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What changed in Matador Resources Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Matador Resources Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+764 added−809 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in Matador Resources Co's 2023 10-K

764 paragraphs added · 809 removed · 672 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

260 edited+33 added−53 removed202 unchanged
Biggest changeIn this Annual 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), (ii) references to “Matador” refer solely to Matador Resources Company, (iii) references to “San Mateo” refer to San Mateo Midstream, LLC, collectively with its subsidiaries and (iv) references to “Pronto” refer to Pronto Midstream, LLC, and the “Pronto Acquisition” refers to the acquisition of Pronto by a subsidiary of the Company on June 30, 2022.
Biggest changeIn this Annual 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), (ii) references to “Matador” refer solely to Matador Resources Company, (iii) references to “Advance” refer to Advance Energy Partners Holdings, LLC, (iv) references to the “Initial Advance Acquisition” refer to the acquisition of Advance from affiliates of EnCap Investments L.P., including certain oil and natural gas producing properties, undeveloped acreage and midstream assets located primarily in Lea County, New Mexico and Ward County, Texas, that was completed by a subsidiary of the Company on April 12, 2023, (v) references to the “Advance Royalty Acquisition” refer to the acquisition of additional interests from affiliates of EnCap Investments L.P., including overriding royalty interests and royalty interests in certain oil and natural gas properties located primarily in Lea County, New Mexico, most of which were included in the Initial Advance Acquisition, (vi) references to the “Advance Acquisition” refer, collectively, to the Initial Advance Acquisition and the Advance Royalty Acquisition, (vii) references to “San Mateo” refer to San Mateo Midstream, LLC, collectively with its subsidiaries, (viii) references to “Pronto” refer to Pronto Midstream, LLC, together with its subsidiary, and (ix) references to the “Pronto Acquisition” refer to the acquisition of Pronto by a subsidiary of the Company on June 30, 2022.
We and others in the industry use PV-10 as a measure to compare the relative size and value of proved reserves held by companies and of the potential return on investment related to the companies’ properties without regard to the specific tax characteristics of such entities.
We and others in the industry use PV-10 as a measure to compare the relative size and value of proved reserves held by companies and of the potential return on investment related to the companies’ properties without regard to the specific tax characteristics of such entities.
We have also implemented real-time remote monitoring of vapor control systems through Supervisory Control And Data Acquisition (“SCADA”) equipment at a number of larger production facilities. These inspections are being conducted regularly, both by our staff and by third-party contractors, more frequently and at more locations than federal and state regulations require.
We have also implemented real-time remote monitoring of vapor control systems through Supervisory Control and Data Acquisition (“SCADA”) equipment at a number of our larger production facilities. These inspections are being conducted regularly, both by our staff and by third-party contractors, more frequently and at more locations than federal and state regulations require.
In addition to the financial benefits to us and our stakeholders of connecting oil, natural gas and water to pipelines, these pipeline connections have many other benefits, including the reduction in the number of trucks needed to transport the produced oil and water.
In addition to the financial benefits to us and our stakeholders of connecting oil, natural gas and produced water to pipelines, these pipeline connections have many other benefits, including the reduction in the number of trucks needed to transport the oil and produced water.
We plan to achieve our goal by, among other items, executing the following business strategies: • focus our exploration and development activities primarily on unconventional plays, including the Wolfcamp and Bone Spring plays in the Delaware Basin; • identify, evaluate and develop additional oil and natural gas plays as necessary to maintain a balanced portfolio of oil and natural gas properties; • continue to improve operational and cost efficiencies; • identify and develop midstream opportunities that support and enhance our exploration and development activities and that generate value for San Mateo and Pronto; • maintain our financial discipline; • return capital to shareholders through our dividend policy; • pursue opportunistic acquisitions, divestitures and joint ventures; and • provide the energy that society needs and do so in a manner that is safe, protects the environment and is consistent with the oil and natural gas industry’s best practices.
We plan to achieve our goal by, among other items, executing the following business strategies: • focus our exploration and development activities primarily on unconventional plays, including the Wolfcamp and Bone Spring plays in the Delaware Basin; • identify, evaluate and develop additional oil and natural gas plays as necessary to maintain a balanced portfolio of oil and natural gas properties; • continue to improve operational and cost efficiencies; • identify and develop midstream opportunities that support and enhance our exploration and development activities and that generate value for San Mateo and Pronto; • maintain our financial discipline; • return capital to shareholders through our dividend policy; • pursue opportunistic acquisitions, divestitures and joint ventures; and • provide the energy that society needs in a manner that is safe, protects the environment and is consistent with the oil and natural gas industry’s best practices.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information regarding these financing transactions. Midstream Highlights Matador conducts its midstream operations primarily through San Mateo, which is owned 51% by us and 49% by our joint venture partner, Five Point, and through Pronto, which is a wholly-owned subsidiary.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information regarding these financing transactions. Midstream Highlights Matador conducts its midstream operations primarily through San Mateo, which is owned 51% by us and 49% by our joint venture partner, Five Point, and through Pronto, which is our wholly-owned subsidiary.
We are then paid for the extracted liquids, or NGLs, based on either a negotiated percentage of the proceeds that are generated from the sale of the liquids or other negotiated pricing arrangements using then-current market pricing less fixed rate processing, transportation and fractionation fees. The prices we receive for our oil, natural gas and NGL production fluctuate widely.
We are then paid for the extracted NGLs based on either a negotiated percentage of the proceeds that are generated from the sale of NGLs or other negotiated pricing arrangements using then-current market pricing less fixed rate processing, transportation and fractionation fees. The prices we receive for our oil, natural gas and NGL production fluctuate widely.
Water Management Using improving technologies, we are able to take produced water from our existing wells and from third-party systems, treat the water and then reuse that water in our completions operations on new wells. This use of recycled water saves significant amounts of fresh water that would otherwise have been used for hydraulic fracturing operations.
Water Management Using improving technologies, we are able to take produced water from our existing wells and from third-party systems, treat the water and then reuse that water in our completions operations on new wells. Use of recycled water saves significant amounts of fresh water that would otherwise have been used for hydraulic fracturing operations.
We consider the vast majority of our Delaware Basin acreage position to be prospective for oil and liquids-rich targets in the Bone Spring and Wolfcamp formations. Other potential targets on certain portions of our acreage include the Brushy Canyon and Avalon formations, as well as the Abo, Strawn, Devonian, Penn Shale, Atoka and Morrow formations.
We consider the vast majority of our Delaware Basin acreage position to be prospective for oil and liquids-rich targets in the Bone Spring and Wolfcamp formations. Other potential targets on certain portions of our acreage include the Brushy Canyon and Avalon formations, as well as the Abo, Strawn, Devonian, Penn Shale, Atoka, Yeso and Morrow formations.
Various policy makers, regulatory agencies and political candidates at the federal, state and local levels have proposed restrictions on hydraulic fracturing, including its outright prohibition. Restrictions on hydraulic fracturing could also reduce the amount of oil and natural gas that we are ultimately able to produce.
Various policy makers, regulatory agencies and political candidates at the federal, state and local levels have proposed restrictions on hydraulic fracturing, including its outright prohibition. Restrictions on hydraulic fracturing could reduce the amount of oil and natural gas that we are ultimately able to produce.
We retain operational control of San Mateo and continue to operate the Delaware Midstream Assets, the expanded Black River Processing Plant and facilities that have been developed in the Greater Stebbins Area and the Stateline asset area.
We retain operational control of San Mateo and continue to operate the Delaware Midstream Assets, the expanded Black River Processing Plant and the other midstream facilities that have been developed in the Greater Stebbins Area and the Stateline asset area.
Estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas. (4) Includes potential future engineered drilling locations in the Wolfcamp, Bone Spring, Brushy Canyon and Avalon plays on our acreage in the Delaware Basin at December 31, 2022. (5) Includes one well producing oil from the Austin Chalk formation in La Salle County, Texas.
Estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas. (4) Includes potential future engineered drilling locations in the Wolfcamp, Bone Spring, Brushy Canyon and Avalon plays on our acreage in the Delaware Basin at December 31, 2023. (5) Includes one well producing oil from the Austin Chalk formation in La Salle County, Texas.
Members of our executive committee and members of the Operations and Engineering Committee of our Board of Directors review the reserves report and our reserves estimation process, and the independent audit of our reserves is reviewed by other members of our Board of Directors as well.
Members of our executive committee and members of the Operations and Engineering Committee of our Board of Directors (the “Board”) review the reserves report and our reserves estimation process, and the independent audit of our reserves is reviewed by other members of the Board as well.
Decreases in these commodity prices adversely affect the carrying value of our proved reserves and our revenues, profitability and cash flows. Short-term disruptions of our oil and natural gas production occur from time to time due to downstream pipeline system failure, capacity issues and scheduled maintenance, as well as maintenance and repairs involving our own well operations.
Decreases in these commodity prices adversely affect the carrying value of our proved reserves and our revenues, profitability and cash flows. Short-term disruptions of our oil and natural gas production occur from time to time due to downstream pipeline system failure, capacity issues and scheduled or unscheduled maintenance, as well as maintenance and repairs involving our own well operations.
Volumes for the years ended December 31, 2022 and 2021 do not include the full quantity of volumes that would have otherwise been delivered by certain San Mateo customers subject to minimum volume commitments (although partial deliveries were made in both years), but for which San Mateo recognized revenues during the years ended December 31, 2022 and 2021.
Volumes for the years ended December 31, 2023 and 2022 do not include the full quantity of volumes that would have otherwise been delivered by certain San Mateo customers subject to minimum volume commitments (although partial deliveries were made in both years), but for which San Mateo recognized revenues during the years ended December 31, 2023 and 2022.
In our Wolf asset area in Loving County, Texas, San Mateo gathers our natural gas production with the natural gas gathering system we retained following the sale of our wholly-owned subsidiary that owned certain natural gas gathering and processing assets in the Wolf asset area, including a cryogenic natural gas processing plant and approximately six miles of high-pressure gathering pipelines.
In the Wolf portion of the West Texas asset area in Loving County, Texas, San Mateo gathers our natural gas production with the natural gas gathering system we retained following the sale of our wholly-owned subsidiary that owned certain natural gas gathering and processing assets in the West Texas asset area, including a cryogenic natural gas processing plant and approximately six miles of high-pressure gathering pipelines.
We operate approximately 8% of the 11,600 gross (4,700 net) acres that we consider to be in the core area of the Haynesville shale play. All of our leasehold in the Haynesville and Cotton Valley plays in Northwest Louisiana was held by existing production at December 31, 2022.
We operate approximately 8% of the 11,600 gross (4,700 net) acres that we consider to be in the core area of the Haynesville shale play. All of our leasehold in the Haynesville and Cotton Valley plays in Northwest Louisiana was held by existing production at December 31, 2023.
(2) Standardized Measure represents the present value of estimated future net cash flows from proved reserves, less estimated future development, production, plugging and abandonment costs and income tax expenses, discounted at 10% per annum to reflect the timing of future cash flows. Standardized Measure is not an estimate of the fair market value of our properties.
(2) Standardized Measure represents the present value of estimated future net cash flows from proved reserves, less estimated future development, production, plugging and abandonment costs and income tax expenses, discounted at 10% to reflect the timing of future cash flows. Standardized Measure is not an estimate of the fair market value of our properties.
See “Risk Factors—Risks Related to Third Parties—Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire properties, market oil and natural gas, provide midstream services and secure trained personnel, and our competitors may use superior technology and data resources that we may be unable to afford.” 24 Table of Contents Environmental Emissions Mitigation We work to maximize the percentage of natural gas we capture from the production of each of our wells.
See “Risk Factors—Risks Related to Third Parties—Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire properties, market oil and natural gas, provide midstream services and secure trained personnel, and our competitors may use superior technology and data resources that we may be unable to afford.” Environmental Emissions Mitigation We work to maximize the percentage of natural gas we capture from the production of each of our wells.
(4) Standardized Measure represents the present value of estimated future net cash flows from proved reserves, less estimated future development, production, plugging and abandonment and income tax expenses, discounted at 10% per annum to reflect the timing of future cash flows. Standardized Measure is not an estimate of the fair market value of our properties.
(4) Standardized Measure represents the present value of estimated future net cash flows from proved reserves, less estimated future development, production, plugging and abandonment and income tax expenses, discounted at 10% to reflect the timing of future cash flows. Standardized Measure is not an estimate of the fair market value of our properties.
These asset teams are staffed with reservoir engineers who prepare reserves estimates at the end of each calendar quarter for the assets they manage. Our Vice President of Reservoir Engineering and the Reserves Team was primarily responsible for overseeing the preparation of our reserves estimates in 2022.
These asset teams are staffed with reservoir engineers who prepare reserves estimates at the end of each calendar quarter for the assets they manage. Our Vice President of Reservoir Engineering and the Reserves Team was primarily responsible for overseeing the preparation of our reserves estimates in 2023.
These operations are also subject to BLM rules regarding engineering and construction specifications for production facilities, safety procedures, the valuation of production, the payment of royalties, the removal of facilities, the posting of bonds, hydraulic fracturing, the control of air emissions and other areas of environmental protection.
These operations are also subject to BLM rules regarding engineering and construction specifications for production facilities, ability to commingle production, safety procedures, the valuation of production, the payment of royalties, the removal of facilities, the posting of bonds, hydraulic fracturing, the control of air emissions and other areas of environmental protection.
These locations have been identified for potential future drilling and were not producing at December 31, 2022. The total net engineered drilling locations are calculated by multiplying the gross engineered drilling locations in an operating area by our working interest participation in such locations.
These locations have been identified for potential future drilling and were not producing at December 31, 2023. The total net engineered drilling locations are calculated by multiplying the gross engineered drilling locations in an operating area by our working interest participation in such locations.
At December 31, 2022, the San Mateo Oil Pipeline Systems included crude oil gathering and transportation pipelines from points of origin in Eddy County, New Mexico and Loving County, Texas to interconnects with Plains and two trucking facilities.
At December 31, 2023, the San Mateo Oil Pipeline Systems included crude oil gathering and transportation pipelines from points of origin in Eddy County, New Mexico and Loving County, Texas to interconnects with Plains and two trucking facilities.
Largely as a result of these factors, we believe that we have increased our technical knowledge of drilling, completing and producing Delaware Basin wells. We expect the Delaware Basin will continue to be our primary area of focus in 2023.
Largely as a result of these factors, we believe that we have increased our technical knowledge of drilling, completing and producing Delaware Basin wells. We expect the Delaware Basin will continue to be our primary area of focus in 2024.
We expect our Delaware Basin production to increase in 2023 as we continue the delineation and development of these asset areas. During 2022, we achieved all five significant and important operational milestones in the Delaware Basin we set at the beginning of the year.
We expect our Delaware Basin production to increase in 2024 as we continue the delineation and development of these asset areas. During 2023, we achieved all five significant and important operational milestones in the Delaware Basin we set at the beginning of the year.
Our PV-10 at December 31, 2022, 2021 and 2020 may be reconciled to our Standardized Measure of discounted future net cash flows at such dates by adding the discounted future income taxes associated with such reserves to the Standardized Measure.
Our PV-10 at December 31, 2023, 2022 and 2021 may be reconciled to our Standardized Measure of discounted future net cash flows at such dates by adding the discounted future income taxes associated with such reserves to the Standardized Measure.
Our activities are subject to a variety of environmental laws and regulations, including but not limited to: the Oil Pollution Act of 1990 (the “OPA 90”), the Clean Water Act (the “CWA”), the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), the Resource Conservation and Recovery Act (“RCRA”), the Clean Air Act (the “CAA”), the Safe Drinking Water Act (the “SDWA”) and the Occupational Safety and Health Act (“OSHA”), as well as comparable state statutes and regulations.
Our activities are subject to a variety of environmental laws and regulations, including but not limited to: the Oil Pollution Act of 1990 (the “OPA 90”), the Clean Water Act (the “CWA”), the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), the Resource Conservation and Recovery Act (“RCRA”), the Clean Air Act (the “CAA”) and the Occupational Safety and Health Act (“OSHA”), as well as comparable state statutes and regulations.
At December 31, 2022, San Mateo had approximately 43 miles of large diameter natural gas gathering pipelines between the Black River Processing Plant and the Stateline asset area (approximately 24 miles) and the Greater Stebbins Area (approximately 19 miles).
At December 31, 2023, San Mateo had approximately 43 miles of large diameter natural gas gathering pipelines between the Black River Processing Plant and the Stateline asset area (approximately 24 miles) and the Greater Stebbins Area (approximately 19 miles).
The EISA, among other things, prohibits market manipulation by any person in connection with the purchase or sale of crude oil, gasoline or petroleum distillates at wholesale in contravention of such rules and regulations that the Federal Trade Commission may prescribe, directs the Federal Trade Commission to enforce the regulations and establishes penalties for violations thereunder.
The EISA, among other things, prohibits market manipulation by any person in connection with the purchase or sale of crude oil, gasoline or petroleum 27 Table of Contents distillates at wholesale in contravention of such rules and regulations that the Federal Trade Commission may prescribe, directs the Federal Trade Commission to enforce the regulations and establishes penalties for violations thereunder.
Our engineered well locations, at December 31, 2022, do not yet include all portions of our acreage position. Our identified well locations presume that multiple intervals may be prospective at any one surface location.
Our engineered well locations, at December 31, 2023, do not yet include all portions of our acreage position. Our identified well locations presume that multiple intervals may be prospective at any one surface location.
The expanded Black River Processing Plant supports our exploration and development activities in the Delaware Basin and, at December 31, 2022, was gathering and processing natural gas from the Stateline asset area and from the Greater Stebbins Area.
