Intrinsic value of Matador Resources - MTDR

Previous Close

$27.40

  Intrinsic Value

$1.59

stock screener

  Rating & Target

str. sell

-94%

Previous close

$27.40

 
Intrinsic value

$1.59

 
Up/down potential

-94%

 
Rating

str. sell

We calculate the intrinsic value of MTDR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.81
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  255
  408
  630
  943
  1,368
  1,930
  2,653
  3,561
  4,676
  6,017
  7,600
  9,437
  11,538
  13,907
  16,547
  19,456
  22,632
  26,070
  29,765
  33,710
  37,900
  42,329
  46,993
  51,888
  57,012
  62,364
  67,944
  73,756
  79,803
  86,090
  92,625
Variable operating expenses, $m
 
  1,774
  2,741
  4,100
  5,949
  8,393
  11,538
  15,487
  20,336
  26,167
  33,051
  41,042
  50,178
  60,482
  71,961
  84,614
  98,426
  113,378
  129,447
  146,605
  164,828
  184,091
  204,374
  225,662
  247,945
  271,220
  295,490
  320,765
  347,063
  374,406
  402,825
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  432
  1,774
  2,741
  4,100
  5,949
  8,393
  11,538
  15,487
  20,336
  26,167
  33,051
  41,042
  50,178
  60,482
  71,961
  84,614
  98,426
  113,378
  129,447
  146,605
  164,828
  184,091
  204,374
  225,662
  247,945
  271,220
  295,490
  320,765
  347,063
  374,406
  402,825
Operating income, $m
  -177
  -1,366
  -2,111
  -3,157
  -4,581
  -6,463
  -8,885
  -11,926
  -15,660
  -20,150
  -25,452
  -31,605
  -38,640
  -46,575
  -55,415
  -65,158
  -75,794
  -87,308
  -99,682
  -112,895
  -126,928
  -141,761
  -157,381
  -173,774
  -190,933
  -208,857
  -227,546
  -247,009
  -267,260
  -288,316
  -310,200
EBITDA, $m
  -55
  -1,171
  -1,809
  -2,706
  -3,926
  -5,539
  -7,615
  -10,222
  -13,422
  -17,270
  -21,814
  -27,088
  -33,118
  -39,918
  -47,494
  -55,845
  -64,961
  -74,830
  -85,435
  -96,759
  -108,786
  -121,500
  -134,887
  -148,937
  -163,644
  -179,005
  -195,023
  -211,705
  -229,061
  -247,107
  -265,864
Interest expense (income), $m
  27
  32
  58
  96
  149
  221
  317
  440
  594
  783
  1,011
  1,280
  1,592
  1,949
  2,352
  2,800
  3,295
  3,834
  4,419
  5,046
  5,717
  6,429
  7,181
  7,974
  8,806
  9,676
  10,586
  11,534
  12,522
  13,549
  14,617
Earnings before tax, $m
  -98
  -1,399
  -2,169
  -3,253
  -4,730
  -6,684
  -9,202
  -12,366
  -16,254
  -20,934
  -26,463
  -32,885
  -40,233
  -48,524
  -57,766
  -67,958
  -79,089
  -91,143
  -104,101
  -117,942
  -132,644
  -148,190
  -164,562
  -181,748
  -199,739
  -218,533
  -238,132
  -258,543
  -279,781
  -301,864
  -324,818
Tax expense, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -97
  -1,399
  -2,169
  -3,253
  -4,730
  -6,684
  -9,202
  -12,366
  -16,254
  -20,934
  -26,463
  -32,885
  -40,233
  -48,524
  -57,766
  -67,958
  -79,089
  -91,143
  -104,101
  -117,942
  -132,644
  -148,190
  -164,562
  -181,748
  -199,739
  -218,533
  -238,132
  -258,543
  -279,781
  -301,864
  -324,818

