Matador Resources Co

SUPPLEMENTAL OIL AND NATURAL GAS DISCLOSURES

Costs Incurred

The following table summarizes costs incurred and capitalized by the Company in the acquisition, exploration and development of oil and natural gas properties for the years ended December 31, 2023, 2022 and 2021 (in thousands).

(1)Excludes midstream-related development and corporate costs of approximately $258.0 million, $159.8 million and $59.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Property acquisition costs are costs incurred to purchase, lease or otherwise acquire oil and natural gas properties, including both unproved and unevaluated leasehold and purchases of reserves in place. For the year ended December 31, 2023, a majority of the Company’s property acquisition costs resulted from the Advance Acquisition.

Exploration costs are costs incurred in identifying areas of these oil and natural gas properties that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and natural gas reserves, including costs of drilling exploratory wells, geological and geophysical costs and costs of carrying and retaining unproved and unevaluated properties. Exploration costs may be incurred before or after acquiring the related oil and natural gas properties. The Company capitalized $7.5 million of geological and geophysical costs, which are included as exploration costs in the table above, for the year ended December 31, 2021. The Company did not capitalize any geological and geophysical costs in 2023 or 2022.

Development costs are costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing oil and natural gas. Development costs include the costs of preparing well locations for drilling, drilling and equipping development wells and acquiring, constructing and installing production facilities.

Costs incurred also include newly established asset retirement obligations, as well as changes to asset retirement obligations resulting from revisions in cost estimates or abandonment dates. Asset retirement obligations included in the table above were an increase of $33.8 million, an increase of $10.7 million and an increase of $1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Capitalized general and administrative expenses that are directly related to acquisition, exploration and development activities are also included in the table above. The Company capitalized $54.2 million, $47.8 million and $38.4 million of these internal costs for the years ended December 31, 2023, 2022 and 2021, respectively, excluding midstream-related capitalized general and administrative expenses. Capitalized interest expense for qualifying projects is also included in the table above. The Company capitalized $20.2 million, $10.1 million and $4.8 million of its interest expense for the years ended December 31, 2023, 2022 and 2021, respectively, excluding midstream-related capitalized interest expense.

Oil and Natural Gas Reserves

Proved reserves are the quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible—from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Estimating oil and natural gas reserves is complex and inexact because of the numerous uncertainties inherent in the process. The process relies on interpretations of available geological, geophysical, petrophysical, engineering and production data. The extent, quality and reliability of both the data and the associated interpretations of that data can vary. The process also requires certain economic assumptions, including, but not limited to, oil and natural gas prices, drilling, completion and operating expenses, capital expenditures and taxes. Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas most likely will vary from the Company’s estimates.

The Company reports its production and proved reserves in two streams: oil and natural gas, including both dry and liquids-rich natural gas. Where the Company produces liquids-rich natural gas, such as in the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas and the Eagle Ford shale in South Texas, the economic value of the NGLs associated with the natural gas is included in the estimated wellhead natural gas price on those properties where

the NGLs are extracted and sold. The Company’s oil and natural gas reserves estimates for the years ended December 31, 2023, 2022 and 2021 were prepared by the Company’s engineering staff in accordance with guidelines established by the SEC and then audited for their reasonableness and conformance with SEC guidelines by Netherland, Sewell & Associates, Inc., independent reservoir engineers.

Oil and natural gas reserves are estimated using then-current operating and economic conditions, with no provision for price and cost escalations in future periods except by contractual arrangements. The commodity prices used to estimate oil and natural gas reserves are based on unweighted, arithmetic averages of first-day-of-the-month oil and natural gas prices for the previous 12-month period. For the period from January through December 2023, these average oil and natural gas prices were $74.70 per Bbl and $2.64 per MMBtu, respectively. For the period from January through December 2022, these average oil and natural gas prices were $90.15 per Bbl and $6.36 per MMBtu, respectively. For the period from January through December 2021, these average oil and natural gas prices were $63.04 per Bbl and $3.60 per MMBtu, respectively.

