Matador Resources Co. on March 11 unveiled plans to scale back drilling among other measures, which included its CEO voluntarily reducing his salary, as the Permian Basin operator responds to a slump in oil prices.

“As we navigate this abrupt change in oil prices, our first priority is to protect our balance sheet and to position ourselves for the long run,” Joseph Wm. Foran, Matador chairman and CEO, said in a statement. 

On March 9, oil had its biggest one-day drop since 1991 with U.S. crude futures sinking as low as $27.34 a barrel. Despite initially climbing upward, WTI crude ended March 11 down $1.38 or 4% to $32.98.

In response, Matador decided to reduce its operated rig count from the current six rigs to three rigs by June 30 with the first rig expected to be released later this month. At least two of the three remaining rigs are likely to remain focused on drilling wells in the Stateline area of New Mexico’s Eddy County in the Delaware Basin.

The company said it will also continue to pursue divestitures of its noncore assets located in the Eagle Ford Shale play in South Texas and the Haynesville Shale and Cotton Valley plays in northwest Louisiana as well as a sale involving its mineral interests in the Delaware Basin.

Additionally, Foran said he voluntarily agreed to reduce his base salary by 25% while adding that the board members have agreed to reduce their compensation by 25%. The executive officers also agreed to reduce their base salaries by 20% and vice presidents by 10%.

“Due to the quality and flexibility of our lease positions, we believe these selective actions to reduce spending should permit us to strengthen our balance sheet and create further value for our shareholders throughout 2020,” Foran said in his statement. “While we believe these are the appropriate steps to take at this time, we stand prepared to take additional actions, if necessary, to conserve cash and reduce spending.”

In late February, Matador estimated its capex for drilling, completing and equipping wells during 2020 would be between $690 million and $750 million. Based on a rough cut view, dropping the three rigs by mid-year would lower 2020 capex estimates of Matador’s 2020 capex to about $600 million from $780 million, wrote Richard Tullis, analyst with Capital One Securities Inc., in a March 11 research note.

Matador intends to provide more specific details regarding the changes to its 2020 operational plan and rig activity and to revise and update its 2020 market guidance in the coming weeks, the release said.

The company also noted that it faces no near-term debt maturities, as its revolving credit facility matures in October 2023, and its senior unsecured notes mature in September 2026. Further, the company has approximately 45% of its anticipated oil production hedged at about $48 per barrel in 2020.

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