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  213
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,465
  2,000
  3,090
  4,621
  6,705
  9,460
  13,005
  17,456
  22,921
  29,494
  37,254
  46,261
  56,558
  68,172
  81,111
  95,372
  110,940
  127,794
  145,906
  165,246
  185,785
  207,497
  230,359
  254,354
  279,471
  305,705
  333,061
  361,550
  391,190
  422,010
  454,043
Adjusted assets (=assets-cash), $m
  1,252
  2,000
  3,090
  4,621
  6,705
  9,460
  13,005
  17,456
  22,921
  29,494
  37,254
  46,261
  56,558
  68,172
  81,111
  95,372
  110,940
  127,794
  145,906
  165,246
  185,785
  207,497
  230,359
  254,354
  279,471
  305,705
  333,061
  361,550
  391,190
  422,010
  454,043
Revenue / Adjusted assets
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
  0.204
Average production assets, $m
  1,099
  1,758
  2,716
  4,061
  5,893
  8,314
  11,429
  15,341
  20,144
  25,921
  32,740
  40,655
  49,705
  59,911
  71,283
  83,816
  97,498
  112,309
  128,226
  145,223
  163,274
  182,355
  202,447
  223,535
  245,608
  268,663
  292,705
  317,741
  343,791
  370,876
  399,027
Working capital, $m
  109
  -166
  -257
  -385
  -558
  -787
  -1,082
  -1,453
  -1,908
  -2,455
  -3,101
  -3,850
  -4,707
  -5,674
  -6,751
  -7,938
  -9,234
  -10,637
  -12,144
  -13,754
  -15,463
  -17,270
  -19,173
  -21,170
  -23,261
  -25,444
  -27,721
  -30,093
  -32,560
  -35,125
  -37,791
Total debt, $m
  574
  1,037
  1,712
  2,659
  3,949
  5,655
  7,849
  10,605
  13,987
  18,056
  22,859
  28,434
  34,809
  41,997
  50,007
  58,834
  68,471
  78,903
  90,115
  102,086
  114,800
  128,240
  142,392
  157,244
  172,791
  189,030
  205,964
  223,598
  241,946
  261,023
  280,852
Total liabilities, $m
  775
  1,238
  1,913
  2,860
  4,150
  5,856
  8,050
  10,806
  14,188
  18,257
  23,060
  28,635
  35,010
  42,198
  50,208
  59,035
  68,672
  79,104
  90,316
  102,287
  115,001
  128,441
  142,593
  157,445
  172,992
  189,231
  206,165
  223,799
  242,147
  261,224
  281,053
Total equity, $m
  690
  762
  1,177
  1,761
  2,555
  3,604
  4,955
  6,651
  8,733
  11,237
  14,194
  17,625
  21,549
  25,973
  30,903
  36,337
  42,268
  48,690
  55,590
  62,959
  70,784
  79,056
  87,767
  96,909
  106,478
  116,474
  126,896
  137,750
  149,044
  160,786
  172,990
Total liabilities and equity, $m
  1,465
  2,000
  3,090
  4,621
  6,705
  9,460
  13,005
  17,457
  22,921
  29,494
  37,254
  46,260
  56,559
  68,171
  81,111
  95,372
  110,940
  127,794
  145,906
  165,246
  185,785
  207,497
  230,360
  254,354
  279,470
  305,705
  333,061
  361,549
  391,191
  422,010
  454,043
Debt-to-equity ratio
  0.832
  1.360
  1.450
  1.510
  1.550
  1.570
  1.580
  1.590
  1.600
  1.610
  1.610
  1.610
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
  1.620
Adjusted equity ratio
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381
  0.381

