Q2 2021 Matador Resources Co Earnings Call

Good morning, ladies and gentlemen, welcome to the second quarter 2021matador.

Oil resource.

[music] Company earnings Conference call. My name is Dana and I will be serving as your operator today at this time all participant lines 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.

Resources Company's web site through August 31, 2021 as discussed in the company's earnings press release issued yesterday I will now turn the call over to Mr. Max Smits capital markets Court coordinator for Matador. Mr. Smith, you May proceed.

Thank you Tina and good morning, everyone.

On the thank you for joining us from Matadors second quarter 2021 earnings Conference call.

Some of the presenters today will reference certain non-GAAP financial measures regularly used that matador resources in measuring the company's financial performance.

Reconciliations of such non-GAAP financial measures with comparable financial measures calculated in accordance with GAAP are contained.

And 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 company's 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 additional.

Information concerning factors that could cause actual results to differ materially is contained in the company's earnings release and the most recent quarterly report on form 10-Q <unk>.

Finally in addition to our earnings press release issued yesterday I would like to remind everyone that you can also find a slide presentation in connection with the second quarter 2021.

Additionally, these press 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 Mac.

It's a pleasure to be here.

Today to have this kind of report.

So on to you.

Normally assets.

2 or 3 things in particular the.

A highlight.

But there's a lot here I would.

Think matador is at an inflection point.

It's been an exceptional quarter everything came together force great effort by our staff.

You know both here in the office.

1 early in the field.

And I think the results are sustainable.

Because many of them are involved in pretty much in the process and wells that will produce for years to come.

At record low cost so I invite you all to read our.

The prepared remarks.

So they're a little long to read to you, but I hope that you'll take the time.

Look that was over we included some slides.

That are on our website and I'm going to go quickly through those cause that highlights what I'm trying to say, but also to share with you.

Some.

These accomplishments and so if you'll look at slide Hey, you'll say that.

We had record.

EBITDA and free cash flow.

And they were saying was above.

Expectations are.

The production was.

Some of the costs were lower.

And <unk>.

Each group contributed to these results are also exciting for me is that we repaid another 1.

100 million on our debt sorry, that's cut it in half and we've gone.

Yeah.

Last year at the heart, we were nearly had a leverage ratio of 3.

That's now day until 1.8 and.

And I like staying in the ones so the balance sheet.

You know it has strengthened as we predicted as we were able to bring the base.

Hi properties online.

The quarterly production was better than expected that these day L. M wells, many of which are going to produce a million to 2 million barrels a piece, we have more zones than we'd really I had originally anticipated.

And and and also most important and.

And that.

It is sustainable we have moved our capital efficiency really forward.

So that now in 2018, we drilled 1 well it was over 2 miles.

L L bean miles or more and this year every well, we drill will be 2 miles or more except 1. So we've moved our efficiency for about 2 per cent did.

98 per cent.

The other thing that.

We have a match com.

That was true that follows our wells in real time as they were drilling horizontally and they've increased our time in zone from 70 per cent, 100%. So you can see what kind of difference that makes and both reserves and production that to increase here.

Duct tape footage.

Nearly a third.

Adding to this effort to improve capital efficiency.

All of us.

All aspects of our business, we we try to be good operators, who both watch revenue.

And expense and.

At each capital project and.

And then their per unit costs so everybody.

As in an effort to provide the shareholders make the most use of the shareholders' capital that's been invested with us.

We're already exceeding.

For 2021 guidance and yeah. That's enabled us to have some operational flexibility to bring some projects forward and really start preparing for 'twenty 'twenty..2 the next slide I have is on slide B, which shows the increase.

Quintin contributions of our midstream assets and are not only does it have these important.

Natural contributions, but it has operational enhancements.

To know that we will be have our pipe out there when the wells are ready to come on line. So.

Increased from the environmental.

Good point, you're not trucking.

You don't have the missions problem.

<unk> already.

And you know they take Hawaii and.

Our AD and then the operational enhancement is that.

Because.

San Mateo the pause.

Actual widen when we're ready to turn on the Rodney Robinson Wells and the board wells.

And they were producing too much volume for it to be truck.

Plus your third party may or may not be there, but our production.

<unk> made it clear that they'd be there with a pops and they work no matter what.

The third thing is what I've already touched upon is the borrowings outstanding.

