsidiary of San Mateo entered into agreements for additional field compression and an amine gas treatment unit to maximize the operation of the Black River Processing Plant. Since inception, San Mateo’s commitments under these agreements totaled $24.8 million. The subsidiary of San Mateo paid approximately $6.3 million and $12.8 million under these agreements during the three and nine months ended September 30, 2018. As of September 30, 2018,2019, the remaining obligations under ~~these agreements~~this agreement were ~~$12.0~~$71.8 million, which are expected to be paid within the next ~~year.~~

~~Other Commitments~~

The Company does not own or operate its own drilling rigs, but instead enters into contracts with third parties for such drilling rigs. These contracts establish daily rates for the drilling rigs and the term of the Company’s commitment for the drilling services to be provided. The Company would incur a termination obligation if the Company elected to terminate a contract and if the drilling contractor were unable to secure replacement work for the contracted drilling rigs at the same daily rates being charged to the Company prior to the end of their respective contract terms. The Company’s undiscounted minimum outstanding aggregate termination obligations under its drilling rig contracts were approximately $32.8 million at September 30, 2018.

At September 30, 2018, the Company had outstanding commitments to participate in the drilling and completion of various non-operated wells. If all of these wells are drilled and completed as proposed, the Company’s minimum outstanding aggregate commitments for its participation in these non-operated wells were approximately $44.2 million at September 30, 2018. The Company expects these costs to be incurred within the next year.12 months.

Legal Proceedings

The Company is a party to several ~~lawsuits~~legal proceedings encountered in the ordinary course of its business. While the ultimate outcome and impact on the Company cannot be predicted with certainty, in the opinion of management, it is remote that these ~~lawsuits~~legal proceedings will have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

NOTE 11 — SUPPLEMENTAL DISCLOSURES

Accrued Liabilities

The following table summarizes the Company’s current accrued liabilities at June 30, 2019 and December 31, 2018 (in thousands).



	June 30, 2019		December 31, 2018
Accrued evaluated and unproved and unevaluated property costs	$	100,014	$	86,318
Accrued midstream property costs	21,840		16,808
Accrued lease operating expenses	20,812		12,705
Accrued interest on debt	18,599		22,448
Accrued asset retirement obligations	1,556		1,350
Accrued partners’ share of joint interest charges	17,165		17,037
Other	11,622		14,189
Total accrued liabilities	$	191,608	$	170,855

Supplemental Cash Flow Information

The following table provides supplemental disclosures of cash flow information for the six months ended June 30, 2019 and 2018 (in thousands).



	Six Months Ended June 30,
	2019		2018
Cash paid for interest expense, net of amounts capitalized	$	37,632	$	14,286
Increase in asset retirement obligations related to mineral properties	$	321	$	834
Increase in asset retirement obligations related to midstream properties	$	283	$	296
Increase (decrease) in liabilities for oil and natural gas properties capital expenditures	$	13,536	$	(26,389	)
Increase (decrease) in liabilities for midstream properties capital expenditures	$	5,854	$	(2,371	)
Decrease in liabilities for accrued cost to issue equity	$	—	$	73
Transfer of inventory from oil and natural gas properties	$	370	$	343
Transfer of inventory to midstream properties	$	—	$	(2,390	)

1920

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 1011 — SUPPLEMENTAL DISCLOSURES — Continued

~~Accrued Liabilities~~

~~The following table summarizes the Company’s current accrued liabilities at September 30, 2018 and December 31, 2017 (in thousands).~~

September 30,
2018 December 31,
2017
Accrued evaluated and unproved and unevaluated property costs $ 108,420
$ 105,347
Accrued midstream property costs 16,996
14,823
Accrued lease operating expenses 18,651
12,611
Accrued interest on debt 5,407
8,345
Accrued asset retirement obligations 928
1,176
Accrued partners’ share of joint interest charges 22,114
27,628
Other 6,314
4,418
Total accrued liabilities $ 178,830
$ 174,348

~~Supplemental Cash Flow Information~~

~~The following table provides supplemental disclosures of cash flow information for the nine months ended September 30, 2018 and 2017 (in thousands).~~

Nine Months Ended
September 30,
2018 2017
Cash paid for interest expense, net of amounts capitalized $ 29,773
$ 14,542
Increase in asset retirement obligations related to mineral properties $ 1,705
$ 2,484
Increase (decrease) in asset retirement obligations related to midstream properties $ 547
$ (138 )
Increase in liabilities for oil and natural gas properties capital expenditures $ 5,157
$ 35,940
Increase (decrease) in liabilities for midstream properties capital expenditures $ 1,864
$ (247 )
Stock-based compensation expense recognized as liability $ (107 ) $ 150
Decrease in liabilities for accrued cost to issue equity $ —
$ (343 )
Increase in liabilities for accrued cost to issue senior notes $ 510
$ —
Transfer of inventory from oil and natural gas properties $ 305
$ 74
Transfer of inventory to midstream and other property and equipment $ (2,691 ) $ —

The following table provides a reconciliation of cash and restricted cash recorded in the interim unaudited condensed consolidated balance sheets to cash and restricted cash as presented on the interim unaudited condensed consolidated statements of cash flows (in thousands).



	Six Months Ended June 30,
	2019		2018
Cash	$	59,950	$	122,450
Restricted cash	24,812		21,063
Total cash and restricted cash	$	84,762	$	143,513

Nine Months Ended
September 30,
2018 2017
Cash $ 45,942
$ 20,178
Restricted cash 7,066
10,744
Total cash and restricted cash $ 53,008
$ 30,922

~~Table of Contents~~

~~Matador Resources Company and Subsidiaries~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —~~

~~UNAUDITED — CONTINUED~~

NOTE 1112 — SEGMENT INFORMATION

The Company operates in two business segments: (i) exploration and production and (ii) midstream. The exploration and production segment is engaged in the ~~acquisition,~~ exploration, development, production and ~~production~~acquisition of oil and natural gas ~~properties~~resources in the United States and is currently 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. The Company also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. The midstream segment conducts midstream operations in support of the Company’s exploration, development and production operations and provides natural gas processing, oil transportation services, oil, natural gas ~~oil~~ and salt water gathering services and salt water disposal services to third parties. Substantially all of the Company’s midstream operations in the Rustler Breaks and Wolf asset areas in the Delaware Basin are conducted through San Mateo.

The following tables present selected financial information for the periods presented regarding the Company’s business segments on a stand-alone basis, corporate expenses that are not allocated to a segment and the consolidation and elimination entries necessary to arrive at the financial information for the Company on a consolidated basis (in thousands). On a consolidated basis, midstream services revenues consist primarily of those revenues from midstream operations related to third parties, including working interest owners in the Company’s operated wells. All midstream services revenues associated with Company-owned production are eliminated in consolidation. In evaluating the operating results of the exploration and production and midstream segments, the Company does not allocate certain expenses to the individual segments, including general and administrative expenses. Such expenses are reflected in the column labeled “Corporate.”


	Exploration and Production								Consolidations and Eliminations			Consolidated Company			Exploration and Production									Consolidations and Eliminations			Consolidated Company
	Exploration and Production			Midstream		Corporate						Consolidated Company			Exploration and Production		Midstream			Corporate				Consolidations and Eliminations			Consolidated Company
Three Months Ended September 30, 2018									Consolidations and Eliminations
Three Months Ended June 30, 2019
Oil and natural gas revenues	$	215,248		$	1,034	$	—		$	—		$	216,282		$	209,563		$	1,497		$	—		$	—		$	211,060
Midstream services revenues	—			24,950		—			(18,141		)	6,809			—			32,166			—			(17,807		)	14,359
Sales of purchased natural gas															—			8,963			—			—			8,963
Realized gain on derivatives	5,424			—		—			—			5,424			1,165			—			—			—			1,165
Unrealized loss on derivatives	(21,337		)	—		—			—			(21,337		)	6,157			—			—			—			6,157
Expenses⁽¹⁾	128,263			10,162		19,041			(18,141		)	139,325			141,514			23,425			17,783			(17,807		)	164,915
Operating income (loss)⁽²⁾	$	71,072		$	15,822	$	(19,041	)	$	—		$	67,853		$	75,371		$	19,201		$	(17,783	)	$	—		$	76,789
Total assets	$	2,697,685		$	391,323	$	65,194		$	—		$	3,154,202		$	3,155,577		$	508,074		$	87,800		$	—		$	3,751,451
Capital expenditures⁽³⁾	$	716,751		$	47,153	$	312		$	—		$	764,216		$	166,532		$	41,707		$	1,400		$	—		$	209,639

_____________________


(1)	Includes depletion, depreciation and amortization expenses of ~~$67.2~~$75.7 million and ~~$2.6~~$3.8 million for the exploration and production and midstream segments, respectively. Also includes corporate depletion, depreciation and amortization expenses of $0.6 million.


(2)	Includes ~~$7.3~~$8.3 million in net income attributable to non-controlling interest in subsidiaries related to the midstream segment.


(3)	Includes ~~$554.9~~$8.2 million attributable to land and seismic acquisition expenditures related to the exploration and production segment and ~~$23.1~~$24.2 million in capital expenditures attributable to non-controlling interest in subsidiaries related to the midstream segment.

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 1112 — SEGMENT INFORMATION — Continued


	Exploration and Production								Consolidations and Eliminations			Consolidated Company			Exploration and Production										Consolidations and Eliminations			Consolidated Company
	Exploration and Production			Midstream		Corporate						Consolidated Company			Exploration and Production			Midstream			Corporate				Consolidations and Eliminations			Consolidated Company
Three Months Ended September 30, 2017									Consolidations and Eliminations
Three Months Ended June 30, 2018
Oil and natural gas revenues	$	134,488		$	460	$	—		$	—		$	134,948		$	207,229			$	1,790		$	—		$	—		$	209,019
Midstream services revenues	—			11,261		—			(8,043		)	3,218			—				19,896			—			(16,489		)	3,407
Realized gain on derivatives	485			—		—			—			485
Unrealized loss on derivatives	(12,372		)	—		—			—			(12,372		)
Realized loss on derivatives															(2,488		)		—			—			—			(2,488		)
Unrealized gain on derivatives															1,429				—			—			—			1,429
Expenses⁽¹⁾	86,728			5,598		15,447			(8,043		)	99,730			126,025				9,363			18,475			(16,489		)	137,374
Operating income (loss)⁽²⁾	$	35,873		$	6,123	$	(15,447	)	$	—		$	26,549		$	80,145			$	12,323		$	(18,475	)	$	—		$	73,993
Total assets	$	1,590,677		$	222,274	$	35,586		$	—		$	1,848,537		$	2,058,447			$	354,068		$	143,332		$	—		$	2,555,847
Capital expenditures⁽³⁾	$	180,686		$	35,008	$	1,494		$	—		$	217,188		$	199,345			$	32,900		$	732		$	—		$	232,977

_____________________


(1)	Includes depletion, depreciation and amortization expenses of ~~$46.1~~$64.5 millionand ~~$1.3~~$2.3 million for the exploration and production and midstream segments, respectively. Also includes corporate depletion, depreciation and amortization expenses of ~~$0.4 million.~~$25,000.


(2)	Includes ~~$2.9~~$5.8 million in net income attributable to non-controlling interest in subsidiaries related to the midstream segment.


(3)	Includes ~~$17.2~~$16.1 million in capital expenditures attributable to non-controlling interest in subsidiaries related to the midstream segment.


	Exploration and Production								Consolidations and Eliminations			Consolidated Company			Exploration and Production										Consolidations and Eliminations			Consolidated Company
	Exploration and Production			Midstream		Corporate						Consolidated Company			Exploration and Production			Midstream			Corporate				Consolidations and Eliminations			Consolidated Company
Nine Months Ended September 30, 2018									Consolidations and Eliminations
Six Months Ended June 30, 2019
Oil and natural gas revenues	$	602,737		$	4,518	$	—		$	—		$	607,255		$	401,226			$	3,103		$	—		$	—		$	404,329
Midstream services revenues	—			60,658		—			(47,374		)	13,284			—				62,420			—			(36,223		)	26,197
Realized loss on derivatives	(1,322		)	—		—			—			(1,322		)
Sales of purchased natural gas															—				20,194			—			—			20,194
Realized gain on derivatives															4,435				—			—			—			4,435
Unrealized loss on derivatives	(9,492		)	—		—			—			(9,492		)	(39,562		)		—			—			—			(39,562		)
Expenses⁽¹⁾	359,830			26,723		55,338			(47,374		)	394,517			283,493				49,260			34,734			(36,223		)	331,264
Operating income (loss)⁽²⁾	$	232,093		$	38,453	$	(55,338	)	$	—		$	215,208		$	82,606			$	36,457		$	(34,734	)	$	—		$	84,329
Total assets	$	2,697,685		$	391,323	$	65,194		$	—		$	3,154,202		$	3,155,577			$	508,074		$	87,800		$	—		$	3,751,451
Capital expenditures⁽³⁾	$	1,105,541		$	125,770	$	1,570		$	—		$	1,232,881		$	364,143			$	71,139		$	2,206		$	—		$	437,488

_____________________


(1)	Includes depletion, depreciation and amortization expenses of ~~$184.4~~$148.3 million and ~~$6.5~~$7.5 million for the exploration and production and midstream segments, respectively. Also includes corporate depletion, depreciation and amortization expenses of ~~$1.8~~$1.2 million.


(2)	Includes ~~$18.2~~$15.8 million in net income attributable to non-controlling interest in subsidiaries related to the midstream segment.


(3)	Includes ~~$613.8~~$31.3 million attributable to land and seismic acquisition expenditures related to the exploration and production segment and ~~$61.6~~$37.9 million in capital expenditures attributable to non-controlling interest in subsidiaries related to the midstream segment.

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 1112 — SEGMENT INFORMATION — Continued


	Exploration and Production								Consolidations and Eliminations			Consolidated Company			Exploration and Production										Consolidations and Eliminations			Consolidated Company
	Exploration and Production			Midstream		Corporate						Consolidated Company			Exploration and Production			Midstream			Corporate				Consolidations and Eliminations			Consolidated Company
Nine Months Ended September 30, 2017									Consolidations and Eliminations
Six Months Ended June 30, 2018
Oil and natural gas revenues	$	362,040		$	1,519	$	—		$	—		$	363,559		$	387,489			$	3,484		$	—		$	—		$	390,973
Midstream services revenues	—			32,244		—			(25,373		)	6,871			—				35,708			—			(29,233		)	6,475
Realized loss on derivatives	(1,176		)	—		—			—			(1,176		)	(6,746		)		—			—			—			(6,746		)
Unrealized gain on derivatives	21,449			—		—			—			21,449			11,845				—			—			—			11,845
Expenses⁽¹⁾	233,145			16,060		47,055			(25,373		)	270,887			232,180				16,561			35,684			(29,233		)	255,192
Operating income (loss)⁽²⁾	$	149,168		$	17,703	$	(47,055	)	$	—		$	119,816		$	160,408			$	22,631		$	(35,684	)	$	—		$	147,355
Total assets	$	1,590,677		$	222,274	$	35,586		$	—		$	1,848,537		$	2,058,447			$	354,068		$	143,332		$	—		$	2,555,847
Capital expenditures⁽³⁾	$	554,642		$	75,235	$	4,710		$	—		$	634,587		$	388,790			$	78,617		$	1,258		$	—		$	468,665

_____________________


(1)	Includes depletion, depreciation and amortization expenses of ~~$118.2~~$117.8 million and ~~$3.8~~$3.9 million for the exploration and production and midstream segments, respectively. Also includes corporate depletion, depreciation and amortization expenses of ~~$1.1~~$0.6 million.


(2)	Includes ~~$8.0~~$10.9 million in net income attributable to non-controlling interest in subsidiaries related to the midstream segment.


(3)	Includes ~~$35.8~~$38.5 million in capital expenditures attributable to non-controlling interest in subsidiaries related to the midstream segment.

Table of Contents

Matador Resources Company and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —

UNAUDITED — CONTINUED

NOTE 1213 — SUBSIDIARY GUARANTORS

The Notes are jointly and severally guaranteed by certain subsidiaries of Matador (the “Guarantor Subsidiaries”) on a full and unconditional basis (except for customary release provisions). At ~~September~~June 30, ~~2018,~~2019, the Guarantor Subsidiaries were 100% owned by Matador. Matador is a parent holding company and has no independent assets or operations, and there are no significant restrictions on the ability of Matador to obtain funds from the Guarantor Subsidiaries by dividend or loan. San Mateo and its subsidiaries (the “Non-Guarantor Subsidiaries”) are not guarantors of the Notes.

The following ~~presents~~tables present condensed consolidating financial information of Matador (as issuer of the ~~issuer (Matador)~~Notes), the Non-Guarantor Subsidiaries, the Guarantor Subsidiaries and all entities on a consolidated basis (in thousands). Elimination entries are necessary to combine the entities. This financial information is presented in accordance with the requirements of Rule 3-10 of Regulation S-X. The following financial information may not necessarily be indicative of results of operations, cash flows or financial position had the Guarantor Subsidiaries operated as independent entities.


