Q4 2020 Matador Resources Co Earnings Call
Good morning, ladies and gentlemen, welcome to the fourth quarter and full year 2020, Matador Resources Company Earnings Conference call. My name is Liz and I'll be serving as the operator for today.
At this time all participants are in a listen only mode. We will facilitate a question and answer session at the end of the company's remarks.
As a reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website through March 31, 2021 as discussed on the company's earnings press release issued yesterday.
I will now turn the call over to Mr. Mac Schmitz capital markets coordinator for Matador. Mr. Schmitz you May proceed.
Thank you Liz good morning, everyone and thank you for joining us for Matador is fourth quarter and full year 2020 earnings conference call.
Some of the presenters today will reference certain non-GAAP financial measures regularly used by Matador resources in measuring the company's financial performance.
Reconciliations of such non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP are contained at the end of the company's earnings press release.
As a reminder, certain statements included in this mornings presentation, maybe forward looking and reflect the companys current expectations or forecasts of future events based on the information that is now available.
Actual results and future events could differ materially from those anticipated in such statements.
Information concerning factors that could cause actual results to differ materially is contained in the company's earnings release and its most recently quarterly report on form 10-Q.
Finally in addition to our earnings press release, I would like to remind everyone that you can find a slide presentation in connection with the fourth quarter and full year 2020 earnings release under the Investor Relations tab on our website.
I would now like to turn the call over to Mr. Joe Foran, our chairman and CEO Joe.
Thank you back.
Yes.
Very much.
And thank you for joining us for Matadors fourth quarter and full year earnings conference call.
Yeah.
In addition to our earnings press release, I would like to remind everyone that you can find the slide presentation.
In connection with the fourth quarter and full year earnings release under the Investor Relations tab on our website.
We appreciate you participating in today's call and we appreciate your time and interest in Matador very much similar to last quarter.
Prepare that say the slides and to give you background and color.
What we're going to present today.
I'm going to turn the call back over to the operator.
To take your questions in a moment, but there are three or four points that I want to particularly my first is I wanted to commend our staff on board.
So the way they've worked together and achieved.
These results.
Everybody.
On each of the teams has done their part and it's been that.
Total effort.
With everybody, helping now and all the different ways that they can much of our success is related to.
Performances, and well results have been better than expected.
This applies particularly to the.
On the wells that we've been drilling the operational results and commodity prices.
And that.
The experiences of everybody working together this year to overcome the problems of Covid and prices and the like has led to improvements in our processes improvements there.
Results in the field the innovations.
And that the asset groups that we.
Have.
Done not only what we've expected the found new ways to add value.
So matador San Mateo has also been an important part of this whole effort, reaching new highs this quarter in EBITDA and EBITDA.
And then their contributions to Matador for example have on the Pops ready as we turned on wells that helps both the environment. It.
It keeps trucks off the road and most important is that during the ice storm, we were still sitting down.
Are they on the pipelines.
To be handled.
And as saves us a lot of money on trucking and other expenses.
So we appreciate the extra effort there and then for me what has been one of the most exciting developments is at Matador has got into a position where it can carefully issue a dividend policy and start paying back to our shareholders many of whom have been with matador since inception of Matador.
This was made possible by the.
Free cash flow that we generated in the fourth quarter.
And the debt reduction that we did with that money. So we do.
On a GAAP.
Where we've achieved.
Debt reduction dividend policy.
You know.
Reinstated.
The.
Pay cuts it paid people to during the Covid and the price crashes.
Yeah.
Uh huh.
Kept our promise and outlook and the development of these eight plus locations, which have been the key to our success in the past couple of years the improvements in capital efficiency.
And.
And that look that we think have US has is on the right track for further debt reductions a strong dividend policy and of course strong operating results with each day plus locations and with that let me open the floor for questions.
Thank you ladies.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Due to time constraints, we ask that you. Please limit yourself to one question and one follow up again, we ask that you. Please limit yourself to one question and a follow up until all have had a chance to ask a question after which we would welcome additional questions from you.
Yeah.
First question is from Neal Dingmann with true Securities. Your line is now open.