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -97
  -1,399
  -2,169
  -3,253
  -4,730
  -6,684
  -9,202
  -12,366
  -16,254
  -20,934
  -26,463
  -32,885
  -40,233
  -48,524
  -57,766
  -67,958
  -79,089
  -91,143
  -104,101
  -117,942
  -132,644
  -148,190
  -164,562
  -181,748
  -199,739
  -218,533
  -238,132
  -258,543
  -279,781
  -301,864
  -324,818
Depreciation, amort., depletion, $m
  122
  195
  302
  451
  655
  924
  1,270
  1,705
  2,238
  2,880
  3,638
  4,517
  5,523
  6,657
  7,920
  9,313
  10,833
  12,479
  14,247
  16,136
  18,142
  20,262
  22,494
  24,837
  27,290
  29,851
  32,523
  35,305
  38,199
  41,208
  44,336
Funds from operations, $m
  136
  -1,203
  -1,867
  -2,802
  -4,075
  -5,760
  -7,932
  -10,661
  -14,015
  -18,054
  -22,825
  -28,368
  -34,710
  -41,867
  -49,846
  -58,645
  -68,256
  -78,664
  -89,853
  -101,806
  -114,503
  -127,928
  -142,068
  -156,911
  -172,449
  -188,681
  -205,609
  -223,239
  -241,582
  -260,656
  -280,481
Change in working capital, $m
  2
  -62
  -91
  -127
  -173
  -229
  -295
  -371
  -455
  -547
  -646
  -750
  -857
  -967
  -1,077
  -1,187
  -1,296
  -1,403
  -1,507
  -1,610
  -1,710
  -1,807
  -1,903
  -1,997
  -2,090
  -2,184
  -2,277
  -2,371
  -2,467
  -2,565
  -2,666
Cash from operations, $m
  134
  -1,141
  -1,777
  -2,674
  -3,902
  -5,531
  -7,637
  -10,291
  -13,561
  -17,507
  -22,179
  -27,618
  -33,853
  -40,900
  -48,769
  -57,458
  -66,960
  -77,261
  -88,346
  -100,196
  -112,793
  -126,121
  -140,165
  -154,913
  -170,359
  -186,498
  -203,332
  -220,867
  -239,115
  -258,091
  -277,815
Maintenance CAPEX, $m
  0
  -122
  -195
  -302
  -451
  -655
  -924
  -1,270
  -1,705
  -2,238
  -2,880
  -3,638
  -4,517
  -5,523
  -6,657
  -7,920
  -9,313
  -10,833
  -12,479
  -14,247
  -16,136
  -18,142
  -20,262
  -22,494
  -24,837
  -27,290
  -29,851
  -32,523
  -35,305
  -38,199
  -41,208
New CAPEX, $m
  -454
  -659
  -958
  -1,346
  -1,831
  -2,421
  -3,116
  -3,912
  -4,803
  -5,776
  -6,819
  -7,916
  -9,050
  -10,206
  -11,371
  -12,533
  -13,682
  -14,812
  -15,917
  -16,997
  -18,051
  -19,081
  -20,092
  -21,087
  -22,073
  -23,056
  -24,041
  -25,037
  -26,049
  -27,085
  -28,152
Cash from investing activities, $m
  -406
  -781
  -1,153
  -1,648
  -2,282
  -3,076
  -4,040
  -5,182
  -6,508
  -8,014
  -9,699
  -11,554
  -13,567
  -15,729
  -18,028
  -20,453
  -22,995
  -25,645
  -28,396
  -31,244
  -34,187
  -37,223
  -40,354
  -43,581
  -46,910
  -50,346
  -53,892
  -57,560
  -61,354
  -65,284
  -69,360
Free cash flow, $m
  -272
  -1,922
  -2,930
  -4,322
  -6,184
  -8,607
  -11,676
  -15,473
  -20,068
  -25,521
  -31,878
  -39,172
  -47,420
  -56,629
  -66,797
  -77,912
  -89,955
  -102,906
  -116,742
  -131,440
  -146,980
  -163,344
  -180,519
  -198,495
  -217,269
  -236,843
  -257,225
  -278,427
  -300,469
  -323,375
  -347,175
Issuance/(repayment) of debt, $m
  185
  463
  675
  948
  1,290
  1,705
  2,194
  2,755
  3,383
  4,069
  4,803
  5,575
  6,374
  7,189
  8,009
  8,828
  9,637
  10,432
  11,211
  11,972
  12,714
  13,440
  14,152
  14,853
  15,547
  16,239
  16,933
  17,634
  18,348
  19,077
  19,828
Issuance/(repurchase) of shares, $m
  289
  1,684
  2,584
  3,836
  5,524
  7,734
  10,552
  14,062
  18,336
  23,438
  29,419
  36,317
  44,156
  52,949
  62,696
  73,392
  85,020
  97,564
  111,001
  125,310
  140,470
  156,462
  173,273
  190,890
  209,308
  228,528
  248,554
  269,397
  291,074
  313,607
  337,022
Cash from financing (excl. dividends), $m  
  468
  2,147
  3,259
  4,784
  6,814
  9,439
  12,746
  16,817
  21,719
  27,507
  34,222
  41,892
  50,530
  60,138
  70,705
  82,220
  94,657
  107,996
  122,212
  137,282
  153,184
  169,902
  187,425
  205,743
  224,855
  244,767
  265,487
  287,031
  309,422
  332,684
  356,850
Total cash flow (excl. dividends), $m
  196
  225
  329
  462
  629
  832
  1,071
  1,345
  1,651
  1,985
  2,344
  2,721
  3,110
  3,508
  3,908
  4,308
  4,702
  5,091
  5,471
  5,842
  6,204
  6,558
  6,905
  7,248
  7,586
  7,924
  8,263
  8,605
  8,953
  9,309
  9,675
Retained Cash Flow (-), $m
  -202
  -1,684
  -2,584
  -3,836
  -5,524
  -7,734
  -10,552
  -14,062
  -18,336
  -23,438
  -29,419
  -36,317
  -44,156
  -52,949
  -62,696
  -73,392
  -85,020
  -97,564
  -111,001
  -125,310
  -140,470
  -156,462
  -173,273
  -190,890
  -209,308
  -228,528
  -248,554
  -269,397
  -291,074
  -313,607
  -337,022
Prev. year cash balance distribution, $m
 