Condensed Consolidating Balance Sheet September 30, 2018
Condensed Consolidating Balance Sheet June 30, 2019												Condensed Consolidating Balance Sheet June 30, 2019
	Matador		Non-Guarantor Subsidiaries		Guarantor Subsidiaries		Eliminating Entries			Consolidated			Matador		Non-Guarantor Subsidiaries		Guarantor Subsidiaries		Eliminating Entries			Consolidated
ASSETS
Intercompany receivable	$	939,294	$	26,382	$	—	$	(965,676	)	$	—		$	1,582,828	$	12,535	$	—	$	(1,595,363	)	$	—
Third-party current assets	827		23,159		201,446		—			225,432
Current assets													3,967		44,100		225,317		—			273,384
Net property and equipment	—		343,371		2,578,603		—			2,921,974			—		438,681		2,944,662		—			3,383,343
Investment in subsidiaries	1,346,446		—		183,297		(1,529,743		)	—			1,211,056		—		109,227		(1,320,283		)	—
Third-party long-term assets	6,425		—		3,305		(2,934		)	6,796
Long-term assets													10,589		1,700		92,004		(9,569		)	94,724
Total assets	$	2,292,992	$	392,912	$	2,966,651	$	(2,498,353	)	$	3,154,202		$	2,808,440	$	497,016	$	3,371,210	$	(2,925,215	)	$	3,751,451
LIABILITIES AND EQUITY
Intercompany payable	$	—	$	—	$	965,676	$	(965,676	)	$	—		$	—	$	—	$	1,595,363	$	(1,595,363	)	$	—
Third-party current liabilities	5,763		30,335		290,909		(256		)	326,751
Current liabilities													18,493		33,080		286,004		(802		)	336,775
Senior unsecured notes payable	740,063		—		—		—			740,063			1,038,625		—		—		—			1,038,625
Other third-party long-term liabilities	—		4,003		363,620		(2,678		)	364,945
Other long-term liabilities													14,845		250,583		278,787		(8,767		)	535,448
Total equity attributable to Matador Resources Company	1,547,166		183,297		1,346,446		(1,529,743		)	1,547,166			1,736,477		109,227		1,211,056		(1,320,283		)	1,736,477
Non-controlling interest in subsidiaries	—		175,277		—		—			175,277			—		104,126		—		—			104,126
Total liabilities and equity	$	2,292,992	$	392,912	$	2,966,651	$	(2,498,353	)	$	3,154,202		$	2,808,440	$	497,016	$	3,371,210	$	(2,925,215	)	$	3,751,451


Condensed Consolidating Balance Sheet December 31, 2017
Condensed Consolidating Balance Sheet December 31, 2018												Condensed Consolidating Balance Sheet December 31, 2018
	Matador		Non-Guarantor Subsidiaries		Guarantor Subsidiaries		Eliminating Entries			Consolidated			Matador		Non-Guarantor Subsidiaries		Guarantor Subsidiaries		Eliminating Entries			Consolidated
ASSETS
Intercompany receivable	$	585,109	$	2,912	$	—	$	(588,021	)	$	—		$	1,244,405	$	29,816	$	—	$	(1,274,221	)	$	—
Third-party current assets	2,240		9,334		245,596		—			257,170
Current assets													4,109		34,027		267,549		—			305,685
Net property and equipment	—		223,178		1,658,278		—			1,881,456			—		379,052		2,743,812		—			3,122,864
Investment in subsidiaries	1,147,295		—		111,077		(1,258,372		)	—			1,490,401		—		95,346		(1,585,747		)	—
Third-party long-term assets	6,425		—		3,642		(3,003		)	7,064
Long-term assets													23,897		1,479		11,095		(9,502		)	26,969
Total assets	$	1,741,069	$	235,424	$	2,018,593	$	(1,849,396	)	$	2,145,690		$	2,762,812	$	444,374	$	3,117,802	$	(2,869,470	)	$	3,455,518
LIABILITIES AND EQUITY
Intercompany payable	$	—	$	—	$	588,021	$	(588,021	)	$	—		$	—	$	—	$	1,274,221	$	(1,274,221	)	$	—
Third-party current liabilities	8,847		19,891		254,142		(274		)	282,606
Current liabilities													22,874		27,988		279,884		(724		)	330,022
Senior unsecured notes payable	574,073		—		—		—			574,073			1,037,837		—		—		—			1,037,837
Other third-party long-term liabilities	1,593		3,466		29,135		(2,729		)	31,465
Other long-term liabilities													13,221		230,263		73,296		(8,778		)	308,002
Total equity attributable to Matador Resources Company	1,156,556		111,077		1,147,295		(1,258,372		)	1,156,556			1,688,880		95,346		1,490,401		(1,585,747		)	1,688,880
Non-controlling interest in subsidiaries	—		100,990		—		—			100,990			—		90,777		—		—			90,777
Total liabilities and equity	$	1,741,069	$	235,424	$	2,018,593	$	(1,849,396	)	$	2,145,690		$	2,762,812	$	444,374	$	3,117,802	$	(2,869,470	)	$	3,455,518


Condensed Consolidating Statement of Operations For the Three Months Ended September 30, 2018
Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2019																Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2019
	Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated				Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated
Total revenues	$	—		$	25,640		$	199,386		$	(17,848	)	$	207,178			$	—		$	41,720		$	216,885		$	(16,901	)	$	241,704
Total expenses	1,184			10,708			145,281			(17,848		)	139,325				901			22,564			158,351			(16,901		)	164,915
Operating (loss) income	(1,184		)	14,932			54,105			—			67,853				(901		)	19,156			58,534			—			76,789
Net loss on asset sales and inventory impairment	—			—			(196		)	—			(196		)
Inventory impairment																	—			—			(368		)	—			(368		)
Interest expense	(10,340		)	—			—			—			(10,340		)		(15,888		)	(2,180		)	—			—			(18,068		)
Prepayment premium on extinguishment of debt	(31,226		)	—			—			—			(31,226		)
Other (expense) income	(6		)	8			(978		)	—			(976		)
Other income (expense)																	—			3			(426		)	—			(423		)
Earnings in subsidiaries	60,550			—			7,619			(68,169		)	—				66,399			—			8,659			(75,058		)	—
Income before income taxes	17,794			14,940			60,550			(68,169		)	25,115				49,610			16,979			66,399			(75,058		)	57,930
Total income tax provision																	12,858			—			—			—			12,858
Net income attributable to non-controlling interest in subsidiaries	—			(7,321		)	—			—			(7,321		)		—			(8,320		)	—			—			(8,320		)
Net income attributable to Matador Resources Company shareholders	$	17,794		$	7,619		$	60,550		$	(68,169	)	$	17,794			$	36,752		$	8,659		$	66,399		$	(75,058	)	$	36,752


Condensed Consolidating Statement of Operations For the Three Months Ended September 30, 2017
Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2018																Condensed Consolidating Statement of Operations For the Three Months Ended June 30, 2018
	Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated				Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated
Total revenues	$	—		$	11,242		$	122,675		$	(7,638	)	$	126,279			$	—		$	21,356		$	206,219		$	(16,208	)	$	211,367
Total expenses	1,175			5,253			100,940			(7,638		)	99,730				1,178			9,466			142,938			(16,208		)	137,374
Operating (loss) income	(1,175		)	5,989			21,735			—			26,549				(1,178		)	11,890			63,281			—			73,993
Net gain on asset sales and inventory impairment	—			—			16			—			16
Interest expense	(8,550		)	—			—			—			(8,550		)		(8,004		)	—			—			—			(8,004		)
Other income	27			11			(74		)	—			(36		)
Other income (expense)																	—			11			(363		)	—			(352		)
Earnings in subsidiaries	24,674			—			2,997			(27,671		)	—				68,988			—			6,070			(75,058		)	—
Income before income taxes	14,976			6,000			24,674			(27,671		)	17,979				59,806			11,901			68,988			(75,058		)	65,637
Total income tax (benefit) provision	(63		)	63			—			—			—
Net income attributable to non-controlling interest in subsidiaries	—			(2,940		)	—			—			(2,940		)		—			(5,831		)	—			—			(5,831		)
Net income attributable to Matador Resources Company shareholders	$	15,039		$	2,997		$	24,674		$	(27,671	)	$	15,039			$	59,806		$	6,070		$	68,988		$	(75,058	)	$	59,806


Condensed Consolidating Statement of Operations For the Nine Months Ended September 30, 2018
Condensed Consolidating Statement of Operations For the Six Months Ended June 30, 2019																Condensed Consolidating Statement of Operations For the Six Months Ended June 30, 2019
	Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated				Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated
Total revenues	$	—		$	64,190		$	592,085		$	(46,550	)	$	609,725			$	—		$	84,596		$	366,133		$	(35,136	)	$	415,593
Total expenses	3,596			27,102			410,369			(46,550		)	394,517				1,936			48,069			316,395			(35,136		)	331,264
Operating (loss) income	(3,596		)	37,088			181,716			—			215,208				(1,936		)	36,527			49,738			—			84,329
Net loss on asset sales and inventory impairment	—			—			(196		)	—			(196		)
Inventory impairment																	—			—			(368		)	—			(368		)
Interest expense	(26,835		)	—			—			—			(26,835		)		(31,675		)	(4,322		)	—			—			(35,997		)
Other (expense) income	—			19			(1,294		)	—			(1,275		)
Prepayment premium on extinguishment of debt	(31,226		)	—			—			—			(31,226		)
Other income (expense)																	—			3			(535		)	—			(532		)
Earnings in subsidiaries	199,151			—			18,925			(218,076		)	—				65,261			—			16,426			(81,687		)	—
Income before income taxes	137,494			37,107			199,151			(218,076		)	155,676				31,650			32,208			65,261			(81,687		)	47,432
Total income tax provision																	11,845			—			—			—			11,845
Net income attributable to non-controlling interest in subsidiaries	—			(18,182		)	—			—			(18,182		)		—			(15,782		)	—			—			(15,782		)
Net income attributable to Matador Resources Company shareholders	$	137,494		$	18,925		$	199,151		$	(218,076	)	$	137,494			$	19,805		$	16,426		$	65,261		$	(81,687	)	$	19,805


Condensed Consolidating Statement of Operations For the Nine Months Ended September 30, 2017
Condensed Consolidating Statement of Operations For the Six Months Ended June 30, 2018															Condensed Consolidating Statement of Operations For the Six Months Ended June 30, 2018
	Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries		Eliminating Entries			Consolidated				Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated
Total revenues	$	—		$	32,179		$	382,520	$	(23,996	)	$	390,703			$	—		$	38,550		$	392,699		$	(28,702	)	$	402,547
Total expenses	4,021			13,935			276,927		(23,996		)	270,887				2,412			16,394			265,088			(28,702		)	255,192
Operating (loss) income	(4,021		)	18,244			105,593		—			119,816				(2,412		)	22,156			127,611			—			147,355
Net gain on asset sales and inventory impairment	—			—			23		—			23
Interest expense	(26,229		)	—			—		—			(26,229		)		(16,495		)	—			—			—			(16,495		)
Other income	27			37			1,892		—			1,956
Other income (expense)																6			11			(316		)	—			(299		)
Earnings in subsidiaries	117,574			—			10,066		(127,640		)	—				138,601			—			11,306			(149,907		)	—
Income before income taxes	87,351			18,281			117,574		(127,640		)	95,566				119,700			22,167			138,601			(149,907		)	130,561
Total income tax (benefit) provision	(181		)	181			—		—			—
Net income attributable to non-controlling interest in subsidiaries	—			(8,034		)	—		—			(8,034		)		—			(10,861		)	—			—			(10,861		)
Net income attributable to Matador Resources Company shareholders	$	87,532		$	10,066		$	117,574	$	(127,640	)	$	87,532			$	119,700		$	11,306		$	138,601		$	(149,907	)	$	119,700


Condensed Consolidating Statement of Cash Flows For the Nine Months Ended September 30, 2018
Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2019																Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2019
	Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated				Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(361,016	)	$	12,318		$	768,016		$	—		$	419,318			$	(109	)	$	51,266		$	143,340		$	—		$	194,497
Net cash used in investing activities	—			(120,836		)	(1,152,987		)	53,295			(1,220,528		)		—			(59,309		)	(327,195		)	(8,190		)	(394,694		)
Net cash provided by financing activities	361,155			109,400			334,476			(53,295		)	751,736				—			13,584			179,201			8,190			200,975
Increase (decrease) in cash and restricted cash	139			882			(50,495		)	—			(49,474		)
(Decrease) increase in cash and restricted cash																	(109		)	5,541			(4,654		)	—			778
Cash and restricted cash at beginning of period	286			5,663			96,533			—			102,482				456			18,841			64,687			—			83,984
Cash and restricted cash at end of period	$	425		$	6,545		$	46,038		$	—		$	53,008			$	347		$	24,382		$	60,033		$	—		$	84,762



Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2018
	Matador			Non-Guarantor Subsidiaries			Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net cash (used in) provided by operating activities	$	(224,441	)	$	10,225		$	468,424		$	—		$	254,208
Net cash used in investing activities	—			(79,119		)	(454,478		)	40,035			(493,562		)
Net cash provided by financing activities	226,539			83,400			10,481			(40,035		)	280,385
Increase in cash and restricted cash	2,098			14,506			24,427			—			41,031
Cash and restricted cash at beginning of period	286			5,663			96,533			—			102,482
Cash and restricted cash at end of period	$	2,384		$	20,169		$	120,960		$	—		$	143,513

Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2017
Matador Non-Guarantor Subsidiaries Guarantor Subsidiaries Eliminating Entries Consolidated
Net cash (used in) provided by operating activities $ (99,546 ) $ 24,075
$ 297,987
$ —
$ 222,516
Net cash provided by (used in) investing activities 33
(75,749 ) (387,257 ) (133,880 ) (596,853 )
Net cash provided by (used in) financing activities —
58,732
(1,495 ) 133,880
191,117
(Decrease) increase in cash and restricted cash (99,513 ) 7,058
(90,765 ) —
(183,220 )
Cash and restricted cash at beginning of period 99,795
2,900
111,447
—
214,142
Cash and restricted cash at end of period $ 282
$ 9,958
$ 20,682
$ —
$ 30,922

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes thereto contained herein and the consolidated financial statements and related notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”), on March 1, 2019, along with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report. The Annual Report is accessible on the SEC’s website at www.sec.gov and on our website at www.matadorresources.com. Our discussion and analysis includes forward-looking information that involves risks and uncertainties and should be read in conjunction with the “Risk Factors” section of the Annual Report and the section entitled “Cautionary Note Regarding Forward-Looking Statements” below for information about the risks and uncertainties that could cause our actual results to be materially different than our forward-looking statements.

In this Quarterly Report on Form 10-Q (the “Quarterly Report”), (i) references to “we,” “our” or the “Company” refer to Matador Resources Company and its subsidiaries as a whole (unless the context indicates otherwise) ~~and~~, (ii) references to “Matador” refer solely to Matador Resources ~~Company.~~Company and (iii) references to “San Mateo” refer to San Mateo Midstream, LLC (“San Mateo I”) together with San Mateo Midstream II, LLC (“San Mateo II”). For certain oil and natural gas terms used in this Quarterly Report, please see the “Glossary of Oil and Natural Gas Terms” included with the Annual Report.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this Quarterly Report constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended ~~or the Securities Act,~~(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~or the Exchange Act.~~(the “Exchange Act”). Additionally, forward-looking statements may be made orally or in press releases, conferences, reports, on our website or otherwise, in the future by us or on our behalf. Such statements are generally identifiable by the terminology used such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecasted,” “hypothetical,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “would” or other similar words, although not all forward-looking statements contain such identifying words.

By their very nature, forward-looking statements require us to make assumptions that may not materialize or that may not be accurate. Forward-looking statements are subject to known and unknown risks and uncertainties and other factors that may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements. Such factors include, among others: general economic conditions, changes in oil, natural gas and natural gas liquids prices and the demand for oil, natural gas and natural gas liquids, the success of our drilling program, the timing of planned capital expenditures, the sufficiency of our cash flow from operations together with available borrowing capacity under our credit ~~agreement,~~facilities, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as our ability to access them, the proximity to our properties and capacity of transportation facilities, availability of acquisitions, our ability to integrate acquisitions with our business, weather and environmental conditions, uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business, and the other factors discussed below and elsewhere in this Quarterly Report and in other documents that we file with or furnish to the SEC, all of which are difficult to predict. Forward-looking statements may include statements about:

our business strategy;

our ~~reserves;~~

~~our technology;~~estimated future reserves and the present value thereof;

our cash flows and liquidity;

our financial strategy, budget, projections and operating results;

our oil and natural gas realized prices;

the timing and amount of future production of oil and natural gas;

the availability of drilling and production equipment;

the availability of oil field labor;

the amount, nature and timing of capital expenditures, including future exploration and development costs;

the availability and terms of capital;

our drilling of wells;

our ability to negotiate and consummate acquisition and divestiture opportunities;

government regulation and taxation of the oil and natural gas industry;

our marketing of oil and natural gas;

our exploitation projects or property acquisitions;

the integration of acquisitions with our business;

our ability and the ability of ~~our midstream joint venture~~San Mateo to construct and operate midstream facilities, including the operation and expansion of our Black River cryogenic natural gas processing plant and the drilling of additional salt water disposal wells;

the ability of ~~our midstream joint venture~~San Mateo to attract third-party volumes;

our costs of exploiting and developing our properties and conducting other operations;

general economic conditions;

competition in the oil and natural gas industry, including in both the exploration and production and midstream segments;

the effectiveness of our risk management and hedging activities;

our technology;

environmental liabilities;

counterparty credit risk;

developments in oil-producing and natural gas-producing countries;

our future operating results;

~~estimated future reserves and the present value thereof;~~ and

our plans, objectives, expectations and intentions contained in this Quarterly Report or in our other filings with the SEC that are not historical.

Although we believe that the expectations conveyed by the forward-looking statements in this Quarterly Report are reasonable based on information available to us on the date hereof, no assurances can be given as to future results, levels of activity, achievements or financial condition.

You should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described above, as well as others not now anticipated. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are interdependent upon other factors. The foregoing statements are not exclusive and further information concerning us, including factors that potentially could materially affect our financial results, may emerge from time to time. We undertake no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements, except as required by law, including the securities laws of the United States and the rules and regulations of the SEC.

Overview

We are an independent energy company founded in July 2003 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. Our 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. We also operate in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. Additionally, we conduct midstream operations, primarily through ~~our midstream joint venture,~~ San Mateo, ~~Midstream, LLC (“San Mateo”),~~ in support of our exploration, development and production operations and provide natural gas processing, oil transportation services, oil, natural gas and salt water gathering services and salt water disposal services to third parties.