The expanded Black River Processing Plant supports our exploration and development activities in the Delaware Basin and, at December 31, 2023, was gathering and processing natural gas from the Stateline asset area and from the Greater Stebbins Area.
Oil production comprised 57% of our total production (using a conversion ratio of one Bbl of oil per six Mcf of natural gas) for each of the years ended December 31, 2022 and 2021.
Oil production comprised 57% of our total production (using a conversion ratio of one Bbl of oil per six Mcf of natural gas) for each of the years ended December 31, 2023 and 2022.
Our competitors in the oil and natural gas industry are generally subject to the same regulatory requirements and restrictions that affect our operations. 25 Table of Contents Texas, New Mexico, Louisiana and many other states require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration, development and production of oil and natural gas.
Our competitors in the oil and natural gas industry are generally subject to the same regulatory requirements and restrictions that affect our operations. Texas, New Mexico, Louisiana and many other states require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration, development and production of oil and natural gas.
Produced Water Gathering and Disposal Assets During 2022, San Mateo placed into service one commercial salt water disposal well in the Greater Stebbins Area, bringing San Mateo’s commercial salt water disposal well count in the Greater Stebbins Area to four.
Produced Water Gathering and Disposal Assets During 2023, San Mateo placed into service one commercial salt water disposal well in the Greater Stebbins Area, bringing San Mateo’s commercial salt water disposal well count in the Greater Stebbins Area to four.
Excluding the Twin Lakes asset area and the undeveloped acreage acquired in the Bureau of Land Management New Mexico Oil and Gas Lease Sale on September 5 and 6, 2018 (the “BLM Acquisition”), which has 10-year leases with favorable lease-holding provisions, our acreage position in the Delaware Basin was approximately 92% held by existing production at December 31, 2022.
Excluding the undeveloped acreage acquired in the Bureau of Land Management New Mexico Oil and Gas Lease Sale on September 5 and 6, 2018 (the “BLM Acquisition”), which has 10-year leases with favorable lease-holding provisions, and the Twin Lakes asset area, our acreage position in the Delaware Basin was approximately 96% held by existing production at December 31, 2023.
The midstream assets that were contributed to San Mateo included (i) San Mateo’s Black River cryogenic natural gas processing plant in Eddy County, New Mexico (the “Black River Processing Plant”) (before its expansions); (ii) one salt water disposal well and a related commercial salt water disposal facility in the Rustler Breaks asset area; (iii) three salt water disposal wells and related commercial salt water disposal facilities in the Wolf asset area and (iv) substantially all related oil, natural gas and produced water gathering systems and pipelines in both the Rustler Breaks and Wolf asset areas (collectively, the “Delaware Midstream Assets”).
The midstream assets that were contributed to San Mateo included (i) San Mateo’s Black River cryogenic natural gas processing plant in Eddy County, New Mexico (the “Black River Processing Plant”) (before its expansions); (ii) one salt water disposal well and a related commercial salt water disposal facility in the Rustler Breaks asset area; (iii) three salt water disposal wells and related commercial salt water disposal facilities in the West Texas asset area and (iv) substantially all related oil, natural gas and produced water gathering systems and pipelines in both the Rustler Breaks asset area and in Loving County, Texas (collectively, the “Delaware Midstream Assets”).
The Company and Five Point own 51% and 49% of San Mateo, respectively. San Mateo provides firm service to us, while also being a midstream service provider to other customers in and around our Stateline, Wolf and Rustler Breaks asset areas and the Greater Stebbins Area.
The Company and Five Point own 51% and 49% of San Mateo, respectively. San Mateo provides firm service to us, while also being a midstream service provider to other customers in and around our Stateline, West Texas and Rustler Breaks asset areas and the Greater Stebbins Area.
The following table sets forth, since 2019, proved undeveloped reserves converted to proved developed reserves during each year and the investments associated with these conversions (dollars in thousands).
The following table sets forth, since 2020, proved undeveloped reserves converted to proved developed reserves during each year and the investments associated with these conversions (dollars in thousands).
(4) Estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas. (5) Includes one well producing oil from the Austin Chalk formation in La Salle County, Texas. (6) Includes the Cotton Valley formation and shallower zones and also includes one well producing from the Frio formation in Orange County, Texas.
(4) Estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas. (5) Includes one well producing oil from the Austin Chalk formation in La Salle County, Texas. (6) Includes the Cotton Valley formation and shallower zones.
We expect to complete the review of fiscal year 2022 data from our ESG initiatives in the second half of 2023 in connection with the preparation of our 2022 Sustainability Report.
We expect to complete the review of fiscal year 2023 data from our ESG initiatives in the second half of 2024 in connection with the preparation of our 2023 Sustainability Report.
Wells are classified as oil wells or natural gas wells according to their predominant production stream. We had an approximate average working interest of 81% in all wells that we operated at December 31, 2022. For wells where we are not the operator, our working interests range from less than 1% to approximately 52% and average approximately 10%.
Wells are classified as oil wells or natural gas wells according to their predominant production stream. We had an approximate average working interest of 84% in all wells that we operated at December 31, 2023. For wells where we are not the operator, our working interests range from less than 1% to approximately 52% and average approximately 10%.
Our HSE group’s experience allows us to understand the technical issues faced by our field employees and contractors, as well as maintain an open dialogue with community leaders in the areas we operate about potential safety issues and mitigation efforts. Available Information Our Internet website address is www.matadorresources.com .
Our HSE group’s experience allows us to understand the technical issues faced by our field employees and contractors, as well as maintain an open dialogue with community leaders in the areas we operate about potential safety issues and mitigation efforts. 33 Table of Contents Available Information Our Internet website address is www.matadorresources.com .
Generally, we intend to conduct operations, make lease rental payments or produce oil and natural gas from wells in paying quantities, where required, prior to 23 Table of Contents expiration of various time periods in order to avoid lease termination.
Generally, we intend to conduct operations, make lease rental payments or produce oil and natural gas from wells in paying quantities, where required, prior to expiration of various time periods in order to avoid lease termination.
Since our inception, our exploration and development efforts have concentrated primarily on known hydrocarbon-producing basins with well-established production histories offering the potential for multiple-zone completions. The following table presents certain summary data for each of our operating areas as of and for the year ended December 31, 2022.
Since our inception, our exploration and development efforts have concentrated primarily on known hydrocarbon-producing basins with well-established production histories offering the potential for multiple-zone completions. 6 Table of Contents The following table presents certain summary data for each of our operating areas as of and for the year ended December 31, 2023.
Acreage Summary The following table sets forth the approximate acreage in which we held a leasehold, mineral or other interest at December 31, 2022.
Acreage Summary The following table sets forth the approximate acreage in which we held a leasehold, mineral or other interest at December 31, 2023.
See “Risk Factors—Risks Related to our Operations—Because our reserves and production are concentrated in a few core areas, problems with production in and markets for a particular area could have a material impact on our business.” Competition The oil and natural gas industry is highly competitive.
See “Risk Factors—Risks Related to our Operations—Because our reserves and production are concentrated in a few core areas, problems with production in and markets for a particular area could have a material impact on our business.” 23 Table of Contents Competition The oil and natural gas industry is highly competitive.
He received Bachelor of Science degrees in both Petroleum Engineering and Mechanical Engineering from Texas Tech University, is a licensed Professional Engineer in the state of Texas and has over ten years of industry experience.
He received Bachelor of Science degrees in both Petroleum Engineering and Mechanical Engineering from 20 Table of Contents Texas Tech University, is a licensed Professional Engineer in the state of Texas and has over ten years of industry experience.
See “Risk Factors—Risks Related to Laws and Regulations—Approximately 31% of our leasehold and mineral acres in the Delaware Basin is 26 Table of Contents located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.” Our sales of natural gas, as well as the revenues we receive from our sales, are affected by the availability, terms and costs of transportation.
See “Risk Factors—Risks Related to Laws and Regulations—Approximately 32% of our leasehold and mineral acres in the Delaware Basin is located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.” Pipeline Regulation Our sales of natural gas, as well as the revenues we receive from our sales, are affected by the availability, terms and costs of transportation.
On August 16, 2022, the Inflation Reduction Act created the Methane Emissions Reduction Program to incentivize methane emission reductions and imposes a fee on greenhouse gas (“GHG”) emissions from certain facilities that exceed specified emissions levels.
On August 16, 2022, the Inflation Reduction Act created the Methane Emissions Reduction Program to incentivize methane emission reductions and impose a fee on greenhouse gas emissions from certain facilities that exceed specified emissions levels.
Natural gas gathering and processing volumes for the years ended December 31, 2022 and 2021 do not include the full quantity of volumes that would have otherwise been delivered by certain 12 Table of Contents San Mateo customers subject to minimum volume commitments (although partial deliveries were made in both years), but for which San Mateo recognized revenues.
Natural gas gathering and processing volumes for the years ended December 31, 2023 and 2022 do not include the full quantity of volumes that would have otherwise been delivered by certain San Mateo customers subject to minimum volume commitments (although partial deliveries were made in both years), but for which San Mateo recognized revenues.
While we do not believe that costs we incur for compliance with environmental regulations and remediating previously or currently owned or operated properties will be material, we cannot provide any assurances that these costs will not result in material expenditures that adversely affect our profitability.
While we do not believe that costs we incur for compliance with environmental regulations and remediating previously or currently owned or operated 32 Table of Contents properties will be material, we cannot provide any assurances that these costs will not result in material expenditures that adversely affect our profitability.
Also in November 2022, the BLM proposed a new rule designed to reduce natural gas waste through limitation of certain oil and natural gas 30 Table of Contents production activities and the imposition of more stringent royalty obligations on natural gas that is “avoidably lost” during operations.
In November 2022, the BLM proposed a new rule designed to reduce natural gas waste through limitation of certain oil and natural gas production activities and the imposition of more stringent royalty obligations on natural gas that is “avoidably lost” during operations.
Under these protocols, applications for salt water disposal well permits in certain areas of New Mexico with recent 31 Table of Contents seismic activity require enhanced review prior to approval.
Under these protocols, applications for salt water disposal well permits in certain areas of New Mexico with recent seismic activity require enhanced review prior to approval.
Low oil, natural gas and NGL prices and the continued volatility in these prices may adversely affect our financial condition and our ability to meet our capital expenditure requirements and financial obligations.” The prices we receive for our oil and natural gas production often reflect a discount to the relevant benchmark prices, such as the NYMEX WTI oil price or the NYMEX Henry Hub natural gas price.
Low oil, natural gas and NGL prices and the continued volatility in these prices may adversely affect our financial condition and our ability to meet our capital expenditure requirements and financial obligations.” 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 (“WTI”) oil price or the NYMEX Henry Hub natural gas price.
During 2022, San Mateo closed seven new midstream transactions with oil and natural gas producers and other counterparties in Eddy County, New Mexico, which are expected to generate additional natural gas gathering and processing, oil gathering and transportation and water handling volumes in future periods.
During 2023, San Mateo closed new midstream transactions with oil and natural gas producers and other counterparties in Eddy County, New Mexico, which are expected to generate additional natural gas gathering and processing and water handling volumes in future periods.
At December 31, 2022, approximately 1% of our proved oil and natural gas reserves would be impacted by the expirations of this undeveloped acreage. Drilling Results The following table summarizes our drilling activity for the years ended December 31, 2022, 2021 and 2020 .
At December 31, 2023, approximately 3% of our proved oil and natural gas reserves would be impacted by the expirations of this undeveloped acreage. Drilling Results The following table summarizes our drilling activity for the years ended December 31, 2023, 2022 and 2021 .
The CWA and comparable state statutes provide for civil, criminal and administrative penalties for any unauthorized discharges of oil and other pollutants and impose liability for the costs of removal or remediation of contamination resulting from such discharges. In September 2015, a rule issued by the Environmental Protection Agency (the “EPA”) and U.S.
The CWA and comparable state statutes provide for civil, criminal and administrative penalties for any unauthorized discharges of oil and other pollutants and impose liability for the costs of removal or remediation of contamination resulting from such discharges. In September 2015, a rule issued by the EPA and U.S.
At December 31, 2022, San Mateo’s natural gas gathering systems included natural gas gathering pipelines and related compression and treating systems.
At December 31, 2023, San Mateo’s natural gas gathering systems included natural gas gathering pipelines and related compression and treating systems.
At December 31, 2022, we had tested a number of different producing horizons at various locations across our acreage position, including the Brushy Canyon, two benches of the Avalon, two benches of the First Bone Spring, two benches of the Second Bone Spring, two benches of the Third Bone Spring, three benches of the Wolfcamp A, including the X and Y sands and the more organic, lower section of the Wolfcamp A, three benches of the Wolfcamp B, the Wolfcamp D, the Morrow and the Strawn.
At December 31, 2023, we had tested a number of different producing horizons at various locations across our acreage position, including the Brushy Canyon, two benches of the Avalon, two benches of the First Bone Spring, the Second Bone Spring Carbonate, three benches of the Second Bone Spring Sand, three benches of the Third Bone Spring Carbonate, two benches of the Third Bone Spring Sand, four benches of the Wolfcamp A, including the X, Y and Z sands and the more organic, lower section of the Wolfcamp A, three benches of the Wolfcamp B, the Wolfcamp D, the Strawn and the Morrow.
The Department of Transportation, through PHMSA, has established rules regarding integrity management programs for interstate 27 Table of Contents oil pipelines, including the Rustler Breaks Oil Pipeline System.
The Department of Transportation, through PHMSA, has established rules regarding integrity management programs for interstate oil pipelines, including the Rustler Breaks Oil Pipeline System.
San Mateo competes with other midstream companies that provide similar services in its areas of operations, and such companies may have legacy relationships with producers in those areas and may have a longer history of efficiency and reliability. Many of our competitors have substantially greater financial resources, staffs, facilities and other resources.
San Mateo and Pronto compete with other midstream companies that provide similar services in their areas of operations, and such companies may have legacy relationships with producers in those areas and may have a longer history of efficiency and reliability. Many of our competitors have substantially greater financial resources, staffs, facilities and other resources.
San Mateo also achieved important milestones in 2022, including the addition of produced water disposal capacity and being awarded several new customer contracts.
San Mateo also achieved important milestones in 2023, including the addition of produced water disposal capacity and being awarded new customer contracts.
At December 31, 2022, we had assigned no proved undeveloped reserves to our leasehold in the Eagle Ford shale. (2) These estimates were prepared by our engineering staff and audited by Netherland, Sewell & Associates, Inc., independent reservoir engineers.
At December 31, 2023, we had assigned no proved undeveloped reserves to our leasehold in the Eagle Ford shale or in Northwest Louisiana. (2) These estimates were prepared by our engineering staff and audited by Netherland, Sewell & Associates, Inc., independent reservoir engineers.
The following table summarizes changes in our estimated proved undeveloped reserves at December 31, 2022.
The following table summarizes changes in our estimated proved undeveloped reserves at December 31, 2023.
In connection with the formation of San Mateo, we dedicated to San Mateo current and certain future leasehold interests in the Rustler Breaks and Wolf asset areas pursuant to 15-year, fixed fee oil, natural gas and produced water gathering and produced water disposal agreements.
In connection with the formation of San Mateo, we dedicated to San Mateo current and certain future leasehold interests in the Rustler Breaks asset area and the Wolf portion of the West Texas asset area pursuant to 15-year, fixed fee oil, natural gas and produced water gathering and produced water disposal agreements.
The increase in oil and natural gas production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin throughout 2022, which offset declining production in the Eagle Ford shale.
The increase in oil and natural gas production was primarily attributable to the Advance Acquisition and our ongoing delineation and development drilling activities in the Delaware Basin throughout 2023, which offset declining production in the Eagle Ford shale.
In addition, we achieved several key capital resources objectives during the year, including generating free cash flow, paying down borrowings, increasing our quarterly cash dividend and earning performance incentives from Five Point Energy, LLC, our joint venture partner in San Mateo (“Five Point”).
In addition, we achieved several key capital resources objectives during the year, including generating free cash flow, paying down some of the borrowings that funded the Advance Acquisition, increasing our quarterly cash dividend and earning performance incentives from Five Point Energy, LLC (“Five Point”), our joint venture partner in San Mateo.
Factors that, directly or indirectly, cause price fluctuations include, but are not limited to: the domestic and foreign supply of, and demand for, oil, natural gas and NGLs; the actions of the Organization of Petroleum Exporting Countries, Russia and certain other oil-exporting countries (“OPEC+”) and state-controlled oil companies; the prices and availability of competitors’ supplies of oil and natural gas; the price and quantity of foreign imports; the impact of U.S. dollar exchange rates; domestic and foreign governmental regulations and taxes; speculative trading of oil and natural gas futures contracts; the availability, proximity and capacity of gathering, processing and transportation systems for oil, natural gas and NGLs and gathering and disposal systems for produced water; the availability of refining capacity; the prices and availability of alternative fuel sources; weather conditions and natural disasters, including hurricanes in the Gulf Coast region and severe cold weather in the Delaware Basin; political conditions in or affecting oil and natural gas producing regions or countries, including the United States, the Middle East, South America, Russia, Ukraine and China; the ongoing military conflict between Russia and Ukraine; domestic or global health concerns, including the outbreak of contagious or pandemic diseases such as COVID-19; the continued threat of terrorism and the impact of military action and civil unrest; public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulate oil and natural gas operations, including hydraulic fracturing activities; the level of global oil and natural gas inventories and exploration and production activity; the impact of energy conservation efforts; technological advances affecting energy consumption; and overall worldwide economic conditions.