Good morning, Al Good morning, Joe and team.
Joe could you heard David talk about now with the fourth rig added maybe just give us a bit of color now how you think about sort of maintenance capital starting on that March period going forward and maybe how that pertains to how your view on free cash flow for the year.
Yes. Good morning, Neal This is David and thank you for starting with that question I wasn't the pool.
I appreciate that.
[laughter] book.
It all seriousness I hate that we.
You did a good job.
Laying out to our decision to you know to pick up the rig in March.
As you know we began the year running three rigs and have every intention of staying with the three rigs there throughout to 2021 about.
About a month ago.
After the inauguration of the president button.
As you're aware the department of the interior came out with on orders that are limited the.
The approval of the local offices to grant permits or sundries or other approvals that are necessary for the development of a federal oil and gas leases.
It's a pause it's a 60 day pause and the good news was it didn't limit any of the.
Our activities on existing federal leases and you know we've continued our operations there without the without any hiccups since that time I think we remain optimistic that the be all and will return to more normal activity. After this pause is over but the fact is we just can't be sure and I think.
As most of our.
Investors know.
Our properties at the Stateline and in the Stebbins area.
Of the Rodney Robinson are these are these are important properties you know Joe Matador. They have many of the eight plus locations on the map that Joe just referred to.
And we felt like that it was important for us to ensure that we preserve the value in those properties.
For you know for the company and its shareholders.
So as a result.
We considered and began talking about picking up a fourth rig it's not a decision that we took that we took lightly we thought about it very carefully.
We wanted to be sure that in and picking up the fourth rig that we could continue to deliver free cash flow.
In 2021, and we believe we can we wanted to be sure that we could pay the dividend that Joe just mentioned and we can we wanted to be sure that we'd still be able to pay down debt during.
During the course of the year and we could and we will be able to do that we've already paid down. Some are just this january and we will continue to pay down debt as we go through the year I think as we've been consistently saying all along is we also wouldn't have done it if we didn't feel like that we could pay for it and fund it without having to borrow additional.
Money. So you know the properties are important to us they carry a lot of value. They also carry the ability.
Not only for Matador, there also valuable to San Mateo.
They enable us to earn incentives from five point that I think which is pretty unique you know we think this year that we may earn upwards of $35 million in incentives, which is just the additional cash flow that comes of that comes from our partner in San Mateo and the wells are going on all have very strong returns. So look I think for.
All of those reasons are having considered it we felt like that.
It was the right thing for Matador to do and so as a.
A result, we have you know we give lou.
The contract.
Another rig coming in March it's going to be on a short term contract.
If things change we have a lot of optionality with how we are you know we'll go forward with our with our program as we always do at Matador, but but for now I think we feel like we've made the right decision.
Yes.
Go ahead, not only on one day will say in there in regards to the rigs we've got this really contracted for.
For three months and so we have as we always do first off with the rig we've got coming is one of our rigs we had running last year Patterson has been a great partner for us in the room.
The relationship continues to be strong. So this is a rig that we know it's coming back to us. It's on a short term contract. We've got it for about three months and so we will have another chance in June to make another decision. If we want to keep that rig we can again in August we will have yet another option on our rigs. So we could go from four rigs to three rigs.
The two rigs by the end of August if we choose to do that and we'll make that decision as we go along and based on the conditions that are resident at that time.
They've only had just one follow up it sounds like you are confident in the <unk>.
Still the free cash flow, even with the program and I'm just wondering how much day to day for you does it are you assuming from San Mateo I mean, you already had 21 million free cash flow last quarter and it seems to me as you all continue to fully you know more than fully ramp there and you have more third party coming on there is obviously I'm just wondering kind of in your expectation.
<unk> how much how much are you assuming from sort of that the free cash flow side from San Mateo. Thank you guys.
Yes, I think very again as we've talked for a while on deal.
The expectation for cash flow from free cash Matador share from San Mateo is probably going to be about $35 million. You know this year. So you take that and the incentives and that's about $70 million of cash that's attributable to San Mateo was a business San Mateo 100 per cent it'll probably generate about seven.