~~Third~~Second Quarter ~~and Year-to-Date~~ Highlights

For the three months ended ~~September~~June 30, ~~2018,~~2019, our total oil equivalent production was ~~5.0~~5.6 million BOE, and our average daily oil equivalent production was ~~54,625~~61,290 BOE per day, of which ~~32,317~~36,767 Bbl per day, or 60%, was oil and 147.1 MMcf per day, or 40%, was natural gas. Our oil production of 3.3 million Bbl for the three months ended June 30, 2019 increased 24% year-over-year from 2.7 million Bbl for the three months ended June 30, 2018. Our natural gas production of 13.4 Bcf for the three months ended June 30, 2019 increased 6% year-over-year from 12.7 Bcf for the three months ended June 30, 2018. For the six months ended June 30, 2019, our total oil equivalent production was 11.0 million BOE, and our average daily oil equivalent production was 60,619 BOE per day, of which 35,648 Bbl per day, or 59%, was oil and ~~133.8~~149.8 MMcf per day, or 41%, was natural gas. Our oil production of ~~3.0~~6.5 million Bbl for the ~~three~~six months ended ~~September~~June 30, ~~2018~~2019 increased ~~37%~~27% year-over-year from ~~2.2~~5.1 million Bbl for the ~~three~~six months ended ~~September~~June 30, ~~2017.~~2018. Our natural gas production of ~~12.3~~27.1 Bcf for the ~~three~~six months ended ~~September~~June 30, ~~2018~~2019 increased ~~21%~~19% year-over-year from ~~10.2~~22.8 Bcf for the ~~three~~six months ended ~~September~~June 30, 2017. For the nine months ended September 30, 2018, our total oil equivalent production was 13.9 million BOE, and our average daily oil equivalent production was 50,979 BOE per day, of which 29,529 Bbl per day, or 58%, was oil and 128.7 MMcf per day, or 42%, was natural gas. Our oil production of 8.1 million Bbl for the nine months ended September 30, 2018 increased 44% year-over-year from 5.6 million Bbl for the nine months ended September 30, 2017. Our natural gas production of 35.1 Bcf for the nine months ended September 30, 2018 increased 27% year-over-year from 27.6 Bcf for the nine months ended September 30, 2017.2018.

For the ~~third~~second quarter of ~~2018,~~2019, we reported net income attributable to Matador Resources Company shareholders of approximately ~~$17.8~~$36.8 million, or ~~$0.15~~$0.31 per diluted common share, on a generally accepted accounting principles in the United States (“GAAP”) basis, as compared to net income attributable to Matador Resources Company shareholders of $59.8 million, or $0.53 per diluted common share, for the second quarter of 2018. For the second quarter of 2019, our Adjusted EBITDA attributable to Matador Resources Company shareholders (“Adjusted EBITDA”), a non-GAAP financial measure, was $144.1 million, as compared to Adjusted EBITDA of $137.3 million during the second quarter of 2018. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income and net cash provided by operating activities, see

“— Liquidity and Capital Resources — Non-GAAP Financial Measures.” For more information regarding our financial results for the second quarter of 2019, see “— Results of Operations” below.

For the six months ended June 30, 2019, we reported net income attributable to Matador Resources Company shareholders of approximately $19.8 million, or $0.17 per diluted common share, on a GAAP basis, as compared to net income attributable to Matador Resources Company shareholders of ~~$15.0~~$119.7 million, or ~~$0.15~~$1.08 per diluted common share, for the ~~third quarter of 2017.~~six months ended June 30, 2018. For the third quarter of 2018, our Adjusted EBITDA attributable to Matador Resources Company shareholders (“Adjusted EBITDA”), a non-GAAP financial measure, was $155.4 million, as compared to Adjusted EBITDA of $84.8 million during the third quarter of 2017. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income and net

cash provided by operating activities, see “— Liquidity and Capital Resources — Non-GAAP Financial Measures.” For more information regarding our financial results for the third quarter of 2018, see “— Results of Operations” below.

~~For the nine~~six months ended ~~September~~June 30, 2018, we reported net income attributable to Matador Resources Company shareholders of approximately $137.5 million, or $1.21 per diluted common share, on a GAAP basis, as compared to net income attributable to Matador Resources Company shareholders of $87.5 million, or $0.87 per diluted common share, for the nine months ended September 30, 2017. For the nine months ended September 30, 2018,2019, our Adjusted EBITDA, a non-GAAP financial measure, was ~~$410.0~~$268.9 million, as compared to Adjusted EBITDA of ~~$227.4~~$254.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see “— Liquidity and Capital Resources — Non-GAAP Financial Measures.” For more information regarding our financial results for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, see “— Results of Operations” below.

Operations Update

During the ~~third~~second quarter of ~~2018,~~2019, we continued our focus on the exploration, delineation and development of our Delaware Basin acreage in Loving County, Texas and Lea and Eddy Counties, New Mexico. We began ~~2018~~2019 operating six drilling rigs in the Delaware Basin and continued to do so ~~through September~~at June 30, ~~2018. We expect to operate those~~2019. During the second quarter of 2019, these six operated drilling rigs ~~in the~~were deployed across our Delaware Basin ~~through the remainder of 2018, including three rigs in the Rustler Breaks asset area, one rig in the Wolf/Jackson Trust~~ asset areas, ~~one rig in the Ranger/Arrowhead and Twin Lakes asset areas and one rig in~~but with an increased focus on the Antelope Ridge asset area. We have continued to build significant optionality into our drilling program. Three of our rigs operate on longer-term contracts with remaining average terms between 12 and 15 months. The other three rigs are on short-term contracts with remaining obligations of six months or less. This affords us the ability to modify our drilling program as management may determine necessary based on changing commodity prices and other factors.

~~By initially deploying~~2019, with four rigs operating between the Rustler Breaks and Antelope Ridge asset areas, one rig operating in the Wolf and Jackson Trust asset areas and one rig operating in the Arrowhead, Ranger and Twin Lakes asset areas, although this ~~seventh~~ rig, in ~~South Texas over~~particular, is expected to operate primarily in the ~~next several months, we will be able to add to~~Stebbins area and surrounding leaseholds in the southern portion of the Arrowhead asset area (the “Greater Stebbins Area”) for the remainder of 2019.

We also concluded completion operations on our ~~oil production~~nine-well program in South Texas during ~~a time when our realized oil price~~the second quarter of 2019, which included eight completions in the ~~Gulf Coast region is expected to be significantly higher than our realized oil price in the Delaware Basin. Further, given the results of the five-well~~ Eagle Ford ~~program we drilled in 2017, we anticipate strong economic returns from this drilling program. In addition, drilling these wells in South Texas provides us with the opportunity to~~formation and one test ~~and establish the prospectivity~~ of ~~new formations, such as~~ the Austin Chalk ~~which we have not previously tested on our South Texas leasehold. This short drilling program should also enable us to satisfy several near-term lease expiration obligations.~~formation. The ~~first few~~final four wells in this ~~South Texas drilling~~nine-well program ~~are expected to be~~were completed and ~~placed on production late~~turned to sales in the ~~fourth~~second quarter of ~~2018. As a result,~~2019. These wells included two Eagle Ford completions on the Haverlah leasehold in Atascosa County, which were turned to sales in April, and two additional Eagle Ford completions on the Lloyd Hurt leasehold, which were turned to sales in May 2019. The rig used to drill these nine wells was released in early February 2019, and we ~~expect the initial production from these wells should~~ have ~~a limited impact on our fourth quarter and full-year 2018 production estimates.~~

~~During the third quarter of 2018, we did not conduct any~~no additional operated drilling ~~and completion~~ activities ~~on our leasehold properties~~planned in the Eagle Ford shale ~~play in South Texas or in~~for the ~~Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. We did participate in the drilling and completion~~remainder of ~~two gross (0.3 net) non-operated Eagle Ford shale wells that were turned to sales in the third quarter of 2018.~~2019.

We completed and turned to sales a total of 3619 gross ~~(16.6~~(15.1 net) wells in the Delaware Basin during the ~~third~~second quarter of ~~2018,~~2019, including 1914 gross ~~(15.0~~(13.1 net) operated horizontal wells, two gross (2.0 net) operated vertical wells and 17three gross ~~(1.6~~(0.1 net) non-operated horizontal wells. During the ~~third~~second quarter of ~~2018,~~2019, we began producing oil and natural gas from a total of ~~six~~12 gross ~~(2.7~~(8.5 net) wells in the Antelope Ridge asset area, including ~~three~~nine gross ~~(2.7~~(8.4 net) operated wells and three gross ~~(less than 0.1~~(0.1 net) non-operated wells. ~~The three~~Of the nine gross operated wells ~~included~~in the Antelope Ridge asset area, two were Wolfcamp ~~A-Lower~~A-XY completions, three were First Bone Spring completions, three were Third Bone Spring completions and one ~~Third~~was a vertical completion in the Wolfcamp formation. In the Rustler Breaks and Arrowhead asset areas, we did not complete or turn to sales any operated or non-operated wells during the second quarter of 2019. In the Wolf and Jackson Trust asset areas, we began producing oil and natural gas from two gross (1.8 net) operated wells during the second quarter of 2019, including one Wolfcamp B completion and one Second Bone Spring completion. In ~~the Rustler Breaks asset area,~~addition, we began producing oil and natural gas from a total of 26four gross (11.7 net) wells during the third quarter of 2018, including 13 gross (10.5 net) operated and 13 gross (1.2 net) non-operated wells. Of the 13 gross operated wells in the Rustler Breaks asset area, eight were Wolfcamp A-XY completions, two were Wolfcamp A-Lower completions, one was a Wolfcamp B-Blair completion and two were Second Bone Spring completions. In addition, we began producing oil and natural gas from two gross (1.0(3.9 net) operated wells in the ~~Wolf and Jackson Trust~~Ranger asset ~~areas~~area during the ~~third~~second quarter of ~~2018,~~2019, including one ~~Wolfcamp A-XY~~First Bone Spring completion, two Second Bone Spring completions and one ~~Wolfcamp B~~Third Bone Spring completion. Finally, in the ~~Arrowhead~~Twin Lakes asset area, we began producing oil and natural gas from one gross ~~(0.8~~(1.0 net) ~~operated~~ well, a ~~Wolfcamp A-XY~~vertical completion in the Morrow formation, during the ~~third~~second quarter of ~~2018.~~2019.

As a result of our ongoing drilling and completion operations in these asset areas, our Delaware Basin production has continued to increase over the past ~~twelve~~12 months. Our total Delaware Basin production for the ~~third~~second quarter of ~~2018~~2019 was ~~47,831~~51,758 BOE per day, consisting of ~~29,931~~32,840 Bbl of oil per day and ~~107.4~~113.5 MMcf of natural gas per day, ~~a 56%~~an 11% increase from

production of ~~30,707~~46,489 BOE per day, consisting of ~~18,689~~27,381 Bbl of oil per day and ~~72.1~~114.6 MMcf of natural gas per day, in the ~~third~~second quarter of ~~2017.~~2018. The Delaware Basin contributed approximately ~~93%~~89% of our daily oil production and approximately ~~80%~~77% of our daily natural gas production in the ~~third~~second quarter of ~~2018,~~2019, as compared to approximately ~~79%~~92% of our daily oil production and approximately ~~65%~~82% of our daily natural gas production in the ~~third~~second quarter of ~~2017.~~2018.

~~Recent Acreage Acquisitions~~

~~On September 12, 2018, we announced the successful acquisition of 8,400 gross (8,400 net)~~We did not conduct any operated drilling and completion activities on our leasehold ~~acres in Lea and Eddy Counties, New Mexico for approximately $387 million, or a weighted average cost of approximately $46,000 per net acre,~~properties in the ~~Bureau of Land Management New Mexico Oil~~Haynesville shale and ~~Gas Lease Sale on September 5~~Cotton Valley plays in Northwest Louisiana and ~~6, 2018 (the “BLM Acquisition”). The acquired leasehold acreage includes approximately 2,800 gross/net acres~~East Texas in the ~~Stateline area, 4,800 gross/net acres in the Antelope Ridge asset area, 400 gross/net acres in the Arrowhead asset area and 400 gross/net acres in the Twin Lakes asset area.~~

~~We completed the BLM Acquisition on September 20, 2018, and we expect the leases will be issued to us in the fourth~~second quarter of ~~2018. We financed~~2019, although we did participate in eight gross (0.3 net) non-operated Haynesville shale wells that were completed and turned to sales.

Capital Resources Update

In April 2019, the ~~BLM Acquisition using cash on hand and borrowings~~lenders under our revolving credit ~~facility~~agreement (the “Credit Agreement”)~~. At September 30,~~, led by Royal Bank of Canada, completed their review of our proved oil and natural gas reserves at December 31, 2018, ~~we had $325.0~~and as a result, the borrowing base was increased to $900.0 million ~~in borrowings outstanding~~with the elected borrowing commitment remaining at $500.0 million. This April 2019 redetermination constituted the regularly scheduled May 1 redetermination. Borrowings under the Credit Agreement ~~and approximately $3.0 million in outstanding letters of credit issued pursuant~~are limited to the ~~Credit Agreement.~~lowest of the borrowing base, the maximum facility amount and the elected borrowing commitment.

In ~~addition~~June 2019, the lender commitments under San Mateo I’s revolving credit facility (the “San Mateo Credit Facility”), led by The Bank of Nova Scotia, were increased to $325.0 million, using the BLM Acquisition, during the third quarter of 2018, we acquired approximately 12,600 net leasehold and mineral acres in and around our existing acreage positions in the Delaware Basin, including approximately 2,600 net mineral acres. Including the BLM Acquisition, we have added approximately 27,200 net leasehold and mineral acres in the Delaware Basin from January 1 through October 31, 2018, bringing our total Delaware Basin leasehold and mineral position to approximately 222,200 gross (131,200 net) acres at October 31, 2018.

~~Capital Market Transactions~~

As of June 30, 2018, we had $575.0 million aggregate principal amount of outstanding 6.875% senior notes due 2023 (the “2023 Notes”). On August 21, 2018, we issued $750.0 million of 5.875% senior unsecured notes due 2026 (the “Original 2026 Notes”) in a private placement (the “2026 Notes Offering”).accordion feature. The Original 2026 Notes were issued at par value, and we received net proceeds of approximately $740.0 million, after deducting the initials purchasers’ discounts and estimated offering expenses. In conjunction with the 2026 Notes Offering, in August and September 2018, respectively, we completed a tender offer to purchase for cash and subsequent redemption ofSan Mateo Credit Facility is guaranteed by San Mateo I’s subsidiaries, secured by substantially all of ~~our $575.0 million aggregate principal amount of 2023 Notes (the “2023 Notes Tender Offer~~San Mateo I’s assets, including real property, and ~~Redemption”). We used a portion of the net proceeds from the 2026 Notes Offering~~is non-recourse with respect to ~~fund the 2023 Notes Tender Offer~~Matador and ~~Redemption.~~its wholly-owned subsidiaries, as well as San Mateo II.

On October 4, 2018, we issued an additional $300.0 million of 5.875% senior unsecured notes due 2026 (the “Additional 2026 Notes” and, collectively with the Original 2026 Notes, the “Notes”). The Additional 2026 Notes were issued pursuant to, and are governed by, the same indenture governing the Original 2026 Notes (the “Indenture”). The Additional 2026 Notes were issued at 100.5% of par, plus accrued interest from August 21, 2018. We received net proceeds from this offering of approximately $297.6 million, after deducting the initial purchasers’ discounts and estimated offering expenses but excluding accrued interest from August 21, 2018 paid by the initial purchasers of the Additional 2026 Notes. The proceeds from this offering were used to repay a portion of the outstanding borrowings under the Credit Agreement, which were incurred in connection with the BLM Acquisition. The Notes will mature September 15, 2026, and interest is payable on the Notes semi-annually in arrears on each March 15 and September 15.

~~2018~~2019 Capital Expenditure Budget

On ~~August 1, 2018,~~July 31, 2019, we ~~adjusted~~increased our anticipated ~~2018~~2019 midstream capital expenditures from $55 to $75 million to $70 to $90 million, primarily for capital expenditures necessary to accommodate new customers and increased commitments from existing customers. The anticipated 2019 midstream capital expenditures reflect our proportionate share of San Mateo’s estimated 2019 capital expenditures and also account for portions of the $50 million capital carry that Five Point Energy LLC (“Five Point”) agreed to provide to us in conjunction with the formation of San Mateo II.

At July 31, 2019, our 2019 estimated capital expenditures for drilling, completing and ~~completions (including~~ equipping wells ~~for production) from $530 to $570 million to $620 to $650 million and our anticipated midstream capital expenditures~~ remained $70 to $90 million, which primarily represents our 51% share of San Mateo’s 2018 estimated capital expenditures. With the addition of the seventh drilling rig deployed to South Texas on October 1, 2018, we increased our anticipated 2018 capital expenditures for drilling and completions (including equipping wells for production) by approximately 4%, or $25 to $30 million, to $645$640 to $680 ~~million. We have allocated substantially all~~million, despite an increase of four gross (6.8 net) additional operated wells expected to be completed and turned to sales in 2019, as compared to our ~~estimated 2018~~original estimates. See “— Liquidity and Capital Resources — 2019 Capital Expenditure Budget” for more information regarding our 2019 capital expenditures to the further delineation and development of our growing leasehold position and midstream assets in the Delaware Basin, with the exception of the South Texas drilling program beginning in the fourth quarter of 2018 and amounts allocated to limited non-operated activities in the Eagle Ford and Haynesville shales. For the remainder of 2018, our Delaware Basin drilling program will continue to focus on the development of the Wolf and Rustler Breaks asset areas and the further delineation and development of the Jackson Trust, Ranger/Arrowhead, Antelope Ridge and Twin Lakes asset areas, although we may also continue to delineate previously untested zones in the Wolf and Rustler Breaks asset areas.