Outstanding and you can see that.

Immediately prior to the BLA M D Ali.

Yeah.

Group, we had a leverage ratio at 1.8.

And then as we did that project the debt.

We borrowed the money low interest right.

To do that to do the projects on the BLM acreage.

And yet it reached a high in the third quarter.

2020, a year ago.

At.

$520 million and we've reduced that now to 240 and outstanding borrowings for the back to the 1 point I.

<unk> ratio so.

Good planning 5 financial growth.

Force control are the operating growth and now those wells are delivering.

Record production rights and we will.

Exceed the original estimates that we had on what our cumulative production would be the next thing is we try to establish it with you.

Are you is the credibility that when we set a priority we achieve it and give you markers are so you can see whether we pass those milestones are not.

And <unk> 2021 priorities deliver free cash flow pay down debt and initiate the other day and continued.

Capital efficiency improvements are the focus on the federal properties growth San Mateo.

All they have achieved and earn the San Mateo performance incentives as well as they employ a proactive hedging strategy. So we did all of those priorities and all of the milestones that you can say we've done the first 3.

You know the.

Next borst wells are we'll get them turned to sales and we still have the greater stebbins area. He's at finish but it's underway.

So.

In the left corner you see the capital efficiency, what I was talking about.

Cutting cost and almost half.

And the sand.

Tao EBITDA growth.

The.

And then the capital efficient say, what also mentioned that we've improved capital efficiency as measured by.

The length of your lateral feet drilled in.

F. Here's wells from 1% in 2018 to 98 per cent to die.

So going forward, we've tried to give you provide you with some guidance.

And.

That we are the outperformance in the first half of the year.

You're very by all of us.

To accelerate our Bonnie well completions it sets us up better for 'twenty 'twenty 2 so we get a full year of production from these wells. So we're feel very excited as good as we're doing here, we'll do even better next year and we lock.

Our chances so with that I like to turn it back.

And to open the floor for questions.

But 1 last if I have not recognized 1 of the groups I'd sure like it make sure I didn't hear the universal shout out because it was really it.

Exciting the way that.

Or his on every group from the field to the office within the office each department did its part in achieving these results so Tina.

First to you.

For the first question.

Thank you, ladies and gentlemen, due to time.

At that time.

We ask that you please limit yourself to 1 question and 1 follow up again, we ask that you. Please limit yourself to 1 question and a follow up until all questions have been answered.

After which we will we would welcome any questions from you.

From the question I'm, sorry first question.

At Scott Hanold.

With RBC.

Hum.

Joe you had indicated that the operational change really sets up for a good 2022.

I'll provide a little bit of color like.

Is from what pulling forward. These wells do we can kind of see what happens in 2021based on your guidance, but can you talk through like what that might look like in 2022 at a high level based on our numbers. It looks like you know you you all should be able to get firmly above 100, a day you know in in 2020.

2 at this point.

Yes. Good morning, Scott. This is a this is David.

You know I think that.

I think that we expect to you know to see to see quite a bit of improvement next year. You know as a result of what we're doing here I mean, when you think about it.

As Joe mentioned, you know not only will we turns visa burrows instead means wells on in the in the fourth quarter, some of which will have to shut in the boros wells some of them for a little bit but we'll also have this you know the pull through from turning things Bonnie wells to sales now probably in February.

Opposed to April may as we were originally planning so that in and of itself.

Should should help us out quite a bit in terms of R. R.

Expectations for you know for 2022.

No that I want to comment on whether we're gonna be you know with a 100000 before.

Every day.

At this point I think it's a little early I think we will will want to wait and see you know want to wait and see what how these wells come in what they do you know line.

If there are any other modifications that we might make a between then and now but look I think that we.

We are very optimistic about to.

About how 2022 was gonna look and.

I certainly think that the the first quarter of 2022, we'll we'll start off very well force.

Okay fair enough and.

Maybe a little bit on you know your your federal.

The acreage obviously you you all have.

Secured a number of permits and I think you have some extensions that you know.

We're looking to get in addition to some sundries can you give us a update where we're at there.

Yes sure.

I think we feel like that are there.

Things are going.

Very well.

With the with the BLM and an office there in Carlsbad and we certainly are you know think thank all of our colleagues there in that office for their for their help in pushing through the various approvals that we need.