Factors that, directly or indirectly, cause price fluctuations include, but are not limited to: the domestic and foreign supply of, and demand for, oil, natural gas and NGLs; the actions of the Organization of Petroleum Exporting Countries, Russia and certain other oil-exporting countries (“OPEC+”) and state-controlled oil companies; the prices and availability of competitors’ supplies of oil and natural gas; the price and quantity of foreign imports; the impact of U.S. dollar exchange rates; domestic and foreign governmental regulations and taxes; speculative trading of oil and natural gas futures contracts; the availability, proximity and capacity of gathering, processing and transportation systems for oil, natural gas and NGLs and gathering and disposal systems for produced water; the availability of refining capacity; the prices and availability of alternative fuel sources; weather conditions and natural disasters, including hurricanes and tropical storms in the Gulf Coast region and severe cold weather in the Delaware Basin; political conditions or conflicts in or affecting oil and natural gas producing regions or countries, including the United States, the Middle East, South America, Russia, Ukraine and China; the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, as well as the related actions of U.S. and other governments and governmental organizations relating to oil, natural gas and NGLs, including through sanctions, embargoes, import restrictions and commodity price caps; domestic or global health concerns, including the outbreak or resurgence of contagious or pandemic diseases such as COVID-19 and its variants; the continued threat of terrorism and the impact of military action and civil unrest; public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulate oil and natural gas operations, including hydraulic fracturing activities; the level of global oil and natural gas inventories and exploration and 22 Table of Contents production activity; the impact of energy conservation efforts; technological advances affecting energy consumption; and overall worldwide economic conditions.
The federal leases provide an 87.5% net revenue interest (“NRI”) as compared to approximately 75% NRI on most fee leases today. At the end of the first quarter of 2022, we achieved one of our five operational milestones we set for Matador in 2022 when we turned to sales nine gross (8.1 net) wells on the Rodney Robinson leasehold.
The federal leases provide an 87.5% net revenue interest (“NRI”) as compared to an approximately 75% NRI on most fee leases today. At the end of the first quarter of 2023, we achieved one of our five operational milestones we set for Matador in 2023 when we turned to sales eight gross (7.7 net) wells on the Rodney Robinson leasehold.
As of December 31, 2022, our leases are primarily fee and state leases with primary terms of three to five years and federal leases with primary terms of 10 years. We believe that our lease terms are similar to our competitors’ lease terms as they relate to both primary term and royalty interests.
As of December 31, 2023, 21 Table of Contents our leases are primarily fee and state leases with primary terms of three to five years and federal leases with primary terms of 10 years. We believe that our lease terms are similar to our competitors’ lease terms as they relate to both primary term and royalty interests.
The Lease Sale Litigation challenges the BLM’s decision to hold the lease sales based on alleged defects in the environmental reviews conducted under the National Environmental Policy Act (“NEPA”) in conjunction with those sales. In 2020, the New Mexico federal district court dismissed the case pending there.
The Lease Sale Litigation challenges the BLM’s decision to hold the lease sales based on alleged defects in the environmental reviews conducted under NEPA in conjunction with those sales. In 2020, the New Mexico federal district court dismissed the case pending there.
Northwest Louisiana — Haynesville Shale, Cotton Valley and Other Formations We did not conduct any operated drilling and completion activities on our leasehold properties in Northwest Louisiana during 2022, although we did participate in the drilling and completion of 11 gross (1.0 net) non-operated Haynesville shale wells that were turned to sales in 2022.
Northwest Louisiana — Haynesville Shale, Cotton Valley and Other Formations We did not conduct any operated drilling and completion activities on our leasehold properties in Northwest Louisiana during 2023, although we did participate in the drilling and completion of 22 gross (0.4 net) non-operated Haynesville shale wells that were turned to sales in 2023.
We received $171.5 million in connection with the formation of San Mateo and had the potential to earn up to $73.5 million in performance incentives over a five-year period, which in October 2020 was extended by an additional year. At February 21, 2023, we had earned all of the potential $73.5 million in performance incentives.
We received $171.5 million in connection with the formation of San Mateo and had the potential to earn up to $73.5 million in performance incentives over a five-year period, which in October 2020 was extended by an additional year to January 31, 2023. Through January 31, 2023, we had earned all of the potential $73.5 million in performance incentives.
See “Risk Factors—Risks Related to our Financial Condition—An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive for our production could adversely affect our business, financial condition, results of operations and cash flows.” For the years ended December 31, 2022, 2021 and 2020, we had three, three and two significant purchasers, respectively, that accounted for approximately 70%, 72% and 65%, respectively, of our total oil, natural gas and NGL revenues.
See “Risk Factors—Risks Related to our Financial Condition—A change in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive for our production could adversely affect our business, financial condition, results of operations and cash flows.” For the years ended December 31, 2023, 2022 and 2021, we had three significant purchasers that accounted for approximately 76%, 70% and 72%, respectively, of our total oil, natural gas and NGL revenues.
See “Risk Factors—Risks Related to our Operations—Insurance against all operational risks is not available to us.” Office Location Our corporate headquarters are located at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. 33 Table of Contents Human Capital At December 31, 2022, we had 360 full-time employees. We believe that our relationships with our employees are satisfactory.
See “Risk Factors—Risks Related to our Operations—Insurance against all operational risks is not available to us.” Office Location Our corporate headquarters are located at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. Human Capital At December 31, 2023, we had 395 full-time employees. We believe that our relationships with our employees are satisfactory.
At December 31, 2022, approximately two-thirds of these identified drilling locations are expected to have horizontal lateral lengths of approximately two miles or greater and approximately 80% are expected to have horizontal lateral lengths of approximately 1.5 miles or greater.
At December 31, 2023, approximately two-thirds of these identified drilling locations are expected to have horizontal lateral lengths of approximately two miles or greater and approximately 83% are expected to have horizontal lateral lengths of approximately 1.5 miles or greater.
At December 31, 2022, San Mateo had (i) a crude oil gathering and transportation system in the Greater Stebbins Area that was connected to the existing interconnect in the Rustler Breaks asset area via approximately 19 miles of various diameter crude oil pipelines and (ii) a crude oil gathering system in the Stateline asset area.
At December 31, 2023, San Mateo had (i) a crude oil gathering and transportation system in the Greater Stebbins Area that was connected to the existing interconnect in the Rustler Breaks asset area totaling approximately 80 miles of various diameter crude oil pipelines and (ii) a crude oil gathering system in the Stateline asset area.
These locations include 2,198 gross (1,296 net) locations that we anticipate operating as we hold a working interest of at least 25% in each of these locations.
These locations include 2,287 gross (1,437 net) locations that we anticipate operating as we hold a working interest of at least 25% in each of these locations.
Additionally, for our federal locations and as otherwise warranted, we conduct wildlife, biology and archeology surveys and undertake reviews for caves, karsts and potential hydrology considerations. During 2022, 89% of our gross operated oil production and 99% of our gross operated water production were connected to pipelines.
Additionally, for our federal locations and as otherwise warranted, we conduct wildlife, biology and archeology surveys and undertake reviews for caves, karsts and potential hydrology considerations. During 2023, 94% of our gross operated oil production and 98% of our gross operated water production were connected to pipelines.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, the possible occurrence of future events, such as decreases in the prices of oil and natural gas, or extended periods of such decreased prices, terrorist attacks, wars or combat peace-keeping missions, the outbreak of contagious or pandemic diseases, financial market disruptions, general economic recessions, oil and natural gas industry recessions, oil and natural gas company bankruptcies, accounting scandals, overstated reserves estimates by public oil companies and disruptions in the financial and capital markets, has caused financial institutions, credit rating agencies and the public to more closely review the financial statements, capital structures and spending and earnings of public companies, including energy companies.
Biggest changeOur cash flows from operations and access to capital are subject to a number of variables, including: • our estimated proved oil and natural gas reserves; • the amount of oil and natural gas we produce; • the prices at which we sell our production; • the costs of developing and producing our oil and natural gas reserves; • the costs of constructing, operating and maintaining our midstream facilities; • our ability to attract third-party customers for our midstream services; • our ability to acquire, locate and produce new reserves; • the ability and willingness of banks or other financial institutions to lend to us; and • our ability to access the equity and debt capital markets. 38 Table of Contents In addition, the possible occurrence of future events, such as decreases in the prices of oil and natural gas, or extended periods of such decreased prices, terrorist attacks, wars or combat peace-keeping missions, the outbreak or resurgence of contagious or pandemic diseases, financial market disruptions, failures of banks, general economic recessions, oil and natural gas industry recessions, oil and natural gas company bankruptcies, accounting scandals, overstated reserves estimates by public oil companies and disruptions in the financial and capital markets, has caused financial institutions, credit rating agencies and the public to more closely review the financial statements, capital structures and spending and earnings of public companies, including energy companies.
Our cash, operating cash flows, contributions from our joint venture partners and potential future borrowings, under our Credit Agreement, the San Mateo Credit Facility or otherwise, may not be sufficient to fund all of our future acquisitions or future capital expenditures.
Our cash, operating cash flows, contributions from our joint venture partners and potential future borrowings under our Credit Agreement, the San Mateo Credit Facility or otherwise may not be sufficient to fund all of our future capital expenditures or future acquisitions.
Alternatively, to fund acquisitions, increase our rate of growth, expand our midstream operations, develop our properties or pay for higher service costs, we may decide to alter or increase our capitalization substantially through the issuance of debt or equity securities, the sale of production payments, the sale or joint venture of midstream assets, oil and natural gas producing assets or leasehold interests, the sale or joint venture of oil and natural gas mineral interests, the borrowing of funds or otherwise to meet any increase in capital spending.
Alternatively, to develop our properties, pay for higher service costs, fund acquisitions, increase our rate of growth, or expand our midstream operations, we may decide to alter or increase our capitalization substantially through the issuance of debt or equity securities, the sale of production payments, the sale or joint venture of midstream assets, oil and natural gas producing assets or leasehold interests, the sale or joint venture of oil and natural gas mineral interests, the borrowing of funds or otherwise to meet any increase in capital spending.
Our failure to cure any title defects may delay or prevent us from utilizing the associated leasehold right or mineral interest, which may adversely impact our ability to increase production and reserves. In the future, we may suffer a monetary loss from title defects or title failure.
A failure to cure any title defects may delay or prevent us from utilizing the associated leasehold right or mineral interest, which may adversely impact our ability to increase production and reserves. In the future, we may suffer a monetary loss from title defects or title failure.
For example, our Credit Agreement requires us to maintain a debt to EBITDA ratio, which is defined as debt outstanding (net of up to $75 million of unrestricted cash and cash equivalents) divided by a rolling four quarter EBITDA calculation, of 3.50 or less and a current ratio, which is defined as current assets plus the unused availability under the Credit Agreement, divided by current liabilities, of equal to or greater than 1.0.
For example, our Credit Agreement requires us to maintain a debt to EBITDA ratio, which is defined as debt outstanding (net of up to $75.0 million of unrestricted cash and cash equivalents) divided by a rolling four quarter EBITDA calculation, of 3.50 to 1.0 or less and a current ratio, which is defined as current assets plus the unused availability under the Credit Agreement, divided by current liabilities, of equal to or greater than 1.0 to 1.0.
Similarly, the San Mateo Credit Facility requires San Mateo to meet a debt to EBITDA ratio, which is defined as consolidated total funded indebtedness outstanding (as defined in the San Mateo Credit Facility) divided by a rolling four quarter EBITDA calculation, of 5.00 or less, subject to certain exceptions.
Similarly, the San Mateo Credit Facility requires San Mateo to meet a debt to EBITDA ratio, which is defined as total consolidated funded indebtedness outstanding (as defined in the San Mateo Credit Facility) divided by a rolling four quarter EBITDA calculation, of 5.00 or less, subject to certain exceptions.
The San Mateo Credit Facility also requires San Mateo to maintain an interest coverage ratio, which is defined as a rolling four quarter EBITDA calculation divided by San Mateo’s consolidated interest expense for such period, of 2.50 or more.
The San Mateo Credit Facility also requires San Mateo to maintain an interest coverage ratio, which is defined as a rolling four quarter EBITDA calculation divided by San Mateo’s consolidated interest expense for such period, of 2.50 or more.
The San Mateo Credit Facility also restricts the ability of San Mateo to distribute cash to its members if San Mateo’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility.
The San Mateo Credit Facility also restricts the ability of San Mateo to distribute cash to its members if San Mateo’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility.
Historically, we have generated and carried forward net operating losses (“NOL”) in amounts sufficient to offset substantially all of our taxable income and, thus, have not incurred material federal or state income tax liabilities. As of December 31, 2022, we had utilized all or substantially all of our federal NOL carryovers.
Historically, we have generated and carried forward net operating losses (“NOL”) in amounts sufficient to offset substantially all of our taxable income and, thus, have not incurred material federal or state income tax liabilities. As of December 31, 2022, we had utilized all of our federal NOL carryovers.
Any failure by us to comply with any additional regulations could result in significant penalties and liability to us, and we cannot predict the potential impact to our business or the energy industry resulting from additional regulations. We may also be subject to regulatory investigations or litigation relating from cybersecurity issues.
Any failure by us to comply with any additional regulations could result in significant penalties and liability to us, and we cannot predict the potential impact to our business or the energy industry resulting from additional regulations. We may also be subject to regulatory investigations or litigation relating to cybersecurity issues.
Additionally, the IRA contains a number of revisions to the Internal Revenue Code, including (i) a 15% corporate minimum income tax for certain corporations with more than $1 billion in average adjusted financial statement income for the three-year tax period ending with the corporation’s current tax year, (ii) a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022 and (iii) expanded business tax credits and incentives for the development of clean energy projects and the production of clean energy.
Additionally, the IRA contains a number of revisions to the Internal Revenue Code, including (i) a 15% corporate minimum income tax for certain corporations with more than $1 billion in average adjusted financial statement income for the three-year tax period ending before the corporation’s current tax year, (ii) a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022 and (iii) expanded business tax credits and incentives for the development of clean energy projects and the production of clean energy.
Under Texas law, a shareholder who beneficially owns more than 20% of our voting stock, or an affiliated shareholder, cannot acquire us for a period of three years from the date this person became an affiliated shareholder, unless various conditions are met, such as approval of the transaction by our Board of Directors before this person became an affiliated shareholder or approval of the holders of at least two-thirds of our outstanding voting shares not beneficially owned by the affiliated shareholder.
Under Texas law, a shareholder who beneficially owns more than 20% of our voting stock, or an affiliated shareholder, cannot acquire us for a period of three years from the date this person became an affiliated shareholder, unless various conditions are met, such as approval of the transaction by our Board before this person became an affiliated shareholder or approval of the holders of at least two-thirds of our outstanding voting shares not beneficially owned by the affiliated shareholder.
In an interpretative guidance on climate change disclosures, the SEC indicated that climate change could have an effect on the severity of weather (including hurricanes and floods), sea levels, the arability of farmland and water availability and quality. If such effects were to occur, there is the potential for our exploration and production operations to be adversely affected.
In an interpretative guidance on climate change disclosures, the SEC indicated that climate change could have an effect on the severity of weather (including hurricanes, droughts and floods), sea levels, the arability of farmland and water availability and quality. If such effects were to occur, there is the potential for our exploration and production operations to be adversely affected.
Like many oil and natural gas companies, we are from time to time involved in various legal and other proceedings, such as title, royalty or contractual disputes, regulatory compliance matters and personal injury or property damage matters, in the ordinary course of our business. Such legal proceedings are inherently uncertain and their results cannot be predicted.
Like many oil and natural gas companies, we are from time to time involved in various legal and other proceedings in the ordinary course of business, such as title, royalty or contractual disputes, regulatory compliance matters and personal injury or property damage matters. Such legal proceedings are inherently uncertain and their results cannot be predicted.
If our joint venture partners do not fulfill their contractual and other obligations, the affected joint venture may be unable to operate according to its business plan, and we may be required to increase our level of financial commitment or seek third-party capital, which could dilute our ownership in the applicable joint venture.
In addition, if our joint venture partners do not fulfill their contractual, financial and other obligations, the affected joint venture may be unable to operate according to its business plan, and we may be required to increase our level of financial commitment or seek third-party capital, which could dilute our ownership in the applicable joint venture.
A component of our growth may come through acquisitions, and our failure to identify or complete future acquisitions successfully could reduce our earnings and hamper our growth. We may be unable to identify properties for acquisition or to make acquisitions on terms that we consider economically acceptable. There is intense competition for acquisition opportunities in our industry.
A component of our growth may come through acquisitions, and our failure to identify, complete or integrate future acquisitions successfully could reduce our earnings and hamper our growth. We may be unable to identify properties for acquisition or to make acquisitions on terms that we consider economically acceptable. There is intense competition for acquisition opportunities in our industry.
Factors that could affect our stock price or result in fluctuations in the market price or trading volume of our common stock include: • our actual or anticipated operating and financial performance and drilling locations, including oil and natural gas reserves estimates; • quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and cash flows, or those of companies that are perceived to be similar to us; • changes in revenue, cash flows or earnings estimates or publication of reports by equity research analysts; • declaration of dividends or adjustments to our dividend policy; • speculation in the press or investment community; • announcement or consummation of acquisitions, dispositions or joint ventures by us; • public reaction to our operations or plans, press releases, announcements and filings with the SEC; • the publication of research or reports by industry analysts regarding the Company, its competitors or our industry; • the enactment of federal, state or local laws, rules or regulations that restrict our ability to conduct our operations, such as the Biden Administration Federal Lease Orders; • sales of our common stock by the Company, directors, officers or other shareholders, or the perception that such sales may occur; • general financial market conditions and oil and natural gas industry market conditions, including fluctuations in the price of oil, natural gas and NGLs; • domestic or global health concerns, including the outbreak of contagious or pandemic diseases, such as COVID-19 and its variants; • the realization of any of the risk factors presented in this Annual Report; • the recruitment or departure of key personnel; • commencement of, involvement in or unfavorable resolution of litigation; • the success of our exploration and development operations, our midstream business (including San Mateo) and the marketing of any oil, natural gas and NGLs we produce; • changes in market valuations of companies similar to ours; and • domestic and international economic, legal and regulatory factors unrelated to our performance.