~~Natural Gas Gathering and Processing Agreement~~

In October 2018, a subsidiary of San Mateo entered into a long-term agreement with a producer in Eddy County, New Mexico relating to the gathering and processing of such producer’s natural gas production. As a result of this agreement, along with prior natural gas gathering and processing agreements entered into by San Mateo with the Company and other customers, San Mateo has now entered into contracts to provide firm gathering and processing services for over 200 million cubic feet of natural gas per day, or over 80% of the designed inlet capacity of 260 million cubic feet of natural gas per day, at its Black River cryogenic natural gas processing plant in the Rustler Breaks asset area in Eddy County, New Mexico (the “Black River Processing Plant”).expenditure budget.

Critical Accounting Policies

Other than as discussed in Note 2 to the interim unaudited condensed consolidated financial statements in this Quarterly Report related to the adoption of Accounting Standards Update ~~2014-09,~~ ~~Revenue from Contracts~~(“ASU”) 2016-02, Leases (Topic 842) and the amendments provided for in ASU 2018-11, Leases (Topic 842), along with ~~Customers~~the adoption of ASU 2018-07, Compensation - Stock Compensation (Topic ~~606)~~718): Improvements to Nonemployee Share-Based Payment Accounting,there have been no changes to our critical accounting policies and estimates from those set forth in the Annual Report.

Recent Accounting Pronouncements

See Note 2 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for a summary of recent accounting pronouncements ~~that we believe may have an~~and the impact of the adoption of these pronouncements on our financial ~~statements upon adoption.~~statements.

Results of Operations

Revenues

The following table summarizes our unaudited revenues and production data for the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017			2018			2017			2019		2018			2019			2018
Operating Data:
Revenues (in thousands):⁽¹⁾
Oil	$	169,913		$	100,150		$	484,343		$	265,107		$	189,085	$	166,271		$	343,288		$	314,430
Natural gas	46,369			34,798			122,912			98,452			21,975		42,748			61,041			76,543
Total oil and natural gas revenues	216,282			134,948			607,255			363,559			211,060		209,019			404,329			390,973
Third-party midstream services revenues	6,809			3,218			13,284			6,871			14,359		3,407			26,197			6,475
Sales of purchased natural gas													8,963		—			20,194			—
Realized gain (loss) on derivatives	5,424			485			(1,322		)	(1,176		)	1,165		(2,488		)	4,435			(6,746		)
Unrealized (loss) gain on derivatives	(21,337		)	(12,372		)	(9,492		)	21,449
Unrealized gain (loss) on derivatives													6,157		1,429			(39,562		)	11,845
Total revenues	$	207,178		$	126,279		$	609,725		$	390,703		$	241,704	$	211,367		$	415,593		$	402,547
Net Production Volumes:⁽¹⁾
Oil (MBbl)⁽²⁾	2,973			2,166			8,061			5,582			3,346		2,706			6,452			5,088
Natural gas (Bcf)⁽³⁾	12.3			10.2			35.1			27.6			13.4		12.7			27.1			22.8
Total oil equivalent (MBOE)⁽⁴⁾	5,025			3,860			13,917			10,190			5,577		4,817			10,972			8,892
Average daily production (BOE/d)⁽⁵⁾	54,625			41,954			50,979			37,325			61,290		52,937			60,619			49,126
Average Sales Prices:
Oil, without realized derivatives (per Bbl)	$	57.15		$	46.25		$	60.08		$	47.49		$	56.51	$	61.44		$	53.20		$	61.80
Oil, with realized derivatives (per Bbl)	$	58.97		$	46.47		$	59.91		$	47.39		$	56.86	$	60.52		$	53.91		$	60.46
Natural gas, without realized derivatives (per Mcf)	$	3.77		$	3.42		$	3.50		$	3.56		$	1.64	$	3.38		$	2.25		$	3.35
Natural gas, with realized derivatives (per Mcf)	$	3.77		$	3.42		$	3.50		$	3.54		$	1.64	$	3.38		$	2.25		$	3.36

_________________


(1)	We report our production volumes in two streams: oil and natural gas, including both dry and liquids-rich natural gas. Revenues associated with ~~NGLs~~natural gas liquids are included with our natural gas revenues.


(2)	One thousand barrels of oil.


(3)	One billion cubic feet of natural gas.


(4)	One thousand barrels of oil equivalent, estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas.


(5)	Barrels of oil equivalent per day, estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas.

Three Months Ended ~~September~~June 30, ~~2018~~2019 as Compared to Three Months Ended ~~September~~June 30, ~~2017~~2018

Oil and natural gas revenues. Our oil and natural gas revenues increased ~~$81.3 million to $216.3~~$2.0 million, or ~~60%~~1%, ~~for the three months ended September 30, 2018, as compared~~ to ~~$134.9~~$211.1 million for the three months ended ~~September~~June 30, ~~2017.~~2019, as compared to $209.0 million for the three months ended June 30, 2018. Our oil revenues increased ~~$69.8~~$22.8 million, or ~~70%~~14%, to $~~169.9~~189.1 million for the three months ended ~~September~~June 30, ~~2018~~2019, as compared to $~~100.2~~166.3 million for the three months ended ~~September~~June 30, ~~2017~~2018. The increase in oil revenues resulted from ~~(i) a higher weighted average oil price realized for~~ the ~~three months ended September 30, 2018 of $57.15 per Bbl, as compared to $46.25 per Bbl realized for the three months ended September 30, 2017, and (ii) the 37%~~24% increase in our oil production to ~~3.0~~3.3 million Bbl of oil for the three months ended ~~September~~June 30, ~~2018, or 32,317 Bbl of oil per day,~~2019, as compared to ~~2.2~~2.7 million Bbl of oil ~~or 23,538 Bbl of oil per day,~~ for the three months ended ~~September~~June 30, ~~2017.~~2018. The increase in oil production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin. This increase was partially offset by a lower weighted average oil price realized for the three months ended June 30, 2019 of $56.51 per Bbl, a decrease of 8% as compared to $61.44 per Bbl realized for the three months ended June 30, 2018. Our natural gas revenues ~~increased~~decreased by ~~$11.6~~$20.8 million, or ~~33%~~49%, to ~~$46.4~~$22.0 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$34.8~~$42.7 million for the three months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease in natural gas revenues resulted from a 51% decrease in realized natural gas prices to $1.64 per Mcf for the ~~21%~~three months ended June 30, 2019, as compared to $3.38 per Mcf realized for the three months ended June 30, 2018. This decrease was partially offset by the 6% increase in our natural gas production to ~~12.3~~13.4 Bcf for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~10.2~~12.7 Bcf for the three months ended ~~September~~June 30, ~~2017, and from the 10% increase in our realized natural gas prices between the two periods.~~2018. The increase in natural gas production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin.

Third-party midstream services revenues. Our third-party midstream services revenues increased ~~$3.6 million to $6.8~~$11.0 million, or ~~112%, for the three months ended September 30, 2018, as compared~~more than four-fold, to ~~$3.2~~$14.4 million for the three months ended ~~September~~June 30, ~~2017.~~2019, as compared to $3.4 million for the three months ended June 30, 2018. Third-party midstream services revenues are those revenues from midstream operations related to third parties, including working interest owners in our operated wells. This increase was primarily attributable to (i) an increase in our third-party salt water gathering and disposal revenues to approximately ~~$3.3~~$6.3 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to approximately ~~$0.4~~$1.9 million for the three months ended ~~September~~June 30, ~~2017.~~2018, and (ii) an increase in our third-party natural gas gathering, transportation and processing revenues to approximately $6.5 million for the three months ended June 30, 2019, as compared to $1.5 million for the three months ended June 30, 2018.

Sales of purchased natural gas. Our sales of purchased natural gas were $9.0 million for the three months ended June 30, 2019. We had no sales of purchased natural gas for the three months ended June 30, 2018. Sales of purchased natural gas primarily reflect those natural gas purchase transactions that we periodically enter into with third parties whereby we process the third party’s natural gas at the Black River cryogenic natural gas processing plant in Eddy County, New Mexico (the “Black River Processing Plant”) and then purchase, and subsequently sell, the residue gas and natural gas liquids (“NGL”) to other purchasers. These revenues, and the expenses related to these transactions included in “Purchased natural gas,” are presented on a gross basis in our interim unaudited condensed consolidated statement of operations.

Realized gain (loss) on derivatives. Our realized net gain on derivatives was ~~$5.4~~$1.2 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to a realized net ~~gain~~loss of ~~$0.5~~$2.5 million for the three months ended ~~September~~June 30, ~~2017.~~2018. We realized a net ~~loss~~gain of ~~$10.2~~$1.2 million related to our oil costless collar contracts for the three months ended ~~September~~June 30, 2018, resulting from oil prices that were above the short call/ceiling prices of certain of our oil costless collar contracts. We realized a net gain of $15.6 million related to our oil basis swap contracts for the three months ended September 30, 2018, resulting from oil basis prices lower than the swap prices of certain of our oil basis swap contracts. We realized a net gain of $0.5 million from our oil derivative contracts for the three months ended September 30, 2017,2019, resulting from oil prices that were below the floor prices of certain of our oil costless collar contracts. We realized an average gain on our oil derivatives contracts of approximately ~~$1.82~~$0.35 per Bbl produced during the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to an average ~~gain~~loss of approximately ~~$0.22~~$0.92 per Bbl produced during the three months ended ~~September~~June 30, ~~2017.~~2018. Our total oil volumes hedged for the three months ended ~~September~~June 30, ~~2018~~2019 represented ~~47%~~68% of our total oil production, as compared to ~~57%~~51% of our total oil production for the three months ended ~~September~~June 30, ~~2017.~~2018. Our total natural gas volumes hedged for the three months ended ~~September~~June 30, ~~2018~~2019 represented ~~34%~~13% of our total natural gas production, as compared to ~~62%~~33% of our total natural gas production for the three months ended ~~September~~June 30, ~~2017.~~2018.

Unrealized ~~loss~~gain (loss) on derivatives. Our unrealized net ~~loss~~gain on derivatives was ~~$21.3~~$6.2 million for the three months ended ~~September~~June 30, ~~2018~~,2019, as compared to an unrealized net ~~loss~~gain of ~~$12.4~~$1.4 million for the three months ended ~~September~~June 30, ~~2017~~.2018. During the three months ended ~~September~~June 30, 2019, the net fair value of our open oil and natural gas derivative contracts increased to a net asset of $10.3 million from a net asset of $4.1 million at March 31, 2019, resulting in an unrealized gain on derivatives of $6.2 million for the three months ended June 30, 2019. During the three months ended June 30, 2018, the net fair value of our open oil and natural gas derivative contracts ~~decreased~~increased to a net liability of ~~$24.7~~$3.4 million from a net liability of ~~$3.4~~$4.8 million at ~~June 30,~~March 31, 2018, resulting in an unrealized ~~loss~~gain on derivatives of ~~$21.3 million~~ ~~for the~~ ~~three months ended September 30, 2018~~. During the three months ended September 30, 2017, the net fair value of our open oil and natural gas derivative contracts decreased to a net liability of approximately $3.5 million from a net asset of $8.9 million at June 30, 2017, resulting in an unrealized loss on derivatives of $12.4$1.4 million for the three months ended ~~September~~June 30, ~~2017.~~2018.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 as Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

Oil and natural gas revenues. Our oil and natural gas revenues increased ~~$243.7 million to $607.3~~$13.4 million, or ~~67%~~3%, to $404.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$363.6~~$391.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Our oil revenues increased ~~$219.2~~$28.9 million, or ~~83%~~9%, to ~~$484.3~~$343.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$265.1~~$314.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The increase in oil revenues resulted from ~~(i) a higher weighted average oil price realized for~~ the ~~nine months ended September 30, 2018 of $60.08 per Bbl, as compared to $47.49 per Bbl realized for the nine months ended September 30, 2017, and (ii) the 44%~~27% increase in our oil production to ~~8.1~~6.5 million Bbl of oil for the ~~nine~~six months ended ~~September~~June 30, ~~2018, or 29,529 Bbl of oil per day,~~2019, as compared to ~~5.6~~5.1 million Bbl of oil ~~or 20,447 Bbl of oil per day,~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The increase in oil production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin. This increase was partially offset by a lower weighted average oil price realized for the six months ended June 30, 2019 of $53.20 per Bbl, a decrease of 14% as compared to $61.80 per Bbl realized for the six months ended June 30, 2018. Our natural gas revenues ~~increased~~decreased by ~~$24.5~~$15.5 million, or ~~25%~~20%, to ~~$122.9~~$61.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$98.5~~$76.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease in natural gas revenues resulted from the 27% increase in our natural gas production to 35.1 Bcf for the nine months ended September 30, 2018, as compared to 27.6 Bcf for the nine months ended September 30, 2017, which was partially offset by a ~~slightly~~ lower weighted average natural gas price realized for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 of ~~$3.50~~$2.25 per Mcf, a decrease of 33% as compared to ~~$3.56~~$3.35 per Mcf realized for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. This decrease was partially offset by the 19% increase in our natural gas production to 27.1 Bcf for the six months ended June 30, 2019, as compared to 22.8 Bcf for the six months ended June 30, 2018. The increase in natural gas production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin.

Third-party midstream services revenues. Our third-party midstream services revenues increased ~~$6.4~~$19.7 million to ~~$13.3~~$26.2 million, or ~~93%,~~just over four-fold, for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$6.9~~$6.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. This increase was primarily attributable to (i) an increase in our third-party salt water gathering and disposal revenues to approximately ~~$6.3~~$12.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to approximately ~~$1.1~~$3.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, and (ii) an increase in natural gas gathering, transportation and processing revenues to approximately ~~$6.8~~$11.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$5.6~~$3.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, due to increased~~2018.

Sales of purchased natural gas. Our sales of purchased natural gas ~~volumes being gathered and/or processed in our Rustler Breaks and Wolf asset areas.~~were $20.2 million for the six months ended June 30, 2019. We had no sales of purchased natural gas for the six months ended June 30, 2018.

Realized ~~loss~~gain (loss) on derivatives. Our realized net ~~loss~~gain on derivatives was ~~$1.3~~$4.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to a realized net loss of ~~$1.2~~$6.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. We realized a net ~~loss~~gain of ~~$21.6~~$4.5 million related to our oil costless collar contracts for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, resulting from oil prices that were ~~above~~below the ~~short call/ceiling~~floor prices of certain of our oil costless collar contracts. We realized a net gain of $20.3 million related to our oil basis swap contracts for the nine months ended September 30, 2018, resulting from oil basis prices lower than the swap prices of certain of our oil basis swap contracts. We realized net losses of ~~$0.6~~$6.7 million from ~~both~~ our oil and natural gas

derivative contracts for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, resulting from oil and natural gas prices that were above the ceiling prices of certain of our oil and natural gas costless collar contracts. We realized an average ~~loss~~gain on our oil derivatives of approximately ~~$0.17~~$0.70 per Bbl produced during the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to an average loss of ~~$0.10~~$1.34 per Bbl produced during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Our total oil volumes hedged for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 represented ~~50%~~57% of our total oil production, as compared to ~~61%~~53% of our total oil production for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Our total natural gas volumes hedged for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 represented ~~36%~~13% of our total natural gas production, as compared to ~~64%~~37% of our total natural gas production for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Unrealized (loss) gain on derivatives. Our unrealized net loss on derivatives was ~~$9.5~~$39.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to an unrealized net gain of ~~$21.4~~$11.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. During the period from December 31, ~~2017~~2018 through ~~September~~June 30, ~~2018,~~2019, the aggregate net fair value of our open oil and natural gas derivative contracts decreased to a net ~~liability~~asset of approximately ~~$24.7~~$10.3 million from a net ~~liability~~asset of approximately ~~$15.2~~$49.8 million, resulting in an unrealized loss on derivatives of approximately ~~$9.5~~$39.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. During the period from December 31, ~~2016~~2017 through ~~September~~June 30, ~~2017,~~2018, the aggregate net fair value of our open oil and natural gas derivative contracts increased from a net liability of approximately ~~$25.0~~$15.2 million to a net liability of approximately ~~$3.5~~$3.4 million, resulting in an unrealized gain on derivatives of approximately ~~$21.4~~$11.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Expenses

The following table summarizes our unaudited operating expenses and other income (expense) for the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except expenses per BOE)	2018			2017			2018			2017			2019			2018			2019			2018
Expenses:
Production taxes, transportation and processing	$	20,215		$	15,666		$	58,116		$	40,348		$	21,542		$	20,110		$	41,207		$	37,901
Lease operating	22,531			16,689			69,685			48,486			26,351			25,006			57,514			47,154
Plant and other midstream services operating	7,291			3,096			17,187			8,379			8,422			5,676			17,738			9,896
Purchased natural gas													8,172			—			18,806			—
Depletion, depreciation and amortization	70,457			47,800			192,664			123,066			80,132			66,838			156,999			122,207
Accretion of asset retirement obligations	387			323			1,126			937			420			375			834			739
General and administrative	18,444			16,156			55,739			49,671			19,876			19,369			38,166			37,295
Total expenses	139,325			99,730			394,517			270,887			164,915			137,374			331,264			255,192
Operating income	67,853			26,549			215,208			119,816			76,789			73,993			84,329			147,355
Other income (expense):
Net (loss) gain on asset sales and inventory impairment	(196		)	16			(196		)	23
Inventory impairment													(368		)	—			(368		)	—
Interest expense	(10,340		)	(8,550		)	(26,835		)	(26,229		)	(18,068		)	(8,004		)	(35,997		)	(16,495		)
Prepayment premium on extinguishment of debt	(31,226		)	—			(31,226		)	—
Other (expense) income	(976		)	(36		)	(1,275		)	1,956
Other expense													(423		)	(352		)	(532		)	(299		)
Total other expense	(42,738		)	(8,570		)	(59,532		)	(24,250		)	(18,859		)	(8,356		)	(36,897		)	(16,794		)
Net income	25,115			17,979			155,676			95,566			57,930			65,637			47,432			130,561
Total income tax provision													12,858			—			11,845			—
Net income attributable to non-controlling interest in subsidiaries	(7,321		)	(2,940		)	(18,182		)	(8,034		)	(8,320		)	(5,831		)	(15,782		)	(10,861		)
Net income attributable to Matador Resources Company shareholders	$	17,794		$	15,039		$	137,494		$	87,532		$	36,752		$	59,806		$	19,805		$	119,700
Expenses per BOE:
Production taxes, transportation and processing	$	4.02		$	4.06		$	4.18		$	3.96		$	3.86		$	4.17		$	3.76		$	4.26
Lease operating	$	4.48		$	4.32		$	5.01		$	4.76		$	4.72		$	5.19		$	5.24		$	5.30
Plant and other midstream services operating	$	1.45		$	0.80		$	1.23		$	0.82		$	1.51		$	1.18		$	1.62		$	1.11
Depletion, depreciation and amortization	$	14.02		$	12.38		$	13.84		$	12.08		$	14.37		$	13.87		$	14.31		$	13.74
General and administrative	$	3.67		$	4.19		$	4.00		$	4.87		$	3.56		$	4.02		$	3.48		$	4.19