I think as we mentioned.

On the call last time, we have focused more in recent months on.

Getting approvals of the sundries, which are sort of the amendments to our to the existing permits and.

A lot of that is because it's allowed us to make some modifications to the to the drilling are.

And designs that we really are.

We had originally proposed for those wells as an example, 1 that I saw it often is the fact that at Stateline.

<unk> had permitted all of those wells for 4 strings of casing pretty early in the process our drilling team determined that those wells could be completed drilled and then.

Completed which is 3.3 things 3 strings of casing and so.

And so but in order to achieve that.

To go back and get a sundry or an amendment to the permit.

Those have all been granted and we've been really focused Scott on kind of getting those.

Just sort of ahead of the splitting of new.

Wells and and that's all gone great I don't think we've missed it I don't think we've missed a beat there so.

That's all proceeded very well.

You are correct, we did have a we.

We did have an extension that was that.

That was pending and.

I am pleased to say that we got it so we have received.

The first extension and feel like that that process looks like that it's that it's working well and we'll continue to you know we've got more in the Hopper and we'll continue to pursue that as well. So all in all I think that our team is very pleased with the way things are going and again I appreciate the help of the BLM certainly.

I appreciate the help of our of our own staff you know to continue to.

To do what we need to do to make sure. We've got the permits that we need I think we're all gratified that in this first 7 months of the year that really we haven't faced any significant impediments at all to our ability to.

Drew.

Drill complete operate our wells in and things continue to move forward just fine.

Great. Thank you.

Okay.

Your next question comes from Neal Dingmann with from Securities.

Your line is open.

Yeah.

Sorry about that guys.

Couldn't help but notice guys just the upside we're seeing on San Mateo you guys had been laid that out now for quite some time really come to fruition and I'm just wondering.

What you know you're getting you're talking about.

$8 million already in EBITDA potential.

This year I'm, just wondering what type of growth could we see there and could that go commensurate with what you might see in the upside means just any details. David you are a matter of the guys could talk about that.

Yeah Neal this is Matt good morning, and thanks for the question.

Where we stand right now Neal we've kind of.

Built.

The bigger components of our midstream business there if we're kind of in the add.

Add on stage, if you will so I think 1 of the things that we're looking forward to his continuing continuing to service Matador certainly as the tenant anchor.

Anchor tenant but.

Also had any third party volumes and so.

As we've done that and we've been successful this year in all 3 parts. We've added oil we've added water we've added.

At a gas so we're to the point, where if we get a customer that comes along with enough volumes that we need to add to that system. Its not like we have to do.

Have a big investment to go.

That direction. We can go ahead and say it's water. We can go ahead and drill a saltwater disposal well additional salt water disposal well, if it's just connecting oil on pipe. It's a pretty quick be able to get that done. So I think we'll keep our eyes on that and if we do end up landing a big fish.

It's certainly something that we would do is make sure that we have some sort of commitment from that.

The customers that we're.

Good assures that we would get our assets faithful.

Yeah, I'd like to Nate I'll add to that is that Matt and his group and Greg and.

Matt Spicer have done a really good job of attracting quality third party business to ask from companies or a rite aid.

The big companies and as you say there.

<unk> list, there's not 1.

Neither dominates it.

It's a whole bunch of very.

Long time operators out there just a quality list. So that takes also a lot of the risk out of the project and we're happy to expand.

And then I've got to give them a commanding.

Nearly all of the companies on that list are now repeat customers have done more than 1 project with us. So that's a good sign of the service and <unk>.

Very pleased I'm very pleased with the way that 5 point has worked with us.

And a good partner and we felt like we've made a good team.

Yeah, Joe just wondering.

Yeah.

You know you've known US long enough you saw as per our acreage position together in the basin as David says brick by brick and you know we're taking the same approach with the San Mateo and what Joe said, you know we've gone out and no deal is too small for US you know we.

We want to make sure that the deals we do we make money money on which we do but we've been able to build this business brick by brick just like we did the E&P side.

Now very very barrel well seen and then just a follow up maybe a little bit on Scott's, but I'm, just taking a little bit different approach on it.

Really like what you guys are doing moving.

You know that the operations on the completion and I'm just wondering maybe Matt for you or Billy I'm, just wondering more sort of qualitatively.

