Matador's Q3 Net Income Plunges 29% Amid Rising Costs

TL;DR

**Matador's Q3 earnings are a red flag, showing revenue growth can't outrun surging costs and debt, making it a risky bet right now.**

AI Summary

Matador Resources Co (MTDR) reported a net income of $176.364 million for the three months ended September 30, 2025, a significant decrease from $248.291 million in the same period of 2024, representing a 29% decline. For the nine months ended September 30, 2025, net income was $566.674 million, down from $670.789 million in 2024, a 15.5% decrease. Total revenues for the three months increased to $939.015 million from $899.783 million year-over-year, driven by higher oil and natural gas revenues of $810.241 million, up from $770.155 million. However, operating income fell to $305.979 million from $392.056 million, primarily due to increased expenses, including depletion, depreciation, and amortization rising to $305.354 million from $242.821 million. Interest expense also surged to $50.641 million from $36.169 million. The company's total assets grew to $11.646 billion as of September 30, 2025, from $10.850 billion at December 31, 2024, largely due to an increase in net property and equipment to $10.559 billion from $9.764 billion. Cash provided by operating activities increased to $1.950 billion for the nine months ended September 30, 2025, compared to $1.671 billion in the prior year.

Why It Matters

Matador's declining net income, despite revenue growth, signals potential margin compression and increased operational costs, which could impact investor returns. The substantial increase in depletion, depreciation, and amortization, alongside higher interest expenses, suggests significant capital deployment and potentially higher debt servicing costs, affecting future profitability. For employees, sustained profitability challenges could influence compensation and job security. Customers might see stable service due to continued midstream investments, but the broader market could view this as a sign of increasing cost pressures within the oil and gas sector, potentially affecting valuations of peer companies.

Risk Assessment

Risk Level: medium — The company's net income decreased by 29% for the three months ended September 30, 2025, to $176.364 million from $248.291 million in 2024, despite an increase in total revenues. This decline is primarily driven by a 24.7% increase in total expenses to $633.036 million from $507.727 million, including a significant rise in depletion, depreciation, and amortization by $62.533 million. Additionally, interest expense jumped by $14.472 million, indicating higher financing costs.

Analyst Insight

Investors should closely monitor Matador's expense management and debt levels in upcoming quarters. Given the significant increase in depletion, depreciation, and amortization, and interest expenses, a deeper dive into capital expenditure efficiency and debt repayment strategies is warranted before making further investment decisions.

Financial Highlights

debt To Equity

0.77

revenue

$939,015,000

operating Margin

32.6%

total Assets

$11,646,708,000

total Debt

$3,220,000,000

net Income

$176,364,000

eps

$1.42

gross Margin

N/A

cash Position

$20,150,000

revenue Growth

+4.4%

Revenue Breakdown

Key Numbers

• $176.364M — Net Income (Q3 2025) (29% decrease from $248.291M in Q3 2024)
• $566.674M — Net Income (9 Months 2025) (15.5% decrease from $670.789M in 9 Months 2024)
• $939.015M — Total Revenues (Q3 2025) (Increased from $899.783M in Q3 2024)
• $305.354M — Depletion, Depreciation & Amortization (Q3 2025) (Increased from $242.821M in Q3 2024)
• $50.641M — Interest Expense (Q3 2025) (Increased from $36.169M in Q3 2024)
• $11.646B — Total Assets (Sep 30, 2025) (Increased from $10.850B at Dec 31, 2024)
• $1.950B — Net Cash Provided by Operating Activities (9 Months 2025) (Increased from $1.671B in 9 Months 2024)
• $1.42 — Basic EPS (Q3 2025) (Decreased from $1.99 in Q3 2024)

Key Players & Entities

• Matador Resources Company (company) — independent energy company
• San Mateo Midstream, LLC (company) — midstream joint venture
• SEC (regulator) — Securities and Exchange Commission
• $176.364 million (dollar_amount) — Net income attributable to Matador Resources Company shareholders for Q3 2025
• $248.291 million (dollar_amount) — Net income attributable to Matador Resources Company shareholders for Q3 2024
• $939.015 million (dollar_amount) — Total revenues for Q3 2025
• $899.783 million (dollar_amount) — Total revenues for Q3 2024
• $305.354 million (dollar_amount) — Depletion, depreciation and amortization for Q3 2025
• $50.641 million (dollar_amount) — Interest expense for Q3 2025
• $11.646 billion (dollar_amount) — Total assets as of September 30, 2025

