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Debt
 12 Months Ended
Dec. 31, 2021
Debt Disclosure [Abstract]  
DEBT DEBT
At December 31, 2021, the Company had (i) $1.05 billion of outstanding senior notes due 2026, (ii) $100.0 million in borrowings outstanding under its reserves-based revolving credit facility, (iii) approximately $45.8 million in outstanding letters of credit issued pursuant to its revolving credit facility and (iv) $7.5 million outstanding under an unsecured U.S. Small Business Administration loan.
At December 31, 2021, San Mateo had $385.0 million in borrowings outstanding under its revolving credit facility and approximately $9.0 million in outstanding letters of credit issued pursuant to its revolving credit facility.
Credit Agreements
MRC Energy Company
On November 18, 2021, the Company entered into its Fourth Amended and Restated credit facility with the lenders party thereto, led by Royal Bank of Canada (“RBC”) as administrative agent (the “Credit Agreement”). MRC Energy Company (“MRC”), a subsidiary of Matador that directly or indirectly holds the ownership interests in the Company’s other operating subsidiaries, other than its less-than-wholly-owned subsidiaries, is the borrower under the Credit Agreement. Borrowings are secured by mortgages on at least 85% of MRC’s and the Restricted Subsidiaries’ (as defined in the Credit Agreement) proved oil and natural gas properties and by the equity interests of certain of MRC’s wholly-owned subsidiaries, which are also guarantors. San Mateo and its subsidiaries are not guarantors of the Credit Agreement. In addition, all obligations under the
Credit Agreement are guaranteed by Matador, the parent corporation. Various commodity hedging agreements with certain of the lenders under the Credit Agreement (or affiliates thereof) are also secured by the collateral of and guaranteed by certain eligible subsidiaries of MRC. The Credit Agreement matures on October 31, 2026 or, if earlier, the date that is 180 days prior to the earliest stated redemption date of any senior notes of the Company with an outstanding principal balance in excess of $25.0 million.
The borrowing base under the Credit Agreement is determined semi-annually as of May 1 and November 1 by the lenders based primarily on the estimated value of the Company’s proved oil and natural gas reserves at December 31 and June 30 of each year, respectively. The Company and the lenders may each request an unscheduled redetermination of the borrowing base once between scheduled redetermination dates.
In November 2021, the lenders completed their review of the Company’s proved oil and natural gas reserves, and, as a result, the borrowing base was increased from $900.0 million to $1.35 billion. The Company elected to keep the borrowing commitment at $700.0 million, and the maximum facility amount remained $1.5 billion. Borrowings under the Credit Agreement are limited to the lowest of the borrowing base, the maximum facility amount and the elected borrowing commitment (subject to compliance with the covenants noted below).
In the event of an increase in the elected commitment, the Company is required to pay a fee to the lenders equal to a percentage of the amount of the increase, which is determined based on market conditions at the time of the increase. If, upon a redetermination of the borrowing base, the borrowing base were to be less than the outstanding borrowings under the Credit Agreement at such time, the Company would be required to provide additional collateral satisfactory in nature and value to the lenders to increase the borrowing base to an amount sufficient to cover such excess or to repay the deficit in equal installments over a period of six months.
Total deferred loan costs were $3.9 million at December 31, 2021, and these costs are being amortized over the term of the Credit Agreement. The Company’s effective interest rate under the Credit Agreement was 1.85% at December 31, 2021. At December 31, 2021, the Company had $100.0 million in borrowings outstanding under the Credit Agreement and approximately $45.8 million in outstanding letters of credit issued pursuant to the Credit Agreement. Between December 31, 2021 and February 28, 2022, the Company repaid $25.0 million of borrowings outstanding under the Credit Agreement.
Borrowings under the Credit Agreement may be in the form of a base rate loan or a Eurodollar loan. If MRC borrows funds as a base rate loan, such borrowings will bear interest at a rate equal to the greatest of (i) the prime rate for such day, (ii) the Federal Funds Effective Rate (as defined in the Credit Agreement) on such day, plus 0.50%, and (iii) the daily adjusting LIBOR rate (as defined in the Credit Agreement) plus 1.0% plus, in each case, an amount ranging from 0.75% to 1.75% per annum depending on the level of borrowings under the Credit Agreement. If MRC borrows funds as a Eurodollar loan, such borrowings will bear interest at a rate equal to (x) the LIBOR Rate (as defined in the Credit Agreement) plus (y) an amount ranging from 1.75% to 2.75% per annum depending on the level of borrowings under the Credit Agreement. The interest period for Eurodollar borrowings may be one, three or six months as designated by MRC. If MRC has outstanding borrowings under the Credit Agreement and interest rates increase, so will MRC’s interest costs, which may have a material adverse effect on the Company’s results of operations and financial condition.