The Company’s net ownership in estimated quantities of proved oil and natural gas reserves and changes in net proved reserves are summarized as follows. All of the Company’s oil and natural gas reserves are attributable to properties located in the United States. The estimated reserves shown below are proved reserves only and do not include any value for unproved reserves classified as probable or possible reserves that might exist for these properties, nor do they include any consideration that could be attributed to interests in unevaluated acreage beyond those tracts for which reserves have been estimated. In the tables presented throughout this section, natural gas is converted to oil equivalent using the ratio of one Bbl of oil to six Mcf of natural gas.

The following is a discussion of the changes in the Company’s proved oil and natural gas reserves estimates for the years ended December 31, 2023, 2022 and 2021.

The Company’s proved oil and natural gas reserves increased 29% from 356.7 million BOE at December 31, 2022 to 460.1 million BOE at December 31, 2023. The Company’s proved oil and natural gas reserves increased by 151.5 million BOE and the Company produced 48.1 million BOE during the year ended December 31, 2023, resulting in a net increase of 103.3 million BOE. This increase in proved oil and natural gas reserves was primarily attributable to the Advance Acquisition and the Company’s delineation and development operations in the Delaware Basin during 2023. The Company increased its total proved oil and natural gas reserves by 109.1 million BOE as a result of acquisitions and trades during 2023. The Company also added 88.3 million BOE in proved reserves through extensions and discoveries during 2023, of which 27.6 million BOE resulted from new well locations drilled during 2023 to establish proved developed reserves and 60.7 million BOE resulted primarily from new proved undeveloped locations identified as a result of drilling activities on its existing acreage in the Delaware Basin during 2023. These increases were partially offset by the removal of 17.4 million BOE resulting from the 17% decrease in oil prices and the 58% decrease in natural gas prices used to estimate total proved reserves at December 31, 2023, as compared to December 31, 2022, and the removal of 31.5 million BOE in proved undeveloped reserves that were not developed or were no longer expected to be developed within five years of their initial booking resulting primarily from changes in development plans for certain of the Company’s properties in the Delaware Basin. As the Company continues to develop its Delaware Basin assets, the Company may reclassify some or all of this 31.5 million BOE to proved reserves at a future date.

The Company’s proved developed oil and natural gas reserves increased 32% from 221.5 million BOE at December 31, 2022 to 292.1 million BOE at December 31, 2023. The Company’s proved developed oil and natural gas reserves increased by 118.7 million BOE and the Company produced 48.1 million BOE during the year ended December 31, 2023, resulting in a net increase of 70.6 million BOE. The Company added 27.6 million BOE in proved developed reserves through extensions and discoveries during 2023, which resulted from new well locations drilled during 2023 to establish proved reserves. In addition, during 2023 the Company converted 34.9 million BOE of its proved undeveloped reserves to proved developed reserves primarily through its development activities in the Delaware Basin. The Company also increased its proved developed reserves by 70.2 million BOE at December 31, 2023 as a result of property acquisitions, including the Advance Acquisition, and trades completed during 2023. Additionally, the Company realized approximately 14.1 million BOE in net downward revisions of prior estimates, most of which was attributable to the lower commodity prices used to estimate proved reserves at December 31, 2023, which resulted in shorter estimated economic lives for certain of its producing properties.

The Company’s proved undeveloped oil and natural gas reserves increased 24% from 135.2 million BOE at December 31, 2022 to 168.0 million at December 31, 2023. The Company added 60.7 million BOE in proved undeveloped reserves through extensions and discoveries during 2023, which resulted primarily from new proved undeveloped locations identified as a result of drilling activities on its existing acreage in the Delaware Basin during 2023. In addition, the Company increased its proved undeveloped reserves by 38.9 million BOE at December 31, 2023 as a result of property acquisitions, including the Advance Acquisition, and trades completed during 2023. These increases were partially offset by approximately 31.9 million BOE in net downward revisions of prior estimates of proved undeveloped reserves due primarily to proved undeveloped reserves that were not developed or were no longer expected to be developed within five years of their initial booking as a result of changes in development plans for certain of the properties in the Delaware Basin at December 31, 2023.

At December 31, 2023, the Company’s proved reserves were comprised of 59% oil and 41% natural gas and were approximately 63% proved developed and 37% proved undeveloped. This increase in the Company’s proved developed reserves to 63% of its total proved reserves at December 31, 2023 reflected a continued increase in the Company’s percentage of proved developed reserves, as compared to 62% and 60% proved developed reserves at December 31, 2022 and 2021, respectively.