Factors that could affect our stock price or result in fluctuations in the market price or trading volume of our common stock include: • our actual or anticipated operating and financial performance and drilling locations, including oil and natural gas reserves estimates; • quarterly variations in the rate of growth of our financial indicators, such as net income per share, net income and cash flows, or those of companies that are perceived to be similar to us; • changes in revenue, cash flows or earnings estimates or publication of reports by equity research analysts; • declaration of dividends or adjustments to our dividend policy; • speculation in the press or investment community; • announcement or consummation of acquisitions, dispositions or joint ventures by us; • public reaction to our operations or plans, press releases, announcements and filings with the SEC; • the publication of research or reports by industry analysts regarding the Company, its competitors or our industry; • the enactment of federal, state or local laws, rules or regulations that restrict our ability to conduct our operations, such as the Biden Administration Federal Lease Orders; 63 Table of Contents • sales of our common stock by the Company, directors, officers or other shareholders, or the perception that such sales may occur; • general financial market conditions and oil and natural gas industry market conditions, including fluctuations in the price of oil, natural gas and NGLs; • domestic or global health concerns, including the outbreak or resurgence of contagious or pandemic diseases, such as COVID-19 and its variants; • the realization of any of the risk factors presented in this Annual Report; • the recruitment or departure of key personnel; • commencement of, involvement in or unfavorable resolution of litigation; • the success of our exploration and development operations, our midstream business (including San Mateo) and the marketing of any oil, natural gas and NGLs we produce; • changes in market valuations of companies similar to ours; and • domestic and international economic, legal and regulatory factors unrelated to our performance.
Climate Alliance, a bipartisan coalition of governors committed to reducing GHG emissions consistent with the goals of the Paris Agreement. The stated objective of the executive order is to achieve a statewide reduction in greenhouse gas emissions of at least 45% by 2030 as compared to 2005 levels.
Climate Alliance, a bipartisan coalition of governors committed to reducing greenhouse gas emissions consistent with the goals of the Paris Agreement. The stated objective of the executive order is to achieve a statewide reduction in greenhouse gas emissions of at least 45% by 2030 as compared to 2005 levels.
Although the completion of additional oil and natural gas pipeline capacity from West Texas to the Texas Gulf Coast and other end markets improved these price differentials in 2020 and 2021, these price differentials for natural gas widened in 2022 and could widen further in future periods.
Although the completion of additional oil and natural gas pipeline capacity from West Texas to the Texas Gulf Coast and other end markets improved these price differentials in 2020 and 2021, these price differentials for natural gas widened in 2022 and 2023 and could widen further in future periods.
Risks Related to Third Parties Financial difficulties encountered by our oil and natural gas purchasers, third-party operators or other third parties could decrease our cash flows from operations and adversely affect the exploration and development of our prospects and assets.
Risks Related to Third Parties Financial difficulties encountered by our oil, natural gas and NGL purchasers, third-party operators or other third parties could decrease our cash flows from operations and adversely affect the exploration and development of our prospects and assets.
If San Mateo borrows funds as a base rate loan, such borrowings will bear interest at a rate equal to the greatest of (i) the prime rate for such day, (ii) the Federal Funds Effective Rate (as defined in the San Mateo Credit Facility) on such day, plus 0.50% and (iii) the Adjusted Term SOFR Rate (as defined in the San Mateo Credit Facility) for a one month tenor, plus 1.00% plus, in each case, an amount ranging from 1.25% to 2.25% per annum depending on San Mateo’s Consolidated Total Leverage Ratio (as defined in the San Mateo Credit Facility).
If San Mateo borrows funds as a base rate loan, such borrowings will bear interest at a rate equal to the greatest of (i) the prime rate for such day, (ii) the Federal Funds Effective Rate (as defined in the San Mateo Credit Facility) on such day, plus 0.50% and (iii) the Adjusted Term SOFR Rate (as defined in the San Mateo Credit Facility) for a one month tenor, plus 1.00% plus, in each case, an amount ranging from 1.25% to 2.25% depending on San Mateo’s Consolidated Total Leverage Ratio (as defined in the San Mateo Credit Facility).
General Risk Factors • We may have difficulty managing growth in our business. • The loss of any key personnel, Board member or special Board advisor could disrupt our business operations. • A cyber incident could occur and result in information theft, data corruption, operational disruption or financial loss. • Our governing documents and Texas law may have anti-takeover effects that could prevent a change in control. • We operate in a litigious environment and may be involved in legal proceedings.
General Risk Factors • We may have difficulty managing growth in our business. • The loss of any key personnel or Board member could disrupt our business operations. • A cyber incident could occur and result in information theft, data corruption, operational disruption or financial loss. • Our governing documents and Texas law may have anti-takeover effects that could prevent a change in control. • We operate in a litigious environment and may be involved in legal proceedings.
Our Board of Directors is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock.
Our Board is authorized to issue shares of preferred stock in one or more series and to fix the voting powers, preferences and other rights and limitations of the preferred stock.
See “—Risks Related to our Financial Condition—An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive for our production could adversely affect our business, financial condition, results of operations and cash flows.” Our operations may also be adversely affected by weather conditions and events such as hurricanes, tropical storms and inclement winter weather, resulting in delays in drilling and completions, damage to facilities and equipment and the inability to receive equipment or access personnel and products at affected job sites in a timely manner.
See “—Risks Related to our Financial Condition—A change in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive for our production could adversely affect our business, financial condition, results of operations and cash flows.” Our operations may also be adversely affected by weather conditions and events such as hurricanes, tropical storms and inclement winter weather, resulting in delays in drilling and completions, damage to facilities and equipment and the inability to receive equipment or access personnel and products at affected job sites in a timely manner.
Risks Related to Third Parties • Financial difficulties encountered by purchasers, operators or other third parties could decrease our cash flows from operations. • The marketability of our production is dependent upon gathering, processing and transportation facilities. • We conduct a portion of our operations through joint ventures, including San Mateo, which subjects us to certain risks. • San Mateo’s and Pronto’s long-term success depends on their ability to obtain new sources of products, which depends on certain factors beyond their control. • Certain of our long-term contracts require us to pay fees to our service providers based on minimum volumes regardless of actual volume throughput and may limit our ability to use other service providers. • We do not own all of the land on which our midstream assets are located, which could disrupt our operations. • Competition in our industry is intense, and our competitors may use superior technology and data resources. • Strategic relationships upon which we may rely are subject to change. • We have limited control over activities on properties we do not operate.
Risks Related to Third Parties • Financial difficulties encountered by purchasers, operators or other third parties could decrease our cash flows from operations and adversely affect the exploration and development of our prospects and assets. • The marketability of our production is dependent upon gathering, processing and transportation facilities. • We conduct a portion of our operations through joint ventures, including San Mateo, which subjects us to certain risks. • San Mateo’s and Pronto’s long-term success depends on their ability to obtain new sources of products, which depends on certain factors beyond their control. • Certain of our long-term contracts require us to pay fees to our service providers based on minimum volumes regardless of actual volume throughput and may limit our ability to use other service providers. • We do not own all of the land on which our midstream assets are located, which could disrupt our operations. • Competition in our industry is intense, and our competitors may use superior technology and data resources. • Strategic relationships upon which we may rely are subject to change. • We have limited control over activities on properties we do not operate.
Our Credit Agreement, the San Mateo Credit Facility and the indenture governing our senior notes contain, and any future indebtedness we incur will likely contain, a number of restrictive covenants that impose significant operating and financial restrictions, including restrictions on our ability to engage in acts that may be in our best long-term interest.
Our Credit Agreement, the San Mateo Credit Facility and the indentures governing our senior notes contain, and any future indebtedness we incur will likely contain, a number of restrictive covenants that impose significant operating and financial restrictions, including restrictions on our ability to engage in acts that may be in our best long-term interest.
To manage our exposure to price risk, we, from time to time, enter into hedging arrangements, using primarily “costless collars” or “swaps” with respect to a portion of our future production. Costless collars provide us with downside price protection through the purchase of a put option, which is financed through the sale of a call option.
To manage our exposure to price risk, including price differential risk, we, from time to time, enter into hedging arrangements, using primarily “costless collars” or “swaps” with respect to a portion of our future production. Costless collars provide us with downside price protection through the purchase of a put option, which is financed through the sale of a call option.
See “—Risks Related to our 61 Table of Contents Operations—If we are unable to acquire adequate supplies of water for our drilling and hydraulic fracturing operations or are unable to dispose of the water we use at a reasonable cost and pursuant to applicable environmental rules, our ability to produce oil and natural gas commercially and in commercial quantities could be impaired.” Should climate change or other drought conditions occur, our ability to obtain water of a sufficient quality and quantity could be impacted and in turn, our ability to perform hydraulic fracturing operations could be restricted or made more costly.
See “—Risks Related to our Operations—If we are unable to acquire adequate supplies of water for our drilling and hydraulic fracturing operations or are unable to dispose of the water we use at a reasonable cost and pursuant to applicable environmental rules, our ability to produce oil and natural gas commercially and in commercial quantities could be impaired.” Should climate change or other drought conditions occur, our ability to obtain water of a sufficient quality and quantity could be impacted and in turn, our ability to perform hydraulic fracturing operations could be restricted or made more costly.
If San Mateo borrows funds as a SOFR loan, such borrowings will bear interest at a rate equal to (x) the Adjusted Term SOFR Rate for the chosen interest period plus (y) an amount ranging from 2.25% to 3.25% per annum depending on San Mateo’s Consolidated Total Leverage Ratio.
If San Mateo borrows funds as a SOFR loan, such borrowings will bear interest at a rate equal to (x) the Adjusted Term SOFR Rate for the chosen interest period plus (y) an amount ranging from 2.25% to 3.25% depending on San Mateo’s Consolidated Total Leverage Ratio.
Risks Relating to Our Common Stock • The price of our common stock has fluctuated substantially and may fluctuate substantially in the future. • Conservation measures and a negative shift in market perception towards the oil and natural gas industry could adversely affect us. • Future sales and offerings of our common stock could depress the price of our common stock. • Our directors and executive officers own a significant percentage of our equity, which could give them influence in corporate transactions and other matters, and their interests could differ from other shareholders. • The issuance of preferred stock could diminish the rights of holders of our common stock.
Risks Relating to Our Common Stock • The price of our common stock has fluctuated substantially and may fluctuate substantially in the future. • Attention to ESG and conservation matters and a negative shift in market perception towards the oil and natural gas industry could adversely affect us. • Future sales and offerings of our common stock could depress the price of our common stock. • Our directors and executive officers own a significant percentage of our equity, which could give them influence in corporate transactions and other matters, and their interests could differ from other shareholders. • The issuance of preferred stock could diminish the rights of holders of our common stock.
Should oil, natural gas or NGL prices decrease to economically unattractive levels and remain there for an extended period of time, we may elect to delay some of our exploration and development plans for our prospects, cease exploration or development activities on certain prospects due to the anticipated unfavorable economics from such activities or cease or delay further expansion of our midstream projects, each of which could have a material adverse effect on our business, financial condition, results of operations and reserves.
Should oil, natural gas or NGL prices decrease to economically unattractive levels and remain there for an extended period of time, we may elect to delay some of our exploration and development plans for our prospects, cease exploration or development activities on certain prospects due to the anticipated unfavorable economics from such activities or cease or delay further expansion of our midstream projects, each of which could have a material adverse effect on our business, financial 37 Table of Contents condition, results of operations and reserves.
We cannot predict the extent of the conflict’s effect on our business and results of operations as well as on the global economy and energy markets.
We cannot predict the extent of either conflict’s effect on our business and results of operations as well as on the global economy and energy markets.
Our Credit Agreement, the San Mateo Credit Facility and the indenture governing our outstanding senior notes include covenants limiting our ability to incur additional debt. If we were to proceed with one or more acquisitions involving the issuance of our common stock, our shareholders would suffer dilution of their interests.
Our Credit Agreement, the San Mateo Credit Facility and the indentures governing our outstanding senior notes include covenants limiting our ability to incur additional debt. If we were to proceed with one or more acquisitions involving the issuance of our common stock, our shareholders would suffer dilution of their interests.
If we borrow funds as a SOFR loan, such borrowings will bear interest at a rate equal to (x) the Adjusted Term SOFR Rate for the chosen interest period plus (y) an amount ranging from 1.75% to 2.75% per annum depending on the level of borrowings under the Credit Agreement.
If we borrow funds as a SOFR loan, such borrowings will bear interest at a rate equal to (x) the Adjusted Term SOFR Rate for the chosen interest period plus (y) an amount ranging from 1.75% to 2.75% depending on the level of borrowings under the Credit Agreement.
Risks Related to Laws and Regulations Approximately 31% of our leasehold and mineral acres in the Delaware Basin is located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.
Risks Related to Laws and Regulations Approximately 32% of our leasehold and mineral acres in the Delaware Basin is located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.
Any future exploration and development activities and equipment could also be adversely affected by extreme weather conditions such as hurricanes or freezing temperatures, which may cause a loss of production from temporary cessation of activity from regional power outages or lost or damaged facilities and equipment.
Any future exploration and development activities and equipment could also be adversely affected by severe weather conditions such as hurricanes or freezing temperatures, which may cause a loss of production from temporary cessation of activity from regional power outages or lost or damaged facilities and equipment.
These operations are also subject to BLM rules regarding engineering and construction specifications for production facilities, safety procedures, the valuation of production, the payment of royalties, the removal of facilities, the posting of bonds, hydraulic fracturing, the control of air emissions and other areas of environmental protection.
These operations are also subject to BLM rules regarding engineering and construction specifications for production facilities, ability to commingle production, safety procedures, the valuation of production, the payment of royalties, the removal of facilities, the posting of bonds, hydraulic fracturing, the control of air emissions and other areas of environmental protection.
The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including the inability to recruit and retain experienced managers, geoscientists, petroleum engineers, landmen, midstream professionals, attorneys and financial and accounting professionals, 66 Table of Contents could have a material adverse effect on our business, financial condition, results of operations and cash flows and our ability to execute our business plan in a timely fashion.
The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including the inability to recruit and retain experienced managers, geoscientists, petroleum engineers, landmen, midstream professionals, attorneys and financial and accounting professionals, could have a material adverse effect on our business, financial condition, results of operations and cash flows and our ability to execute our business plan in a timely fashion.
We expect that substantially all of our capital expenditures in 2023 will continue to be in the Delaware Basin, with the exception of amounts allocated to limited operations and certain non-operated well opportunities in our South Texas and Haynesville shale positions.
We expect that substantially all of our capital expenditures in 2024 will continue to be in the Delaware Basin, with the exception of amounts allocated to limited operations and certain non-operated well opportunities in our South Texas and Haynesville shale positions.
Furthermore, future environmental regulations and permitting requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing of wells could increase operating costs and cause delays, interruptions or termination of operations, the extent of which cannot be predicted, and all of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Furthermore, future environmental regulations and permitting requirements governing the withdrawal, storage and use of surface water or groundwater necessary for hydraulic fracturing of wells could 50 Table of Contents increase operating costs and cause delays, interruptions or termination of operations, the extent of which cannot be predicted, and all of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
These provisions include: • authorization for our Board of Directors to issue preferred stock without shareholder approval; • a classified Board of Directors so that not all members of our Board of Directors are elected at one time; • the prohibition of cumulative voting in the election of directors; and • a limitation on the ability of shareholders to call special meetings to those owning at least 25% of our outstanding shares of common stock.
These provisions include: 66 Table of Contents • authorization for our Board to issue preferred stock without shareholder approval; • a classified Board so that not all members of our Board are elected at one time; • the prohibition of cumulative voting in the election of directors; and • a limitation on the ability of shareholders to call special meetings to those owning at least 25% of our outstanding shares of common stock.
In addition, private parties, including the owners of properties upon which our wells are drilled or our facilities are located, the owners of properties adjacent to or in close proximity to those properties or non-governmental organizations such as environmental groups, may also pursue legal actions against us based on alleged non-compliance with certain of these laws, rules and regulations.
In addition, private parties, including the owners of properties upon which our wells are drilled or our facilities are located, the owners of properties adjacent to or in close proximity to those properties or non- 56 Table of Contents governmental organizations such as environmental groups, may also pursue legal actions against us based on alleged non-compliance with certain of these laws, rules and regulations.
The EPA finalized a more stringent National Ambient Air Quality Standard (“NAAQS”) for ozone in October 2015.
The EPA finalized a more stringent National Ambient Air Quality Standard for ozone in October 2015.
Furthermore, if we were required to shut in wells we might also be obligated to pay shut-in royalties to certain mineral interest owners in order to maintain our leases. 54 Table of Contents The disruption of our own or third-party facilities due to maintenance, weather or other factors could negatively impact our ability to market and deliver our oil, natural gas and NGLs.