  213
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -1,246
  -2,255
  -3,374
  -4,894
  -6,902
  -9,482
  -12,717
  -16,685
  -21,453
  -27,075
  -33,596
  -41,046
  -49,441
  -58,788
  -69,084
  -80,318
  -92,473
  -105,531
  -119,469
  -134,266
  -149,904
  -166,367
  -183,642
  -201,722
  -220,604
  -240,291
  -260,793
  -282,121
  -304,298
  -327,347
Discount rate, %
 
  5.50
  5.78
  6.06
  6.37
  6.69
  7.02
  7.37
  7.74
  8.13
  8.53
  8.96
  9.41
  9.88
  10.37
  10.89
  11.43
  12.01
  12.61
  13.24
  13.90
  14.59
  15.32
  16.09
  16.89
  17.74
  18.62
  19.56
  20.53
  21.56
  22.64
PV of cash for distribution, $m
 
  -1,181
  -2,016
  -2,828
  -3,824
  -4,994
  -6,311
  -7,730
  -9,191
  -10,620
  -11,939
  -13,074
  -13,955
  -14,531
  -14,768
  -14,656
  -14,208
  -13,456
  -12,453
  -11,259
  -9,946
  -8,580
  -7,227
  -5,940
  -4,762
  -3,721
  -2,832
  -2,098
  -1,511
  -1,058
  -718
Current shareholders' claim on cash, %
  100
  55.0
  30.8
  17.5
  10.1
  6.0
  3.5
  2.1
  1.3
  0.8
  0.5
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Matador Resources Company is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. The Company's segments include exploration and production, and midstream. The Company's operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. The Company also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. Additionally, the Company conducts midstream operations primarily, as of February 17, 2017, through its midstream joint venture, San Mateo Midstream, LLC (San Mateo or the Joint Venture).

FINANCIAL RATIOS  of  Matador Resources (MTDR)

Valuation Ratios
P/E Ratio -28.1
Price to Sales 10.7
Price to Book 4
Price to Tangible Book
Price to Cash Flow 20.3
Price to Free Cash Flow -8.5
Growth Rates
Sales Growth Rate 5.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.7%
Cap. Spend. - 3 Yr. Gr. Rate 4.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 83.2%
Total Debt to Equity 83.2%
Interest Coverage -3
Management Effectiveness
Return On Assets -5.4%
Ret/ On Assets - 3 Yr. Avg. -15.8%
Return On Total Capital -9.1%
Ret/ On T. Cap. - 3 Yr. Avg. -21%
Return On Equity -16.5%
Return On Equity - 3 Yr. Avg. -33.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 59.2%
Gross Margin - 3 Yr. Avg. 66.8%
EBITDA Margin 20%
EBITDA Margin - 3 Yr. Avg. -56.1%
Operating Margin -69.4%
Oper. Margin - 3 Yr. Avg. -120.7%
Pre-Tax Margin -38.4%
Pre-Tax Margin - 3 Yr. Avg. -113.5%
Net Profit Margin -38%
Net Profit Margin - 3 Yr. Avg. -98%
Effective Tax Rate 1%
Eff/ Tax Rate - 3 Yr. Avg. 18.5%
Payout Ratio 0%

MTDR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTDR stock intrinsic value calculation we used $255 million for the last fiscal year's total revenue generated by Matador Resources. The default revenue input number comes from 2016 income statement of Matador Resources. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MTDR stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.5%, whose default value for MTDR is calculated based on our internal credit rating of Matador Resources, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Matador Resources.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MTDR stock the variable cost ratio is equal to 434.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MTDR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Matador Resources.