The Company’s proved oil and natural gas reserves increased 10% from 323.4 million BOE at December 31, 2021 to 356.7 million BOE at December 31, 2022. The Company’s proved oil and natural gas reserves increased by 71.8 million BOE and the Company produced 38.5 million BOE during the year ended December 31, 2022, resulting in a net increase of 33.3 million BOE. The Company added 78.5 million BOE in proved reserves through extensions and discoveries during 2022, of which 24.7 million BOE resulted from new well locations drilled during 2022 to establish proved developed reserves and 53.8 million BOE resulted primarily from new proved undeveloped locations identified as a result of drilling activities on its existing acreage in the Delaware Basin during 2022. The Company realized approximately 7.7 million BOE in net downward revisions of prior estimates due primarily to proved undeveloped reserves that were not developed or were no longer expected to be developed within five years of their initial booking as a result of changes in development plans for certain of the properties in the Delaware Basin at December 31, 2022.

The Company’s proved oil and natural gas reserves increased 20% from 270.3 million BOE at December 31, 2020 to 323.4 million BOE at December 31, 2021. The Company’s proved oil and natural gas reserves increased by 84.5 million BOE and the Company produced 31.5 million BOE during the year ended December 31, 2021, resulting in a net increase of 53.1 million BOE. The Company added 49.4 million BOE in proved reserves through extensions and discoveries during 2021, of which 22.4 million BOE resulted from new well locations drilled during 2021 to establish proved developed reserves and 26.9 million BOE resulted primarily from new proved undeveloped locations identified as a result of drilling activities on its existing acreage in the Delaware Basin during 2021. The Company realized approximately 25.6 million BOE in net upward revisions of prior estimates, primarily driven by a 40.1 million BOE increase due to significantly higher commodity prices used to estimate proved reserves at December 31, 2021, which resulted in longer estimated economic lives for certain of its properties. The Company also had small upward revisions of prior estimates attributable to increased working interests and lower estimated operating costs on certain of its properties. These upward revisions were partially offset by approximately 16.3 million BOE in downward revisions of prior estimates due primarily to proved undeveloped reserves that were not developed or were no longer expected to be developed within five years of their initial booking as a result of changes in development plans for certain of the properties in the Delaware Basin at December 31, 2021. In addition, the Company realized 9.5 million BOE in net increases to its proved oil and natural gas reserves at December 31, 2021 as a result of property acquisitions and divestitures completed during 2021.

Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Oil and Natural Gas Reserves

The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves is not intended to provide an estimate of the replacement cost or fair market value of the Company’s oil and natural gas properties. An estimate of fair market value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, potential improvements in industry technology and operating practices, the risks inherent in reserves estimates and perhaps different discount rates.

As noted previously, for the period from January through December 2023, the unweighted, arithmetic averages of first-day-of-the-month oil and natural gas prices were $74.70 per Bbl and $2.64 per MMBtu, respectively. For the period from January through December 2022, the comparable average oil and natural gas prices were $90.15 per Bbl and $6.36 per MMBtu, respectively. For the period from January through December 2021, the comparable average oil and natural gas prices were $63.04 per Bbl and $3.60 per MMBtu, respectively.

Future net cash flows were computed by applying these oil and natural gas prices, adjusted for all associated transportation and gathering costs, gravity and energy content and regional price differentials, to year-end quantities of proved oil and natural gas reserves and accounting for any future production, development and plugging and abandonment costs associated with producing these reserves; neither prices nor costs were escalated with time in these computations.

Future income taxes were computed by applying the statutory tax rate to the excess of future net cash flows relating to proved oil and natural gas reserves less the tax basis of the associated properties. Tax credits and net operating loss carryforwards available to the Company were also considered in the computation of future income taxes. Future net cash flows after income taxes were discounted using a 10% annual discount rate to derive the standardized measure of discounted future net cash flows.

The following table presents the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the years ended December 31, 2023, 2022 and 2021 (in thousands).

The following table summarizes the changes in the standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves for the years ended December 31, 2023, 2022 and 2021 (in thousands).