Furthermore, if we were required to shut in wells, we might also be obligated to pay shut-in royalties to certain mineral interest owners in order to maintain our leases. The disruption of our own or third-party facilities due to maintenance, weather or other factors could negatively impact our ability to market and deliver our oil, natural gas and NGLs.
If we have insufficient production to meet the minimum volume commitments under any of 55 Table of Contents these agreements, our cash flow from operations will be reduced, which may require us to reduce or delay our planned investments and capital expenditures or seek alternative means of financing, all of which may have a material adverse effect on our results of operations.
If we have insufficient production to meet the minimum volume commitments under any of these agreements, our cash flow from operations will be reduced, which may require us to reduce or delay our planned investments and capital expenditures or seek alternative means of financing, all of which may have a material adverse effect on our results of operations.
If indebtedness under our Credit Agreement, the San Mateo Credit Facility or the indenture governing our outstanding senior notes is accelerated, there can be no assurance that we will have sufficient assets to repay such indebtedness.
If indebtedness under our Credit Agreement, the San Mateo Credit Facility or the indentures governing our outstanding senior notes is accelerated, there can be no assurance that we will have sufficient assets to repay such indebtedness.
In addition, problems affecting one well could adversely affect production from other wells on the same pad. As a result, multi-well pad drilling can cause delays in the scheduled commencement of production or interruptions in ongoing production. Additionally, infrastructure expansion, 51 Table of Contents including more complex facilities and takeaway capacity, could become challenging in project development areas.
In addition, problems affecting one well could adversely affect production from other wells on the same pad. As a result, multi-well pad drilling can cause delays in the scheduled commencement of production or interruptions in ongoing production. Additionally, infrastructure expansion, including more complex facilities and takeaway capacity, could become challenging in project development areas.
If we are not able to obtain the capital necessary to fund either of these contingencies or find a new farmout party, our results of operations and cash flows could be negatively affected.
If we are not able to obtain the capital necessary to fund either of these contingencies or find a new farmout party, our results of operations and cash flows could be adversely affected.
On August 16, 2022, the IRA created the Methane Emissions Reduction Program to incentivize methane emission reductions and, for the first time ever, imposes a fee on GHG emissions from certain facilities that exceed specified emissions levels.
On August 16, 2022, the IRA created the Methane Emissions Reduction Program to incentivize methane emission reductions and, for the first time ever, impose a fee on GHG emissions from certain facilities that exceed specified emissions levels.
Such extreme weather conditions could also impact access to our drilling and production facilities for routine operations, maintenance and repairs and the availability of and our access to, necessary third-party services, such as gathering, processing, compression and transportation services.
Such severe weather conditions could also impact access to our drilling and production facilities for routine operations, maintenance and repairs and the availability of and our access to, necessary third-party services, such as gathering, processing, compression and transportation services.
To develop our business, we endeavor to use the business relationships of our management, Board of Directors and special Board advisors to enter into strategic relationships, which may take the form of contractual arrangements with other oil and natural gas companies and service companies, including those that supply equipment and other resources that we expect to use in our business, as well as midstream companies and certain financial institutions.
To develop our business, we endeavor to use the business relationships of our management and Board to enter into strategic relationships, which may take the form of contractual arrangements with other oil and natural gas companies and service companies, including those that supply equipment and other resources that we expect to use in our business, as well as midstream companies and certain financial institutions.
We cannot assure you that our credit ratings will 47 Table of Contents remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances so warrant. Any future downgrade could increase the cost of any indebtedness incurred in the future.
We cannot assure you that our credit ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances so warrant. Any future downgrade could increase the cost of any indebtedness incurred in the future.
We may be required to alter or increase substantially our capitalization to finance these acquisitions through the use of cash on hand, the issuance of debt or equity securities, the sale of production payments, the sale or joint venture of midstream assets or oil and natural gas producing assets 43 Table of Contents or acreage, the borrowing of funds or otherwise.
We may be required to alter or increase substantially our capitalization to finance these acquisitions through the use of cash on hand, the borrowing of funds, the issuance of debt or equity securities, the sale of production payments, the sale or joint venture of midstream assets or oil and natural gas producing assets or acreage or otherwise.
In the course of such evaluations, an agency will prepare an environmental assessment that assesses 57 Table of Contents impacts that are “reasonably foreseeable” and have a “reasonably close causal relationship” to the agency action under review and, if necessary, will prepare a more detailed environmental impact statement that may be made available for public review and comment.
In the course of such evaluations, an agency will prepare an environmental assessment that assesses impacts that are “reasonably foreseeable” and have a “reasonably close causal relationship” to the agency action under review and, if necessary, will prepare a more detailed environmental impact statement that may be made available for public review and comment.
Texas and New Mexico have adopted regulations that require the disclosure of information regarding the substances used in the hydraulic fracturing process. Recently, bills have been introduced in the New Mexico legislature to place a moratorium on, ban or otherwise restrict hydraulic fracturing activities, including prohibiting the injection of fresh water in such operations.
For example, Texas and New Mexico have adopted regulations that require the disclosure of information regarding the substances used in the hydraulic fracturing process. Bills have been introduced in the New Mexico legislature to place a moratorium on, ban or otherwise restrict hydraulic fracturing activities, including prohibiting the injection of fresh water in such operations.
These transactions limit our potential gains if oil, natural gas or NGL prices rise above the maximum price established by the 42 Table of Contents call option or swap as applicable, and may offer protection if prices fall below the minimum price established by the put option or swap, as applicable, only to the extent of the volumes then hedged.
These transactions limit our potential gains if oil, natural gas or NGL prices rise above the maximum price established by the call option or swap, as applicable, and may offer protection if prices fall below the minimum price established by the put option or swap, as applicable, only to the extent of the volumes then hedged.
If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations. 56 Table of Contents We have limited control over activities on properties we do not operate. We are not the operator on some of our properties in Northwest Louisiana, particularly in the Haynesville shale.
If our strategic relationships are not established or maintained, our business prospects may be limited, which could diminish our ability to conduct our operations. We have limited control over activities on properties we do not operate. We are not the operator on some of our properties in Northwest Louisiana, particularly in the Haynesville shale.
Actual future prices and costs may be materially higher or lower than the prices and costs used for these estimates and will be affected by factors such as: • actual prices we receive for oil and natural gas; • actual costs and timing of development and production expenditures; • the amount and timing of actual production; and • changes in governmental regulations or taxation.
Actual future prices and costs may be materially higher or lower than the prices and costs used for these estimates and will be affected by factors such as: • actual prices we receive for oil and natural gas; 39 Table of Contents • actual costs and timing of development and production expenditures; • the amount and timing of actual production; and • changes in governmental regulations or taxation.
We may experience similar interruptions and processing capacity constraints as we continue to explore and develop our Wolfcamp, Bone Spring and other liquids-rich plays in the Delaware Basin in 2023.
We may experience similar interruptions and processing capacity constraints as we continue to explore and develop our Wolfcamp, Bone Spring and other liquids-rich plays in the Delaware Basin in 2024.
Further, on November 11, 2022, the EPA issued a supplemental notice of proposed rulemaking on methane and GHG emissions from new and existing sources in the oil and natural gas industry.
Further, on November 11, 2022, the EPA issued a supplemental notice of proposed rulemaking on methane and greenhouse gas emissions from new and existing sources in the oil and natural gas industry.
A breach of any of these covenants could result in an event of default under our Credit Agreement, the San Mateo Credit Facility and the indenture governing our outstanding senior notes.
A breach of any of these covenants could result in an event of default under our Credit Agreement, the San Mateo Credit Facility and the indentures governing our outstanding senior notes.
These rules could result in increased compliance costs for our operations, which in turn could have a material adverse effect on our business and results of operations. Under certain circumstances, the BLM may require our operations on federal leases to be suspended or terminated.
These rules could result in increased compliance costs for our operations, which in turn 55 Table of Contents could have a material adverse effect on our business and results of operations. Under certain circumstances, the BLM may require our operations on federal leases to be suspended or terminated.
On March 21, 2022, the SEC released proposed new rules that would require significantly expanded climate-related disclosures in SEC filings, including certain climate-related risks, climate-related metrics and GHG emissions, information about climate-related targets and goals, transition plans, if any, and extensive attestation requirements.
On March 21, 2022, the SEC released proposed new rules that would require significantly expanded climate-related disclosures in SEC filings, including certain climate-related risks, climate-related metrics and greenhouse gas emissions, information about climate-related targets and goals, transition plans, if any, and extensive attestation requirements.
Because the call option proceeds are used to offset the cost of the put option, these arrangements are initially “costless” to us. Three-way costless collars also provide us with downside price protection through the purchase of a put option, but they also allow us to participate in price upside through the purchase of a call option.
Because the call option proceeds are used to offset the cost of the put option, these arrangements are initially “costless” 40 Table of Contents to us. Three-way costless collars also provide us with downside price protection through the purchase of a put option, but they also allow us to participate in price upside through the purchase of a call option.
Our Credit Agreement, the San Mateo Credit Facility and the indenture governing our outstanding senior notes currently restrict our ability to dispose of assets and our use of the proceeds from such disposition.
Our Credit Agreement, the San Mateo Credit Facility and the indentures governing our outstanding senior notes currently restrict our ability to dispose of assets and our use of the proceeds from such disposition.
Certain covenants in our Credit Agreement and the indenture governing our outstanding senior notes may limit our ability to pay dividends or repurchase shares of our common stock.
Certain covenants in our Credit Agreement and the indentures governing our outstanding senior notes may limit our ability to pay dividends or repurchase shares of our common stock.
Furthermore, such facilities may become unavailable because of testing, turnarounds, line repair, maintenance, reduced operating pressure, lack of operating capacity, regulatory requirements and curtailments of receipt or deliveries due to insufficient capacity or because of damage from severe weather conditions or other operational issues.
Furthermore, such facilities may become unavailable because of testing, turnarounds, line 52 Table of Contents repair, maintenance, reduced operating pressure, lack of operating capacity, regulatory requirements and curtailments of receipt or deliveries due to insufficient capacity or because of damage from severe weather conditions or other operational issues.
See Note 12 to the consolidated financial statements in this Annual Report for a summary of our open derivative financial instruments at December 31, 2022.
See Note 12 to the consolidated financial statements in this Annual Report for a summary of our open derivative financial instruments at December 31, 2023.
Borrowings under the Credit Agreement are limited to the lowest of the borrowing base, maximum facility amount and elected borrowing commitment (subject to compliance with the covenant noted above).
Borrowings under the Credit Agreement are limited to the lowest of the borrowing base, maximum facility amount and elected borrowing commitment (subject to compliance with the covenants noted above).
Due to the concentration of our operations, we may be disproportionately exposed to the impact of delays or interruptions of production from our wells in our operating areas caused by transportation capacity constraints or interruptions, curtailment of production, availability of equipment, facilities, personnel 50 Table of Contents or services, significant governmental regulation, natural disasters, adverse weather conditions or plant closures for scheduled maintenance.
Due to the concentration of our operations, we may be disproportionately exposed to the impact of delays or interruptions of production from our wells in our operating areas caused by transportation capacity constraints or interruptions, curtailment of production, availability of equipment, facilities, personnel or services, significant governmental regulation, natural disasters, adverse weather conditions or plant closures for scheduled or unscheduled maintenance.
Should oil and natural gas prices remain at their current levels or increase, we expect to be subject to additional service cost inflation in future periods, which may increase our costs to drill, complete, equip and operate wells.
Should oil and natural gas prices remain at their current levels or increase, we expect to be subject to additional supply chain constraints and service cost inflation in future periods, which may increase our costs to drill, complete, equip and operate wells.
In addition, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. Losses could, therefore, occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage.
In addition, we may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. Losses could, therefore, occur for uninsurable 48 Table of Contents or uninsured risks or in amounts in excess of existing insurance coverage.
A challenge to the ozone precursor rule is currently pending in New Mexico state court. The EPA has begun adopting and implementing a comprehensive suite of regulations to restrict GHG emissions under existing provisions of the CAA and the recent authority of the IRA.
A challenge to the ozone precursor rule is currently pending in New Mexico state court. The EPA has begun adopting and implementing a comprehensive suite of regulations to restrict greenhouse gas emissions under existing provisions of the CAA and the recent authority of the IRA.
Finally, increasing attention to the risks of climate change has resulted in an increased possibility of lawsuits or investigations brought by public and private entities against oil and natural gas companies in connection with their greenhouse gas emissions.
Finally, increasing attention to the risks of climate change has resulted in an increased possibility of lawsuits or investigations brought by public 60 Table of Contents and private entities against oil and natural gas companies in connection with their greenhouse gas emissions.
The productivity and profitability of a well may be negatively affected by a number of additional factors, including the following: • general economic and industry conditions, including the prices received for oil and natural gas; • shortages of, or delays in, obtaining equipment, including hydraulic fracturing equipment, and qualified personnel; 48 Table of Contents • potential drainage of oil and natural gas from our properties by operations on adjacent properties; • the existence or magnitude of faults or unanticipated geological features; • loss of or damage to oilfield development and service tools; • accidents, equipment failures or mechanical problems; • title defects of the underlying properties; • increases in severance taxes; • adverse weather conditions that delay drilling activities or cause producing wells to be shut in; • domestic and foreign governmental regulations; and • proximity to and capacity of gathering, processing, transportation and disposal facilities.
The productivity and profitability of a well may be negatively affected by a number of additional factors, including the following: • general economic and industry conditions, including the prices received for oil and natural gas; • shortages of, or delays in, obtaining equipment, including hydraulic fracturing equipment, and qualified personnel; • potential drainage of oil and natural gas from our properties by operations on adjacent properties; • the existence or magnitude of faults or unanticipated geological features; • loss of or damage to oilfield development and service tools; • accidents, equipment failures or mechanical problems; • title defects of the underlying properties; • increases in severance taxes; • adverse weather conditions that delay drilling activities or cause producing wells to be shut in; • inflation in exploration, drilling, completion and production costs; • domestic and foreign governmental regulations; and • proximity to and capacity of gathering, processing, transportation and disposal facilities.
If we borrow funds as a base rate loan, such borrowings will bear interest at a rate equal to the greatest of (i) the prime rate for such day, (ii) the Federal Funds Effective Rate (as defined in the Credit Agreement) on such day, plus 0.50%, and (iii) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) for a one month tenor, plus 1.00%, plus, in each case, an amount ranging from 0.75% to 1.75% per annum depending on the level of borrowings under the Credit Agreement.
If we borrow funds as a base rate loan, such borrowings will bear interest at a rate equal to the greatest of (i) the prime rate for such day, (ii) the Federal Funds 44 Table of Contents Effective Rate (as defined in the Credit Agreement) on such day, plus 0.50%, and (iii) the Adjusted Term SOFR Rate (as defined in the Credit Agreement) for a one month tenor, plus 1.00%, plus, in each case, an amount ranging from 0.75% to 1.75% depending on the level of borrowings under the Credit Agreement.
Our success depends, to a large extent, on our ability to retain our key personnel, including our chairman and chief executive officer, management and technical team, the members of our Board and our special Board advisors, and the loss of any key personnel, Board member or special Board advisor could disrupt our business operations.
Our success depends, to a large extent, on our ability to retain our key personnel, including our chairman and chief executive officer, management and technical team and the members of our Board, and the loss of any key personnel or Board member could disrupt our business operations.
Risks Related to our Operations • Drilling for and producing oil and natural gas involve a high degree of operational and financial risk. • Our reserves and production are concentrated in a few core areas. • There is no guarantee that we will be successful in optimizing our spacing, drilling and completions techniques. • Certain of our properties are in areas that may have been partially depleted or drained by offset wells, and certain of our wells may be adversely affected by actions of other operators. • Multi-well pad drilling may result in volatility in our operating results. • The unavailability or high cost of drilling rigs, completion equipment and services, supplies and personnel could adversely affect our ability to establish and execute exploration and development plans within budget and on a timely basis. • We may be unable to acquire adequate supplies of water for our drilling and hydraulic fracturing operations or dispose of the water we use at a reasonable cost and pursuant to applicable environmental rules. • Regulatory changes could prevent our ability to continue to pool wells in accordance with our past practices. 35 Table of Contents • Midstream projects are subject to risks of construction delays and cost over-runs. • Our identified drilling locations are scheduled over several years, making them susceptible to uncertainties and lease expirations that could materially alter the occurrence or timing of their drilling. • The seismic data and other technologies we use cannot eliminate exploration risk.
Risks Related to our Operations • Drilling for and producing oil, natural gas and NGLs is highly speculative and involves a high degree of operational and financial risk. • Our operations are subject to operational hazards and risks, and insurance against all such risks is not available to us. • Our reserves and production are concentrated in a few core areas. • There is no guarantee that we will be successful in optimizing our spacing, drilling and completions techniques. • Certain of our properties are in areas that may have been partially depleted or drained by offset wells, and certain of our wells may be adversely affected by actions of other operators. • Multi-well pad drilling may result in volatility in our operating results. • The unavailability or high cost of drilling rigs, completion equipment and services, supplies and personnel could adversely affect our ability to establish and execute exploration and development plans within budget and on a timely basis. • We may be unable to acquire adequate supplies of water for our drilling and hydraulic fracturing operations or dispose of the water we use at a reasonable cost and pursuant to applicable environmental rules. • Regulatory changes could prevent our ability to continue to pool wells in accordance with our past practices. • Midstream projects are subject to risks of construction delays and cost over-runs. 35 Table of Contents • Our identified drilling locations are scheduled over several years, making them susceptible to uncertainties and lease expirations that could materially alter the occurrence or timing of their drilling. • The seismic data and other technologies we use cannot eliminate exploration risk.