How does I'm sure that gets you excited from a from an operation standpoint, I'm just wondering.

By moving that and having more of a.

Constant sort of operation could you just walk us through what gets you more excited about moving the program I know <unk>.

David touched on this a little bit but would love to hear.

More on just what you think kind of just maybe qualitative improvements in what will this will do that through this year, but even in the next year.

Neal I'm going to start off and others will bat clean up on this but 1 of the first things is that how they are.

On the Bourse wells.

I think 800 or more frac stages, I got them all done without a single without.

Without any material downtime all done and then on the vantage wells I think there was 750 something in that order 1500. So you had 1500 frac stages.

There were done without any.

Material downtime all the cost is.

So had we wanted those same gas continue to work for us.

So that instead of releasing them so somebody else can get the benefit of their.

Their skills and their ability to get more many fracs than in a day, we've elected to keep them, which has brought about lower.

Lower cost.

Greater efficiency and when do you think a 1500.

Frac stages done pulled off right.

That says a lot about the crude we feel like there the varsity and we don't want to give them up to.

Some less proven.

People that was in.

According to me, but I'll, let Matt or bill or David So it was important to them.

I think Joe you've hit on a lot of things moving.

The efficiencies you get doing operations like this or or meaningful.

You've got a.

A couple of Frac crews out there there you get these these different too.

<unk> related.

Having both crews running at the same time, but really what's what you get is a constant.

Area, where you can improve or move to suck.

Some type of sports community practice for a reason you practice to get better and so if we just look back.

If you look back in 2018.

Cycle times to complete these wells to frac them and get them drilled out getting ready.

But it was about 45 days and so in the first half of this year, we've reduced that down to 24 days, which is a 19 day improvement. So there's 19 days that you don't have to pay supervision and you don't have to pay rental you don't have to pay these other things on the other side of it. There's 19 days there that you don't have to shut in offset wells.

From flow because you get the efficiency not only on the.

The cost side, but on the production side of things and so that's 1 metric we look at and we just recently.

For sample for and Oh, we did really well there we were well over 2000 feet of completed lateral length per day.

You compare that back to 2018 minutes.

So 900, so you can see we've more than doubled that with our first time frame and.

And so we anticipate that probably 60% of these wells that we'll drill and complete in the back half of it.

2021 will be Sama, Frac wells, and so we've calculated and actually with our first experience with the Cymer Frac weeds.

Saves about 250.

<unk> thousand dollars per well, so that's about 6% of the completion cost.

Just on assignment Frac and so on a 4 well pad. That's that's a million dollars per well that we're saving on that so there's some real savings and real efficiencies that we'll see going forward on automobile if he has something to do.

Well those are all real good pile on.

Mark mentioned things that we've talked about you know David was talking about cutting them.

Eliminating casing strings and that improves our cycle time, we get to faster, but also depending on which strength as I say, there's another half million to a $1 million. So.

That's a good thing too.

And.

Like you mentioned with a million dollars saving with Asama Frac, that's that's a big deal, but even the wells, where we're doing the zipper fracs, we're getting better at those 2 and getting more footage per day and improving all the way around there and we also talked about you know on the production side you know.

Doing great things there and.

And you know getting getting all everything on pipe you know everything on water and oil on pipe and that's helping us out there to taking trucks off the road, we all know increasing cost and fuel and things like that so eliminating all of that just doing better all around.

Well that's.

That sounds like the better start taking about 1 million bucks off the well costs going forward, So love to hear that.

[laughter] budgeted.

Neil I didn't think I was going to have to step in.

[laughter].

As we've calculated on there's some has completed lateral length per foot we've calculated.

<unk> every 300 foot that we get better it's about $75000 per well so those those efficiencies are meaningful.

And he himself or herself.

Hats off to Universal and Halliburton has been working with us in and just doing a really good job in standard behind there were.

Great. Thanks, Joe.

Yeah.

Thanks Neil.

Our next question is from John Freeman with Raymond James.

Good morning, guys.

Hey, John.

And I I wanted to follow up just on what Neal was asking just just.

To get a better idea of sort of what's what's built into that that second half 'twenty, 1 sort of cost per foot guidance. Obviously, you all been just running dramatically ahead of schedule you know the first half of the year with the.

Average in the 655, a foot and realized and you. All know you took down the guidance it was 7.