Millions of dollars on free cash flow are part of that it'll be about 35, and then we expect to pick up the other 35 billion in incentives from from five point of which 15 million of it is is earned and I expect will be paid with just in the next week or two so that usually comes in early March so.
I think that that's.
That's all something that we can certainly we can certainly count on and I think the incentives. It's important for me to point out again that the incentives come straight from five point. They don't they don't they don't come from San Mateo, So it doesn't impact San potatoes, cash flow or revenues at all that is all money that's paid directly from five point on that.
The other source of cash for the company.
Very good thank you much for the details.
Thanks Neil.
Next question comes from Michael <unk> with Stifel. Your line is now open.
Good morning, everybody, maybe just to follow on to the conversation on the fourth rig would you need to see out of the administration.
In order to but that fourth rig go in June when the contract comes up.
I think I think Mike that you.
You know you would want to see a a certain certainty yet but sort of a return to normalcy. If you will you know I mean, we'd like to see them go back to the.
Issuing permits.
Issuing extensions to existing permits.
You know granting sundries I think if you know I think if we begin to see those kinds of things coming through on a on a regular basis on on a timely basis.
Similar to what we were seeing prior to the pause being initiated that.
There might be reason to consider.
Changing course, a little bit, but I think we'd have to feel like we're seeing those things happen and that the things are continuing to move along at a pace. That's a fairly commensurate to what we saw before the pause.
Got it thanks and.
Noted in your in your budget and includes a 10% inflation starting in second quarter I just wanted to see if you've seen any indications of service cost inflation, yet and if so where and.
In that budget have you built any additional capital efficiency improvements into it.
Yeah, Mark this is Matt and thanks for the question. We are right now where we're not seeing a whole lot of cost inflation, we have built it in to the budget.
One of the good things for US you know on the particularly on the completion side.
40% of the wells that we're going to drill this well this year, we're going to complete in this first quarter and this lower pricing environment. So you know the kind of the way, we typically think about our vendors as we're looking for for vendors to help us create value and so we had anticipated that our you know the bed.
Some of the vendors couldn't continue to work at the processes that they have for the last couple of quarters and I do want to make sure that they're able to do their business effectively so that we can become more capital efficient as we go through these things so I will say.
In addition to that we're continuing to have more efficiencies on the drilling completion and production side I mean, we're drilling these wells faster and faster and faster on the drilling side on the completion side with the boy. We're developing these acreages a lot of these are four well pads and so we're moving into the Cymer Frac operations, which is much more cost efficient.
Good for wells completed faster even on the production side. The production teams has started on their flowback operations, we've kind of eliminated the flowback crews we've got.
Couple of separate or is that we rent and we do all this stuff internally in house with our production guys. So we will do anticipate some service cost inflation, but I also think that efficiencies will probably make up a lot of that difference.
Great. Thanks, Matt.
Thank you Mike Thanks, Mike.
Next question comes from Richard Tullis with capital One Securities. Your line is now open.
Hey, Thanks, good morning, everyone.
Hey, Richard Richard.
How's everybody maybe start with UGI what gave it how many of the 50 gross operated wells planned for 2021.
Bill will be located on federal acreage.
And does adding a fourth rig change any of the planned wells for the other three rigs for 'twenty one.
I believe that Ah I believe that all but two of the wells that are that we're.
We're drilling in this plan are on federal acreage, we're drilling two wells in our Wolf asset area. One that's drilled on one that'll be finished just in the next few days, but those are I believe the only two that don't have some federal component you have wells like the Rodney Robinson, and the and the Stateline which are.
100 per cent fed and then we have others like those up in the Stebbins area that they tend to have a federal component to them and that they pass through you know on federal acreage or maybe they start on federal acreage, but.
And frankly, most all the wells that we contemplate are going to be on are going to be on federal acreage. How did that change things I think that that you know prior to you now.
Part two a couple of months ago, when we were putting together our plan.
We probably would have drilled a few more wells in the rustler breaks or perhaps in the Antelope Ridge area that were not directly associated with federal properties and we probably would have drilled a few more wells down on our Wolf asset. So we you know, we certainly have modified things a little bit.