Lower revenues as a result of less volumes than anticipated, or otherwise, or an increase in interest rates may adversely impact San Mateo’s EBITDA and interest expense, and therefore San Mateo’s ability to comply with these covenants.
Lower revenues as a result of less volumes than anticipated, or 45 Table of Contents otherwise, or an increase in interest rates may adversely impact San Mateo’s EBITDA and interest expense, and therefore San Mateo’s ability to comply with these covenants.
Any of these or other similar occurrences could result in the disruption or impairment of our operations, substantial repair costs, personal injury or loss of human life, significant damage to 49 Table of Contents property, environmental pollution and substantial revenue losses.
Any of these or other similar occurrences could result in the disruption or impairment of our operations, substantial repair costs, personal injury or loss of human life, significant damage to property, environmental pollution and substantial revenue losses.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. See “Business” for descriptions of our properties. We also have various operating leases for rental of office space and office and field equipment. See Note 4 to the consolidated financial statements in this Annual Report for the future minimum rental payments. Such information is incorporated herein by reference.
Biggest changeItem 2. Properties. 68 Table of Contents See “Business” for descriptions of our properties. We also have various operating leases for rental of office space and office and field equipment. See Note 4 to the consolidated financial statements in this Annual Report for the future minimum rental payments. Such information is incorporated herein by reference.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the ultimate outcome and impact on us cannot be predicted with certainty, in the opinion of management, it is remote that these legal proceedings will have a material adverse impact on our financial condition, results of operations or cash flows. 68 Table of Contents On November 4, 2019, we received a Notice of Violation and Finding of Violation from the EPA and a Notice of Violation from the NMED alleging violations of the CAA and New Mexico State Implementation Plan at certain of our operated locations in New Mexico.
Biggest changeItem 3. Legal Proceedings. We are party to several 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 legal proceedings will have a material adverse impact on our financial condition, results of operations or cash flows.
Removed
Item 3. Legal Proceedings. We are party to several legal proceedings encountered in the ordinary course of business.
Removed
We have provided information to the EPA and the NMED and are engaged in discussions regarding a resolution of the alleged violations. We believe it is remote that the resolution of this matter will have a material adverse impact on our financial condition, results of operations or cash flows.
Removed
Resolution of the matter may result in monetary sanctions of more than $300,000.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIn July 2022 and October 2022, the Board declared quarterly cash dividends of $0.10 per share of common stock. In December 2022, the Board amended our dividend policy to increase the quarterly dividend to $0.15 per share of common stock for future dividend payments.
Biggest changeDividends In February 2023, April 2023 and July 2023, our Board declared quarterly cash dividends of $0.15 per share of common stock. In October 2023, the Board amended our dividend policy to increase the quarterly dividend to $0.20 per share of common stock and also declared a quarterly cash dividend of $0.20 per share of common stock.
This graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
This graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act or the Exchange Act, whether made before, on, or after the date hereof and irrespective of any general incorporation language in any such filing.
(2) The Matador Resources Company 2019 Long-Term Incentive Plan (the “2019 Incentive Plan”) was adopted by our Board of Directors in April 2019 and approved by our shareholders on June 6, 2019. For a description of our 2019 Incentive Plan, see Note 9 to the consolidated financial statements in this Annual Report.
(2) The Matador Resources Company 2019 Long-Term Incentive Plan (the “2019 Incentive Plan”) was adopted by our Board in April 2019 and approved by our shareholders on June 6, 2019. For a description of our 2019 Incentive Plan, see Note 9 to the consolidated financial statements in this Annual Report.
Comparison of Cumulative Total Return Among Matador Resources Company, the Russell 2000 Index and the Russell 2000 Energy Index 71 Table of Contents Repurchase of Equity by the Company or Affiliates During the quarter ended December 31, 2022, 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.
Comparison of Cumulative Total Return Among Matador Resources Company, the Russell 2000 Index and the Russell 2000 Energy Index 71 Table of Contents Repurchase of Equity by the Company or Affiliates During the quarter ended December 31, 2023, 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.
(3) The Matador Resources Company 2022 Employee Stock Purchase Plan (the “ESPP”) was adopted by our Board of Directors in April 2022 and approved by our shareholders on June 10, 2022.
(3) The Matador Resources Company 2022 Employee Stock Purchase Plan (the “ESPP”) was adopted by our Board in April 2022 and approved by our shareholders on June 10, 2022.
For a description of our ESPP, see Note 9 to the consolidated financial statements in this Annual Report. 70 Table of Contents Share Performance Graph The following graph compares the cumulative return on a $100 investment in our common stock from December 31, 2017 through December 31, 2022, to that of the cumulative return on a $100 investment in the Russell 2000 Index and the Russell 2000 Energy Index for the same period.
For a description of our ESPP, see Note 9 to the consolidated financial statements in this Annual Report. 70 Table of Contents Share Performance Graph The following graph compares the cumulative return on a $100 investment in our common stock from December 31, 2018 through December 31, 2023, to that of the cumulative return on a $100 investment in the Russell 2000 Index and the Russell 2000 Energy Index for the same period.
Equity Compensation Plan Information The following table presents the securities authorized for issuance under our equity compensation plans as of December 31, 2022.
Equity Compensation Plan Information The following table presents the securities authorized for issuance under our equity compensation plans as of December 31, 2023.
Equity Compensation Plan Information Plan Category Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans Equity compensation plans approved by security holders (1)(2)(3) 1,357,496 $ 22.92 8,755,116 Equity compensation plans not approved by security holders — — — Total 1,357,496 $ 22.92 8,755,116 __________________ (1) Our Board of Directors has determined not to make any additional grants of awards under the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the “2012 Incentive Plan”).
Equity Compensation Plan Information Plan Category Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans Equity compensation plans approved by security holders (1)(2)(3) 830,377 $ 19.11 8,422,916 Equity compensation plans not approved by security holders — — — Total 830,377 $ 19.11 8,422,916 __________________ (1) Our Board has determined not to make any additional grants of awards under the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the “2012 Incentive Plan”).
On February 15, 2023, the Board declared a quarterly cash dividend of $0.15 per share of common stock payable on March 9, 2023 to shareholders of record as of February 27, 2023. We expect that, based on current circumstances, comparable cash dividends will continue to be paid in the foreseeable future.
On February 13, 2024, the Board declared a quarterly cash dividend of $0.20 per share of common stock payable on March 13, 2024 to shareholders of record as of February 23, 2024. We expect that, based on current circumstances, comparable cash dividends will continue to be paid in the foreseeable future.
Prior to trading on the NYSE, there was no established public trading market for our common stock. On February 21, 2023, we had 119,071,975 shares of common stock outstanding held by approximately 325 record holders, excluding shareholders for whom shares are held in “nominee” or “street” name.
Prior to trading on the NYSE, there was no established public trading market for our common stock. On February 20, 2024, we had 119,519,883 shares of common stock outstanding held by approximately 350 record holders, excluding shareholders for whom shares are held in “nominee” or “street” name.
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 October 1, 2022 to October 31, 2022 388 $ 66.04 — — November 1, 2022 to November 30, 2022 — — — — December 1, 2022 to December 31, 2022 136 61.46 — — Total 524 $ 64.85 — — _________________ (1) The shares were not re-acquired pursuant to any repurchase plan or program.
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 October 1, 2023 to October 31, 2023 373 $ 61.88 — — November 1, 2023 to November 30, 2023 — — — — December 1, 2023 to December 31, 2023 394 55.93 — — Total 767 $ 58.82 — — _________________ (1) The shares were not re-acquired pursuant to any repurchase plan or program.
Removed
Dividends In February 2022 and April 2022, our Board of Directors declared quarterly cash dividends of $0.05 per share of common stock. In June 2022, the Board amended our dividend policy to increase the quarterly dividend to $0.10 per share of common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe net cash used in financing activities for the year ended December 31, 2022 was primarily attributable to (i) the repurchase of an aggregate principal amount of $350.8 million of the Notes for $344.3 million, (ii) net repayments under our Credit Agreement of $100.0 million, (iii) net borrowings under the San Mateo Credit Facility of $80.0 million, (iv) net distributions related to non-controlling interest owners of less-than-wholly-owned subsidiaries of $57.7 million and (v) dividends paid of $35.2 million.
Biggest changeDuring the year ended December 31, 2022, our net cash used in financing activities was primarily attributable to (i) the repurchase of an aggregate principal of $350.8 million of the 2026 Notes for $344.3 million, (ii) net repayments under our Credit Agreement of $100.0 million, (iii) net distributions related to non-controlling interest owners of less-than-wholly-owned subsidiaries of $57.7 million and (iv) dividends paid of $35.2 million, which were partially offset by net borrowings under the San Mateo Credit Facility of $80.0 million. 83 Table of Contents See Note 7 to the consolidated financial statements in this Annual Report for a summary of our debt, including the Credit Agreement, the San Mateo Credit Facility, the 2026 Notes and the 2028 Notes.
We may divest portions of our non-core assets, particularly in the Eagle Ford shale in South Texas and the Haynesville shale in Northwest Louisiana (as we have done in recent years), as well as consider monetizing other assets, such as certain midstream assets and mineral and royalty interests, as value-creating opportunities arise.
As we have done in recent years, we may divest portions of our non-core assets, particularly in the Eagle Ford shale in South Texas and the Haynesville shale in Northwest Louisiana, as well as consider monetizing other assets, such as certain midstream assets and mineral and royalty interests, as value-creating opportunities arise.
We may divest portions of our non-core assets, particularly in the Eagle Ford shale in South Texas and the Haynesville shale in Northwest Louisiana (as we have done in recent years), as well as consider monetizing other assets, such as certain midstream assets and mineral and royalty interests, as value-creating opportunities arise.
As we have done in recent years, we may divest portions of our non-core assets, particularly in the Eagle Ford shale in South Texas and the Haynesville shale in Northwest Louisiana, as well as consider monetizing other assets, such as certain midstream assets and mineral and royalty interests, as value-creating opportunities arise.
For a 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.
For a discussion of our expectations of such commodity prices, see “—General Outlook and Trends” below. At times, we use commodity derivative financial instruments 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.
The following tables present summarized financial information of Matador (as issuer of the Notes) and the Guarantor Subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances between the parent and the Guarantor Subsidiaries and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor.
The following tables present summarized financial information of Matador (as issuer of the 2026 Notes) and the Guarantor Subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances between the parent and the Guarantor Subsidiaries and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor.
See “Risk Factors—Risks Related to Laws and Regulations—Approximately 31% of our leasehold and mineral acres in the Delaware Basin is located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.” We and San Mateo dispose of large volumes of produced water gathered from our and third parties’ drilling and production operations by injecting it into wells pursuant to permits issued to us by governmental authorities overseeing such disposal activities.
See “Risk Factors—Risks Related to Laws and Regulations—Approximately 32% of our leasehold and mineral acres in the Delaware Basin is located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.” We and San Mateo dispose of large volumes of produced water gathered from our and third parties’ drilling and production operations by injecting it into wells pursuant to permits issued to us by governmental authorities overseeing such disposal activities.
If capital expenditures were to exceed our operating cash flows in 2023, we expect to fund any excess capital expenditures, including for other significant acquisitions, through borrowings under the Credit Agreement or the San Mateo Credit Facility (assuming availability under such facilities) or through other capital sources, including borrowings under expanded or additional credit arrangements, the sale or joint venture of midstream assets, oil and natural gas producing assets, leasehold interests or mineral interests and potential issuances of equity, debt or convertible securities, none of which may be available on satisfactory terms or at all.
If capital expenditures were to exceed our operating cash flows in 2024, we expect to fund any excess capital expenditures, including for other significant acquisitions, through borrowings under the Credit Agreement or the San Mateo Credit Facility (assuming availability under such facilities) or through other capital sources, including borrowings under expanded or additional credit arrangements, the sale or joint venture of midstream assets, oil and natural gas producing assets, leasehold interests or mineral interests and potential issuances of equity, debt or convertible securities, none of which may be available on satisfactory terms or at all.
If capital expenditures were to exceed our operating cash flows in 2023, we expect to fund any excess capital expenditures, including for other significant acquisitions, through borrowings under the Credit Agreement or the San Mateo Credit Facility (assuming availability under such facilities) or through other capital sources, including borrowings under expanded or additional credit arrangements, the sale or joint venture of midstream assets, oil and natural gas producing assets, leasehold interests or mineral interests and potential issuances of equity, debt or convertible securities, none of which may be available on satisfactory terms or at all.
If capital expenditures were to exceed our operating cash flows in 2024, we expect to fund any excess capital expenditures, including for significant acquisitions, through borrowings under the Credit Agreement or the San Mateo Credit Facility (assuming availability under such facilities) or through other capital sources, including borrowings under expanded or additional credit arrangements, the sale or joint venture of midstream assets, oil and natural gas producing assets, leasehold interests or mineral interests and potential issuances of equity, debt or convertible securities, none of which may be available on satisfactory terms or at all.
We also realized a net loss of approximately $81.7 million related to our natural gas costless collar contracts for the year ended December 31, 2022, resulting primarily from natural gas prices that were above the ceiling prices of certain of our natural gas costless collar contracts.
We realized a net loss of approximately $81.7 million related to our natural gas costless collar contracts for the year ended December 31, 2022, resulting primarily from natural gas prices that were above the ceiling prices of certain of our natural gas costless collar contracts.
As of December 31, 2022, the material off-balance sheet arrangements and transactions that we have entered into include (i) non-operated drilling commitments, (ii) firm gathering, transportation, processing, fractionation, sales and disposal commitments and (iii) 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.
As of December 31, 2023, the material off-balance sheet arrangements and transactions that we have entered into include (i) non-operated drilling commitments, (ii) firm gathering, transportation, processing, fractionation, sales and disposal commitments and (iii) 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.
We have built significant optionality into our drilling program, which should generally allow us to decrease or increase the number of rigs we operate as necessary based on changing commodity prices and other factors.
We have built significant optionality into our 2024 drilling program, which should generally allow us to decrease or increase the number of rigs we operate as necessary based on changing commodity prices and other factors.
As a result, it is difficult to estimate these 2023 monetizations, divestitures and capital expenditures with any degree of certainty; therefore, we have not provided estimated proceeds related to monetizations or divestitures or estimated capital expenditures related to acquiring producing properties, acreage and mineral interests and midstream assets for 2023. 76 Table of Contents Revenues The following table summarizes our revenues and production data for the periods indicated.
As a result, it is difficult to estimate these 2024 monetizations, divestitures and capital expenditures with any degree of certainty; therefore, we have not provided estimated proceeds related to monetizations or divestitures or estimated capital expenditures related to acquiring producing properties, acreage and mineral interests and midstream assets for 2024. 76 Table of Contents Revenues The following table summarizes our revenues and production data for the periods indicated.
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.
For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income and net cash provided by operating activities, see “—Non-GAAP Financial Measures” below.
In addition, we intend to continue evaluating the opportunistic acquisition of producing properties, acreage and mineral interests and midstream assets, principally in the Delaware Basin, during 2023. These monetizations, divestitures and expenditures are opportunity-specific, and purchase price multiples and per-acre prices can vary significantly based on the asset or prospect.
In addition, during 2024, we intend to continue evaluating the opportunistic acquisition of producing properties, acreage and mineral interests and midstream assets, principally in the Delaware Basin. These monetizations, divestitures and expenditures are opportunity-specific, and purchase price multiples and per-acre prices can vary significantly based on the asset or prospect.
In addition, we intend to continue evaluating the opportunistic acquisition of producing properties, acreage and mineral interests and midstream assets, principally in the Delaware Basin, during 2023. These monetizations, divestitures and expenditures are opportunity-specific, and purchase price multiples and per-acre prices can vary significantly based on the asset or prospect.
In addition, during 2024, we intend to continue evaluating the opportunistic acquisition of producing properties, acreage and mineral interests and midstream assets, principally in the Delaware Basin. These monetizations, divestitures and expenditures are opportunity-specific, and purchase price multiples and per-acre prices can vary significantly based on the asset or prospect.
Volumes for the years ended December 31, 2022 and 2021 do not include the full quantity of volumes that would have otherwise been delivered by certain San Mateo customers subject to minimum volume commitments (although partial deliveries were made in both years), but for which San Mateo recognized revenues during the years ended December 31, 2022 and 2021.
Volumes for the years ended December 31, 2023 and 2022 do not include the full quantity of volumes that would have otherwise been delivered by certain San Mateo customers subject to minimum volume commitments (although partial deliveries were made in both years), but for which San Mateo recognized revenues during the years ended December 31, 2023 and 2022.
Our existing wells may not produce at the levels we are forecasting 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 oil and natural gas prices for 2023 and the hedges we currently have in place.
Our existing wells may not produce at the levels we are forecasting 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 oil and natural gas prices for 2024 and the hedges we currently have in place.
This increase in oil production was primarily a result of our ongoing delineation and development drilling activities in the Delaware Basin, which offset declining oil production in the Eagle Ford shale where we have not turned to sales any new operated wells since the second quarter of 2019.
This increase in oil production was primarily a result of the Advance Acquisition and our ongoing delineation and development drilling activities in the Delaware Basin, which offset declining oil production in the Eagle Ford shale where we have not turned to sales any new operated wells since the second quarter of 2019.
Substantially all of these 2023 estimated capital expenditures are expected to be allocated to (i) the further delineation and development of our leasehold position, (ii) the construction, installation and maintenance of midstream assets and (iii) our participation in certain non-operated well opportunities in the Delaware Basin, South Texas and Haynesville shale.