730, a flip of 695 and I'm just trying to get a sense of sort of the gives and takes of you know I know that the greater stebbins area typically those wells a little more expensive, but then you know what Matt mentioned on the Simon Fracs from the cost reductions there just just trying to get a sense.

As Neil was kind of alluding to kind of what what's baked into.

The second half.

Cost per foot numbers, how much of this is just marking to market what happened in the first half of the year and kind of leave in the second half you know the same.

Yeah. John This is Matt I'll take the first day of or do something David probably have some comments too but kind of what we've looked at you know we anticipated.

Cost increases we went throughout the first half of the year and we really didn't see a whole lot of those the back half of the year. We are seeing some of those and it's kind of a lot of its dependent on crude price relative to what the price of diesel is so on the drilling side, we're seeing cost increases you know sales.

As much as 20%.

Free drill stuff building location moving in rigs.

Anything that involves a lot of use of diesel we're seeing those co. So.

Probably if you roll everything into it on a drilling completion basis, you may have 4 or 5.6% cost increase on the drilling so I don't want my completion completion side.

On the same thing you see.

Obviously these frac crews running a lot of diesel so that cost is up the cost to transport sand is a sand itself. The proppant is up 35 per cent or so, but it's a pretty small portion of the completion costs. So we're probably looking at 5 or 6% on the completion side. So.

You see that's kind of built into that 695 number that you've got but then we also anticipate that to you.

The operations team, they're going to be able to become more and more efficient as we go along so I think we feel pretty good about that 695 number.

And John I might just add to the second part of your question I do think that the that the.

So production there does does reflect a bit of a mark to market or mark to the first half of the year, you know and that we had that we had done better and so that's a that sort of enabled us to to lower the you know the rest of the day you know the full year down a little bit.

I don't know that we've made a lot of it.

The other change 1 way or the other in our expectations for the rest of the year for the reasons that Matt said you know the original estimates we had 410% inflation in the third and fourth quarters of the year are still there you know in our in what we have budgeted to the extent that you know that we can do better than that or mitigate.

Some of these costs, we might we might do better here in the second half of the year, but but it that those are you know that.

Those original assumptions are still reflected in our in our numbers for the rest of the year.

Okay.

That's helpful.

The context, and then my follow up question.

Mitigate.

Obviously, you know historically, you've been pretty active on the hedging front end.

Now that we've got the balance sheet, Scott, it's below 2 times leverage and pretty good line of sight on that.

And being able to reduce that further over the next 12 months.

You know theres been some of your some of the other of your peers have sort of.

What is the balance sheets from currency.

Kind of across the industry from some companies may be being.

Less inclined to hedge as much as they used to I'm. Just curious if you all balance sheet strength and that continues to improve if there's any way that might impact you all.

Hedging strategy going forward or if you.

You talked about still being sort of.

The same as it's been historically.

Well John This is David again, I think that I think the way we view it as a I think we always feel like we've been fairly opportunistic and tried to you know.

To you know to make the right calls.

<unk> with with regard to hedging it's it's unusual for us to go into a year I can't think of 1 recently, where we haven't had some hedging you know headed into year, but sometimes that'll be on the order of 30% or something like that and then we'll we may dial that up a little bit during the course of the year. If we think it's appropriate.

Thank you I think you can see reflected in the in the slide deck that we put out along with the presentation that we did in the.

The recent just recently begin to add to our hedging position for 2022, I think we've got about 10% of our oil hedged into <unk>.

<unk> added some additional hedges on natural gas through the winter months. So.

You know we will continue to look we're pretty optimistic on the on where the commodity is going to be and and certainly as you know.

Things are backward dated strip, so that always kind of impacts your decision.

And we but we monitor it very closely and I think that as we go forward that wouldn't surprise me. If we are if we added a little more going into the year.

Yeah.

I appreciate it thanks, guys well done.

Right.

John.

Our next question is from.

But with Cowen.

Hey, good morning, everyone.

Okay.

Hey, guys.

Hopefully we can make gains.

Yes.

Hopefully we can maybe just go back to San Mateo for for a minute just curious.

If this incremental business from from third party.

How that impacts.

Volumes this year and next year, and then I know, there's a little bit of a capex range associated with that but curious if that requires any additional build out beyond.

