Matador Resources (MTDR)

Oil and gas producer Matador Resources (NYSE:MTDR) beat Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 12.6% year on year to $848 million. Its non-GAAP profit of $0.87 per share was 15.1% above analysts’ consensus estimates.

Company Overview

Operating primarily in the Delaware Basin where multiple oil-bearing layers lie stacked thousands of feet deep, Matador Resources (NYSE:MTDR) explores for, drills, and produces oil and natural gas from underground rock formations in New Mexico and Texas.

US shale oil producers extract crude from tight rock formations using horizontal drilling and hydraulic fracturing (fracking) techniques, primarily in basins like the Permian, Bakken, and Eagle Ford. Tailwinds include short-cycle investment flexibility allowing rapid production adjustments, technological improvements enhancing well productivity, and proximity to refining and export infrastructure. Capital discipline has improved financial returns. Headwinds include commodity price sensitivity affecting drilling economics, accelerating well decline rates requiring continuous capital investment, and increasing regulatory and ESG scrutiny. Water usage, induced seismicity concerns, and evolving environmental regulations present ongoing operational challenges.

Matador Resources competes with other Delaware Basin producers including Diamondback Energy (NASDAQ:FANG), Permian Resources (NYSE:PR), Endeavor Energy Resources, Mewbourne Oil Company, and Occidental Petroleum (NYSE:OXY).

The size of the revenue base is a way to assess topline, and it tells an investor whether an Energy producer has crossed the line between being a more vulnerable commodity taker and a durable operating platform. Scaled businesses tend to produce and generate revenue from many wells, pads, takeaway routes, and geographies, not just a single field or drilling program. Matador Resources’s $3.7 billion of revenue in the last year lacks scale in an industry where it matters.

A company’s long-term performance can give signals about its business quality. Even a bad business, especially in a cyclical industry, can shine for a year or so, but a top-tier one should exhibit resilience through cycles. Thankfully, Matador Resources’s 33.8% annualized revenue growth over the last five years was incredible. Its growth surpassed the average energy upstream and integrated energy company and shows its offerings resonate with customers, a great starting point for our analysis.

Even a long stretch in Energy can be shaped by a single commodity cycle, so extending the view to ten years adds another perspective and reveals which companies are built to grow regardless of the pricing regime. Matador Resources’s annualized revenue growth of 26.7% over the last ten years is below its five-year trend, but we still think the results suggest decent demand.

While looking at revenue is important, it can also introduce noise around commodity prices and M&A. Analyzing drivers of revenue, on the other hand, highlights what is happening inside the asset base and whether the economic footprint of a company is expanding. Over the last two years, Matador Resources’s total oil volume per day - Upstream averaged 27.3% year-on-year growth while natural gas volume per day - Upstream averaged 25.2% year-on-year growth, which was good.

This quarter, Matador Resources’s revenue fell by 12.6% year on year to $848 million but beat Wall Street’s estimates by 4.7%. This quarter, Matador Resources grew its production by 2.5% year on year, and its 11,165 Mboe (thousand barrels of oil equivalent) of production was in line with Wall Street’s estimates.

In any given year, energy gross margins are heavily influenced by prices, hedging, and cost inflation, but over a full cycle these gross margins reveal which producers are structurally advantaged through superior “rock” quality, infrastructure access, and cost position.

Matador Resources, which averaged 82.5% gross margin over the last five years, exhibits enviable unit economics in the sector. It means the company will remain profitable at lower commodity prices than peers with inferior gross margins and serves as an advantaged starting point for ultimate operating profits and free cash flow generation.

Matador Resources produced a 91.3% gross profit margin in Q4, in line with the same quarter last year.

Adjusted EBITDA margin strips out accounting distortions tied to depletion and historical drilling spend, providing a clearer view of the cash-generating power of the underlying asset base before financing and reinvestment decisions.

Matador Resources has been a well-oiled machine over the last five years. It demonstrated elite profitability for an upstream and integrated energy business, boasting an average EBITDA margin of 68.7%.

Analyzing the trend in its profitability, Matador Resources’s EBITDA margin decreased by 2.9 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Matador Resources generated an EBITDA margin profit margin of 64.7%, down 2.7 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue. This adjusted EBITDA beat Wall Street’s estimates by 12%.

Adjusted EBITDA shows how profitable a company’s existing wells are before financing and reinvestment decisions, but free cash flow shows how much value remains after paying the cost of replacing those wells. In upstream energy, production naturally declines over time, so companies must continuously reinvest just to stand still. A producer can report strong EBITDA margins yet generate little or no free cash flow if its wells decline quickly or if new drilling is expensive. Free cash flow therefore captures not only how efficiently a company produces hydrocarbons today, but also how costly it is to sustain that production into the future.

Matador Resources has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the energy upstream and integrated energy sector, averaging 23.8% over the last five years.

While the level of free cash flow margins is important, their consistency matters just as much.

Matador Resources’s ratio of quarterly free cash flow volatility to WTI Crude price volatility over the past five years was 4 (lower is better), indicating unusually strong insulation from commodity swings. This stability supports superior capital access in downturns and positions Matador Resources to act as a consolidator when weaker peers are forced to retrench.

You may be asking why we wait until the free cash flow line to perform this stability analysis versus commodity prices. Why not compare revenue or EBITDA to WTI in the case of Matador Resources? Because what ultimately matters is not how much revenue or profit you earn when prices are high but how much cash you can generate when prices are low. Free cash flow is the superior metric because it includes everything from hedging prowess to growth and maintenance capex to management behavior during good times and bad.

Matador Resources burned through $36.3 million of cash in Q4, equivalent to a negative 4.3% margin. The company’s cash flow turned negative after being positive in the same quarter last year, which isn’t ideal considering its longer-term trend.

Free cash flow shows how much money a producer generated, while ROIC shows how efficiently that money was earned. ROIC measures the operating profit produced for each dollar of capital invested, whether from debt or equity. Cash generation measures quantity while ROIC measures the quality of value creation.

We at StockStory like to look at ROIC over a ten-year period because energy investment cycles can involve up to five years of ramping production and another five years of harvesting. A decade view captures buying, extracting, and monetizing rather than just part of that picture. Matador Resources’s management team makes decent investment decisions and generates value for shareholders. Its ten-year average ROIC was 10%, slightly better than typical energy upstream and integrated energy business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Matador Resources’s ROIC has decreased significantly over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

Matador Resources reported $79.48 million of cash and $3.47 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.42 billion of EBITDA over the last 12 months, we view Matador Resources’s 1.4× net-debt-to-EBITDA ratio as safe. We also see its $208.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Matador Resources blew past analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 2.1% to $57.53 immediately after reporting.

Updated: March 12, 2026 at 1:04 AM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Matador Resources.

There are numerous reasons why we think Matador Resources is one of the best energy upstream and integrated energy companies out there. For starters, its revenue growth over the last five years was top-tier for the sector. On top of that, its revenue growth over the last ten years was top-tier for the sector, and its admirable gross margin indicates excellent unit economics.

Matador Resources’s P/E ratio based on the next 12 months is 11.9x. Looking across the spectrum of energy upstream and integrated energy businesses, Matador Resources’s fundamentals clearly illustrate it’s a special business. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $60.68 on the company (compared to the current share price of $56.28), implying they see 7.8% upside in buying Matador Resources in the short term.