Three Months Ended ~~September~~June 30, ~~2018~~2019 as Compared to Three Months Ended ~~September~~June 30, ~~2017~~2018

Production taxes, transportation and processing. Our production taxes, transportation and processing expenses increased ~~$4.5 million to $20.2~~$1.4 million, or ~~29%~~7%, ~~for the three months ended September 30, 2018, as compared~~ to ~~$15.7~~$21.5 million for the three months ended ~~September~~June 30, ~~2017.~~2019, as compared to $20.1 million for the three months ended June 30, 2018. The increase was primarily attributable to the $1.3 million increase in transportation and processing fees to $6.3 million for the three months ended June 30, 2019, as compared to $5.0 million for the three months ended June 30, 2018, principally due to the 6% increase in our natural gas production to 13.4 Bcf of natural gas for the three months ended June 30, 2019, as compared to 12.7 Bcf of natural gas for the three months ended June 30, 2018. On a unit-of-production basis, our production taxes, transportation and processing expenses decreased 1%7% to ~~$4.02~~$3.86 per BOE for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$4.06~~$4.17 per BOE for the three months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase in production taxes, transportation and processing expenses~~decrease was primarily attributable to ~~the $7.9 million increase in our~~lower production taxes on a per unit basis as a result of the decrease in the weighted average oil and natural gas prices realized between the two periods.

Lease operating. Our lease operating expenses increased $1.3 million, or 5%, to ~~$16.0~~$26.4 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$8.1~~$25.0 million for the three months ended ~~September~~June 30, ~~2017, principally due~~2018. The increase was largely attributable to ~~the $81.3~~increases in compression, repairs and maintenance and non-operated lease operating expenses of approximately $2.6 million ~~increase in oil and natural gas revenues~~ for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the three months ended ~~September~~June 30, ~~2017. In addition, the production tax rates~~2018. This increase was partially offset by a decrease in ~~New Mexico are higher than production tax rates in Texas. As~~salt water trucking and disposal costs as more of our ~~oil and natural gas production becomes attributable~~operated wells have been connected to ~~New Mexico, we expect our production tax expenses to increase proportionately.~~

~~Lease operating.~~salt water disposal pipelines. Our lease operating expenses ~~increased $5.8 million to $22.5 million, or 35%, for the three months ended September 30, 2018, as compared to $16.7 million for the three months ended September 30, 2017. On~~decreased 9% on a unit-of-production basis ~~our lease operating expenses increased 4%~~ to ~~$4.48~~$4.72 per BOE for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$4.32~~$5.19 per BOE for the three months ended ~~September~~June 30, ~~2017. The~~2018, as a result of the 16% increase in ~~lease operating expenses~~total oil equivalent production for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the three months ended ~~September~~June 30, ~~2017, was primarily attributable to an increase in costs of services and equipment related to the increased number of wells at September 30, 2018, as compared to September 30, 2017.~~2018.

Plant and other midstream services operating. Our plant and other midstream services operating expenses increased ~~$4.2 million to $7.3~~$2.7 million, or ~~an increase of 135%~~48%, to $8.4 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$3.1~~$5.7 million for

the three months ended ~~September~~June 30, ~~2017.~~2018. This increase was primarily attributable to (i) increased expenses associated with the Black River Processing Plant of $3.1 million for the three months ended June 30, 2019, as compared to $1.9 million for the three months ended June 30, 2018, (ii) increased expenses associated with our expanded commercial salt water disposal operations ~~to $3.7~~of $3.8 million for the three months ended ~~September~~June 30, 2019, as compared to $3.0 million for the three months ended June 30, 2018, ~~as compared to~~and (iii) increased expenses associated with pipeline operations of $1.6 million for the three months ended ~~September~~June 30, ~~2017, and (ii) increased expenses associated with the Black River Processing Plant, which was expanded in the first quarter of 2018, to $1.7 million for the three months ended September 30, 2018,~~2019, as compared to $1.0 million for the three months ended ~~September~~June 30, ~~2017.~~2018.

Depletion, depreciation and amortization. Our depletion, depreciation and amortization expenses increased ~~$22.7 million to $70.5~~$13.3 million, or ~~47%~~20%, ~~for the three months ended September 30, 2018, as compared~~ to ~~$47.8~~$80.1 million for the three months ended ~~September~~June 30, ~~2017.~~2019, as compared to $66.8 million for the three months ended June 30, 2018. On a unit-of-production basis, our depletion, depreciation and amortization expenses increased ~~13%~~4% to ~~$14.02~~$14.37 per BOE for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$12.38~~$13.87 per BOE for the three months ended ~~September~~June 30, ~~2017.~~2018. The increase in our total depletion, depreciation and amortization expenses was primarily attributable to (i) ~~increased well costs year-over-year in response to increased oil prices over~~ the ~~past year and (ii) the 30%~~16% increase in our total oil equivalent production to ~~5.0~~5.6 million BOE for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~3.9~~4.8 million BOE for the three months ended ~~September~~June 30, ~~2017. The~~2018, and (ii) increased depreciation expenses attributable to our midstream segment of approximately $3.8 million for the three months ended June 30, 2019, as compared to $2.3 million for the three months ended June 30, 2018. On a unit-of-production basis, the impact of the ~~increase~~increases in ~~well costs~~total oil equivalent production and ~~oil and natural gas production~~midstream depreciation expenses was ~~partially~~largely offset by higher total proved oil and natural gas reserves at ~~September~~June 30, ~~2018,~~2019, as compared to ~~September~~June 30, ~~2017,~~2018, primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin. ~~In addition, depreciation~~

General and administrative. Our general and administrative expenses ~~attributable~~increased $0.5 million, or 3%, to ~~our midstream segment were approximately $2.6~~$19.9 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$1.3~~$19.4 million for the three months ended ~~September~~June 30, ~~2017.~~

~~General and administrative.~~2018. Our general and administrative expenses increased $2.3 million to $18.4 million, or 14%, for the three months ended September 30, 2018, as compared to $16.2 million for the three months ended September 30, 2017. The increase in our general and administrative expenses was primarily attributable to increased payroll and related expenses of $5.6 million, including approximately $3.5 million of non-cash stock-based compensation. These increases were partially offset by the $2.4 million increase in capitalized general and administrative expenses for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017. As a result of the 30% increase in oil and natural gas production for the three months ended September 30, 2018, as compared to the three months ended September 30, 2017, our general and administrative expenses decreased ~~12%~~11% on a unit-of-production basis to ~~$3.67~~$3.56 per BOE for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$4.19~~$4.02 per BOE for the three months ended ~~September~~June 30, ~~2017.~~2018, primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin.

Interest expense. For the three months ended ~~September~~June 30, ~~2018,~~2019, we incurred total interest expense of approximately ~~$12.1~~$20.7 million. We capitalized approximately ~~$1.7~~$2.6 million of our interest expense on certain qualifying projects for the three months ended ~~September~~June 30, ~~2018~~2019 and expensed the remaining ~~$10.3~~$18.1 million to operations. For the three months ended ~~September~~June 30, ~~2017,~~2018, we incurred total interest expense of approximately $10.6 million. We capitalized approximately ~~$2.1~~$2.6 million of our interest expense on certain qualifying projects for the three months ended ~~September~~June 30, ~~2017~~2018 and expensed the remaining ~~$8.6~~$8.0 million to operations.

~~Prepayment premium on extinguishment~~Total income tax provision. We recorded a total income tax expense of ~~debt.~~ ~~Our prepayment premium on the extinguishment of debt~~$12.9 million for the three months ended ~~September~~June 30, 2019, which differs from amounts computed by applying the U.S. federal statutory rate to pre-tax income due primarily to the impact of permanent differences between book and tax income. Due to a variety of factors, including our significant net income in 2017 and 2018, our federal valuation allowance and a portion of our state valuation allowance were reversed at December 31, 2018, as the deferred tax assets were determined to be more likely than not to be utilized. As a portion of our state net operating loss carryforwards are not expected to be utilized before expiration, a valuation allowance will continue to be recognized until the state deferred tax assets are more likely than not to be utilized. At June 30, 2018, was $31.2 million due to the 2023 Notes Tender Offer and Redemption, including total payments of $30.4 million to holders of the 2023 Notes as a result of the tender premium and the required 105.156% redemption price payable pursuant to the 2023 Notes indenture.

~~Total income tax benefit.~~ ~~Our~~our deferred tax assets exceeded our deferred tax liabilities ~~at September 30, 2018~~ due to the deferred tax amounts generated by full-cost ceiling impairment charges recorded in prior periods. As a result, we established a valuation allowance against the deferred tax assets beginning in the third quarter of 2015. We retained a full valuation allowance at ~~September~~June 30, 2018 due to uncertainties regarding the future realization of our deferred tax assets. ~~Should we continue to generate net income, we anticipate the reversal of a portion of the deferred tax asset valuation allowance in a future period.~~

~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 as Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018

Production taxes, transportation and processing. Our production taxes, transportation and processing expenses increased ~~$17.8 million to $58.1~~$3.3 million, or ~~44%~~9%, to $41.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$40.3~~$37.9 million for the ~~nine~~six months ended ~~September~~June 30, 2017. On a unit-of-production basis, our production taxes, transportation and processing expenses increased 6% to $4.18 per BOE for the nine months ended September 30, 2018, as compared to $3.96 per BOE for the nine months ended September 30, 2017.2018. The increase in production taxes, transportation and processing expenses was primarily attributable to the ~~$22.0~~$2.8 million increase in our ~~production taxes to $44.2 million~~transportation and processing expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$22.2 million for~~ the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, principally due to the ~~$243.7 million~~19% increase in our natural gas production to 27.1 billion Bcf of natural gas for the six months ended June 30, 2019, as compared to 22.8 billion Bcf of natural gas for the six months ended June 30, 2018. On a unit-of-production basis, our production taxes, transportation and processing expenses decreased 12% to $3.76 per BOE for the six months ended June 30, 2019, as compared to $4.26 per BOE for the six months ended June 30, 2018. The decrease was primarily attributable to lower production taxes on a per unit basis as a result of the decrease in weighted average oil and natural gas ~~revenues for~~prices realized between the nine months ended September 30, 2018, as compared to the nine months ended September 30, 2017. In addition, the production tax rates in New Mexico are higher than production tax rates in Texas. As more of our oil and natural gas production becomes attributable to New Mexico, we expect our production tax expenses to increase proportionately.two periods.

Lease operating. Our lease operating expenses increased ~~$21.2 million to $69.7~~$10.4 million, or ~~44%~~22%, to $57.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$48.5~~$47.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017. Our lease operating expenses on a unit-of production basis increased 5% to $5.01 per BOE for the nine months ended September 30, 2018, as compared to $4.76~~

~~per BOE for the nine months ended September 30, 2017.~~2018. The increase in lease operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, was primarily attributable to an increase in costs of services and equipment, including salt water disposal costs in asset areas other than Wolf and Rustler Breaks (which are

serviced by San Mateo)~~, at September~~. Our lease operating expenses on a unit-of production basis decreased 1% to $5.24 per BOE for the six months ended June 30, ~~2018,~~2019, as compared to ~~September~~$5.30 per BOE for the six months ended June 30, ~~2017.~~2018.

Plant and other midstream services operating. Our plant and other midstream services operating expenses increased ~~$8.8 million to $17.2~~$7.8 million, or ~~105%~~79%, to $17.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$8.4~~$9.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. This increase was primarily attributable to (i) increased expenses associated with our expanded commercial salt water disposal operations ~~to $8.8~~of $8.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$4.7~~$5.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, and~~2018, (ii) increased expenses associated with the Black River Processing Plant, which was expanded late in the first quarter of 2018, ~~to $5.3~~of $6.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$2.8~~$3.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018, and (iii) increased expenses associated with pipeline operations of $3.7 million for the six months ended June 30, 2019, as compared to $1.6 million for the six months ended June 30, 2018.

Depletion, depreciation and amortization. Our depletion, depreciation and amortization expenses increased ~~$69.6 million to $192.7~~$34.8 million, or ~~57%~~28%, to $157.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$123.1~~$122.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. On a unit-of-production basis, our depletion, depreciation and amortization expenses increased ~~15%~~4% to ~~$13.84~~$14.31 per BOE for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$12.08~~$13.74 per BOE for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The increase in our total depletion, depreciation and amortization expenses was primarily attributable to (i) ~~increased well costs in response to increased oil prices over~~ the ~~past year and (ii) the 37%~~23% increase in our total oil equivalent production to ~~13.9~~11.0 million BOE for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~10.2~~8.9 million BOE for the ~~nine~~six months ended ~~September~~June 30, ~~2017. The~~2018, and (ii) the increase in depreciation expenses attributable to our midstream segment of approximately $9.3 million for the six months ended June 30, 2019, as compared to $5.2 million for the six months ended June 30, 2018. On a unit-of-production basis, the impact of the ~~increase~~increases in ~~well costs~~total oil equivalent production and ~~oil and natural gas production~~midstream depreciation expenses was ~~partially~~largely offset by higher total proved oil and natural gas reserves at ~~September~~June 30, ~~2018,~~2019, as compared to ~~September~~June 30, ~~2017,~~2018, primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin. In addition, depreciation expenses attributable to our midstream segment were approximately $6.5 million for the nine months ended September 30, 2018, as compared to $3.8 million for the nine months ended September 30, 2017.

General and administrative. Our general and administrative expenses increased ~~$6.1 million to $55.7~~$0.9 million, or ~~12%~~2%, to $38.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$49.7~~$37.3 million for the ~~nine~~six months ended ~~September~~June 30, 2017. The increase in our general and administrative expenses was partially attributable to increased payroll and related expenses of approximately $9.4 million associated with additional employees joining the Company to support our increased land, geoscience, drilling, completion, production, midstream, accounting and administration functions2018. Primarily as a result of ~~our continued growth. These increases were partially offset by~~ the ~~$5.7 million~~23% increase in ~~capitalized general and administrative expenses~~total oil equivalent production for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017. As a result of the 37% increase in oil and natural gas production for the nine months ended September 30,~~ 2018, ~~as compared to the nine months ended September 30, 2017,~~ our general and administrative expenses decreased ~~18%~~17% on a unit-of-production basis to ~~$4.00~~$3.48 per BOE for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$4.87~~$4.19 per BOE for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Interest expense. For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, we incurred total interest expense of approximately ~~$33.0~~$40.2 million. We capitalized approximately ~~$6.2~~$4.2 million of our interest expense on certain qualifying projects for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and expensed the remaining ~~$26.8~~$36.0 million to operations. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, we incurred total interest expense of approximately ~~$31.5~~$21.0 million. We capitalized approximately ~~$5.2~~$4.5 million of our interest expense on certain qualifying projects for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and expensed the remaining ~~$26.2~~$16.5 million to operations.

~~Prepayment premium on extinguishment~~Total income tax provision. We recorded a total income tax expense of ~~debt.~~ ~~Our prepayment premium on the extinguishment of debt~~$11.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018 was $31.2 million~~2019, which differs from amounts computed by applying the U.S. federal statutory rate to pre-tax income primarily due to the ~~2023 Notes Tender Offer~~impact of permanent differences between book and ~~Redemption,~~tax income. Due to a variety of factors, including ~~total payments~~our significant net income in 2017 and 2018, our federal valuation allowance and a portion of ~~$30.4 million~~our state valuation allowance were reversed at December 31, 2018, as the deferred tax assets were determined to ~~holders~~be more likely than not to be utilized. As a portion of our state net operating loss carryforwards are not expected to be utilized before expiration, a valuation allowance will continue to be recognized until the ~~2023 Notes as a result of the tender premium and the required 105.156% redemption price payable pursuant~~state deferred tax assets are more likely than not to ~~the 2023 Notes indenture.~~

~~Total income tax benefit.~~ ~~Our~~be utilized. At June 30, 2018, our deferred tax assets exceeded our deferred tax liabilities ~~at September 30, 2018~~ due to the deferred tax amounts generated by ~~the~~ full-cost ceiling impairment charges recorded in prior periods. As a result, we established a valuation allowance against the deferred tax assets beginning in the third quarter of 2015. We retained a full valuation allowance at ~~September~~June 30, 2018 due to uncertainties regarding the future realization of our deferred tax assets. ~~Should we continue to generate net income, we anticipate the reversal of a portion of the deferred tax asset valuation allowance in a future period.~~

Liquidity and Capital Resources

Our primary use of capital has been, and we expect will continue to be during the remainder of ~~2018~~2019 and for the foreseeable future, for the acquisition, exploration and development of oil and natural gas properties and for midstream investments. Excluding any possible significant acquisitions, we expect to fund our capital expenditure requirements for the remainder of ~~2018 and for~~ 2019 through a combination of cash on hand, operating cash flows, ~~and~~performance incentives in connection with the formation of San Mateo I that were received in the first quarter of 2019, borrowings under the Credit Agreement (assuming availability under our borrowing base). and borrowings under the San Mateo Credit Facility. We continually evaluate other capital sources, including borrowings under additional credit arrangements, the sale or joint venture of midstream assets or oil and natural gas producing assets or ~~acreage,~~leasehold interests, particularly in our non-core asset areas, the sale or joint venture of oil and natural gas mineral interests, as well as potential issuances of equity, debt or convertible securities, none of which may be available on satisfactory terms or at all. Our future success in growing proved reserves and production will be highly dependent on our ability to access outside sources of capital and to generate operating cash flows.