Beyond what's already been communicated.

Yeah Gabe.

Things that we have in hand, now or in the budget that was the increase you saw them into capex for for San Mateo.

Things that are out there that we may get well, obviously, we can't budget for that yet so I think for the volumes.

<unk> that we have locked up right now that that will be taken care of with the Capex. We have in there. If we're able to have some success and we hope we do have that success in the back half of the year that would probably be incremental to that so we just don't know what it is at this current time.

Okay. Thanks, Matt that's helpful and then.

Just a follow up.

This is just curious if you could give us your latest and greatest thoughts on M&A.

M&A in.

This consolidation generally and if there's anything interesting that you got.

Maybe looking at it from a from a asset package standpoint, or even if it's just a.

Corporate.

Transactions, just any any thoughts on the landscape in.

And color there would be helpful. Thanks, guys.

Okay.

I'd just say like this is that.

We are a public company.

And as a public company.

Try to play a strike game, if someone makes us a serious offer or inquiry, we try to take it.

Very seriously in the past Matador has done a number of transactions public.

Public we sell.

<unk> first matador.

To a public company and then this Matador, we did a deal with Chesapeake on part of our Haynesville position that enabled us to go to that.

Our Eagle Ford.

We established that you could produce the oil from that the smaller pore throats of the shales.

And we took profits from that and moved out to the Delaware, which has been good to us and we've also had been active in the private markets.

We did a deal with HEICO and Heiko still our partner.

Or still part of our fabric they pay.

People that work for Heiko still work for US George H is still a real good friend and our valued shareholders. So you know we're open to that in particular.

<unk>.

What I'd call a small private old.

Particularly old school oil and gas family company.

Doing deals with where there is a cultural.

Fifth and.

And outlook.

Fifth and we have.

Criteria and we wanted to be sure that it's a good deal for the shareholders.

As you know that.

David Matt and I and the other members of our executive team are large shareholders.

And we make more money by the shares going up a dollar or 2 than we do from our.

Salary compensation. So that's our primary deal is this good for the shareholders because again, we didn't come up through private equity, we came up through friends and family and.

That's you know that's primary for US is is it a good deal for the shareholders and not necessarily a logistic.

Steel for the management, but in the end we ask ourselves what we think we're optimistic here as we are in hedging but in the end. We asked does this make is not just bigger.

But better and and that's why we've continued most often would just bolt on.

Its a good acreage acquisitions that bolt onto our existing.

Positions, so that we have less risk there because we know that area.

And.

It's small and easy to digest and doesn't require meshing of.

Systems.

<unk>.

Computer systems or or.

Our cultures are people.

And we found that to be pretty effective so we're.

We are open to deals.

Where.

Particularly.

As I said with with with companies not we're not.

Is interested or we don't see the.

The appeal of private equity companies it may create a hangover or a public to public where we're enjoying good growth.

Now with this existing effort at bolt ons in the dealing with people, we know Ah, but where we're open to it.

We want everybody know would play out.

Strike game.

And.

But fortunately our.

Our team.

Right.

Had been able to produce plenty of 8 plus locations.

And that's what we're going after and and.

We have a very rich inventory of that 20 years plus that affords.

Before just a lot of choice.

And haven't had the need to stretch out.

For.

For some big deal with some big public.

Did that help.

Yes, yes, no that's great. Thanks, so much for the color thanks, everyone.

Okay. Good.

Yeah.

Right.

Next question.

Your next line is from Michael.

<unk> with stifle.

Oh I'm sorry.

Hey, good morning, everybody.

Uh huh.

Joe you walked us through the production over there.

All 3 quarters, and you said you're comfortable in the sub 2 times leverage range.

I just wanted to see how you're thinking about further debt reduction from here versus maybe potentially increasing the dividend I know you just recently implemented the dividend, but is there a debt level or leverage target you want to achieve before you consider ramping that up.

Well, you know, Mike Theres always a lot of variables and what you're trying to achieve.

And we are certainly in favor of further debt reduction exactly the paces, depending on a lot of circumstances, but deal, but I think as shareholder will safely.

Say further debt reduction as we go along.

And.

We fully expect and hope to increase the dividend.

Overtime and.

Certainly I can't say, what you know exactly when and where.

We'll increase it by how.

<unk>, but it's something that.