A commitment fee of 0.375% to 0.50% per annum, depending on the level of borrowings under the Credit Agreement, is also paid quarterly in arrears. The Company includes this commitment fee, any amortization of deferred financing costs (including origination, borrowing base increase and amendment fees) and annual agency fees, if any, as interest expense and in its interest rate calculations and related disclosures. The Credit Agreement requires the Company to maintain (i) a current ratio, which is defined as (x) total consolidated current assets plus the unused availability under the Credit Agreement divided by (y) total consolidated current liabilities less current maturities under the Credit Agreement, of not less than 1.0 to 1.0 at the end of each fiscal quarter and (ii) a debt to EBITDA ratio, which is defined as debt outstanding (net of up to $75 million of cash or cash equivalents) divided by a rolling four quarter EBITDA calculation, of 3.50 to 1.0 or less.
Subject to certain exceptions, the Credit Agreement contains various covenants that limit MRC’s and its Restricted Subsidiaries’ (as defined in the Credit Agreement) ability to take certain actions, including, but not limited to, the following:
•incur indebtedness or grant liens on any of its assets;
•enter into commodity hedging agreements or interest rate agreements;
•declare or pay dividends, distributions or redemptions;
•merge or consolidate;
•make any loans or investments;
•engage in transactions with affiliates;
•engage in certain asset dispositions, including a sale of all or substantially all of MRC’s assets; and
•take certain actions with respect to the Company’s senior unsecured notes.
If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of the borrowings and exercise other rights and remedies. Events of default include, but are not limited to, the following events:
•failure to pay any principal on the outstanding borrowings when due or any interest on the outstanding borrowings, any reimbursement obligation under any letter of credit or any fees or other amounts within certain grace periods;
•failure to perform or otherwise comply with the covenants and obligations in the Credit Agreement or other loan documents, subject, in certain instances, to certain grace periods;
•bankruptcy or insolvency events involving the Company or any of the Restricted Subsidiaries; and
•a change of control, as defined in the Credit Agreement.
The Company believes that it was in compliance with the terms of the Credit Agreement at December 31, 2021.
San Mateo Midstream, LLC
On December 19, 2018, San Mateo entered into a $250.0 million credit facility with the lenders party thereto, currently led by Truist Bank as administrative agent (the “San Mateo Credit Facility”). The San Mateo Credit Facility matures December 19, 2023 and was amended in June 2021 to increase the lender commitments under the revolving credit facility from $375.0 million to $450.0 million (subject to San Mateo’s compliance with the covenants noted below) and to increase the borrowing rate for a base rate loan or a Eurodollar loan under such facility by 0.50%. The San Mateo Credit Facility includes an accordion feature, which, after the aforementioned amendment, provides for potential increases in lender commitments to up to $700.0 million. The San Mateo Credit Facility is non-recourse with respect to Matador and its wholly-owned subsidiaries, but is guaranteed by San Mateo’s subsidiaries and secured by substantially all of San Mateo’s assets, including real property.
Total deferred loan costs were $1.9 million at December 31, 2021, and these costs are being amortized over the term of the San Mateo Credit Facility. San Mateo’s effective interest rate under the San Mateo Credit Facility was 2.11% at December 31, 2021. At December 31, 2021, San Mateo had $385.0 million in borrowings outstanding under the San Mateo Credit Facility and $9.0 million in outstanding letters of credit issued pursuant to the San Mateo Credit Facility. Between December 31, 2021 and February 22, 2022, San Mateo repaid $30.0 million of borrowings outstanding under the San Mateo Credit Facility.
Borrowings under the San Mateo Credit Facility may be in the form of a base rate loan or a Eurodollar loan. If San Mateo borrows funds as a base rate loan, such borrowings will bear interest at a rate equal to the greatest of (i) the prime rate for such day, (ii) the Federal Funds Effective Rate (as defined in the San Mateo Credit Facility) on such day, plus 0.50%, and (iii) the Adjusted LIBO Rate (as defined in the San Mateo Credit Facility) plus 1.0% plus, in each case, an amount ranging from 1.00% to 2.00% per annum depending on San Mateo’s Consolidated Total Leverage Ratio (as defined in the San Mateo Credit Facility). If San Mateo borrows funds as a Eurodollar loan, such borrowings will bear interest at a rate equal to (x) the Adjusted LIBO Rate for the chosen interest period plus (y) an amount ranging from 2.00% to 3.00% per annum depending on San Mateo’s Consolidated Total Leverage Ratio. If San Mateo has outstanding borrowings under the San Mateo Credit Facility and interest rates increase, so will San Mateo’s interest costs, which may have a material adverse effect on San Mateo’s results of operations and financial condition.
