Moody's Ratings on Thursday shifted its outlook for Matador Resources Company to stable from positive, while upholding the company's Ba3 Corporate Family Rating, the Ba3-PD Probability of Default Rating and the B1 rating on its senior unsecured notes. In the same action, Moody's downgraded Matador's Speculative Grade Liquidity rating to SGL-2 from SGL-1.
The ratings firm tied the change in outlook to a sharp rise in Matador's indebtedness following a series of acquisitions announced since late May. Those transactions, which the company intends to fund largely with debt, have altered the trajectory of leverage relative to Moody's prior expectations.
Specifically, Moody's cited four recent purchases that together materially increase Matador's financial commitments. These include the May purchase of 5,154 undeveloped Delaware Basin acres for $1.14 billion acquired through a Bureau of Land Management lease sale; a June agreement to buy Cardinal Midstream Partners, LLC for $752 million; the announced $1.275 billion acquisition of Paloma Permian LLC; and the roughly $200 million purchase of undeveloped Woodford Shale acreage in the Delaware Basin from Ridge Runner Resources II, LLC.
Moody's said total consolidated debt could rise by as much as 75% since it changed Matador's outlook to positive in April and could approach $6.4 billion if the company completes the latest acquisitions and finances them with debt later this year. The agency characterized management's decision to rely principally on debt funding as a willingness to stretch the balance sheet in order to expand the company's drilling inventory.
Moody's also observed that the assets Matador is buying are expected to contribute limited near-term cash flow compared with the company's existing operations. That dynamic increases execution risk as Matador develops the newly acquired acreage and seeks to realize the assets' full value.
Company management has indicated that reducing debt remains a top priority. Executives plan to move net leverage toward a long-term target of about 1x within 12-18 months. Moody's noted that restoring the balance sheet to pre-acquisition strength will hinge on oil prices staying high through 2027; it warned that if benchmark WTI falls below $60 per barrel, Matador would have difficulty cutting debt.
On liquidity, Moody's estimated Matador had approximately $1.8 billion of availability under its revolving facility as of June 30, 2026, after second-quarter payments related to the BLM lease acquisition. The revolver runs until March 2029, and Matador has no near-term debt maturities before 2032, according to Moody's assessment.
Looking at cash flow, Moody's expects Matador to produce modest free cash flow in 2026 on the assumption that WTI averages $70 per barrel for the remainder of the year and existing hedges cover roughly 50% of projected oil production. That projection underpins Moody's view of Matador's ability to generate cash, but the agency's overall stance on the company's credit profile reflects the elevated leverage risk tied to the recent deal activity.
Key points
- Moody's moved Matador's outlook to stable from positive and affirmed Ba3 corporate and B1 senior unsecured ratings while lowering the SGL rating to SGL-2.
- Four acquisitions announced since late May - totaling about $3.367 billion in disclosed purchase prices - are expected to substantially increase Matador's debt and drilling inventory.
- Moody's projects Matador could have up to about $6.4 billion of consolidated debt if the company completes the latest acquisitions and funds them with debt, with revolver availability of roughly $1.8 billion as of June 30, 2026.
Risks and uncertainties
- Execution risk from integrating and developing newly acquired assets that are expected to provide limited near-term cash flow relative to existing operations - this affects Matador's operational and financial performance.
- Commodity price risk - if benchmark WTI falls below $60 per barrel, Matador would face difficulty reducing debt, increasing the risk to its balance sheet restoration plans.
- Leverage risk - funding transactions primarily with debt raises the possibility that consolidated leverage could remain elevated, which impacts creditworthiness and could constrain capital allocation.
Note on methodology - The analysis above draws on Moody's ratings action and the company's disclosed transaction values and financing intent. Projections referenced reflect Moody's assumptions as described, including a $70 WTI assumption for 2026 and hedges covering roughly 50% of projected oil production.