~~As of~~At June 30, ~~2018,~~2019 and July 31, 2019, we had ~~$575.0 million~~(i) $1.05 billion of outstanding ~~2023 Notes with a coupon of 6.875%. On August 21, 2018, we issued $750.0 million of Original~~5.875% senior notes due 2026 Notes with a coupon of 5.875% in a private placement. The Original 2026 Notes were issued at par value, and we received net proceeds of approximately $740.0 million, after deducting the initial purchasers’ discounts and estimated offering expenses. In conjunction with the 2026 Notes Offering, in August and September 2018, we completed the 2023 Notes Tender Offer and Redemption of all of our $575.0 million aggregate principal amount of 2023 Notes. We used a portion of the net proceeds from the 2026 Notes Offering to fund the 2023 Notes Tender Offer and Redemption.

On September 12, 2018, we announced the successful acquisition of 8,400 gross (8,400 net) leasehold acres in Lea and Eddy Counties, New Mexico for approximately $387 million, or a weighted average cost of approximately $46,000 per net acre, in the Bureau of Land Management New Mexico Oil and Gas Lease Sale on September 5 and 6, 2018 (the ~~“BLM Acquisition”~~“Notes”). We completed the BLM Acquisition on September 20, 2018, and we expect the leases will be issued to us in the fourth quarter of 2018. We financed the BLM Acquisition using cash on hand and borrowings under the Credit Agreement.

~~At September 30, 2018, we had $750.0 million of outstanding Original 2026 Notes, $325.0~~, (ii) $205.0 million in borrowings outstanding under the Credit Agreement and (iii) approximately ~~$3.0~~$13.6 million in outstanding

letters of credit issued pursuant to the Credit Agreement, and San Mateo I had $240.0 million in borrowings outstanding under the San Mateo Credit Facility and approximately $16.2 million in outstanding letters of credit issued pursuant to the San Mateo Credit ~~Agreement.~~ Facility.

At ~~September~~June 30, ~~2018,~~2019, we ~~also~~ had cash totaling approximately ~~$45.9~~$60.0 million and restricted cash, ~~totaling approximately $7.1 million,~~ most of which iswas associated with San ~~Mateo.~~Mateo, totaling approximately $24.8 million. By contractual agreement, the cash in the accounts held by our less-than-wholly-owned subsidiaries is not to be commingled with our other cash and is to be used only to fund the capital expenditures and operations of these less-than-wholly-owned subsidiaries.

On October 4, 2018, we issued $300.0 million of Additional 2026 Notes. The Additional 2026 Notes were issued pursuant to, and are governed by, the same Indenture governing the Original 2026 Notes. The Additional 2026 Notes were issued at 100.5% of par, plus accrued interest from August 21, 2018. We received net proceeds from this offering of approximately $297.6 million, after deducting the initial purchasers’ discounts and estimated offering expenses but excluding accrued interest from August 21, 2018 paid by the initial purchasers of the Additional 2026 Notes. The proceeds from this offering were used to repay a portion of the $325.0 million in outstanding borrowings under the Credit Agreement, which were incurred in connection with the BLM Acquisition. The Notes will mature September 15, 2026, and interest is payable on the Notes semi-annually in arrears on each March 15 and September 15.

At October 31, 2018, we had $1.05 billion of outstanding Notes, $25.0 million in borrowings outstanding under the Credit Agreement and approximately $3.0 million in outstanding letters of credit issued pursuant to the Credit Agreement.

In ~~October 2018,~~April 2019, the lenders under our Credit Agreement, led by Royal Bank of Canada, completed their review of our proved oil and natural gas reserves at ~~June 30, 2018. In connection with such review, we amended the Credit Agreement to, among other items, increase the maximum facility amount to $1.5 billion, increase~~December 31, 2018, and as a result, the borrowing base was increased to ~~$850.0~~$900.0 million ~~increase~~with the elected borrowing commitment toremaining at $500.0 ~~million, extend the maturity to October 31, 2023 and reduce borrowing rates by 0.25% per annum.~~million. This ~~October 2018~~April 2019 redetermination constituted the regularly scheduled ~~November~~May 1 redetermination. Borrowings under the Credit Agreement are limited to the lowest of the borrowing base, the maximum facility amount and the elected borrowing commitment.

In June 2019, the lender commitments under the San Mateo Credit Facility, led by The Bank of Nova Scotia, were increased to $325.0 million, using the accordion feature. The San Mateo Credit Facility is guaranteed by San Mateo I’s subsidiaries, secured by substantially all of San Mateo I’s assets, including real property, and is non-recourse with respect to Matador and its wholly-owned subsidiaries, as well as San Mateo II.

During the ~~third~~second quarter of ~~2018,~~2019, we continued our focus on the exploration, delineation and development of our Delaware Basin acreage in Loving County, Texas and Lea and Eddy Counties, New Mexico. We began ~~2018~~2019 operating six drilling rigs in the Delaware Basin and continued to do so ~~through September~~at June 30, ~~2018. We expect to operate those~~2019. During the second quarter, these six operated drilling rigs ~~in the~~were deployed across our Delaware Basin ~~through the remainder of 2018, including three rigs in the Rustler Breaks asset area, one rig in the Wolf/Jackson Trust~~ asset areas, ~~one rig in the Ranger/Arrowhead and Twin Lakes asset areas and one rig in~~but with an increased focus on the Antelope Ridge asset area. We have continued to build significant optionality into our drilling program. Three of our rigs operate on longer-term contracts with remaining average terms between 12 and 15 months. The other three rigs are on short-term contracts with remaining obligations of six months or less. This affords us the ability to modify our drilling program as management may determine necessary based on changing commodity prices and other factors.

Effective October 1, 2018, we added a seventh operated drilling rig to our drilling program on a short-term contract. This seventh drilling rig was deployed initially in South Texas to drill up to ten wells, primarily in the Eagle Ford shale. This rig is expected to operate in South Texas throughout the fourth quarter of 2018 and into early 2019. At that time, subject to commodity prices and other economic circumstances, we anticipate moving this rig to the Delaware Basin, most likely to either the Arrowhead or Antelope Ridge asset area. We then expect to operate ~~this seventh rig~~six rigs in the Delaware Basin throughout the remainder of 2019, with four rigs operating between the Rustler Breaks and Antelope Ridge asset areas, one rig operating in the Wolf and Jackson Trust asset areas and one rig operating in the Arrowhead, Ranger and Twin Lakes asset areas, although this rig, in particular, is expected to operate in the Greater Stebbins Area for most of the remainder of 2019. We expect that development of our Delaware Basin assets will be the primary focus of our operations and capital expenditures for the remainder of 2019.

~~On August 1,~~During the second quarter of 2019, we also finished our nine-well program in South Texas, which we began in October 2018, including eight Eagle Ford shale wells and one Austin Chalk well. The rig used to drill these nine wells was released in early February 2019, and we ~~adjusted~~have no additional operated drilling activities planned in the Eagle Ford shale for the remainder of 2019.

2019 Capital Expenditure Budget

At July 31, 2019, our ~~anticipated 2018~~2019 estimated capital expenditures for drilling, completing and ~~completions (including~~ equipping wells ~~for production) from $530~~(“D/C/E”) remained $640 to ~~$570~~$680 million, ~~to $620 to $650 million~~as originally estimated. As a result of improved drilling and completion and capital efficiencies, an accelerated pace of activity and our expectations for acquiring additional working interests primarily through acreage trades in certain of our operated wells throughout 2019, we now expect to complete and turn to sales four gross (6.8 net) additional operated wells in 2019, as compared to our original 2019 plan, which includes four gross (3.0 net) additional wells resulting from an accelerated pace of drilling and completion activity in 2019 and 3.8 net additional wells attributable to increased working interests acquired or anticipated to be acquired in certain operated wells during the course of the year. Due to the lower well costs and facilities savings achieved thus far in 2019, however, at July 31, 2019, we anticipate we should be able to deliver these additional well completions within our originally budgeted estimates for D/C/E capital expenditures of $640 to $680 million. In addition, at July 31, 2019, we have no plans to add a seventh rig to our 2019 drilling program.

On July 31, 2019, we increased our anticipated 2019 midstream capital expenditures ~~remained~~from $55 to $75 million to $70 to $90 million, ~~which~~ primarily ~~represents~~for capital expenditures necessary to accommodate new customers and increased commitments from existing customers. During the first six months of 2019, San Mateo received an increased natural gas gathering and processing commitment from an existing natural gas customer and obtained a significant additional acreage dedication and a salt water disposal well permit from an existing salt water customer. In addition, San Mateo is in negotiations with other third parties to provide oil, natural gas and salt water gathering services, natural gas processing services and salt water disposal services. In order to provide the midstream services under these executed and anticipated agreements, San Mateo expects to undertake additional projects that will require added compression, oil, natural gas and water gathering lines and water disposal infrastructure not originally budgeted for in 2019. At July 31, 2019, San Mateo had also entered into an agreement to acquire an existing commercial salt water disposal well and facility, a salt water disposal permit and surface acreage near the Greater Stebbins Area. The anticipated total 2019 midstream capital expenditures of $70 to $90 million reflect our ~~51%~~proportionate share of San Mateo’s ~~2018~~ estimated 2019 capital ~~expenditures. With the addition~~expenditures and also account for portions of the ~~seventh drilling rig deployed~~$50 million capital carry that Five Point agreed to ~~South Texas on October 1, 2018, we increased our anticipated 2018 capital expenditures for drilling and completions (including equipping wells for production) by approximately 4%, or $25~~provide to ~~$30 million, to $645 to $680 million. We have allocated substantially~~us in conjunction with the formation of San Mateo II.

Substantially all of our remaining 2019 estimated ~~2018~~ capital expenditures will be allocated to (i) the further delineation and development of our ~~growing~~ leasehold position, ~~and~~(ii) the continued construction of midstream assets and (iii) our participation in certain non-operated well opportunities in the Delaware Basin, with the exception of ~~the South Texas drilling program beginning in the fourth quarter of 2018 and~~ amounts allocated to limited operations in our South Texas and Haynesville shale positions to maintain and extend leases and to participate in certain non-operated ~~activities~~well opportunities. To narrow any potential difference between our 2019 capital expenditures and operating cash flows, we may divest portions of our non-core assets, particularly in our South Texas and Haynesville shale positions, as well as consider monetizing other assets, such as certain mineral, royalty and midstream interests, as value-creating opportunities arise. For example, in the ~~Eagle Ford~~second quarter and early in the third quarter of 2019, we successfully closed and received approximately $22 million in proceeds attributable to the sale of portions of our properties, primarily in our South Texas and Haynesville ~~shales. For~~shale positions, as well as a small portion of our leasehold in a non-operated area of the ~~remainder~~Delaware Basin. We intend to continue evaluating the opportunistic acquisition of ~~2018, our~~acreage and mineral interests, principally in the Delaware Basin, ~~drilling program will continue to focus~~during 2019. These monetizations, divestitures and expenditures are opportunity-specific, and purchase price multiples and per-acre prices can vary significantly based on the ~~development~~asset or prospect. As a result, it is difficult to estimate these 2019 monetizations, divestitures and capital expenditures with any degree of ~~the Wolf~~certainty; therefore, we have not provided estimated proceeds related to monetizations or divestitures or estimated capital expenditures related to acreage and Rustler Breaks asset areas and the further delineation and development of the Jackson Trust, Ranger/Arrowhead, Antelope Ridge and Twin Lakes asset areas, although we may also continue to delineate previously untested zones in the Wolf and Rustler Breaks asset areas.mineral acquisitions for 2019.

Our ~~2018~~2019 capital expenditures may be adjusted as business conditions warrant and the amount, timing and allocation of such expenditures is largely discretionary and within our control. The aggregate amount of capital we will expend may fluctuate materially based on market conditions, the actual costs to drill, complete and place on production operated or non-operated wells, our drilling results, the actual costs and scope of our midstream activities, the ability of our joint venture partners to meet their capital obligations, other opportunities that may become available to us and our ability to obtain capital. When oil or natural gas prices decline, or costs increase significantly, we have the flexibility to defer a significant portion of our capital expenditures until later periods to conserve cash or to focus on projects that we believe have the highest expected returns and potential to generate near-term cash flows. We routinely monitor and adjust our capital expenditures in response to changes in prices, availability of financing, drilling, completion and acquisition costs, industry conditions, the timing of regulatory approvals, the availability of rigs, success or lack of success in our exploration and development activities, contractual obligations, drilling plans for properties we do not operate and other factors both within and outside our control. In addition, we attempt to avoid long-term service agreements where possible to minimize ongoing future commitments.

Exploration and development activities are subject to a number of risks and uncertainties, which could cause these activities to be less successful than we anticipate. A significant portion of our anticipated cash flows from operations for the remainder of ~~2018~~2019 is expected to come from producing wells and development activities on currently proved properties in the Wolfcamp and Bone Spring plays in the Delaware Basin, the Eagle Ford shale in South Texas and the Haynesville shale in Louisiana. Our existing wells may not produce at the levels we have forecasted and our exploration and development activities in these areas may not be as successful as we anticipate. Additionally, our anticipated cash flows from operations are based upon current expectations of realized oil, natural gas and NGL prices for the remainder of ~~2018~~2019 and the hedges we currently have in place. For further discussion of our expectations of such commodity prices, see “— General Outlook and Trends” below. We use commodity derivative financial instruments at times to mitigate our exposure to fluctuations in oil, natural gas and NGL prices and to partially offset reductions in our cash flows from operations resulting from declines in commodity prices. See Note 78 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for a summary of our open derivative financial instruments at ~~September~~June 30, ~~2018.~~2019.

Our unaudited cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 are presented below:


	Nine Months Ended September 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2019			2018
Net cash provided by operating activities	$	419,318		$	222,516		$	194,497		$	254,208
Net cash used in investing activities	(1,220,528		)	(596,853		)	(394,694		)	(493,562		)
Net cash provided by financing activities	751,736			191,117			200,975			280,385
Net change in cash and restricted cash	$	(49,474	)	$	(183,220	)	$	778		$	41,031
Adjusted EBITDAattributable to Matador Resources Company shareholders⁽¹⁾	$	409,984		$	227,444		$	268,943		$	254,592

__________________


(1)	Adjusted EBITDA is a non-GAAP financial measure. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see “— Non-GAAP Financial Measures” below.

Cash Flows Provided by Operating Activities

Net cash provided by operating activities ~~increased $196.8~~decreased $59.7 million to ~~$419.3~~$194.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~$222.5~~$254.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Excluding changes in operating assets and liabilities, net

cash provided by operating activities increased to ~~$405.0~~$255.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~$210.7~~$251.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017. This increase was~~2018, primarily attributable to ~~higher~~the increase in our total oil equivalent production, which was partially offset by the decrease in realized oil and natural gas ~~production and higher oil prices.~~prices between the two periods. Changes in our operating assets and liabilities between the two periods resulted in a net ~~increase~~decrease of approximately ~~$2.5~~$64.2 million in net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Our operating cash flows are sensitive to a number of variables, including changes in our production and volatility of oil and natural gas prices between reporting periods. Regional and worldwide economic activity, the actions of ~~OPEC,~~the Organization of Petroleum Exporting Countries (OPEC), weather, infrastructure capacity to reach markets and other variable factors significantly impact the prices of oil and natural gas. These factors are beyond our control and are difficult to predict. We use commodity derivative financial instruments to mitigate our exposure to fluctuations in oil, natural gas and NGL prices. ~~In addition, we attempt to avoid long-term service agreements where possible in order to minimize ongoing future commitments.~~

Cash Flows Used in Investing Activities

Net cash used in investing activities ~~increased~~decreased by ~~$623.7~~$98.9 million to ~~$1.221 billion for the nine months ended September 30, 2018 from $596.9~~$394.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019 from $493.6 million for the six months ended June 30, 2018. This ~~increase~~decrease in net cash used in investing activities is ~~primarily~~ due in part to ~~an increase~~a decrease of ~~$589.3~~$71.7 million in oil and natural gas properties capital expenditures for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Cash used for oil and natural gas properties capital expenditures for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 was ~~attributable to the acquisition of additional leasehold and mineral interests including,~~ primarily ~~the BLM Acquisition, and~~attributable to our operated and non-operated drilling and completion activities in the Delaware ~~Basin.~~Basin and in South Texas. The remaining ~~increase~~decrease in net cash used in investing activities was primarily attributable to ~~an increase~~a decrease in cash used for midstream ~~and other property and equipment~~capital expenditures of ~~$41.7~~$14.2 million, primarily related to capital expenditures for San Mateo, ~~which was partially offset by a net~~and an increase of ~~$7.3~~$13.9 million in proceeds from the sale of ~~acreage.~~assets.

