Q1 2023 Matador Resources Co Earnings Call
Okay.
Okay.
Good morning, ladies and gentlemen, welcome to the first quarter 2023 Matador Resources Company earnings Conference call. My name is speedy 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.
A reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website for one year as discussed in the company's earnings press release issued yesterday I will now turn the call over to Mr. Mac Schmitz, Vice President Investor Relations for Matador.
Mr. Smith you May proceed.
Thank you Denise good morning, everyone and thank you for joining us for Matadors first quarter 2023 earnings conference call.
Some of the presenters this morning 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 comparable financial measures calculated in accordance with GAAP are contained at the end of the Companys 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 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 its most recent annual report on Form 10-K, and any subsequent quarterly reports on Form 10-Q.
In addition to the earnings press release issued yesterday I would like to remind everyone that you can find a slide presentation in connection with the first quarter of 2023 earnings release under the Investor Relations tab on our website.
And with that I would now like to turn the call over to Mr. Joe Foran, our founder Chairman and CEO Joe.
Thank you very much Mac.
Pleasure to be here this morning, and thank you all for taking time.
Listen man.
What.
I wanted to be sure to emphasize.
That.
This year is off to a very strong start and both from organic growth position and also for the acquisition of advanced switches.
Then after another a really good start and the integration has gone smoothly. The handoff has been very professional.
From a merit Dev and in cab.
And working hard on those assets. So that we can offer to you is matador.
First quarter has added to its strategic assets.
It is developed.
<unk> locations.
To drill as well as the finish.
<unk> Index 21 deaths that merit dad was on and the midstream strength.
That we have.
It is made.
It has increased its volume is delivered on time.
Formats.
So.
Yes.
Theme, you will hear from because we answered the questions is that.
Yeah.
Is it.
We've saved money not just from working with our long term vendors, but also from cutting the days on the well for drilling for completion forgetting production there that are all making a difference.
So it isn't just about cutting specific cost, but it's also the efficiency part.
Part of your capital efficiency and people efficiency comes from getting down days on the well and delivering more product than last time.
So with that.
I'd like to open the floor for questions.
Mac However is first.
Thanks, Keith you can open it up to questions. Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, ladies and gentlemen, due to time constraints, we ask that you please limit.
Self 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.
Our first question.
Yeah.
Okay.
Our first question is from John Freeman of Raymond James Your line is open.
Good morning, guys.
Good morning, John .
Yes, the first question Joe.
Kind of on what you just touched on there at the end.
Just sort of the progress shall keep making online.
On the efficiency gains drilling completion cost.
Just keep coming down and I guess I know you all reiterated that the full year D&C.
Guidance of 11 to $25 four it.
Could you, perhaps give me what that was in the first quarter.
The D&C per foot.
Hi, John This is Chris Calvert, EVP and co Chief operating officer, and yes. So the $11 24 that you mentioned that was our full year guide and that was with a 10% to 20% increase from service cost inflation.
And we really started working on in December of last year and so we.
We did not put anything out publicly but our D&C cost per foot for this quarter definitely came in below that they came in around $1014 per foot.
So we were proud of where we were and those those efficiencies were through reductions in drill times simultaneous remote Simon.
We had kind of in 2022, we had basically used simulcast on about 45% of our wells, we put a target to use over half of our wells in 2023 to be simultaneously in the first quarter, we beat that and so a lot of this efficiencies come from reduction on the drilling times increased use of simultaneous increase.
Use of dual fuel.
So we're definitely extremely excited and proud of the work that we did on the on the capital efficiency side and reducing those D&C cost per foot.
But one thing I would like to mention.
On the service cost side, we really haven't seen other than small cost components, such as diesel fuel that you and I have spoke about it in previous conversations we really haven't seen costs come down all that much from the vendor side. You know we have a couple of of our heavy cost components on both drilling and completion that were actually up quarter over quarter from the fourth quarter of.
2020 to tell today till the first quarter of 2003, and so a lot of those savings really mostly all of those savings have been through efficiencies and that's reduced drill times.