To focus more heavily on the federal properties.
That's helpful. David Thank you and just a follow up.
As Joe mentioned, you you initiated the dividend policy, how do you see the dividend potentially growing say over the next two years.
I'll give you the oil price environment say $55 oil price environment, and a four rig scenario.
Richard I'll take first deal and and and I think can back playing out but it's just too early to tell.
We initiated this dividend policy we feel.
You know of course, we're confident it's sustainable, but we don't know how it will work or the effect on our shareholder growth and so we will take you know go into it cautiously.
And.
And see how well it works see what the cash flow is you now see what the day of the business are.
And.
And you know go from there and how fast they can grow.
Certainly it's in phase five dollar we see growth in it.
But want to again move cautiously because we're on a.
Path, we haven't been before first Matador always had any day of a Dan it was much smaller and that was private so getting used to this we wanted to share iron out any of the problems on the payment and make sure everybody gets paid and then we can look in and plan to increase it over time.
But wanted to began conservatively and not have missed staff. So we're very excited by it.
On our legacy shareholders and other shareholders.
Shareholders had called in to say how much they like it how much they appreciate it and.
So we say it is a win win win type of arrangement.
And.
Sure.
We're looking forward to in the staff, we have as you know large calendar shift among our management group and staff and they're eagerly.
Looking forward to the checks too and we'll see how it works but.
We'll have more at the next conference an H one after that.
I'll, let you know how to go on.
Thanks, Joe.
Our next question comes from Gail Nicholson with Stephens. Your line is now open.
Good morning, Thank you for taking my question.
After the team gets more efficient.
And what could be considerably higher than what the market was.
And I think that's predominantly driven by better efficiencies versus that fourth rig.
Helping the 2020.
Thank you.
And the other.
Is that you guys are implementing really kind of.
That process enables to get wells on quicker.
Yeah.
So what we've decided to do and what do we think it is absolutely the right way to conduct our business and you'll you'll notice the lumpy nature of the the production we've gone to these multi well pads, where we're drilling.
234, sometimes five wells per pad and so you end up with a lot of drilling efficiencies there you've got fewer rig moves and Billy and his team have put these rigs together, where we can very efficiently.
Drill these wells you know on whole section at a time and wanted to just get these things drill a lot faster. Additionally, coming.
Coming in with Frac crews.
Got to you know initially we started too.
Tracking well, we'd do wireline work and then do the roof rack and then do wireline work and then we moved true what we were calling on the Zipper design, where we've got two wells that we're fracking on one and doing wireline work on the other and now we're moving more towards the what we call final Frac wells, where we've got one frac crew.
Completing four wells at a time when we're fracking on two of them with the same Frac fleet and doing wireline work on on the other with the wireline crews and so it was Chris Calvert, who whose.
I mean, we're heads of operations. He says theres very little white space on that operation. So we're able to complete more lateral footage per day, which ends up saving us a couple of hundred thousand dollars per well on a four well pad. So.
Just moving on into the production side of things Glenn and his team have done a really nice job of making sure that we've got to water and oil pipe on location as well as gas little bit were flowing directly from the wellhead through a couple of sand knockouts into our production facilities, we're selling gas, we're disposing water and we're so on oil on pipe right off the bat so.
All those things just to get the wells on faster and much more with much more capital efficiency.
Great.
With the number of wells that are in progress at year end, which is a healthy number.
The 2022 volume outlook lumpy on a quarterly basis.
Anticipate that lumpiness.
Yeah, Gail I really do think that they'd probably even again in 'twenty. Two we will still see we'll still see the Lumpiness you know and I just think that's a that's just a bit of an artifact of the art just a natural kind of outgrowth of the way that we've chosen to develop these properties when we're drilling these.
You know 12, 13 will sort of batches or at a time and putting all these wells on them on production at the same time. It just is going to cause us to continue to sort of have the you know the ups and downs in production I think the good news is you know.
It may be up and down from quarter to quarter, but six months to six months or a year over year. It tends to be you know up until the ride to you know most all the time and so I think that's a that's a positive thing, but I would expect that this will this will continue for some time.
