What: Shares of Matador Resources Company (NYSE:MTDR) are up 11% as of 10:45 a.m. EDT today. The surge comes after the company posted better-than-expected operational results after the close yesterday, and increased its guidance for production and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
So what: Matador Resources' per-share loss of $1.15 certainly wasn't going to turn people's heads this past quarter, but that result had some large one-time charges baked into it, including $103 million in non-cash charges related to asset impairments and losses on derivatives. If we strip out these charges, the company's adjusted net loss was only $1.3 million -- or $0.01 per share. Driving this result in large part were increased production and a 28% decrease in lease operating expenses, to $5.17 per barrel of oil equivalent produced.
Another reason Wall Street seems excited about Matador's results is that the company increased its production and adjusted EBITDA guidance for the year while keeping its capital spending levels steady for the year.
Now what: Matador's shareholders have been on a wild ride for a couple of years now, but this quarter's results are a little encouraging. Raising production guidance while maintaining capital spending levels is a welcome sight no matter what happens in the future. That said, it may have been a little premature for the company to raise its EBITDA guidance. Oil at $50 per barrel appears to have been a fleeting moment, and lower oil and gas prices could eat away at profitability levels pretty quickly.
Until we see oil and gas prices show steady improvement, Matador is likely to languish with modest losses for a while and remains a very speculative bet on commodity prices. For the long-term investor, this isn't a stock worth looking too deeply into.