Going back we're using existing pads on the production facility side.
The increased use of dual fuel.
Better partnerships with with third party operators and specifically San Mateo when it comes to water usage and getting better rates on our water for stimulations and Thats, we lean on our partnership with San Mateo for that and so it really has been a push from the operations group to mitigate those service cost inflation that we've seen but like we say.
It's really one quarter's worth of work and so while we're proud of where we are we still have a lot to do in this year and so.
$11 24 that we put forward in.
In the capital guidance plan.
That was that was put forward in December and we're we're still happy with where that number is but we're extremely proud of where we came in in the first quarter.
Thanks, Chris I appreciate all the detail and then just my follow up question.
The testing of these horizontal wells.
Maybe just any sort of background on kind of what led to that decision and the optimism to try and test.
The operations team have prior experience.
The horseshoe whilst there's been a few that are.
<unk> been done over the years in the industry, just any any background and kind of what led to that decision.
Hi, John as Glenn Stetson EVP of production, so I'll start out with the kind of the why and then I'll, let Chris talk about some of the operational efficiencies.
This this piece of acreage.
Unique in that.
The upper Wolfcamp to the Wolfcamp a XY.
What was undeveloped but.
In our section.
Got that.
Had been developed on an every other side of this piece of acreage and so.
The illustration I think shows a very nicely that we put in the slide deck, but ultimately what we're doing here is instead of drilling for one mile Wolfcamp a XY.
We've actually drilled.
And and TD in case these wells already but what we did was drill too.
Horseshoe wells instead.
And so it was it was a unique opportunity our technical team did a whole lot of work on the front end to ensure that.
But the drilling would go smoothly.
As it did and so the next the next piece of this is to go in and get these wells completed and then put them on production.
Yes, Hi, John This is Chris again I think.
From the Genesis of this project it really starts with with the team and the teamwork that was illustrated with bringing this project to fruition Travis Wolf the team leader of our West, Texas asset former Max Ops graduate.
Now running the asset there the teamwork between the teams the land group the permitting side to get this well on the schedule and permanent properly, but then from the technical side.
It was.
The curve on these U turns and I think if youre looking at a piece of paper it looks somewhat dramatic but actually the curve from a technical perspective of in the curve its actually less of a build when we made that turn to come back towards the heel of the well less of a turn and then actually the curve when we when we go from vertical portion into the horizontal.
I think from a technical standpoint, we were very confident in our team confident in the drilling group led by obviously barely Josh pursuer, our Maxx Com team plays an integral part in projects like this are keeping us in zone, and allowing us to drill as fast as we have proven that we can.
Obviously, we recognize and realize there is a time savings component to this if you drill four single mile wells versus two U turns.
We've calculated that it's about a 50% reduction so not only is there a cost savings associated with that but youre, bringing offset wells that you've shut in and youre, bringing these wells to production faster and so there's a time savings component to that but then also a cost savings.
Documented it's about $10 million in estimated savings that we're going to realize.
When you think about the amount of steel that's needed to case, a four stream well if youre doing for single mile laterals versus two you turn horseshoes, we're actually saving about 10 miles of casing base.
Basically by reducing two vertical portions of these wells and so a lot of work was done on the team side not just from the reservoir group the land group permitting production. It really has been a team effort that is is truly indicative of a lot of these operational projects that we take on whether its simultaneous remote frac dual fuel usage, you turn wells, if you come to anything like any meat.
So we have it is truly a team effort from land to legal to reservoir and so we're extremely proud of these two projects are at least two wells. There is still work to do and we're expecting to turn these online on the latter half of this year.
That's great Thanks, guys and congratulations on a nice quarter.
Thank you John .
One moment for our next question.
Yes.
Our next question comes from Gabe <unk> from Cowen. Your line is now open.
Thanks, Hey, everybody good morning.
Guys, maybe I was hoping we could start with the advance of properties <unk> production came in a little bit better than what you were anticipating.