Thank you.
As a reminder, ladies and gentlemen, if you'd like to ask a question at this time that's star then one.
Our next question comes from Zach <unk> with J P. Morgan Your line is now open.
Hey, guys. Thanks for taking my question could you talk a little bit about the permitting process in new Mexico, and what you've seen recently I know you're on talked about getting to around 300 permits by year end on federal acreage, but it didn't seem like that the permitting process really move forward like even in November and December of last year. So just.
Any color there on what happened.
Yeah sure.
Sure Zach good morning, and happy to answer that question I think that.
You know we did I think have three new permits that were approved in the fourth quarter, but I think it was more.
That was more on outcome are a result of sort of what we did we had a number of our we had a number of sundries on existing wells are wells that were due to come up.
Particularly at the in the Stateline area. Instead burdens that are that we wanted to kind of get through the system and these are.
These impacted things like Oh, maybe we had a.
Little change, we needed to make to the surface location or perhaps the you know the the downhole interval that we're wanting to complete.
One important thing was as we've drilled our wells at the Stateline, particularly and Rodney Robinson and other places we've learned our drilling team has done a great job of being able to drill with just three casing strings as opposed to four and I think a number of the sundries that we requested in that period of time.
On had to do with just reducing the number of casing strings and and we were routinely receiving those are you know those approvals. The nice thing about that is it saves us several hundred thousand dollars on well you know so it keeps keeps.
Keeps enabling us to drive down the well costs on these wells, but I think that's really what to what caused you know just the number of new permits to slow down a little bit force in the fourth quarter was that we asked them. You know there's you you kind of have your own cute with the B, a little a little bit and we were asking them to move these other.
Sundries on existing permits up in the queue. So that we.
We could continue moving ahead with our existing operations and do them more efficiently and that probably delayed getting more of the permits are through the through the system in the fourth quarter than what we originally estimated.
Got it thanks for that that's good color and then just one follow up on on the dividend kind of how you think about that going forward I mean, how do you compare growing the dividend with debt reduction do you have a target debt level or leverage level you'd like to get to.
No it's a balance between that.
Two is that.
On the debt reduction has the first priority.
You have to work with our banks.
On that we've been helped by the better than expected performance of our wells. It has increased our borrowing base, but yet we want to lower that and we were very pleased that our leverage ratio.
Yeah.
Over the year got down to less than three point has ended the year two point not customarily you now we would like to be down there to the point now it doesn't have it won't happen overnight, but we expect to try to aim for a steady reduction through the year there'll be a little lumpiness because our production is going to be.
Lumpy.
And then David Dan.
Well, then you know I have priority as a day, but again will.
You know once you start day, a day and you don't want to cut it so we'll be cautious there, but we helped to grow inches.
As we grow our production and our revenues and profitability.
We have a say on hussein's around here.
One is that we want profitable growth at a measured pace and the same applies to playing down the debt we want it measured and the devotee and growth we want it but it'll be measured.
Same way with production and then the second thing we always try to reserve the right to get smarter. So if circumstances change, we'll change and we will try to be nimble and responding to.
Now, whether it's winter storms or or price wars, or COVID-19 or whatever.
And I really thank our staff did a really good job of it.
Navigating through all of those things and ended the year stronger than it began.
And if I may while I'm still on your question just point out to the slides that I put in there the 2021 priorities and milestones I think this will address some of your quest.
Questions, but it has our priorities what we want to achieve during the year. We had this for last year, we achieved all of them and we expect to do the same this year and then I tried to provide over in the upper right corner.
Some significant milestones that our objective we either achieve them only down just as we gave out last year.
And that the first thing he has turned in the Rodney Robinson wells for the Rodney Robinson Wells to sales then you got the Bonnie which will be some of the best wells we've ever drilled.
And we've drilled some of those wells that are there two three miles.
In the same amount of time that.
We did two mile laterals salad again, that's your capital efficiency better methods out there and then you have forward greater stab at swells you have nine nine more wells to turn in the year and we have 13 more Boris Stateline wells, while all you add that had non.