If prices remain steady or operations results remain steady all those different factors we.

We expect.

Now another increase in the Desi and you know before too long.

Our reputation for raising the dividend from time to time as well.

Results operations and results.

Can't justify so the first priority is debt reduction and then of course, the second 1 is to keep increasing the dividend.

Not sure.

Sure about the pace, but it's certainly that will.

Well studied going forward at each of our board meetings.

Here on in I like it comes up every time and we'd look at it and we want to be prudent and again I point out how much Ami shares.

We want them in our exacting group, 1 and the dividend increase is important that all of us.

In the company because our shareholding in the company goes deep you know, we have 250 or so shareholders are.

In the company now between.

That and our field staff. So you can be sure it'll.

Any thoughts of dividend increase.

A lot of hard steady here.

Very good things from that and.

David You said that it's too early to give guidance on 'twenty, 2 you're not ready to.

I mean that production is going to go above 100000 barrel you day, but.

Is it fair to say with the 11, Bonnie wells coming on in February the first quarter production should be up pretty sharply from from fourth quarter and.

Given that are you still planning to maintain the 4 rigs next year are there any plans that are anyway.

Do you do anything differently.

Well, our price I'm always going to try 1.1.

1 or 2 sentences and then David you take out I'd, just say our plans are always flexible and we think that has to be 1 of our strength that when circumstances change.

We'll change.

And it's not that we are.

Once we set a course, where it never got to alter it or amend it or tweak it or whatever where we think about that all the time, what what knobs can we change to make the.

The value would go up more so where our value prop.

And rather than.

This is the way it is and it's we're not going to change it and I'm excited about the opportunities and choices we have Davis.

Yeah, Mike I think that I think if.

If things go as we would expect that to you.

That's fair.

Physicians from that we'll see a notch up.

Quarter in the first quarter of 2022 so.

I think that too that that is a reasonable assumption.

Very good thank you guys.

Thanks, Mike.

Your next question is from Jake Roberts with Tudor.

And homes.

Good morning.

Morning.

I'm just curious looking at the Capex guide for the remainder of the year. If you could provide some commentary on the non op side of things and maybe particularly competence.

We won't see that move higher and year end.

Yeah good morning.

2 it's David again.

Well.

Again, I think what we tried to do is just to update.

Our shareholders on our expectations with regard to non non non op activity here at the here at the end of the year.

As I think we pointed out in the release.

I have had a couple of our operating partners that have decided have decided to make some modifications to their own programs and.

Have deferred activity from the latter part of 2021 into 2022, I think that we expect that these non operated wells.

We will get drilled.

And I fully expect that Matador will participate in those opportunities we have already committed to do so frankly.

This is just.

Some minor changes in operations, but fact is don't think they're going to happen in 'twenty..1. They don't think they are more likely to happen in 'twenty..2 so it just felt like to us that it was.

Is the right thing to do to you know.

To update our shareholders and the market on on that it's really it's really nothing more than that and.

You know just as we change our plans from time to time, they changed theirs and and we don't really control that but I will say that I think that our our non op.

Team does a very good job.

Having relationships with our partners and staying close to our partners. So that we have.

We have a little I think we have a good insight into what their plans are going forward. So really that's that's all of this reflected today.

Great. Thank you and maybe the second 1.

Just curious on your thoughts on the Haynesville assets in terms of you know obviously the.

That's correct.

Significantly improved I'm, just curious in terms of maybe activity or even circling back to the M&A discussion earlier.

Your thoughts on Louisiana in general.

Well I'd, just say that Haynesville are nice.

Some great wells.

And cash.

It's been very good to us and in particular in our deal with Chesapeake We were able to reserve the difference between 75 per cent and and the existing in our eyes. So a number of cases were up there with.

90 per say it in our eyes that make wells all that much more profitable.

The other aspect of it it's say little known but I. Thank you for asking it is when we did the deal with Chesapeake we reserved all of the uphold rates that cotton valley.

And we probably have.

Something in the neighborhood of 200 billion cubic feet of reserves in the cotton Valley.

We have no plans to drill it this time because gas prices.

They've been until this year kind of.

Down and we've had enough opportunities in the Delaware and the Eagle Ford and then the.

Haynesville.

That wasn't necessary, but it's H b P lightened to be developed.

