U.S. oil producers have little to be excited about entering first-quarter earnings.
WTI crude prices have collapsed 14% since the start of the year, averaging $62.92/bbl during the week ended April 18, according to Energy Information Administration data.
Concerns about OPEC+ barrels returning to market, slowed global demand and trade uncertainty hanging over the oil patch, Tudor, Pickering, Holt & Co. (TPH) Analyst Oliver Huang said in an April 24 report.
Amid volatile prices, the firm downgraded two oily names, SM Energy and Civitas Resources, to hold from buy due to their heightened debt levels. For 2026, TPH forecasts WTI averaging $55/bbl.
Market turbulence is forcing E&Ps to redraw spending plans and analysts to rethink outlooks for 2025 and beyond.
In response to the volatility, Permian E&P Matador Resources adjusted its drilling and completion (D&C) activity for 2025, CEO Joe Foran said in Matador’s first-quarter earnings released April 23.
The company plans to drop to eight drilling rigs by midyear, down from nine rigs at the start of 2025.
Declining D&C activity by Matador and on its non-operated assets will result in 6.7 fewer net wells this year.
After the adjustments, Matador’s oil production is expected to average about 118,000 bbl/d this year, down 3% from the firm’s original guidance of 122,000 bbl/d.
Total production will average around 200,000 boe/d, down more than 2% from an original forecast of 205,000 boe/d.
The pullback in activity should reduce Matador’s D&C spending by $100 million to $1.275 billion.
Matador holds 198,700 net acres spanning across the Delaware Basin of New Mexico and West Texas. Production averaged 198,631 boe/d in the first quarter.
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Hunkering down
Foran and the Matador team have “weathered many turbulent storms” over the company’s four decades in the oil and gas business, he said.
He launched the original Matador brand in 1983 after raising $270,000 from friends and family. Today, Matador has a public market value of over $5 billion—and many of those friends and family remain shareholders.
Leaning on 40-plus years of industry experience, Matador took steps to shore up its balance sheet ahead of market turbulence.
“That’s the nature of this business, trying to be ready for whatever the circumstances are being thrown at you,” Foran said on an April 24 earnings call.
The company generated $440 million through non-core asset sales and other transactions in the first and the fourth quarter of last year including:
- Selling its final Eagle Ford acreage for proceeds of $30 million. The assets were in La Salle, Karnes and Atascosa counties, Texas;
- Divesting a 19% stake in the parent company of Piñon Midstream LLC for $115 million; and
- Contributing Pronto Midstream into San Mateo Midstream for an upfront cash payment of $220 million to Matador. The deal includes the ability to earn additional drilling incentives of up to $75 million.
Matador also repaid $190 million in borrowings under its credit facility in the first quarter.
Matador shares have fallen by around 37% over the past year.
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SM, Civitas woes
Depressed oil prices “will be more challenging for upstream operators with relatively elevated balance sheets,” TPH’s Huang wrote in an April 24 report.
Debt was cited as a concern. SM ended 2024 with a 1.3x leverage ratio; Civitas at 1.7x.
Both companies have been consolidators in the Permian Basin, and SM dove into Utah’s Uinta waxy crude play with partner Northern Oil & Gas (NOG) in a $2.6 billion deal last year.
SM “has limited capacity to lean aggressively into any sort of buyback with the near-term prioritization of debt reduction,” Huang said. SM has a 1x leverage target.
Civitas, meanwhile, “carries one of the higher oil PDP declines within our coverage and will be churning through some of their most valuable resource over the next few years” to reduce debt, he said.
Civitas has a leverage target goal of 0.75x.
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