Moody's Revises Matador Resources Outlook to Stable on Rising Debt from Acquisitions

Moody's Ratings has revised its outlook for Matador Resources Company (NYSE: MTDR) to stable from positive, reflecting the significant increase in leverage expected from a recent string of acquisitions. The ratings agency affirmed Matador's Ba3 Corporate Family Rating and B1 senior unsecured notes rating but downgraded its Speculative Grade Liquidity rating to SGL-2 from SGL-1.

Debt Rises After Acquisition Spree

The outlook change is a direct result of several major transactions announced since late May, which are expected to be funded primarily with debt. Moody's noted that this signals management's willingness to stretch the company's balance sheet to expand its drilling inventory.

Key acquisitions driving the higher debt load include:

• $1.14 billion for undeveloped Delaware Basin acreage in a May lease sale.
• $752 million for Cardinal Midstream Partners, LLC in a June agreement.
• $1.275 billion for Paloma Permian LLC.
• Approximately $200 million for undeveloped Woodford Shale acreage.

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According to the ratings agency, these deals could cause Matador's total consolidated debt to increase by 75% since April, potentially approaching $6.4 billion later this year. Moody's also highlighted that the acquired assets are expected to generate limited near-term cash flow, increasing execution risk as Matador works to develop them.

Path to Deleveraging Faces Commodity Risk

Matador's management has stated that debt reduction is a top priority, with a goal to bring net leverage down to its long-term target of approximately 1x within 12 to 18 months. However, Moody's cautioned that achieving this goal will be highly dependent on strong commodity prices.

The agency's analysis suggests that restoring the balance sheet will require oil prices to remain high through 2027. If the benchmark West Texas Intermediate (WTI) crude price were to fall below $60 per barrel, Matador would face significant difficulty in reducing its debt load. Despite the increased leverage, Matador maintains adequate liquidity, with no near-term debt maturities before 2032.