Moody's: Matador ratings unaffected

Moody's Investors Service said that Matador Resources Co.'s proposed issuance of $300 million 5.875% senior unsecured notes due 2026 will not affect the company's credit ratings or stable outlook.

The additional notes are being offered as an addition to Matador's existing $750 million 5.875% senior unsecured notes due 2026.

In September 2018, Matador announced the acquisition of 8,400 net acres in Lea and Eddy counties, New Mexico in the Bureau of Land Management New Mexico Oil and Gas Lease sale, for $387 million, the agency said.

Matador's tack-on notes issuance in light of the company's newly acquired lease-hold acreage initially weakens Matador's credit profile, as the issuance increases debt burden while the acquisition does not immediately contribute to the company's production volumes or proved developed reserves, Moody's said.

However, the agency said it expects the company's production and reserves growth through its development activity will continue to improve its credit metrics despite the additional debt issuance.

Additionally, Matador has a track record of maintaining its debt at relatively lower levels compared to peers through the issuance of equity or asset sales, Moody's said.

The B2 rating of Matador's senior unsecured notes due 2026, one notch lower than the B1 corporate family rating, reflects their effective subordination to the company's $400 million senior secured revolving credit facility, the agency said.

Matador's ratings consider the company's growing production and reserves, mainly contributed by substantial development in its oil-weighted Delaware basin acreage, significantly large and repeatable drilling inventory and growth potential, Moody's said.

The company also benefits from fiscal discipline through commodity price cycles and management's track record, the agency said.

The company's ratings are constrained by its small scale and its need to outspend its cash flow to continue on its growth trajectory, Moody's said.

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