Corporate tax rate of 27% is the nominal tax rate for Matador Resources. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MTDR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MTDR are equal to 430.8%.

Life of production assets of 9 years is the average useful life of capital assets used in Matador Resources operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MTDR is equal to -40.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $690 million for Matador Resources - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 108.569 million for Matador Resources is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Matador Resources at the current share price and the inputted number of shares is $3.0 billion.

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COMPANY NEWS

▶ US Gasoline Inventories Add More Pain to Crude Oil Futures   [Dec-07-17 09:39AM  Market Realist]
▶ The Fourth-Best-Performing Upstream Stock Year-to-Date   [Dec-05-17 05:16PM  Market Realist]
▶ Matador Resources Scores Relative Strength Rating Upgrade; Hits Key Threshold   [Dec-04-17 03:00AM  Investor's Business Daily]
▶ Dow, S&P 500, Nasdaq Inch Up At Open As Two Big Travel Names Dive   [Nov-07-17 09:45AM  Investor's Business Daily]
▶ Matador beats Street 3Q forecasts   [Nov-06-17 07:09PM  Associated Press]
▶ Matador Resources Shows Improved Relative Strength; Still Shy Of Benchmark   [Nov-02-17 03:00AM  Investor's Business Daily]
▶ Understanding Falling US Distillate Inventories   [Sep-28-17 02:06PM  Market Realist]
▶ Matador Resources Reaches 80-Plus Relative Strength Rating Benchmark   [Sep-26-17 03:00AM  Investor's Business Daily]
▶ Matador Resources Clears Technical Benchmark, Hitting 80-Plus RS Rating   [Sep-22-17 03:00AM  Investor's Business Daily]
▶ US Gasoline Inventories Fell for 4th Time in 5 Weeks   [Sep-21-17 09:43AM  Market Realist]
▶ Why US Crude Oil Production Rose Last Week   [Sep-14-17 02:10PM  Market Realist]
▶ Why Hedge Funds May Be Turning Bearish on US Crude   [Aug-31-17 07:39AM  Market Realist]
▶ Matador meets 2Q profit forecasts   [Aug-02-17 10:43PM  Associated Press]
▶ US Gasoline Demand Falls for 2nd Time in 5 Weeks   [Jul-26-17 08:35AM  Market Realist]
▶ Will Saudi Arabias Crude Oil Export Plans Rescue Oil Prices?   [Jul-19-17 09:26AM  Market Realist]
▶ Cushing Inventories: Lowest Level since November 2016   [Jul-10-17 01:21PM  Market Realist]
▶ US Gasoline Inventories Could Help Crude Oil Bulls   [Jun-22-17 11:13AM  Market Realist]
▶ US Gasoline Consumption Rose in May   [Jun-07-17 12:35PM  Market Realist]
▶ Libyas Crude Oil Production: Boon or Bane for Oil Bulls?   [May-31-17 10:05AM  Market Realist]
▶ Matador Resources Set to Join S&P MidCap 400   [May-25-17 05:45PM  PR Newswire]
▶ Will Crude Oil Futures Rise after OPECs Meeting?   [May-22-17 08:31AM  Market Realist]
▶ US Refinery Demand Fell from an All-Time High   [May-04-17 09:01AM  Market Realist]
▶ Matador tops Street 1Q forecasts   [May-03-17 07:09PM  Associated Press]
▶ Cushing Crude Oil Inventories Hit an All-Time High   [Apr-17-17 08:41AM  Market Realist]
▶ How US Distillate Inventories Affect Diesel and Oil Prices   [Apr-13-17 12:05PM  Market Realist]
▶ US Distillate Inventories Fell for the Fifth Straight Week   [Mar-16-17 07:35AM  Market Realist]
▶ US Crude Oil Production: Highest Level since March 2016   [Mar-02-17 09:10AM  Market Realist]
▶ Houston PE firm forms JV with Dallas energy co.   [09:20AM  at bizjournals.com]
▶ [$$] Five Point, Matador Resources Form Midstream Venture   [Feb-17-17 06:47PM  at The Wall Street Journal]
Financial statements of MTDR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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