The eight per se that are two miles or more we only have one well that's going to be less than two miles. So we'll enjoy great capital efficiency and year to date, so far that cost that Dan much like 2020, as Billy somebody pointed out that 40%.
Of our completions is going to occur in the first quarter. So we will have.
Yeah, very large part of the year done.
Next month in terms of Capex at those lower prices.
Uh huh.
And.
So that's something that you can watch it and if we achieve them.
We're on track and if something happens and we're off Trey and the capital efficiency on that has grown from a 9%.
In 2018 to 29.
Per se.
In 2019 to this year was closer.
70% alrighty per Se and 83 and now we're up in the 98 per cent and the last thing is again mentioned what a good job San Mateo is achieved.
<unk>.
And steady growth from 2019, a depressant, so that's a mitigate or on decline and theoretically now declining business. So.
You know all day, saying seem to be working for good our board is very active and we have some.
Late director, Tim Parker, and it really has helped us too.
Two rather these areas in parallel the debt reduction.
On the capital David and the capital efficiency, Yeah, the EBITDA, San Mateo and so right now it looks like everything's clicking we have our challenges, but I think we can deal with them in 2021 and the outlook is very positive for all of US here and I hope that I hope that's helpful.
T.
Yeah. Thanks, a lot for the color that's all for me.
Thanks, Ed Thanks day.
Our next question comes from Scott Hanold with RBC. Your line is now open.
Hey, good morning.
Hey, Scott.
Hey.
I was curious on on.
With adding the fourth rig and you know obviously the San Mateo system has certainly been enhanced over the course of the last year.
When you think about the San Mateo and the higher level of activity and growth I mean is there some.
Some capacity expansions needed or do you think San Mateo is pretty well set up where it needs to be here over the course of the next day one to two years.
Yes, Scott this is Matt and I think we're in pretty good shape you know we've.
We added the 200 million so were 460 million cubic feet of processing capacity there to the Black River processing plant and I think that when we put all that together we were contemplating.
Six rig program. So we've got plenty I think to the.
The challenge for the team is going to be adding third party volumes, and I think Matt and Korean and others on the San Mateo team are.
Actively doing that I will say that with the increased activity up at Stebbins, we have a.
Saltwater disposal permits that we had.
From from the state and we were kind of sitting on that waiting until we really needed to do I think we're going to go ahead and drill that and that's built into the 20.
20, or $30 million on Capex, so really for us from the San Antonio right now we've kind of transitioned from a company that's building things to a company that's operating claims and adding third party volume so.
That being said if we were.
Moving to land, a big fish out there that might require some additional capital.
It would be something that we would have some sort of guarantee who return to.
Give us a good return on on our investment before we would do that and that would be additive to what we've got a projected now Scott This is David.
Just if you would.
I want to take just a moment and and give a shout out to our sales.
Team our production team in San Mateo team.
They did a marvelous job over the last 10 days of the of our you know keeping the keeping those facilities up and going and keeping us producing.
Think that we'd we'd heard that there was only five per cent of the plants that were up and go on in new Mexico.
On all the cold weather and in San Mateo was one of them. So you.
Never was San Mateo more important to Matador, then over the last 10 days and I just want to I just wanted to give them a shout out for their excellent performance over the last 10 days. Scott. This is Joe I wanted to jump on that day.
On your question you can give a shout out to our field staff on the production side is it takes gas or 14 day shifts either on 14 days 14 days and again they work through the night they worked through the morning.
Keeping that production going and you.
You know just great work, great teamwork, a great effort.
All of them and we appreciate that.
You know very much and that's what's helped make this quarter and while we can get the other promising outlook for the first quarter.
And.
You know that the maintenance what.
Yeah.
<unk> was talking about the other factor is that kind of a.
Longer range is that if the.
Federal government does really restrict pipelines building the pipelines on this surface out there.
It makes the patch we already have it on the ground that much more valuable so that's an interesting development.
What we don't know how that turned out health at the.
Bill and we'll continue to work with everybody its a very professional staff out there.
And we really appreciate them continuing to.
Work with paper and there's been government shut down and they have persevered through a lot the bad weather the COVID-19 had shutting down on the government offices, so I think there.