Substantially all of these 2024 estimated capital expenditures are expected to be allocated to (i) the further delineation and development of our leasehold position, (ii) the construction, installation and maintenance of midstream assets and (iii) our participation in certain non-operated well opportunities in the Delaware Basin, South Texas and Haynesville shale.
Substantially all of these 2023 estimated capital expenditures are expected to be allocated to (i) the further delineation and development of our leasehold position, (ii) the construction, installation and maintenance of midstream assets and (iii) our participation in certain non-operated well opportunities in the Delaware Basin, South Texas and Haynesville shale.
Substantially all of these 2024 estimated capital expenditures are expected to be allocated to (i) the further delineation and development of our leasehold position, (ii) the construction, installation and maintenance of midstream assets and (iii) our participation in certain non-operated well opportunities in the Delaware Basin, South Texas and the Haynesville shale.
A significant portion of our anticipated cash flows from operations for 2023 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 Northwest Louisiana.
A significant portion of our anticipated cash flows from operations for 2024 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 Northwest Louisiana.
At December 31, 2022, most of our oil production from the Delaware Basin was sold based on prices established in Midland, Texas, and a significant portion of our natural gas production from the Delaware Basin was sold based on Houston Ship Channel pricing, while the remainder of our Delaware Basin natural gas production was sold primarily based on prices established at the Waha hub in far West Texas.
At December 31, 2023, most of our oil production from the Delaware Basin was sold based on prices established in Midland, Texas, and a significant portion of our natural gas production from the Delaware Basin was sold based on Houston Ship Channel pricing, while the remainder of our Delaware Basin natural gas production was sold primarily based on prices established at the Waha hub in far West Texas.
As a result, it is difficult to estimate these 2023 monetizations, divestitures and capital expenditures with any degree of certainty; therefore, we have not provided estimated proceeds related to monetizations or divestitures or estimated capital expenditures related to acquiring producing properties, acreage and mineral interests and midstream assets for 2023.
As a result, it is difficult to estimate these 2024 monetizations, divestitures and capital expenditures with any degree of certainty; therefore, we have not provided estimated proceeds related to monetizations or divestitures or estimated capital expenditures related to acquiring producing properties, acreage and mineral interests and midstream assets for 2024.
See “Risk Factors—Risks Related to our Financial Condition—Our exploration, development, exploitation and midstream projects require substantial capital expenditures that may exceed our cash flows from operations and potential borrowings, and we may be unable to obtain needed capital on satisfactory terms, which could adversely affect our future growth,” “Risk Factors—Risks Related to our Operations—Drilling for and producing oil and natural gas are highly speculative and involve a high degree of operational and financial risk, with many uncertainties that could adversely affect our business,” “Risk Factors—Risks Related to our Operations—Our identified drilling locations are scheduled over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling” and “Risk Factors—Risks Related to Laws and Regulations—Approximately 31% of our leasehold and mineral acres in the Delaware Basin is located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.” 82 Table of Contents Our cash flows for the years ended December 31, 2022, 2021 and 2020 are presented below.
See “Risk Factors—Risks Related to our Financial Condition—Our exploration, development, exploitation and midstream projects require substantial capital expenditures that may exceed our cash flows from operations and potential borrowings, and we may be unable to obtain needed capital on satisfactory terms, which could adversely affect our future growth,” “Risk Factors—Risks Related to our Operations—Drilling for and producing oil, natural gas and NGLs is highly speculative and involves a high degree of operational and financial risk, with many uncertainties that could adversely affect our business,” “Risk Factors—Risks Related to our Operations—Our identified drilling locations are scheduled over several years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling” and “Risk Factors—Risks Related to Laws and Regulations—Approximately 32% of our leasehold and mineral acres in the Delaware Basin is located on federal lands, which are subject to administrative permitting requirements and potential federal legislation, regulation and orders that may limit or restrict oil and natural gas operations on federal lands.” 82 Table of Contents Our cash flows for the years ended December 31, 2023, 2022 and 2021 are presented below.
We consider the following to be our most critical accounting policies and estimates involving significant judgment or estimates by our management. See Note 2 to the consolidated financial statements in this Annual Report for further details on our accounting policies at December 31, 2022.
We consider the following to be our most critical accounting policies and estimates involving significant judgment or estimates by our management. See Note 2 to the consolidated financial statements in this Annual Report for further details on our accounting policies at December 31, 2023.
At both December 31, 2022 and December 31, 2021, these reserves estimates were based on evaluations prepared by our engineering staff and have been audited for their reasonableness and conformance with SEC guidelines by Netherland, Sewell & Associates, Inc., independent reservoir engineers.
At both December 31, 2023 and December 31, 2022, these reserves estimates were based on evaluations prepared by our engineering staff and have been audited for their reasonableness and conformance with SEC guidelines by Netherland, Sewell & Associates, Inc., independent reservoir engineers.
The San Mateo Credit Facility also restricts the ability of San Mateo to distribute cash to its members if San Mateo’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility. We believe that San Mateo was in compliance with the terms of the San Mateo Credit Facility at December 31, 2022.
The San Mateo Credit Facility also restricts the ability of San Mateo to distribute cash to its members if San Mateo’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility. We believe that San Mateo was in compliance with the terms of the San Mateo Credit Facility at December 31, 2023.
Revenues associated with NGLs are included with our natural gas revenues. (2) Estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas. Year Ended December 31, 2022 as Compared to Year Ended December 31, 2021 Oil and natural gas revenues .
Revenues associated with NGLs are included with our natural gas revenues. (2) Estimated using a conversion ratio of one Bbl of oil per six Mcf of natural gas. Year Ended December 31, 2023 as Compared to Year Ended December 31, 2022 Oil and natural gas revenues .
Some of the key factors that could cause actual results to vary from our expectations include changes in oil or natural gas prices, the timing of planned capital expenditures, availability under our Credit Agreement and the San Mateo Credit Facility, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting our oil and natural gas and midstream operations, the condition of the capital markets generally, as well as our ability to access them, the ongoing impact of COVID-19 on oil and natural gas demand, oil and natural gas prices and our business, the proximity to and capacity of gathering, processing and transportation facilities, availability and integration of acquisitions, uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business, as well as those factors discussed below and elsewhere in this Annual Report, all of which are difficult to predict.
Some of the key factors that could cause actual results to vary from our expectations include changes in oil or natural gas prices, the timing of planned capital expenditures, availability under our Credit Agreement and the San Mateo Credit Facility, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting our oil and natural gas and midstream operations, the condition of the capital markets generally, as well as our ability to access them, the proximity to and capacity of gathering, processing and transportation facilities, availability and integration of acquisitions, uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business, as well as those factors discussed below and elsewhere in this Annual Report, all of which are difficult to predict.
In recent years prior to 2021, equity returns in the sector versus other industry sectors have led to lower oil and natural gas representation in certain key equity market indices and some investors, including certain pension funds, 89 Table of Contents sovereign wealth funds, university endowments and family foundations, have stated policies to reduce or eliminate their investments in the oil and natural gas sector based on social and environmental considerations.
In recent years prior to 2021, equity returns in the sector versus other industry sectors have led to lower oil and natural gas representation in certain key equity market indices and some investors, including certain pension funds, sovereign wealth funds, university endowments and family foundations, have stated policies to reduce or eliminate their investments in the oil and natural gas sector based on social and environmental considerations.
Should we experience future periods of negative pricing for natural gas as we have in previous periods, 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.
Should we experience future periods of negative pricing for natural gas as we have experienced historically, 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.
Failure to comply with these laws, rules and regulations can result in substantial monetary penalties or delay or suspension of operations. The regulatory burden on the oil and natural gas industry 88 Table of Contents increases our cost of doing business and affects our profitability.
Failure to comply with these laws, rules and regulations can result in substantial monetary penalties or delay or suspension of operations. The regulatory burden on the oil and natural gas industry increases our cost of doing business and affects our profitability.
See Note 12 to the consolidated financial statements in this Annual Report for a summary of our open derivative financial instruments at December 31, 2022.
See Note 12 to the consolidated financial statements in this Annual Report for a summary of our open derivative financial instruments at December 31, 2023.
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 our liquidity or availability of or requirements for capital resources.
Other than the off-balance sheet arrangements described above, the 85 Table of Contents Company has no transactions, arrangements or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect our liquidity or availability of or requirements for capital resources.
Our 2023 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.
Our 2024 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.
Certain volumes of our Delaware Basin natural gas production are exposed to the Waha-Henry Hub basis differential, which has also been highly volatile in recent years. In early 2022, concerns about natural gas pipeline takeaway capacity out of the Delaware Basin, particularly beginning in the latter half of 2022, began to increase.
Certain volumes of our Delaware Basin natural gas production are exposed to the Waha-Henry Hub basis differential, which has also been highly volatile in recent years. In 2022, concerns about natural gas pipeline takeaway capacity out of the Delaware Basin began to increase, particularly beginning in the latter half of 2022 and into 2023.
The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project within a reasonable time. Our engineers and technical staff must make many subjective assumptions based on their professional judgment in developing reserves estimates.
The project to extract the hydrocarbons must have commenced, or the operator must be reasonably certain that it will commence the project within a reasonable time. 90 Table of Contents Our engineers and technical staff must make many subjective assumptions based on their professional judgment in developing reserves estimates.
Interest expense. For the year ended December 31, 2022, we incurred total interest expense of approximately $77.2 million. We capitalized approximately $10.1 million of our interest expense on certain qualifying projects for the year ended December 31, 2022 and expensed the remaining $67.2 million to operations.
We capitalized approximately $10.1 million of our interest expense on certain qualifying projects for the year ended December 31, 2022 and expensed the remaining $67.2 million to operations.
These revenues, and the expenses related to these transactions included in “Purchased natural gas,” are presented on a gross basis in our consolidated statements of operations. Realized (loss) gain on derivatives .
These revenues, and the expenses related to these transactions included in “Purchased natural gas,” are presented on a gross basis in our consolidated statements of income. Realized loss on derivatives .
The San Mateo Credit Facility is non-recourse with respect to Matador and its wholly-owned subsidiaries, but is guaranteed by San Mateo’s subsidiaries and secured by substantially all of San Mateo’s assets, including real property.
The San Mateo Credit Facility is non-recourse with respect to Matador and its other subsidiaries, but is guaranteed by San Mateo’s subsidiaries and secured by substantially all of San Mateo’s assets, including real property.
Our 2023 Delaware Basin operated drilling program is expected to focus on the continued development of our various asset areas throughout the Delaware Basin, with a continued emphasis on drilling and completing a 81 Table of Contents high percentage of longer horizontal wells in 2023, including 96% with anticipated completed lateral lengths of greater than one mile.
Our 2024 Delaware Basin operated drilling program is expected to focus on the continued development of our various asset areas throughout the Delaware 81 Table of Contents Basin, with a continued emphasis on drilling and completing a high percentage of longer horizontal wells, including 99% with anticipated completed lateral lengths of greater than one mile.
See “Business—Regulation.” In January 2021, President Biden signed an executive order instructing the Department of the Interior to pause new oil and natural gas leases on public lands pending completion of a comprehensive review and consideration of federal oil and natural gas permitting and leasing practices, which lapsed at December 31, 2022.
See “Business—Regulation.” In January 2021, President Biden signed an executive order instructing the Department of the Interior to pause new oil and natural gas leases on public lands pending completion of a comprehensive review and consideration of federal oil and natural gas permitting and leasing practices, which has lapsed.
We realized a net loss of $73.9 million related to our oil costless collar for the year ended December 31, 2022, resulting primarily from oil prices that were above the ceiling prices of certain of our oil costless collar contracts and above the strike price of certain of our oil swap contracts.
We realized a net loss of $73.9 million related to our oil costless collar contracts for the year ended December 31, 2022, resulting primarily from oil prices that were above the ceiling prices of certain of our oil costless collar contracts.
We believe that we were in compliance with the terms of the Credit Agreement at December 31, 2022. At December 31, 2022, San Mateo had $465.0 million in borrowings outstanding under the San Mateo Credit Facility and approximately $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility.
We believe that we were in compliance with the terms of the Credit Agreement at December 31, 2023. At December 31, 2023, San Mateo had $522.0 million in borrowings outstanding under the San Mateo Credit Facility and approximately $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility.
Should oil and natural gas prices remain at their current levels or increase further, we expect to be subject to additional service cost inflation in future periods, which may increase our costs to drill, complete, equip and operate wells.
Should oil prices remain at their current levels or increase, we may be subject to additional service cost inflation in future periods, which may increase our costs to drill, complete, equip and operate wells.
These and other laws, rules and regulations, including any federal legislation, regulations or orders intended to limit or restrict oil and natural gas operations on federal lands, if enacted, could have a material adverse impact on our business, financial condition, results of operations and cash flows.
The NMED has implemented similar rules and regulations. These and other laws, rules and regulations, including any federal legislation, regulations or orders intended to limit or restrict oil and natural gas operations on federal lands, if enacted, could have a material adverse impact on our business, financial condition, results of operations and cash flows.
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.
If we do experience any material interruptions with produced water disposal, takeaway capacity or NGL fractionation, our oil and natural gas revenues, business, financial condition, results of operations and cash flows could be adversely affected.
Further, approximately 10% of our reported natural gas production for the year ended December 31, 2022 was attributable to the Haynesville and Eagle Ford shale plays, which are not exposed to Waha pricing.
Further, approximately 8% of our reported natural gas production for the year ended December 31, 2023 was attributable to the Haynesville and Eagle Ford shale plays, which are not exposed to Waha pricing.
See “—Obligations and Commitments” below and Note 14 to the consolidated financial statements in this Annual Report for more information regarding our off-balance sheet arrangements. Such information is incorporated herein by reference. 85 Table of Contents Obligations and Commitments We had the following material contractual obligations and commitments at December 31, 2022.
See “—Obligations and Commitments” below and Note 14 to the consolidated financial statements in this Annual 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 December 31, 2023.
See “Cautionary Note Regarding Forward-Looking Statements.” For a comparison of our results of operations for the years ended December 31, 2021 and December 31, 2020, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022.
See “Cautionary Note Regarding Forward-Looking Statements.” For a comparison of our results of operations for the years ended December 31, 2022 and December 31, 2021, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023.
Low oil, natural gas and NGL prices and the continued volatility in these prices may adversely affect our financial condition and our ability to meet our capital expenditure requirements and financial obligations.” Cash Flows Used in Investing Activities Net cash used in investing activities increased by $308.2 million to $1.04 billion for the year ended December 31, 2022 from $729.3 million for the year ended December 31, 2021.
Low oil, natural gas and NGL prices and the continued volatility in these prices may adversely affect our financial condition and our ability to meet our capital expenditure requirements and financial obligations.” Cash Flows Used in Investing Activities Net cash used in investing activities increased by $2.17 billion to $3.21 billion for the year ended December 31, 2023 from $1.04 billion for the year ended December 31, 2022.
At December 31, 2022 San Mateo had $465.0 million of borrowings outstanding under the San Mateo Credit Facility and approximately $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility. The San Mateo Credit Facility matures December 9, 2026.
At December 31, 2023 San Mateo had $522.0 million of borrowings outstanding under the San Mateo Credit Facility and approximately $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility. The San Mateo Credit Facility matures December 9, 2026.
(7) We dedicated to San Mateo our current and certain future leasehold interests in the Rustler Breaks and Wolf asset areas and the Greater Stebbins Area and Stateline asset area pursuant to 15-year, fixed-fee oil transportation, oil, natural gas and produced water gathering and produced water disposal agreements.
(7) We dedicated to San Mateo our current and certain future leasehold interests in the Rustler Breaks asset area and the Wolf portion of the West Texas asset area and acreage in the Greater Stebbins Area and Stateline asset area pursuant to 15-year, fixed-fee oil transportation, oil, natural gas and produced water gathering and produced water disposal agreements.
Adjusted EBITDA for the year ended December 31, 2022 was $2.13 billion, as compared to Adjusted EBITDA of $1.05 billion for the year ended December 31, 2021. Adjusted EBITDA is a non-GAAP financial measure.
Adjusted EBITDA for the year ended December 31, 2023 was $1.85 billion, as compared to Adjusted EBITDA of $2.13 billion for the year ended December 31, 2022. Adjusted EBITDA is a non-GAAP financial measure.
In addition, supply chain disruptions and other inflationary pressures being experienced throughout the United States and global economy and in the oil and natural gas industry may limit our ability to procure the necessary products and services we need for drilling, completing and producing wells in a timely fashion, which could result in delays to our operations and could, in turn, adversely affect our business, financial condition, results of operations and cash flows.
In addition, supply chain disruptions and other inflationary pressures experienced in recent periods throughout the United States and global economy and in the oil and natural gas industry may limit our ability to procure the necessary products and services we need for drilling, completing and producing wells in a timely and cost-effective manner, which could result in reduced margins and delays to our operations and could, in turn, adversely affect our business, financial condition, results of operations and cash flows.
Ceiling Test The net capitalized costs of oil and natural gas properties are limited to the lower of unamortized costs less related deferred income taxes or the cost center “ceiling.” The cost center ceiling is defined as the sum of: (a) the present value, discounted at 10%, of future net revenues of proved oil and natural gas reserves, reduced by the estimated costs of developing these reserves, plus (b) unproved and unevaluated property costs not being amortized, plus (c) the lower of cost or estimated fair value of unproved and unevaluated properties included in the costs being amortized, if any, less (d) any income tax effects related to the properties involved. 90 Table of Contents Any excess of our net capitalized costs above the cost center ceiling as described above is charged to operations as a full-cost ceiling impairment.