Cash Flows Provided by Financing Activities

Net cash provided by financing activities ~~increased~~decreased by ~~$560.6~~$79.4 million to ~~$751.7~~$201.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~$191.1~~$280.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017. During the nine months ended September 30, 2018, we received~~2018. This decrease in net ~~proceeds of $226.5 million from our May 2018 public equity offering, had borrowings under our credit agreement of $370.0 million, received~~cash provided by financing activities is due in part to a net ~~proceeds from the 2026 Notes Offering of $740.5 million and had an~~ increase ~~of $44.1 million in contributions from non-controlling interest owners in less-than-wholly-owned subsidiaries. These increases were offset by the repayment of the $45.0 million~~ in borrowings under our Credit Agreement of $165.0 million between the ~~purchase~~two periods, offset by a reduction in proceeds from the issuance of ~~our 2023 Notes for $605.8~~common stock of $226.6 million and a decrease of ~~$156.8~~$34.1 million in contributions ~~related to the formation of San Mateo and an increase of $11.8 million in distributions to~~from non-controlling interest owners in less-than-wholly-owned subsidiaries.

Non-GAAP Financial Measures

We define 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, certain other non-cash items and non-cash stock-based compensation expense, and net gain or loss on asset sales and inventory impairment. Adjusted EBITDA is not a measure of net income (loss) or cash flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies.

Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the results of operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired.

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as a primary indicator of our 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. Our 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 our 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.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Unaudited Adjusted EBITDA Reconciliation to Net Income:
Net income attributable to Matador Resources Company shareholders	$	17,794		$	15,039		$	137,494		$	87,532		$	36,752		$	59,806		$	19,805		$	119,700
Net income attributable to non-controlling interest in subsidiaries	7,321			2,940			18,182			8,034			8,320			5,831			15,782			10,861
Net income	25,115			17,979			155,676			95,566			45,072			65,637			35,587			130,561
Interest expense	10,340			8,550			26,835			26,229			18,068			8,004			35,997			16,495
Total income tax provision													12,858			—			11,845			—
Depletion, depreciation and amortization	70,457			47,800			192,664			123,066			80,132			66,838			156,999			122,207
Accretion of asset retirement obligations	387			323			1,126			937			420			375			834			739
Unrealized loss (gain) on derivatives	21,337			12,372			9,492			(21,449		)
Unrealized (gain) loss on derivatives													(6,157		)	(1,429		)	39,562			(11,845		)
Stock-based compensation expense	4,842			1,296			13,787			12,488			4,490			4,766			9,076			8,945
Net loss (gain) on asset sales and inventory impairment	196			(16		)	196			(23		)
Prepayment premium on extinguishment of debt	31,226			—			31,226			—
Inventory impairment													368			—			368			—
Consolidated Adjusted EBITDA	163,900			88,304			431,002			236,814			155,251			144,191			290,268			267,102
Adjusted EBITDA attributable to non-controlling interest in subsidiaries	(8,508		)	(3,471		)	(21,018		)	(9,370		)	(11,147		)	(6,853		)	(21,325		)	(12,510		)
Adjusted EBITDA attributable to Matador Resources Company shareholders	$	155,392		$	84,833		$	409,984		$	227,444		$	144,104		$	137,338		$	268,943		$	254,592


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities:
Net cash provided by operating activities	$	165,111		$	101,274		$	419,318		$	222,516		$	135,257		$	118,059		$	194,497		$	254,208
Net change in operating assets and liabilities	(11,111		)	(21,481		)	(14,300		)	(11,828		)	2,472			18,174			60,963			(3,190		)
Interest expense, net of non-cash portion	9,900			8,511			25,984			26,126			17,522			7,958			34,808			16,084
Adjusted EBITDA attributable to non-controlling interest in subsidiaries	(8,508		)	(3,471		)	(21,018		)	(9,370		)	(11,147		)	(6,853		)	(21,325		)	(12,510		)
Adjusted EBITDA attributable to Matador Resources Company shareholders	$	155,392		$	84,833		$	409,984		$	227,444		$	144,104		$	137,338		$	268,943		$	254,592

Net income attributable to Matador Resources Company shareholders ~~increased~~decreased by ~~$2.8~~$23.1 million to ~~$17.8~~$36.8 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$15.0~~$59.8 million for the three months ended ~~September~~June 30, ~~2017.~~2018. This ~~increase~~decrease in net income attributable to Matador Resources Company shareholders ~~for the three months ended September 30, 2018 as compared to the three months ended September 30, 2017~~ is primarily attributable to ~~the increase in oil and natural gas revenues of $81.3 million, which was offset by~~(i) a ~~$9.0~~$13.3 million increase in ~~unrealized loss on derivatives,~~depletion, depreciation and amortization expenses, (ii) a ~~$39.6~~$10.1 million increase in ~~total expenses~~interest expense and (iii) a $12.9 million increase in the ~~$31.2~~deferred income tax provision between the two periods. This decrease was partially offset by an increase of $3.7 million from realized loss to realized gain on derivatives and an increase of $4.7 million in ~~prepayment premium~~unrealized gain on ~~extinguishment of debt.~~derivatives.

Net income attributable to Matador Resources Company shareholders ~~increased~~decreased by ~~$50.0~~$99.9 million to ~~$137.5~~$19.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$87.5~~$119.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. This ~~increase~~decrease in net income attributable to Matador Resources Company shareholders ~~for the nine months ended September 30, 2018 as compared to the nine months ended September 30, 2017~~ is primarily attributable to (i) a $51.4 million decrease from unrealized gain to unrealized loss on derivatives, (ii) a $34.8 million increase in depletion, depreciation and amortization expenses, (iii) a $19.5 million increase in interest expense and (iv) an $11.8 million increase in the deferred income tax provision between the two periods. This decrease was partially offset by an increase of $11.2 million from realized loss to realized gain on derivatives, a $13.4 million increase in oil and natural gas revenues and an increase of ~~$243.7 million, which was offset by a $30.9 million decrease in unrealized gain on derivatives, a $123.6 million increase in total expenses and the $31.2~~$19.7 million in ~~prepayment premium on extinguishment of debt.~~third-party midstream services revenues.

Adjusted EBITDA, a non-GAAP financial measure, increased by ~~$70.6~~$6.8 million to ~~$155.4~~$144.1 million for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$84.8~~$137.3 million for the three months ended ~~September~~June 30, ~~2017.~~2018. This increase ~~in our Adjusted EBITDA~~ is primarily attributable to higher oil and natural gas production, ~~and higher~~partially offset by lower realized oil and natural gas prices for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to the three months ended ~~September~~June 30, ~~2017.~~2018.

Adjusted EBITDA, a non-GAAP financial measure, increased by ~~$182.5~~$14.4 million to ~~$410.0~~$268.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$227.4~~$254.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. This increase ~~in our~~

~~Adjusted EBITDA~~ is primarily attributable to higher oil and natural gas production, partially offset by lower realized oil and ~~higher oil~~gas prices for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Off-Balance Sheet Arrangements

From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. As of ~~September~~June 30, ~~2018,~~2019, the material off-balance sheet arrangements and transactions that we have entered into include (i) ~~operating lease agreements, (ii)~~ non-operated drilling commitments, ~~(iii)~~(ii) termination obligations under drilling rig contracts, ~~(iv)~~(iii) firm transportation, gathering, processing and disposal commitments and ~~(v)~~(iv) contractual obligations for which the ultimate settlement amounts are not fixed and determinable, such as derivative contracts that are sensitive to future changes in commodity prices or interest rates, gathering, treating, transportation and disposal commitments on uncertain volumes of future throughput, open delivery commitments and indemnification obligations following certain divestitures. Other than the off-balance sheet arrangements described above, the Company has no transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect the Company’s liquidity or availability of or requirements for capital resources. See “— Obligations and Commitments” below and Note 910 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for more information regarding our off-balance sheet arrangements. Such information is incorporated herein by reference.

Obligations and Commitments

We had the following material contractual obligations and commitments at ~~September~~June 30, ~~2018~~2019:


	Payments Due by Period										Payments Due by Period
(In thousands)	Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years		Total		Less Than 1 Year		1 - 3 Years		3 - 5 Years		More Than 5 Years
Contractual Obligations:
Revolving credit borrowings, including letters of credit⁽¹⁾	$	327,991	$	—	$	—	$	—	$	327,991
Borrowings under credit agreements and facilities, including letters of credit⁽¹⁾											$	474,871	$	—	$	—	$	474,871	$	—
Senior unsecured notes⁽²⁾	750,000		—		—		—		750,000		1,050,000		—		—		—		1,050,000
Office leases	21,035		2,647		5,388		5,604		7,396		28,112		3,724		7,963		8,415		8,010
Non-operated drilling commitments⁽³⁾	44,234		44,234		—				—		51,719		51,719		—				—
Drilling rig contracts⁽⁴⁾	32,790		30,771		2,019		—		—		39,127		23,870		15,257		—		—
Asset retirement obligations	29,634		928		1,106		2,229		25,371		32,242		1,556		2,441		537		27,708
Natural gas transportation, gathering and processing agreements with non-affiliates⁽⁵⁾	451,092		18,957		87,651		90,815		253,669		554,863		43,786		113,567		113,598		283,912
Gathering, processing and disposal agreements with San Mateo⁽⁶⁾	222,028		1,727		69,994		75,102		75,205		547,514		—		96,517		163,408		287,589
Natural gas construction contracts⁽⁷⁾	11,955		11,955		—		—		—
Natural gas engineering, construction and installation contract⁽⁷⁾											71,820		71,820		—		—		—
Total contractual cash obligations	$	1,890,759	$	111,219	$	166,158	$	173,750	$	1,439,632	$	2,850,268	$	196,475	$	235,745	$	760,829	$	1,657,219

__________________

(1)

The amounts included in the table above represent principal maturities only. At ~~September~~June 30, ~~2018~~2019, we had ~~$325.0~~$205.0 million in borrowings outstanding under our Credit Agreement and approximately ~~$3.0~~$13.6 million in outstanding letters of credit issued pursuant to the Credit Agreement. The Credit Agreement matures in October 2023. At June 30, 2019, San Mateo I had $240.0 million of borrowings outstanding under the San Mateo Credit Facility and approximately $16.2 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility. The San Mateo Credit Facility matures in December 2023. Assuming the amounts outstanding and interest rates of 3.64% and 4.16% (for the Credit Agreement and the San Mateo Credit Facility), respectively, at June 30, 2019, the interest expense is expected to be approximately $7.5 million and $10.0 million each year until maturity.


(2)	The amounts included in the table above represent principal maturities only. Interest expense on the ~~Original 2026~~$1.05 billion of Notes that were outstanding as of ~~September~~June 30, ~~2018~~2019 is expected to be approximately ~~$44.1~~$61.7 million each year until maturity.

(3)

At ~~September~~June 30, ~~2018,~~2019, we had outstanding commitments to participate in the drilling and completion of various non-operated wells. Our working interests in these wells are typically small, and certain of these wells were in progress at ~~September~~June 30, ~~2018.~~2019. If all of these wells are drilled and completed, we will have minimum outstanding aggregate commitments for our participation in these wells of approximately ~~$44.2~~$51.7 million at ~~September~~June 30, ~~2018,~~2019, which we expect to incur within the next ~~year.~~12 months.


(4)	We do not own or operate our own drilling rigs but instead enter into contracts with third parties for such drilling rigs. ~~See Note 9 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for more information regarding these contractual commitments.~~

(5)

~~In late 2015,~~From time to time, we ~~entered~~enter into ~~a 15-year fixed-fee~~agreements with third parties whereby we commit to deliver anticipated natural gas ~~gathering~~ and ~~processing agreement for a significant portion~~oil production and salt water from certain portions of our ~~operated natural gas production~~acreage for gathering, transportation, processing, fractionation, sales and, in ~~Loving County, Texas. In late 2017, we entered into an 18-year fixed-fee natural gas transportation agreement where we committed to deliver a portion~~the case of ~~the residue natural gas production at the tailgate~~salt water, disposal. Certain of the Black River Processing Plant to transport through the counterparty’s pipeline in Eddy County, New Mexico. In late 2017, we also entered into a fixed-fee NGL transportation and fractionation agreement whereby we committed to deliver our NGL production at the tailgate of the Black River Processing Plant. We have committed to deliver a minimum amount of NGLs to the counterparty upon construction and completion of a pipeline expansion and a fractionation facility by the counterparty, which is currently expected to be completed late in 2019. We have no rights to compel the counterparty to construct this pipeline extension or fractionation facility. If the counterparty does not construct the pipeline extension and fractionation facility, then we do not have any minimum volume commitments under the agreement. If the counterparty constructs the pipeline extension and fractionation facility on or prior to February 28, 2021, then we will have a commitment to deliver athese

agreements contain minimum ~~amount of NGLs for seven years following the completion of the pipeline extension and fractionation facility.~~volume commitments. If we do not meet ~~our NGL~~the minimum volume ~~commitment in any quarter during the seven-year commitment period,~~commitments under these agreements, we will be required to pay acertain deficiency fee per gallon of NGL deficiency. The amounts in the table assume that the seven-year period containing minimum NGL volume commitments begins in late 2019. In the second quarter of 2018, we entered into a 16-year, fixed fee natural gas transportation agreement that begins on October 1, 2019, whereby we committed to deliver a portion of the residue natural gas production at the tailgate of the Black River Processing Plant to transport through the counterparty’s pipeline. Additionally, in the second quarter of 2018, we entered into a short-term natural gas transportation agreement whereby we committed to deliver a portion of the residue natural gas production at the tailgate of the Black River Processing Plant to transport through the counterparty’s pipeline. Lastly, in the second quarter of 2018, we entered into a 10-year, fixed-fee natural gas sales agreement whereby we committed to deliver residue natural gas through the counterparty’s pipeline to the Texas Gulf Coast beginning on the in-service date for such pipeline, which is expected to be operational in late 2019.fees. See Note 910 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for more information ~~regarding~~about these contractual commitments.

(6)

In February 2017, in connection with the formation of San Mateo I, we dedicated our current and certain future leasehold interests in the Rustler Breaks and Wolf asset areas pursuant to 15-year, fixed-fee natural gas, oil and salt water gathering agreements and salt water disposal agreements. In addition, effective February 1, 2017, we dedicated our current and certain future leasehold interests in the Rustler Breaks asset area pursuant to a 15-year, fixed-fee natural gas processing agreement. In February 2019, in connection with the formation of San Mateo II, we dedicated our current and certain future leasehold interests in the Greater Stebbins Area and the Stateline asset area pursuant to 15-year, fixed-fee agreements for oil, natural gas and salt water gathering, natural gas processing and salt water disposal. See Note 910 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for more information ~~regarding~~about these contractual commitments.

(7)

Beginning in ~~May 2017,~~June 2019, a subsidiary of San Mateo II entered into ~~certain agreements~~an agreement with third parties for the engineering, procurement, construction and installation of an expansion of the Black River Processing Plant. In addition, during the first quarter of 2018, a subsidiary of San Mateo entered into agreements for additional field compression and an amine gas treatment unit to maximize the operation of the Black River Processing Plant.Plant, including required compression. See Note 910 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for more information ~~regarding~~about these contractual commitments.

General Outlook and Trends

In 2018 and 2019, oil prices generally improved from the lower prices we experienced in 2016 and 2017, although oil prices remained significantly below their most recent highs in 2014. For the three months ended ~~September~~June 30, ~~2018,~~2019, oil prices averaged ~~$69.51~~$59.96 per Bbl, ranging from a high of ~~$74.14~~$66.30 per Bbl in ~~early July~~late April to a low of ~~$65.01~~$51.14 per Bbl in ~~mid-August,~~mid-June, based upon the NYMEX West Texas Intermediate oil futures contract price for the earliest delivery date.

We realized a weighted average oil price of ~~$57.15~~$56.51 per Bbl ($~~58.97~~56.86 per Bbl including realized gains from oil derivatives) for our oil production for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$46.25~~$61.44 per Bbl ($~~46.47~~60.52 per Bbl including realized ~~gains~~losses from oil derivatives) for our oil production for the three months ended ~~September~~June 30, ~~2017.~~2018. At ~~October~~July 31, ~~2018,~~2019, the NYMEX West Texas Intermediate oil futures contract for the earliest delivery date had ~~declined~~decreased from the average price for the ~~third~~second quarter of ~~2018,~~2019, settling at ~~$65.31~~$58.58 per Bbl, which was also a ~~significant increase~~decrease as compared to ~~$54.38~~$68.76 per Bbl at ~~October~~July 31, ~~2017.~~2018.

For the three months ended ~~September~~June 30, ~~2018,~~2019, natural gas prices averaged ~~$2.87~~$2.51 per MMBtu, ranging from a high of approximately ~~$3.08~~$2.71 per MMBtu in ~~late September~~early April to a low of approximately ~~$2.72~~$2.19 per MMBtu in ~~mid-July,~~late June, based upon the NYMEX Henry Hub natural gas futures contract price for the earliest delivery date.

We realized a weighted average natural gas price of ~~$3.77~~$1.64 per Mcf (with no realized gains or losses from natural gas derivatives) for our natural gas production (including revenues attributable to NGLs) for the three months ended ~~September~~June 30, ~~2018,~~2019, as compared to ~~$3.42~~$3.38 per Mcf (with no realized gains or losses from natural gas derivatives) for our natural gas production (including revenues attributable to NGLs) for the three months ended ~~September~~June 30, ~~2017. Our weighted average natural gas price was positively impacted by increasing NGL revenues during the third quarter of 2018 as compared to the third quarter of 2017.~~2018. At ~~October~~July 31, ~~2018,~~2019, the NYMEX Henry Hub natural gas futures contract price for the earliest delivery date had ~~increased~~decreased from the average price for the ~~third~~second quarter of ~~2018,~~2019, settling at ~~$3.26~~$2.23 per MMBtu, which was also ~~an increase~~a decrease as compared to ~~$2.90~~$2.78 per MMBtu at ~~October~~July 31, ~~2017.~~2018.