It makes for a very nice gas bank.

We probably you know continue to put more emphasis on selling break by brick our haynesville or Eagle Ford assets.

As opposed to our haynesville assets, but again.

Serious offer it gets serious consideration.

Thank you guys appreciate the time.

Yeah. Thanks Jay.

And our final question comes from Gail Nicholson from Stephens.

Good morning, everybody I know Youre free.

So our profile is very attractive from Utah.

You know really good progress paying down the revolver.

Curious on the 2016 your notes I think they become callable in September and you guys have any thoughts about that in regards to retiring those.

Potentially like pushing out the maturity that along the Interstate.

Hey, Joe It's David.

Well I don't know that we have any immediate plans to you know to do that but but it certainly is something that that are I think we.

It's an option it's something that you know that we are that.

We have considered and have talked about.

Maybe any immediate plans to do so I don't think I'd be doing my job if I wasn't too if I wasn't bringing up those kind of alternatives are opportunities you know to the to the company and to the board for consideration but.

But we haven't made any immediate plans.

Yeah.

Okay great.

Yeah.

Another nice reduction quarter ever corner can you talk about the inflationary environment surrounding our only in the back half of 'twenty 2 and then.

What could be looks like in 'twenty 2 versus the back half of 'twenty 2 versus the first half of 'twenty 1.

Yeah. This is Matt.

Below this this.

We have another very good quarter force and.

Regards to do going forward.

Cost increases a lot of the things that we've talked about on the drilling and completion that were affected by the price of fuel oil.

Subject to the same thing in Workover rigs used fuel just to deliver the chemicals used fuel so.

We are seeing some increases on that side I think the the next quarter. We got you know production would be down a little bit so that'll make it a little more difficult, but I really like the way the team's approach and things we've got to go through the winter months.

It did but I think really well in summer has its own challenges too but.

Instead.

Stetson and his team in particular, you guys in the field before they get out in front of things. They don't wait till things happen to start reacting so.

I think we will see some some good cost control in regards to <unk>.

And I think the second part was the.

Workover face was that right Joe.

Yes, Sir.

Yeah. So.

You know most of the work over work we have comes along with the when we're ready to to change from 1 form of artificial lift to another and that's usually baked into the plan. The other part of when we have rod rod jobs that need to be done we will have a rod part and work a rig on rig up on that and fix that or maybe an ESP that.

And go and fix that so those are kind of are you just kind of have to do some windage there too I know, you've got say 130, rod pump wells and you're going to have so many failures per year. So that's just kind of the way we build that in as far as any you know major workovers on the existing horizontal wells.

Most of.

It goes better known enough, we're not contemplating any of that activity.

Okay, great. Thank you.

Thanks, Kyle Thanks, Kevin Thanks Gail.

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 closing remarks.

Yes.

Thank you Tina.

Uh huh.

Again.

We appreciate it.

Everybody listening in and taking the time.

And in particular I would also again once again, thank the staff I think.

Everybody.

Really put in the.

Our World Africa.

And Ken.

And then I need to pay the the results.

I would.

Just like to end.

By saying more.

More formally.

We got more quest.

Extra on the first day.

On the first half of 2021 and the first half of 'twenty 'twenty, 2 but I believe not only the second half of 2021 will be exciting for us, but also all of 'twenty 'twenty 2 will be exciting as we work to continue to generate.

<unk> additional free cash flow lower cost reduced debt pay dividends to our shareholders and grow the value.

Of our oil and natural gas and midstream assets.

Uh huh.

We're pleased.

Pleased with the <unk>.

Growth in our cash.

Additionally, and the the improvement in our unit cost of Mt.

And the continued building of our inventory of 8 plus locations.

We believe all of this creates a stronger value creation.

For Matador.

Ste.

Stakeholders are in the remainder of this year and going and then the years to come.

<unk>.

Hi.

You know as many of you know I started.

First Matador back in 1983 with 270000, it's just hard to believe I pinch myself.

Myself when.

When I say, we're now approaching $4 billion in value.

Even though we sold first Matador and started over in 2003. So it's been quite a ride a very exciting, but we still think our various tiers or are you.

Yet to come.

And with that I'll sign off thanks, again, and feel free to come see us or give us a call at any time.

Ladies and gentlemen, thank you for your participation today. This concludes the program.

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