Entering text into the input field will update the search result below

Matador Resources Company Is A Value Opportunity Right Now

Mar. 10, 2020 9:52 AM ETMatador Resources Company (MTDR)3 Comments
Cash-Centered Creep profile picture
Cash-Centered Creep


  • The coronavirus epidemic and the oil price war between the Saudis and the Russians have pummelled Matador's share price.
  • The firm has excellent growth prospects for the year ahead, a solid balance sheet, and consistently rising revenues.
  • It is trading at a 432% discount to fair value.

Even in the context of the massive sell-off in the oil markets yesterday, Matador Resources Company's (NYSE:MTDR) fall of 64.2% in share price was notable - and unjustified, in light of the underlying quality of the business itself. In my view, the sell-off has created a real value opportunity and one I am taking advantage of.

At close of market on 03/09/2020, Matador Resources Company was trading at $2.35 per share. Chart generated by FinViz.

The oil markets experienced a real hammering on 03/09/2020, a direct consequence of Saudi Arabia's response to the breakdown of OPEC negotiations last week regarding production cuts, which Russia opposed. Launching a price war to undercut Russia, Saudi Arabia lowered its own prices and hiked up its oil production.

The Saudi response to the breakdown of OPEC negotiations has tanked the oil markets. Image provided by Upnewsinfo.com.

The particular issue here is the coronavirus epidemic. With the global economy - and China in particular - stalled as a consequence of the outbreak, demand for crude oil has dwindled, and prices had already been falling before the Saudi announcement. The kingdom's decision to flood the market with oil at a time when supply is already outstripping demand has only exacerbated the issue.

Saudi Arabia's decision to flood the market with oil has sent prices into freefall. Chart generated by FinViz.

This situation is not one that is likely to last - it is likely a move by the Saudis to force the Russians back to the negotiating table. Financially, it is not a situation that would benefit either the Saudis or the Russians to prolong, as Jonathan Barratt, CIO of Probis Group, observed:

Saudis and other Middle Eastern producers have their budgetary constraints [and] Russia is starved for cash...So the dynamics of all those put together will mean

This article was written by

Cash-Centered Creep profile picture
Buy and hold, common stock investor focused on dividends and on value. Interested in various stocks that are suitable for long-term dividend investment. A Buffett admirer, but not a Buffett cultist, and not quite as creepy as my name implies - though certainly cash-centered!

Analyst’s Disclosure: I am/we are long MTDR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (3)

Prime leases and good management. No current debt due. IMO adding at $1.20 with potential for 6-12 mo HR. If SA and Rus negotiate, maybe sooner. Do your own research.

Other Side Of Trade profile picture
This Matador has been gored, and is in the OR right now. What are the chances it won't die on the table? Ask Senior Putan.
lol wut profile picture
Looking at 2019 MTDR had a negative "FCF" and a calculated (LT Debt)/(PDP Reserves) "Debt to PDP" of almost $22/BOE (Similar to OXY, CHK, SM, and OAS). If MTDR were delivering outstanding results two things would emerge 1) They would be at least FCF neutral to positive (like an EOG or CLR) 2) Their Debt to PDP ratio would not be rising and in fact should fall.

Considering they are currently FCF negative, their Debt to PDP has been rising, and their Debt to PDP is already extraordinarily high I wouldn't touch MTDR. Only way I would play it is as a short term levered play to oil prices.

"FCF" is basically their Net Cash Provided by Operations minus their O&G CapEx.

The BOE conversion is a $ weighted conversion not an energy weighted one which amounts to north of 21:1 instead of the traditional 6:1
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.