Ceiling Test The net capitalized costs of oil and natural gas properties are limited to the lower of unamortized costs less related deferred income taxes or the cost center “ceiling.” The cost center ceiling is defined as the sum of: (a) the present value, discounted at 10%, of future net revenues of proved oil and natural gas reserves, reduced by the estimated costs of developing these reserves, plus (b) unproved and unevaluated property costs not being amortized, plus (c) the lower of cost or estimated fair value of unproved and unevaluated properties included in the costs being amortized, if any, less (d) any income tax effects related to the properties involved.
Standardized Measure represents the present value of estimated future net cash flows from proved reserves, less estimated future development, production, plugging and abandonment costs and income tax expenses, discounted at 10% per annum to reflect the timing of future cash flows. Standardized Measure is not an estimate of the fair market value of our properties.
Standardized Measure represents the present value of estimated future net cash flows from proved reserves, less estimated future development, production, plugging and abandonment costs and income tax expenses, discounted at 10% to reflect the timing of future cash flows. Standardized Measure is not an estimate of the fair market value of our properties. PV-10 is a non-GAAP financial measure.
We realized an average gain on our natural gas derivatives of approximately $0.83 per Mcf of natural gas produced during the year ended December 31, 2022, as compared to an average loss on our natural gas derivatives of approximately $0.32 per Mcf of natural gas produced during the year ended December 31, 2021.
We realized an average loss on our natural gas derivatives of approximately $0.08 per Mcf of natural gas produced during the year ended December 31, 2023, as compared to an average loss on our natural gas derivatives of approximately $0.83 per Mcf of natural gas produced during the year ended December 31, 2022.
In 2021, the NMOCD implemented rules regarding the reduction of natural gas waste and the control of emissions that, among other items, require upstream and midstream operators to reduce natural gas waste by a fixed amount each year and achieve a 98% natural gas capture rate by the end of 2026. The NMED has implemented similar rules and regulations.
In 2021, the NMOCD implemented rules regarding the reduction of natural gas waste and the control of emissions that, among other items, require upstream and midstream 88 Table of Contents operators to reduce natural gas waste by a fixed amount each year and achieve a 98% natural gas capture rate by the end of 2026.
At December 31, 2022, approximately 97% of our total proved oil and natural gas reserves were attributable to our properties in the Delaware Basin.
At December 31, 2023, approximately 98% of our total proved oil and natural gas reserves were attributable to our properties in the Delaware Basin.
Liquidity and Capital Resources Our primary use of capital has been, and we expect will continue to be during 2023 and for the foreseeable future, for the acquisition, exploration and development of oil and natural gas properties and for midstream investments. In January 2023, we announced the Advance Acquisition.
Liquidity and Capital Resources Our primary use of capital has been, and we expect will continue during 2024 and for the foreseeable future to be, for the acquisition, exploration and development of oil and natural gas properties and for midstream investments.
For the year ended December 31, 2022, natural gas prices averaged $6.54 per MMBtu, as compared to $3.71 per MMBtu in 2021, based upon the NYMEX Henry Hub natural gas futures contract price for the earliest delivery date.
For the year ended December 31, 2023, natural gas prices averaged $2.66 per MMBtu, as compared to $6.54 per MMBtu in 2022, based upon the NYMEX Henry Hub natural gas futures contract price for the earliest delivery date.
This, in turn, may affect the liquidity that can be accessed through the 87 Table of Contents borrowing base under the Credit Agreement and through the capital markets.
This, in turn, may affect the liquidity that can be accessed through the borrowing base under the Credit Agreement and through the capital markets.
Changes in our operating assets and liabilities between December 31, 2021 and December 31, 2022 resulted in a net decrease of approximately $117.0 million in net cash provided by operating activities for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Changes in our operating assets and liabilities between December 31, 2022 and December 31, 2023 resulted in a net increase of approximately $168.0 million in net cash provided by operating activities for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
During 2021 and 2022, we typically realized a premium to natural gas sold at the Waha hub despite higher transportation charges incurred to transport the natural gas to the Gulf Coast. At certain times, we may also sell a portion of our natural gas production into other markets to improve our realized natural gas pricing.
During 2022 and 2023, we typically realized a narrower 87 Table of Contents differential to natural gas sold at the Waha hub despite higher transportation charges incurred to transport the natural gas to the Gulf Coast. At certain times, we may also sell a portion of our natural gas production into other markets to improve our realized natural gas pricing.
Commodity prices are affected by changes in market supply and demand, which are impacted by overall economic activity, the ongoing military conflict between Russia and Ukraine as well as political instability in China and the Middle East, the actions of OPEC+, the ongoing impact of COVID-19 and its variants, weather, pipeline capacity constraints, inventory storage levels, oil and natural gas price differentials and other factors.
Commodity prices are affected by changes in market supply and demand, which are impacted by overall economic activity, the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, political instability in China, military conflict and political instability in the Middle East, the actions of OPEC+, weather, pipeline capacity constraints, inventory storage levels, oil and natural gas price differentials and other factors.
We did not conduct any operated drilling and completion activities on our leasehold properties in South Texas or Northwest Louisiana during 2022, although we did participate in the drilling and completion of 11 gross (1.0 net) non-operated Haynesville shale wells that began producing in 2022.
We did not conduct any operated drilling and completion activities on our leasehold properties in South Texas or Northwest Louisiana during 2023, although we did participate in the drilling and completion of 22 gross (0.4 net) non-operated Haynesville shale wells and one gross (0.4 net) non-operated South Texas well that began producing in 2023.
Proved oil reserves comprised 56% of our Delaware Basin total proved reserves at December 31, 2022, as compared to 57% at December 31, 2021.
Proved oil reserves comprised 60% of our Delaware Basin total proved reserves at December 31, 2023, as compared to 56% at December 31, 2022.
On a unit-of-production basis, our depletion, depreciation and amortization expenses increased 10% to $12.11 per BOE for the year ended December 31, 2022, as compared to $10.97 per BOE for the year ended December 31, 2021, primarily as a result of the increase in actual costs and estimated future costs to drill, complete and equip our wells between the two periods.
On a unit-of-production basis, our depletion, depreciation and amortization expenses increased 23% to $14.90 per BOE for the year ended December 31, 2023, as compared to $12.11 per BOE for the year ended December 31, 2022, primarily as a result of the Advance Acquisition and an increase in actual costs and estimated future costs to drill, complete and equip our wells between the two periods.
Excluding changes in operating assets and liabilities, net cash provided by operating activities increased to $2.10 billion for the year ended December 31, 2022 from $1.05 billion for the year ended December 31, 2021.
Excluding changes in operating assets and liabilities, net cash provided by operating activities decreased to $1.82 billion for the year ended December 31, 2023 from $2.10 billion for the year ended December 31, 2022.
Our total oil volumes hedged represented 42% and 61% of our total oil production for the years ended December 31, 2022 and 2021, respectively. Our total natural gas volumes hedged represented 61% and 62% of our total natural gas production the years ended December 31, 2022 and 2021, respectively. Unrealized gain (loss) on derivatives.
Our total natural gas volumes hedged represented 2% and 61% of our total natural gas production for the years ended December 31, 2023 and 2022, respectively. Unrealized (loss) gain on derivatives .
Regional and worldwide economic activity, the actions of OPEC+ and other large state-controlled oil producers, weather, infrastructure capacity to reach markets and other variable factors significantly impact the prices of oil and natural gas.
Regional and worldwide economic activity, the actions of OPEC+ and other large state-controlled oil producers, 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.
The Midland-Cushing (Oklahoma) oil price differential has been highly volatile in recent years. At February 21, 2023, this oil price differential was approximately +$2.17 per Bbl. At February 21, 2023, we had no derivative contracts in place to mitigate our exposure to this Midland-Cushing (Oklahoma) oil price differential for 2023.
The Midland-Cushing (Oklahoma) oil price differential has been highly volatile in recent years. At February 20, 2024, this oil price differential was approximately +$1.64 per Bbl. At February 20, 2024, we had no derivative contracts in place to mitigate our exposure to this Midland-Cushing (Oklahoma) oil price differential for 2024.
We realized a net gain of $1.9 million from our oil basis swap contracts for the year ended December 31, 2022, resulting from oil basis prices that were lower than the fixed prices of certain of our oil basis swap contracts.
We realized a net loss of $1.9 million from our oil basis differential swap contracts for the year ended December 31, 2022, resulting from oil basis differentials that were above the fixed prices of certain of our oil basis differential swap contracts.
Our realized net loss on derivatives was $157.5 million for the year ended December 31, 2022, as compared to a realized net loss of approximately $220.1 million for the year ended December 31, 2021.
Our realized net loss on derivatives was $9.6 million for the year ended December 31, 2023, as compared to a realized net loss of approximately $157.5 million for the year ended December 31, 2022.
We reported net income attributable to Matador shareholders of approximately $1.21 billion, or $10.11 per diluted common share, on a GAAP basis for the year ended December 31, 2022, as compared to a net income of $585.0 million, or $4.91 per diluted common share, for the year ended December 31, 2021.
We reported net income attributable to Matador shareholders of approximately $846.1 million, or $7.05 per diluted common share, on a GAAP basis for the year ended December 31, 2023, as compared to a net income of $1.21 billion, or $10.11 per diluted common share, for the year ended December 31, 2022.
During the year ended December 31, 2021, the aggregate net fair value of our open oil and natural gas derivative and oil basis swap contracts decreased from a net liability of approximately $35.9 million to a net liability of approximately $14.9 million, resulting in an unrealized gain on derivatives of approximately $21.0 million for the year ended December 31, 2021. 78 Table of Contents Expenses The following table summarizes our operating expenses and other income (expense) for the periods indicated.
During the year ended December 31, 2022, the aggregate net fair value of our open oil and natural gas derivatives and oil basis differential swap contracts changed from a net liability of approximately $14.9 million to a net asset of approximately $3.9 million, resulting in an unrealized gain on derivatives of approximately $18.8 million for the year ended December 31, 2022. 78 Table of Contents Expenses The following table summarizes our operating expenses and other income (expense) for the periods indicated.
Our proved oil and natural gas reserves in the Delaware Basin increased 11% to 346.8 million BOE at December 31, 2022, as compared to 312.0 million BOE at December 31, 2021, primarily as a result of our ongoing delineation and development operations there.
Our proved oil and natural gas reserves in the Delaware Basin increased 31% to 452.6 million BOE at December 31, 2023, as compared to 346.8 million BOE at December 31, 2022, primarily as a result of the Advance Acquisition and our ongoing delineation and development operations there.
This increase was primarily attributable to (i) an increase in our third-party natural gas gathering, transportation and processing revenues to $45.1 million for the year ended December 31, 2022, which includes $4.4 million associated with operating our Pronto midstream assets that were purchased on June 30, 2022 as part of the Pronto Acquisition, as compared to $37.6 million for the year ended December 31, 2021, and (ii) an increase in third-party produced water disposal revenues to $35.6 million for the year ended December 31, 2022, as compared to $27.6 million for the year ended December 31, 2021. 77 Table of Contents Sales of purchased natural gas.
This increase was primarily attributable to (i) an increase in our third-party natural gas gathering, transportation and processing revenues to $65.9 million for the year ended December 31, 2023, as compared to $45.1 million for the year ended December 31, 2022, which includes $15.9 million associated with operating our Pronto midstream assets for the year ended December 31, 2023, as compared to $4.4 million for the year ended December 31, 2022, and (ii) an increase in third-party produced water disposal revenues to $45.3 million for the year ended December 31, 2023, as compared to $35.6 million for the year ended December 31, 2022. 77 Table of Contents Sales of purchased natural gas.
Our oil revenues increased 75% to $2.11 billion, as compared to $1.21 billion for the year ended December 31, 2021.
Our oil revenues increased 1% to $2.14 billion, as compared to $2.11 billion for the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

13 edited+1 added−1 removed15 unchanged
Biggest changeIn the case of a costless collar, the put option or options 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.
Biggest changeIn 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.
See “Risk Factors—Risks Related to Laws and Regulations—The derivatives legislation adopted by Congress could have an adverse impact on our ability to hedge risks associated with our business.” Interest rate risk. We do not and have not used interest rate derivatives to alter interest rate exposure in an attempt to reduce interest rate expense on existing debt.
See “Risk Factors—Risks Related to Laws and Regulations—Derivatives legislation adopted by Congress could have an adverse impact on our ability to hedge risks associated with our business.” Interest rate risk. We do not and have not used interest rate derivatives to alter interest rate exposure in an attempt to reduce interest rate expense on existing debt.
When the settlement price is below the price floor established by the collar, we receive from our counterparty an amount equal to the difference between the settlement price and the price floor multiplied by the contract oil or natural gas volume.
When the settlement price is below the price floor established by the collar, we receive from our counterparty an amount equal to the difference between the settlement price and the price floor multiplied by the contract oil, natural gas or NGL volume.
The inability or failure of our, San Mateo’s or Pronto’s significant customers to meet their obligations or their insolvency or liquidation may adversely affect our financial condition, results of operations and cash flows. In addition, our derivative arrangements expose us to credit risk in the event of nonperformance by our counterparties.
The inability or failure of our, San Mateo’s or Pronto’s significant customers to meet their obligations or their 92 Table of Contents insolvency or liquidation may adversely affect our financial condition, results of operations and cash flows. In addition, our derivative arrangements expose us to credit risk in the event of nonperformance by our counterparties.
See “Risk Factors—Risks Related to our Financial Condition—Our industry and the broader U.S. economy experienced higher than expected inflationary pressures in 2022, related to increases in oil and natural gas prices, continued supply chain disruptions, labor shortages and geopolitical instability.
See “Risk Factors—Risks Related to our Financial Condition—Our industry and the broader U.S. economy have experienced higher than expected inflationary pressures in recent years related to increases in oil and natural gas prices, continued supply chain disruptions, labor shortages and geopolitical instability, among other pressures.
At February 21, 2023, we do not know how long these inflationary pressures may persist or the impact they may have on our business moving forward.
We do not know how long these inflationary pressures may persist or the impact they may have on our business moving forward.
Although the CFTC has finalized certain regulations, others remain to be finalized or implemented, and it is not possible at this time to predict when, or if, this will be accomplished.
The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act. Although the CFTC has finalized certain regulations, others remain to be finalized or implemented, and it is not possible at this time to predict when, or if, this will be accomplished.
The counterparty on our derivative financial instruments in place at February 21, 2023 was PNC Bank, who is also a lender (or affiliate thereof) under our Credit Agreement. Impact of inflation . Inflation in the United States has become much more significant in recent years, and in 2022 it reached its highest levels in approximately 40 years.
The counterparty on our derivative financial instruments in place at February 20, 2024 was Bank of America, which is also a lender (or affiliate thereof) under our Credit Agreement. Impact of inflation . Inflation in the United States has become much more significant in recent years.
At December 31, 2022, we had no outstanding borrowings under our Credit Agreement, $699.2 million in Notes outstanding at a coupon rate of 5.875% per annum and $465.0 million of outstanding borrowings under the San Mateo Credit Facility at an interest rate of 6.68% per annum.
At December 31, 2023, we had $500.0 million of outstanding borrowings under our Credit Agreement at an interest rate of 7.21%, $699.2 million of outstanding 2026 Notes at a coupon rate of 5.875%, $500.0 million of outstanding 2028 Notes at a coupon rate of 6.875% and $522.0 million of outstanding borrowings under the San Mateo Credit Facility at an interest rate of 7.71%.
The fair value of our derivative financial instruments is determined using purchase and sale information available for similarly traded securities. At December 31, 2022, PNC Bank was the counterparty for our derivative instrument. We have considered the credit standing of the counterparty in determining the fair value of our derivative financial instruments.
At December 31, 2023, Bank of America was the counterparty for our derivative instruments. We have considered the credit standing of the counterparty in determining the fair value of our derivative financial instruments.
Such information is incorporated herein by reference. Effect of Derivatives Legislation. The Dodd-Frank Act, among other things, established federal oversight and regulation of certain derivative products, including commodity hedges of the type we use. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
See Note 12 to the consolidated financial statements in this Annual Report for a summary of our open derivative financial instruments at December 31, 2023. Such information is incorporated herein by reference. Effect of Derivatives Legislation. The Dodd-Frank Act, among other things, established federal oversight and regulation of certain derivative products, including commodity hedges of the type we use.
When the settlement price is above the price ceiling established by the costless collar, we pay our counterparty an amount equal to the difference between the settlement price and the price ceiling multiplied by the contract oil or natural gas volume. 92 Table of Contents See Note 12 to the consolidated financial statements in this Annual Report for a summary of our open derivative financial instruments at December 31, 2022.
When the settlement price is above the price ceiling established by the costless collar, we pay our counterparty an amount equal to the difference between the settlement price and the price ceiling multiplied by the contract oil, natural gas or NGL volume.
At December 31, 2022, we had entered into a costless collar contract to mitigate our exposure to fluctuations in natural gas prices, with an established price floor and ceiling.
At December 31, 2023, we had natural gas basis differential swap contracts open and in place to mitigate our exposure to natural gas price volatility, with a specific term (calculation period), notional quantity (volume hedged) and fixed price.
Removed
We have begun to experience such inflationary pressure in our drilling and completion and midstream operations, and we budgeted a 10 to 20% increase in oilfield service costs in preparing our full year 2023 D/C/E and midstream capital expenditures estimates.
Added
In the case of a costless collar, the put option or options and the call option or options have different fixed price components.

Other MTDR 10-K year-over-year comparisons