FAQ

Risk Factors

• Commodity Price Volatility [high — market]: The company's financial performance is highly sensitive to fluctuations in the prices of oil and natural gas. A significant decline in these prices, as experienced in prior periods, could materially and adversely affect revenues, profitability, and the carrying value of oil and natural gas properties. For the three months ended September 30, 2025, revenues were $939.015 million, an increase from $899.783 million in the prior year, but net income decreased 29% due to rising costs.
• Increased Operating Expenses [medium — operational]: Depletion, depreciation, and amortization (DD&A) expenses increased significantly to $305.354 million for Q3 2025 from $242.821 million in Q3 2024. This rise, coupled with increased interest expense from $36.169 million to $50.641 million, directly impacted operating income, which fell to $305.979 million from $392.056 million.
• Debt Management and Interest Expense [medium — financial]: The company's total long-term liabilities increased to $4.534 billion as of September 30, 2025, from $4.397 billion at December 31, 2024. Interest expense rose to $50.641 million in Q3 2025 from $36.169 million in Q3 2024, indicating a higher cost of debt or increased borrowing. Borrowings under the San Mateo Credit Facility increased to $815 million from $615 million.
• Environmental Regulations [medium — regulatory]: The company is subject to stringent federal, state, and local environmental laws and regulations. Compliance with these regulations requires significant capital expenditures and can impact operational flexibility. Asset retirement obligations increased to $139.120 million from $114.237 million, reflecting potential future environmental remediation costs.
• Midstream Infrastructure and Logistics [low — operational]: The company relies on third-party midstream infrastructure for the transportation and marketing of its oil and natural gas production. Disruptions or limitations in this infrastructure could impact the company's ability to deliver its products to market, affecting revenues. Midstream properties increased in cost to $1.926 billion from $1.683 billion.
• Derivative Instruments [low — financial]: Matador utilizes derivative instruments for hedging commodity prices. While intended to mitigate price volatility, these instruments can also result in gains or losses that impact financial results. Derivative instruments on the balance sheet increased significantly, with current assets showing $21.205 million and long-term liabilities $17.246 million as of September 30, 2025.

Industry Context

Matador Resources operates in the highly competitive U.S. oil and gas exploration and production sector. The industry is characterized by significant capital intensity, cyclical commodity prices, and evolving regulatory landscapes. Companies like Matador focus on acquiring and developing reserves in key basins, often leveraging advanced drilling and completion technologies to enhance production efficiency and reduce costs.

Regulatory Implications

The oil and gas industry faces increasing scrutiny regarding environmental impact and emissions. Matador must navigate complex federal, state, and local regulations concerning drilling, production, and waste disposal. Compliance requires ongoing investment and can lead to operational constraints or penalties if not managed effectively.

What Investors Should Do

1. Monitor DD&A and Interest Expense Trends
2. Analyze Debt Structure and Refinancing Risk
3. Evaluate Commodity Price Hedging Strategy
4. Assess Capital Allocation and Asset Growth

Glossary

Depletion, Depreciation and Amortization (DD&A)

The accounting process of allocating the cost of natural resources (depletion) and tangible assets (depreciation) or intangible assets (amortization) over their useful lives. For oil and gas companies, it represents the cost of extracting reserves and the wear and tear on equipment. (An increase in DD&A expenses to $305.354 million in Q3 2025 from $242.821 million in Q3 2024 significantly impacted net income, contributing to the reported decrease.)

Full-Cost Method

An accounting method used in the oil and gas industry where all costs associated with the acquisition, exploration, and development of oil and gas properties are capitalized and amortized on a units-of-production basis. This includes costs that might otherwise be expensed under other methods. (The company's 'Oil and natural gas properties, full-cost method' are valued at $13.875 billion (evaluated) and $1.796 billion (unproved and unevaluated) as of September 30, 2025, representing the bulk of its assets.)

Asset Retirement Obligation

A legal obligation associated with the retirement of tangible long-lived assets, such as plugging and abandoning wells or dismantling offshore platforms. The company must estimate and accrue for these future costs. (The increase in asset retirement obligations to $139.120 million from $114.237 million suggests potential future environmental compliance costs or increased operational scope.)

