XML 31 R15.htm IDEA: XBRL DOCUMENT v3.22.4
Debt
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
DEBT DEBT
At December 31, 2022, the Company had (i) $699.2 million of outstanding senior notes due 2026, (ii) no borrowings outstanding under its reserves-based revolving credit facility and (iii) approximately $45.6 million in outstanding letters of credit issued pursuant to its revolving credit facility. During the first quarter of 2022, the Company’s approximately $7.5 million unsecured U.S. Small Business Administration loan, which was issued through Iberiabank in April 2020 as part of the Paycheck Protection Program, was forgiven in full under the terms of the loan agreement and recorded as a gain on the extinguishment of debt within “Other expense” on the unaudited consolidated statement of operations. During the year ended December 31, 2022, the Company repurchased an aggregate principal amount of $350.8 million of its Notes for $344.3 million.
At December 31, 2022, San Mateo had $465.0 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 Agreement 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 and Pronto 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 April 2022, 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 $1.35 billion to $2.00 billion, the borrowing commitment was increased from $700.0 million to $775.0 million and the maximum facility amount remained $1.50 billion. In addition, the terms of the Credit Agreement were amended to increase the sublimit for issuances of letters of credit under the Credit Agreement from $50 million to $100 million and replace the London Interbank Offered Rate (“LIBOR”) interest rate benchmark with a secured overnight financing rate administered by the Federal Reserve Bank of New York (“Adjusted Term SOFR”) (as defined in the Credit Agreement) interest rate benchmark. This April 2022 redetermination constituted the regularly scheduled May 1 redetermination.
In November 2022, 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 $2.00 billion to $2.25 billion. The Company elected to keep the borrowing commitment at $775.0 million, and the maximum facility amount remained $1.50 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 $3.2 million at December 31, 2022, and these costs are being amortized over the term of the Credit Agreement. At December 31, 2022, the Company had no borrowings outstanding under the Credit Agreement and approximately $45.6 million in outstanding letters of credit issued pursuant to the Credit Agreement. If the Company were to borrow funds under the Credit Agreement, the applicable margin that would be added to Adjusted Term SOFR would have been 1.75% at December 31, 2022.
After giving effect to the amendment to the Credit Agreement, the applicable interest rate margin for borrowings under the Credit Agreement ranges from 1.75% to 2.75% per annum for borrowings bearing interest with reference to the Adjusted Term SOFR and from 0.75% to 1.75% per annum for borrowings bearing interest with reference to the Alternate Base Rate (as defined in the Credit Agreement), in each case depending on the level of borrowings under the Credit Agreement. In addition, the Adjusted Term SOFR includes a credit spread adjustment of 0.10% per annum for all interest periods. The interest period for Adjusted Term SOFR 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 unrestricted cash and cash equivalents) divided by a rolling four quarter EBITDA calculation, of 3.50 to 1.0 or less at the end of each fiscal quarter.
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 terminate their commitments, 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, 2022.
San Mateo Midstream, LLC
On December 19, 2018, San Mateo entered into a credit facility with the lenders party thereto, currently led by Truist Bank as administrative agent (the “San Mateo Credit Facility”). In December 2022, the lenders under the San Mateo Credit Facility extended the maturity of the facility from December 19, 2023 to December 9, 2026 and increased the lender commitments from $450.0 million to $485.0 million. In addition, the lenders agreed to refresh the San Mateo Credit Facility’s accordion feature, which could expand lender commitments to up to $735.0 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 $3.9 million at December 31, 2022, 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 6.7% at December 31, 2022. At December 31, 2022, San Mateo had $465.0 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, 2022 and February 21, 2023, 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 an Adjusted Term SOFR 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 Term SOFR Rate (as defined in the San Mateo Credit Facility) for a one month tenor plus 1.0%, plus, in each case, an amount ranging from 1.25% to 2.25% 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 an Adjusted Term SOFR loan, such borrowings will bear interest at a rate equal to (x) the Adjusted Term SOFR Rate for the chosen interest period plus (y) an amount ranging from 2.25% to 3.25% 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 San Mateo’s Consolidated Total Leverage Ratio, 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 for such period, 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 restricted subsidiaries.
If an event of default exists under the San Mateo Credit Facility, the lenders will be able to terminate their commitments, 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, 2022.
Senior Unsecured Notes
At December 31, 2022, the Company had $699.2 million 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 jointly and severally guaranteed on a senior unsecured basis by certain subsidiaries of the Company (the “Guarantors”). San Mateo and its subsidiaries and Pronto are not Restricted Subsidiaries (as defined in the Indenture) or Guarantors of the Notes. During the year ended December 31, 2022, the Company repurchased an aggregate principal amount of $350.8 million of its Notes for $344.3 million.
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
2022102.938%
2023101.469%
2024 and thereafter100.000%
Subject to certain exceptions, the Indenture contains various covenants that limit the Company’s and its Restricted Subsidiaries’ 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.
Debt Maturities
The Credit Agreement matures on October 31, 2026. The outstanding borrowings of $465.0 million at December 31, 2022 under the San Mateo Credit Facility mature on December 9, 2026. The $699.2 million of outstanding Notes at December 31, 2022 mature on September 15, 2026.