The prices we receive for oil, natural gas and NGLs heavily influence our revenue, profitability, cash flow available for capital expenditures, access to capital and future rate of growth. Oil, natural gas and ~~NGLs are commodities, and therefore, their~~NGL prices are subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the markets for oil, natural gas and NGLs have been volatile and these markets will likely continue to be volatile in the future. Declines in oil, natural gas or NGL prices not only reduce our revenues, but could also reduce the amount of oil, natural gas and NGLs we can produce ~~economically.~~economically and, as a result, could have an adverse effect on our financial condition, results of operations, cash flows and reserves. We are uncertain if oil and natural gas prices may rise from their current levels, and, in fact, oil and natural gas prices may decrease in future periods.

From time to time, we use derivative financial instruments to mitigate our exposure to commodity price risk associated with oil, natural gas and NGL ~~prices and basis differentials.~~prices. Even so, decisions as to whether, at what price and what production volumes to hedge are difficult and depend on market conditions and our forecast of future production and oil, natural gas and NGL prices, and we may not always employ the optimal hedging strategy. This, in turn, may affect the liquidity that can be accessed through the borrowing base under our Credit Agreement and through the capital markets.

In addition, the prices we receive for our oil and natural gas production often reflect a discount to the relevant benchmark prices, such as the NYMEX West Texas Intermediate oil price or the NYMEX Henry Hub natural gas price. The difference between the benchmark price and the price we receive is called a differential. At ~~September~~June 30, ~~2018,~~2019, most of our oil production from the Delaware Basin was sold based on prices established in Midland, Texas, and most of our natural gas production from the Delaware Basin was sold based on prices established at the Waha Hub in far West Texas. During the ~~first~~second quarter of 2018, the price differentials for oil sold in Midland and natural gas sold at ~~the~~ Waha ~~Hub~~ compared to the benchmark prices for oil and natural gas, respectively, began to widen significantly and ~~these differentials widened further in~~continued to widen throughout most of the ~~second and third quarters.~~year. These widening basis differentials negatively impacted our oil and natural gas revenues ~~throughout~~in 2018.

During 2018, the ~~third~~Midland-Cushing (Oklahoma) oil price differential increased substantially from essentially no difference in the first quarter to as much as $16.00 per Bbl in late September but narrowed to about $5.00 per Bbl at the

beginning of 2019. The Midland-Cushing (Oklahoma) oil price differential narrowed further to less than $1.00 per Bbl during the first quarter of ~~2018, with~~2019 but widened again during the second quarter to levels experienced at the beginning of the year. The Midland-Cushing (Oklahoma) oil price ~~differentials reaching higher than ($16.00) per Bbl~~differential has narrowed again early in the third quarter of 2019 and may become positive in the future, although it is possible that this differential could widen further at certain times during the remainder of 2019.

Our realized price for our Delaware Basin natural gas production is exposed to the Waha-Henry Hub basis differential. This natural gas price ~~differentials reaching higher than ($1.25)~~differential increased significantly throughout 2018 from about $0.50 per MMBtu at the beginning of the year to between $1.00 and $2.00 per MMBtu for most of 2018, but reaching highs of greater than $4.00 per MMBtu for a brief period near the end of the year. The natural gas price differential narrowed to between $1.00 and $2.00 per MMBtu at the beginning of 2019 and remained there throughout much of the first quarter.

The natural gas basis differentials widened significantly in April 2019 for a short period of time, including a few days when natural gas was being sold at Waha for negative prices as high as ($7.00) to ($9.00) per MMBtu on a daily market basis, resulting, in part, from a number of simultaneous outages and maintenance projects impacting major pipelines in the area. Natural gas prices at Waha were positive for most of the latter part of April 2019, but daily market prices for natural gas sold at Waha reached negative levels of ($2.00) to ($3.00) per MMBtu in late May. During the ~~quarter. The oil price differentials have begun to narrow somewhat since September 30, 2018, but~~second quarter of 2019, the average daily Waha natural gas price was ($0.07) per MMBtu. In response to these basis differentials, ~~have widened further. These oil~~we temporarily shut in certain high gas-oil ratio wells and took other actions to mitigate the impact of these negative prices on our results. Daily market prices for natural gas ~~price differentials are~~sold at Waha were positive for the month of July, although prices at Waha remained well below Henry Hub prices.

The majority of our Delaware Basin natural gas production is expected to ~~negatively impact our oil and natural gas revenues~~remain exposed to the Waha-Henry Hub basis differentials until early in the fourth quarter of ~~2018.~~2019, when the Kinder Morgan Gulf Coast Express Pipeline Project (“GCX Pipeline”) is expected to become operational. We have secured firm natural gas transportation and sales on the GCX Pipeline for an average of approximately 110,000 to 115,000 MMBtu per day at a price based upon Houston Ship Channel pricing. Further, approximately 23% of our reported natural gas production in the second quarter of 2019 was attributable to the Haynesville and Eagle Ford shale plays, which are not exposed to Waha pricing. In addition, as a two-stream reporter, most of our natural gas volumes in the Delaware Basin are processed for NGLs, resulting in a further reduction in the reported natural gas volumes exposed to Waha pricing.

~~We anticipate that these~~These widening ~~price differentials could persist for 12 to 18 months or longer until additional~~ oil and natural gas pipeline capacity from West Texas to the Texas Gulf Coast and other end markets is completed; however, we can provide no assurances as to how long these widening differentials may persist, and these price differentials could widen further in future periods. At September 30, 2018, we had approximately 45% to 50% of our anticipated Delaware Basin oil production for the fourth quarter of 2018 hedged at a weighted average basis differential swap price of ($1.02) per barrel to help mitigate our exposure to these widening oil price basis differentials. See Note 7 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for a summary of these oil basis swaps. At September 30, 2018, we had no hedges in place to mitigate our exposure to basis differentials for our natural gas production in 2018 and no basis hedges in place for either oil or natural gas production in 2019 or beyond.

~~These widening~~ basis differentials are largely attributable to industry concerns regarding the near-term sufficiency of pipeline takeaway capacity for oil, natural gas and NGL production in the Delaware Basin. At ~~October~~July 31, ~~2018,~~2019, we had not experienced material pipeline-related interruptions to our oil, natural gas or NGL ~~production during 2018.~~production. During the third quarter of 2018, shortages of NGL fractionation capacity were experienced by certain operators in the Delaware Basin and elsewhere. WeAlthough we did not ~~experience such~~encounter fractionation capacity problems ~~in the third quarter of 2018,~~then and ~~although we~~ do not expect to encounter ~~fractionation capacity~~such problems going forward, we can provide no assurances that such problems will not arise. If we do experience any interruptions with takeaway capacity or NGL fractionation, our oil and natural gas revenues, business, financial condition, results of operations and cash flows could be adversely affected.

~~Coinciding with~~We anticipate that the ~~improvements~~volatility in these oil and natural gas ~~prices since the latter part of 2016, we have experienced~~ price ~~increases from certain of our service providers for some~~differentials could persist throughout much of the ~~products and services we use in our drilling, completion and production operations. If~~remainder of 2019 or longer until additional oil and natural gas ~~prices remain at their current levels or increase further, we could experience additional price increases for drilling, completion~~pipeline capacity from West Texas to the Texas Gulf Coast and ~~production products and services, although we~~other end markets is completed. We can provide no ~~estimates~~assurances as to how long these volatile differentials may persist, and as noted above, these price differentials could widen further in future periods. Should we experience future periods of negative pricing for natural gas as we did during the ~~magnitude~~second quarter of 2019, we may temporarily shut in certain high gas-oil ratio wells and take other actions to mitigate the impact on our realized natural gas prices and results. In addition, we have no derivative contracts in place to mitigate our exposure to these ~~increases.~~natural gas price differentials during the remainder of 2019 and have limited oil basis hedges in place for the remainder of 2019 and 2020.

Our oil and natural gas exploration, development, production, midstream and related operations are subject to extensive federal, state and local laws, rules and regulations. The regulatory burden on the oil and natural gas industry increases our cost of doing business and affects our profitability. Because these laws, rules and regulations are frequently amended or reinterpreted and new laws, rules and regulations are proposed or promulgated, we are unable to predict the future cost or impact of complying with the laws, rules and regulations to which we are, or will become, subject. For example, in early 2019, separate bills were introduced in the New Mexico Senate proposing to add a surtax on natural gas processors and proposing to place a moratorium on hydraulic fracturing. New Mexico’s governor also signed an executive order requiring a regulatory framework to ensure reductions of methane emissions. Although the bills relating to the moratorium on hydraulic fracturing and the tax on natural gas processors were not passed in the most recent legislative session, these and other laws, rules and regulations, if enacted, could have an adverse impact on our business, financial condition, results of operations and cash flows.

Like other oil and natural gas producing companies, our properties are subject to natural production declines. By their nature, our oil and natural gas wells will experience rapid initial production declines. We attempt to overcome these production

declines by drilling to develop and identify additional reserves, by exploring for new sources of reserves and, at times, by acquisitions. During times of severe oil, natural gas and NGL price declines, however, drilling ~~certain~~additional oil or natural gas wells may not be economic, and we may find it necessary to reduce capital expenditures and curtail drilling operations in order to preserve liquidity. A material reduction in capital expenditures and drilling activities could materially impact our production volumes, revenues, reserves, cash flows and our availability under our Credit Agreement.

We strive to focus our efforts on increasing oil and natural gas reserves and production while controlling costs at a level that is appropriate for long-term operations. Our ability to find and develop sufficient quantities of oil and natural gas reserves at economical costs is critical to our long-term success. Future finding and development costs are subject to changes in the costs of acquiring, drilling and completing our prospects.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Except as set forth below, there have been no material changes to the sources and effects of our market risk since December 31, ~~2017,~~2018, which are disclosed in Part II, Item 7A of the Annual Report and incorporated herein by reference.

Commodity price exposure. We are exposed to market risk as the prices of oil, natural gas and NGLs fluctuate as a result of changes in supply and demand and other factors. To partially reduce price risk caused by these market fluctuations, we have entered into derivative financial instruments in the past and expect to enter into derivative financial instruments in the future to cover a significant portion of our anticipated future production.

We typically use costless (or zero-cost) collars and/or swap contracts to manage risks related to changes in oil, natural gas and NGL prices. Traditional costless collars provide us with downside price protection through the purchase of a put option that is financed through the sale of a call option. Because the call option proceeds are used to offset the cost of the put option, these arrangements are initially “costless” to us. Participating three-way costless collars also provide the Company with downside price protection through the purchase of a put option, but they also allow the Company to participate in price upside through the purchase of a call option; the purchase of both the put option and the call option are financed through the sale of a call option. Because the proceeds from the call option sale are used to offset the cost of the purchased put and call options, these arrangements are also initially “costless” to the Company. In the case of a costless collar, the put option and the call option or options have different fixed price components. In a swap contract, a floating price is exchanged for a fixed price over a specified period, providing downside price protection.

We record all derivative financial instruments at fair value. The fair value of our derivative financial instruments is determined using purchase and sale information available for similarly traded securities. At ~~September~~June 30, ~~2018, Royal Bank of Canada,~~2019, The Bank of Nova Scotia, BMO Harris Financing (Bank of Montreal) and SunTrust Bank (or affiliates thereof) were the counterparties for all of our derivative instruments. We have considered the credit standing of the counterparties in determining the fair value of our derivative financial instruments. See Note 78 to the interim unaudited condensed consolidated financial statements in this Quarterly Report for a summary of our open derivative financial instruments at ~~September~~June 30, ~~2018.~~2019. Such information is incorporated herein by reference.

Item 4. ~~Controls and Procedures~~

~~Evaluation of Disclosure~~ Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, we evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~September~~June 30, ~~2018~~2019 to ensure that (i) information required to be disclosed in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that (ii) information required to be disclosed under the Exchange Act is accumulated and communicated to the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls during the three months ended ~~September~~June 30, ~~2018~~2019 that have materially affected or are reasonably likely to have a material effect on our internal control over financial reporting.

Part II — OTHER INFORMATION

Item 1. Legal Proceedings

We are party to several ~~lawsuits~~legal proceedings encountered in the ordinary course of business. While the ultimate outcome and impact on us cannot be predicted with certainty, in the opinion of management, it is remote that these ~~lawsuits~~legal proceedings will have a material adverse impact on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors

We are subject to various risks and uncertainties in the course of our business. For a discussion of such risks and uncertainties, please see “Item 1A. Risk Factors” in the Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended ~~September~~June 30, ~~2018,~~2019, the Company re-acquired shares of common stock from certain employees in order to satisfy the employees’ tax liability in connection with the vesting of restricted stock.

Period
Total Number of Shares Purchased⁽¹⁾
Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs
July 1, 2018 to July 31, 2018 4,713
$ 31.63
—
—
August 1, 2018 to August 31, 2018 37,828
32.05
—
—
September 1, 2018 to September 30, 2018 2,827
32.81
—
—
Total 45,368
$ 32.05
—
—



Period	Total Number of Shares Purchased⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs
April 1, 2019 to April 30, 2019	1,526	$	20.04	—	—
May 1, 2019 to May 31, 2019	1,460	$	19.03	—	—
June 1, 2019 to June 30, 2019	1,026	$	19.00	—	—
Total	4,012	$	19.41	—	—

_________________

(1) The shares were not re-acquired pursuant to any repurchase plan or program. The Company re-acquired shares of common stock from certain employees in order to satisfy the employees’ tax liability in connection with the vesting of restricted stock.


(1)	The shares were not re-acquired pursuant to any repurchase plan or program. The Company re-acquired shares of common stock from certain employees in order to satisfy the employees’ tax liability in connection with the vesting of restricted stock.

Item 6. Exhibits



Exhibit Number		Description

3.1		Certificate of Merger between Matador Resources Company (now known as MRC Energy Company) and Matador Merger Co. (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-1 filed on August 12, 2011).

~~3.2~~		Amended and Restated Certificate of Formation of Matador Resources Company (incorporated by reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017).

~~3.3~~3.2		Certificate of Amendment to the Amended and Restated Certificate of Formation of Matador Resources Company dated April 2, 2015 (incorporated by reference to Exhibit 3.3 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017).

~~3.4~~3.3		Certificate of Amendment to the Amended and Restated Certificate of Formation of Matador Resources Company effective June 2, 2017 (incorporated by reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017).

~~3.5~~3.4		Amended and Restated Bylaws of Matador Resources Company, as amended (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on February 22, 2018).

~~4.1~~10.1†		~~Indenture, dated August 21, 2018, by and among the~~Matador Resources Company ~~the Guarantors and Wells Fargo Bank, National Association, as trustee~~2019 Long-Term Incentive Plan (incorporated by reference to Exhibit ~~4.1~~99.1 to the ~~Current Report~~Registration Statement on Form ~~8-K~~S-8 filed on ~~August 21, 2018)~~June 6, 2019).

10.2†		Form of Restricted Stock Unit Award Agreement for director awards under the Matador Resources Company 2019 Long-Term Incentive Plan (filed herewith).

~~4.2~~10.3†		~~Registration Rights~~Form of Restricted Stock Unit Award Agreement ~~dated August 21, 2018, by and among~~for director awards with deferred delivery under the Matador Resources Company the Guarantors and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers named therein (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on August 21, 2018)2019 Long-Term Incentive Plan (filed herewith).

~~4.3~~10.4†		Registration Rights Agreement, dated October 4, 2018, by and among the Company, the Guarantors and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers named therein (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on October 4, 2018).

~~10.1~~		First Amendment to the Employment Agreement between Matador Resources Company and ~~Billy E. Goodwin (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended June 30, 2018)~~G. Gregg Krug (filed herewith).

~~10.2~~10.5†		First Amendment to the Amended and Restated Employment Agreement between Matador Resources Company and Bradley M. Robinson ~~(incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the period ended June 30, 2018)~~(filed herewith).

~~10.3~~		Purchase Agreement, dated as of August 7, 2018, by and among the Company, the Guarantors and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers named therein (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on August 9, 2018).

~~10.4~~		Purchase Agreement, dated as of October 1, 2018, by and among the Company, the Guarantors and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers named therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 4, 2018).

~~10.5~~		Eleventh Amendment to Third Amended and Restated Credit Agreement, dated as of August 7, 2018, by and among MRC Energy Company, as Borrower, the Lenders party thereto and Royal Bank of Canada, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 9, 2018).

~~10.6~~		Twelfth Amendment to Third Amended and Restated Credit Agreement, dated as of October 1, 2018, by and among MRC Energy Company, as Borrower, the Lenders party thereto and Royal Bank of Canada, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on October 4, 2018).

~~10.7~~		Thirteenth Amendment to Third Amended and Restated Credit Agreement, dated as of October 31, 2018, by and among MRC Energy Company, as Borrower, the Lenders party thereto and Royal Bank of Canada, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 1, 2018).

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).



32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101		The following financial information from Matador Resources Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2018~~2019 formatted in Inline XBRL ~~(eXtensible~~(Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets - Unaudited, (ii) the Condensed Consolidated Statements of Operations - Unaudited, (iii) the Condensed Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity - Unaudited, (iv) the Condensed Consolidated Statements of Cash Flows - Unaudited and (v) the Notes to Condensed Consolidated Financial Statements - Unaudited (submitted electronically herewith).

104		Cover Page Interactive Data File, formatted in Inline XBRL.

†		Indicates a management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		MATADOR RESOURCES COMPANY

Date: ~~November 1, 2018~~August 2, 2019	By:	/s/ Joseph Wm. Foran
		Joseph Wm. Foran
		Chairman and Chief Executive Officer



Date: ~~November 1, 2018~~August 2, 2019	By:	/s/ David E. Lancaster
		David E. Lancaster
		Executive Vice President and Chief Financial Officer

4745



Year		Redemption Price
2021		104.406%
2022		102.938%
2023		101.469%
2024 and thereafter		100.000%