Non-controlling Interest

The portion of equity interest in a subsidiary that is not attributable to the parent company. It represents the ownership stake held by outside shareholders in consolidated subsidiaries. (The non-controlling interest in subsidiaries was $349.819 million as of September 30, 2025, a decrease from $368.283 million at December 31, 2024, indicating a slight reduction in external ownership of consolidated entities.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, Matador Resources Co. reported a 29% decrease in net income for Q3 2025 ($176.364M vs. $248.291M) and a 15.5% decrease for the nine months ended September 30, 2025 ($566.674M vs. $670.789M). While total revenues saw a modest increase to $939.015M in Q3 2025, this was offset by a substantial rise in depletion, depreciation, and amortization expenses, which grew by over 25% year-over-year, and a significant increase in interest expense. Total assets grew to $11.646B, primarily due to increased investment in property and equipment, while net cash provided by operating activities showed a healthy increase for the nine-month period.

Key Financial Figures

• $0.01 — ich registered Common Stock, par value $0.01 per share MTDR New York Stock Exchange

Filing Documents

• mtdr-20250930.htm (10-Q) — 1725KB
• a20250930mtdr10qex311.htm (EX-31.1) — 8KB
• a20250930mtdr10qex312.htm (EX-31.2) — 8KB
• a20250930mtdr10qex321.htm (EX-32.1) — 4KB
• a20250930mtdr10qex322.htm (EX-32.2) — 4KB
• 0001520006-25-000218.txt ( ) — 8119KB
• mtdr-20250930.xsd (EX-101.SCH) — 50KB
• mtdr-20250930_cal.xml (EX-101.CAL) — 87KB
• mtdr-20250930_def.xml (EX-101.DEF) — 277KB
• mtdr-20250930_lab.xml (EX-101.LAB) — 635KB
• mtdr-20250930_pre.xml (EX-101.PRE) — 437KB
• mtdr-20250930_htm.xml (XML) — 1208KB

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION 3

Financial Statements — Unaudited

Item 1. Financial Statements — Unaudited 3 Condensed Consolidated Balance Sheets at September 30, 2025 and December 31, 2024 3 Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three and Nine Months Ended September 30, 2025 and 2024 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 9 Notes to Condensed Consolidated Financial Statements 10

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 42

Controls and Procedures

Item 4. Controls and Procedures 43

— OTHER INFORMATION

PART II — OTHER INFORMATION 44

Legal Proceedings

Item 1. Legal Proceedings 44

Risk Factors

Item 1A. Risk Factors 44

Repurchase of Equity by the Company or Affiliates

Item 2. Repurchase of Equity by the Company or Affiliates 44

Other Information

Item 5. Other Information 44

Exhibits

Item 6. Exhibits 45

SIGNATURES

SIGNATURES 46 Table of Contents

— FINANCIAL INFORMATION

Part I — FINANCIAL INFORMATION

Financial Statements — Unaudited

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, 2025 December 31, 2024 ASSETS Current assets Cash $ 20,150 $ 23,033 Restricted cash 76,237 71,709 Accounts receivable Oil and natural gas revenues 301,798 331,590 Joint interest billings 236,614 260,555 Other 101,443 62,584 Derivative instruments 21,205 15,968 Lease and well equipment inventory 43,549 38,469 Prepaid expenses and other current assets 115,845 123,437 Total current assets 916,841 927,345 Property and equipment, at cost Oil and natural gas properties, full-cost method Evaluated 13,875,196 12,534,290 Unproved and unevaluated 1,796,468 1,702,203 Midstream properties 1,926,215 1,683,334 Other property and equipment 51,661 47,532 Less accumulated depletion, depreciation and amortization ( 7,089,632 ) ( 6,203,263 ) Net property and equipment 10,559,908 9,764,096 Other assets Derivative instruments 2,237 — Other long-term assets 167,722 158,668 Total other assets 169,959 158,668 Total assets $ 11,646,708 $ 10,850,109 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 125,624 $ 147,139 Accrued liabilities 548,362 441,484 Royalties payable 342,901 227,865 Amounts due to affiliates 36,714 30,544 Derivative instruments 2,518 — Advances from joint interest owners 119,481 83,338 Other current liabilities 81,591 64,987 Total current liabilities 1,257,191 995,357 Long-term liabilities Borrowings under Credit Agreement 285,000 595,500 Borrowings under San Mateo Credit Facility 815,000 615,000 Senior unsecured notes payable 2,119,554 2,114,908 Asset retirement obligations 139,120 114,237 Derivative instruments 17,246 — Deferred income taxes 1,041,242 847,666 Other long-term liabilities 116,575 110,009 Total long-term liabilities 4,533,737 4,397,320 Commitments and contingencies (see Note 10) Sh

View Full Filing

View this 10-Q filing on SEC EDGAR