Deserving for our whole industry to get a little credit debt. Despite the adversity.
The industry is doing very well out there in the Delaware.
Hey, Joe and I'm I'll, just pile on a little bit here too I mean.
You were talking about the production guys and they're just talking about the San Mateo guys.
It takes the.
The entire team really I mean, the San Mateo guys would tell you it takes gas for us to run the plant with production guidance and say, we've got to have a point, that's up and running to make that work and the marketing guys are on the back end of this finding homes for all of this and making sure that we don't over nominated are under nomination.
The difficult thing to do during these trying times at the same time on the.
Drilling gas they set a record in the lateral.
This time, it's freezing cold out there and they're setting records on the completion guys we were able to.
So we're saying in a very difficult time to keep to our frac crews running I mean, a lot of the sandbox had their natural gas cut cut off and so that's how they draw the sandy we were able to on a little here and find a little there and keep things go on so lots of lots and lots of effort wildly in Turkey.
Alright.
The marketing gas.
He can't find in markets as refineries were shutting down and waste are familiar to you all so go.
Go ahead, Scott didn't mean use all your airtime for.
[laughter].
And in April.
[laughter].
And maybe just to play off sort of a comment that you.
You know, Matt and David in terms of like the uptime of the system win.
Certainly you know things were rough out there I mean, certainly that's going to help your ability probably market to get third party volumes, but.
There was some increased obviously non op activity you're expecting this year.
Is there a line of sight to you know for some of that to come into the system or is that not quite in the right.
Now in the right Zip code.
You know Scott some of it may some of it may not it's just depending on you know whether that acreage has been dedicated to to us or it's been dedicated to somebody else or whether it's on dedicated so I assure you that the San Mateo team as he was looking at the rig count and they're looking at where these rigs are located and if there's something coming up there.
Moving to their offices and visiting with them.
Okay, Oh, absolutely and you know.
Just at a high level on with anything that.
Fourth rig.
What is your all perspective on on you know the.
The risks of needing that rig I know, there's some flexibility with the rig but can you talk about like how you know how you sense that you know this me unfold here.
Yeah.
Yeah.
Right.
Crystal ball, that's gotten cloudy honestly you just don't know what right now with the administration.
Is is going to day and that we should know in the next 30 to 60 days or they get a ruse granting the permits and the Sandri says in a routine manner. So when you see that happening there Neil you'll know and.
Uh huh.
But the other thing I want to emphasize that a lot of this is we have a lot of opportunities it's pretty clear we're in some pretty good areas. When we drilled 98 per cent of our wells two miles or longer and these are a plus locations and so we'll take stock we don't want to lose anything.
Those locations because it adds value laws to Matador.
We're not in this to grow for the sake of growth, but that profitable growth that that measured pace and if it didn't work out or prices decline or you know other obstacles come in as Matt pointed out we could you.
You know give up this rig and Jade we have another rig that's term is expiring in August. So we can go down from four rigs to two rigs.
Very quickly or we can stay where we are so that was another advantage we had a lot of flexibility.
You know, it's portrayed gave us that flexibility. It was a reagan that we knew that was state of the art, where the crude that was really strong.
And we thought that was better than waiting to say what might be available in 90 days or six months and this was a bird in the hand.
And I think anybody that had the facts that we did what it done the same same thing we are not a one size fits all kind of me and she's now.
And we are.
We're not a company that.
That turns on one element, we really tried to look at things broadly from all the different angles. That's why we work it teams and we have that deal about reserving the right to get smarter. So.
As the year goes a long way in that you or any other analyst or any other shareholder call us and ask us what were thinking and as the year evolves, we'll be trying to keep you all all up today and run things as transparent as we as.
As we can and we added to segment for non op properties in a week.
You don't know for sure that that'll happen, but we thought we should play it conservative and the same thing on Capex we.
Overestimated their capex for fourth quarter and for last year, we came in better than expected.
Health and Billy and his grateful come here better than expected again, but we'll wait and see but neither way we went on everybody on notice.
This is what looks best best today in the foreseeable future.