A commitment fee of 0.30% to 0.50% per annum, depending on the unused availability under the San Mateo Credit Facility, is also paid quarterly in arrears. The Company includes this commitment fee, any amortization of deferred financing costs (including origination and amendment fees) and annual agency fees, if any, as interest expense and in its interest rate calculations and related disclosures. The San Mateo Credit Facility requires San Mateo to maintain a debt to EBITDA ratio, which is defined as total consolidated funded indebtedness outstanding (as defined in the San Mateo Credit Facility) divided by a rolling four quarter EBITDA calculation, of 5.00 or less, subject to certain exceptions. The San Mateo Credit Facility also requires San Mateo to maintain an interest coverage ratio, which is defined as a rolling four quarter EBITDA calculation divided by San Mateo’s consolidated interest expense, of 2.50 or more. The San Mateo Credit Facility also restricts the ability
of San Mateo to distribute cash to its members if San Mateo’s liquidity is less than 10% of the lender commitments under the San Mateo Credit Facility.
Subject to certain exceptions, the San Mateo Credit Facility contains various covenants that limit San Mateo’s and its restricted subsidiaries’ ability to take certain actions, including, but not limited to, the following:
•incur indebtedness or grant liens on any of San Mateo’s assets;
•enter into hedging agreements;
•declare or pay dividends, distributions or redemptions;
•merge or consolidate;
•make any loans or investments;
•engage in transactions with affiliates;
•engage in certain asset dispositions, including a sale of all or substantially all of San Mateo’s assets; and
•issue equity interests in San Mateo or its subsidiaries.
If an event of default exists under the San Mateo Credit Facility, the lenders will be able to accelerate the maturity of the borrowings and exercise other rights and remedies. Events of default include, but are not limited to, the following events:
•failure to pay any principal or interest on the outstanding borrowings or any reimbursement obligation under any letter of credit when due or any fees or other amounts within certain grace periods;
•failure to perform or otherwise comply with the covenants and obligations in the San Mateo Credit Facility or other loan documents, subject, in certain instances, to certain grace periods;
•bankruptcy or insolvency events involving San Mateo or its subsidiaries; and
•a change of control, as defined in the San Mateo Credit Facility.
The Company believes that San Mateo was in compliance with the terms of the San Mateo Credit Facility at December 31, 2021.
Senior Unsecured Notes
At December 31, 2021, the Company had $1.05 billion of outstanding 5.875% senior notes due 2026 that were registered under the Securities Act and mature September 15, 2026 (the “Notes”). Interest is payable on the Notes semi-annually in arrears on each March 15 and September 15. The Notes are guaranteed on a senior unsecured basis by certain subsidiaries of the Company (the “Guarantors”). San Mateo and its subsidiaries are not Restricted Subsidiaries (as defined in the Indenture) or Guarantors of the Notes.
The Company may redeem all or a part of the Notes at any time or from time to time at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on September 15 of the years indicated below:
YearRedemption Price
2021104.406%
2022102.938%
2023101.469%
2024 and thereafter100.000%
Subject to certain exceptions, the Indenture contains various covenants that limit the Company’s ability to take certain actions, including, but not limited to, the following:
•incur additional indebtedness;
•sell assets;
•pay dividends or make certain investments;
•create liens that secure indebtedness;
•enter into transactions with affiliates; and
•merge or consolidate with another company.
In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to Matador, any Restricted Subsidiary (as defined in the Indenture) that is a Significant Subsidiary (as defined in the Indenture) or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other event of default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Events of default include, but are not limited to, the following events:
•default for 30 days in the payment when due of interest on the Notes;
•default in the payment when due of the principal of, or premium, if any, on the Notes;
•failure by the Company to comply with its obligations to offer to purchase or purchase Notes pursuant to the change of control or asset sale covenants of the Indenture or to comply with the covenant relating to mergers;
•failure by the Company for 180 days after notice to comply with its reporting obligations under the Indenture;
•failure by the Company for 60 days after notice to comply with any of the other agreements in the Indenture;
•payment defaults and accelerations with respect to other indebtedness of the Company and its Restricted Subsidiaries in the aggregate principal amount of $50.0 million or more;
•failure by the Company or any Restricted Subsidiary to pay certain final judgments aggregating in excess of $50.0 million within 60 days;
•any subsidiary guarantee by a Guarantor ceases to be in full force and effect, is declared null and void in a judicial proceeding or is denied or disaffirmed by its maker; and
•certain events of bankruptcy or insolvency with respect to the Company or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary.
The outstanding borrowings of $100.0 million at December 31, 2021 under the Credit Agreement mature on October 31, 2026. The outstanding borrowings of $385.0 million at December 31, 2021 under the San Mateo Credit Facility mature on December 19, 2023. The $1.05 billion of outstanding Notes at December 31, 2021 mature on September 15, 2026.