Alright got you know thinks that and you know and maybe if I could kick off that with one other question and you know obviously you you all had some nice pacesetter well cost coming into the fourth quarter at six on a quarter.
For foot.
And fourth and in the fourth quarter and I know you're targeting a little over 702021, and when you look at that number as was the 625, just sort of a trough kind of pace setter well or do you is the difference between that in 'twenty and 'twenty, one really does sort of inferred in place and you think that may occur.
And I'm not sure if youre starting to see some of that at this point coming through different.
Different components.
Yes, Scott this is Matt it's a good question.
The wells that we drilled in Q3 that are in that really low numbers. Some of these longer laterals, where we were able to be very efficient in.
We're going to continue to do that but we do have the 10 per cent baked in there for inflation and you know we're drilling wells in different areas. So some of the costs may be higher in different areas and they were down on the Bora and Nevada. So it's a little bit of both but I think to 730 number is a pretty good number and certainly where we started a couple of years ago.
It's a very good number and I will say the you know just on the capital efficiency. You know on one thing I think is interesting that are here in the last couple of years by getting.
These efficiencies in drilling these longer laterals lateral footage that we're drilling for rig year is almost doubled and so you know youre drilling in August footage and you're completing more of the food that you're drilling.
Yeah I wanted to jump in here, Scott, we didn't see chat apps, what we need to give a shout out to on Max column right. When they propose the BACS com room, we were all on share of hat might work. It goes 24, seven it's you know it's assessed our directional drilling.
And what they did at that time, we implement it.
We were staying in zone about 70% of the time now we're staying in zone over 95 per se on at the time and so you can just manage AD proportionate increase.
In reserves add so much extra value add.
Staying in zone, and also saves us tens of millions of dollars in drilling cost not having to back up and re drill or one of the other problems that you would have and death.
That's a bunch of young gas have come in and have really worked and coordinate with the drilling gas and yeah, but that's been a big boost to our better than expected performance in our <unk>.
Didn't want.
This go by without some recognition of that David well, Scott I just wanted to add just a little bit of color to what Matt said, one thing to keep in mind is that we have 19 wells being completed right now in the first quarter.
And so youre looking at are probably you know close to 40% of all the net wells, we're going to put on production in in 'twenty and 'twenty. One are in the process of being completed right now 13, Bonnie wells four at Rustler breaks and too up in the Ranger asset area. The good news about those is.
Theyre all they were drilled and all will be completed under what I would call 2020, you know pricing and so we're gonna get you know some of the sort of the trough level pricing on on those completions now as we go forward. We're expecting there may be some inflation as we talked about but but I think these first.
This first batch of wells that we're going to get.
He is going to really help out you know the average you know for the year, which is why we're confident that we're going to come in in that to kind of 730 type range that we've been talking about in addition, I might point out that the 625, where all wells up in Rustler breaks, which is one of the Shallowest areas. You know that we are you know that we drill.
And.
And so that probably contributed a little bit to that as well.
Somebody just handed me a note that I said that there were four wells at Rustler breaks and I met four wells that Rodney Robinson. So there's 13 bodies for wells that Rodney Robinson and two wells up in the up in the range of area that.
The six of those the Rod news on the Rangers are gonna be on production.
March and then the body wells will start coming on in the in April, but I think the I think the cost per foot the completed cost per foot on those volume wells is going to look really really strong.
Alright, I appreciate the color. Thank you.
Yes, Sir.
Thank you ladies and gentlemen, this ends the Q&A portion of this morning's conference call I'd like to turn the call over to management for any closing remarks.
Thank you very much we appreciate the questions. We again want to invite you to call us whenever you have other questions or suggestions are we like to engage with you and also extend the invitation.
Whenever as we worked finished working her way through Covid to come see us in person.
Your your views and your relationship friendship it means a lot to us.
We're very excited we think we're continuing to come of age and appreciate all your support and interest through the years and on behalf of all of us to assets here. Thank you all for hanging with the Kennedy in the historic Cold.
People are all in here, giving things then working together and that has made it a total team effort. Thanks.
Yes.
Ladies and gentlemen, thank you for your participation today. This concludes the program.
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