The 21 wells being completed currently and then another 21 in early 'twenty four so I guess just kind of curious what does the cadence look like from here like when does when do those 21 wells being completed come on is that is that <unk> and <unk> and then you mentioned in the release how advance makes 2024.
Even better could you maybe just provide a little bit of context on what even better economies.
Hey, Dave This is Brian Reilly, Chief Financial Officer, and President of Midstream Happy I think I would answer your question and thanks for joining the call today.
We're really excited about the advanced asset so very strategic great assets perfect fit into our existing assets and so.
We're thrilled about them and they have release better I think in the first quarter than we expected as a reminder, we don't get credit for that production, yet because we didn't own the assets, but we are excited and encouraged by the fact that they produced better than we thought and so.
I guess, Keith the car now for a couple of weeks since it is still early on as we drive the car here, but but we are excited about it I think in fact, we can I can turn to Chris in a minute, but I think our completions, where you've started yesterday.
So their completions, we've to ours and we're sorry to complete the wells in the <unk>.
Omar you mentioned, we do expect kind of a second half of the year those will come on.
Kevin that third and fourth quarter, you said and then you know as we look to next year.
We have 49 total wells are going to be in progress at the end of the year 'twenty. One of those are going to be the wells that we're currently drilling on.
On the advanced acreage and we'll be completing later this year. So we expect those to come on early next year.
At the end of the year, we're going to end up with 143000 or so on a run rate.
Yes, that's a great run rate as we kind of go into next year and those 49 wells in progress I'll, just add to that including the 21 wells that are there at advance. So we're really excited about 2024. If you look at just comparing 2020 to the fourth quarter to <unk> 23 in the fourth quarter.
To just deal basis, so an oil only basis, that's a 40% growth is what we expect and so that.
That sets us up really well for a great 2024.
Both on a BOE basis on an oil basis, and then just thoughtful on our total Boe basis, and so we're really excited about 2024 and what that looks like it's early in the game I mean, we just finished the first quarter. So a lot of golf to play before we hit the 2024, but but we're really excited about the opportunity set ahead for us.
Well thanks for that.
That's helpful.
So I guess, then just given the elevated maybe wells in progress exiting this year versus historical norms.
Rig program, which is.
Also I guess a high rate program for <unk> based on historical obviously, a larger company now, but but then how should I think about like the exit to exit growth in 'twenty floor relative to 'twenty three just given all those moving pieces.
Yes, so I think the exit growth.
Mentioned the agent growth in 2023, and if you take that 143000 Boe per day, and you're just held it flat it's about a 15% growth over 2023 would be if you held it flat in the 'twenty 'twenty four.
We obviously hope we can do better than that then that Hollywood flat as you mentioned the eight rig program, but it's pretty early for US I think to talk about an exit rate in 2024.
I guess almost two years away. So we're certainly excited about 'twenty 'twenty four and while we can do there and getting the phase III gone in and being able to have those opportunities and advance acreage, especially some of which we talked about a plus locations at some of the vets acreage will have an and.
Compete very well with the other acreage we have in the drilling locations and so on.
Tom do you want to talk anymore about the acreage yourself, Hey, Dave It's Tom Elsner EVP Reservoir engineering.
As we've shown over the last several months, we're clearly very excited for all of that all of these wells will be drilled and completed on the on the advanced properties.
The bulk of it there then southern Ranger, Northern Northern Antelope Ridge, where we've drilled wells nearby.
Allen Wells that have each produced 1 million barrels of oil each.
Nearby some of our other <unk> wells in the northern end of Antelope Ridge.
And then we will for the south.
The Rodney Robinson wells are.
This is an area that's characterized by having very high oil cuts.
Typically 75% oil cut.
And also very low water cuts.
So typically two to two barrels of water per one barrel of oil and sometimes even closer to one to one.
Obviously, we've talked about the kind.
The ability with pronto to be able to to be nearby and we look forward to.
Spanning that relationship to be able to see some of the similar benefits that we've seen across other portions of our acreage like stateline or rustler breaks are.
And I think what we're seeing is as we've.
As we've said we've.
We spread the ball around quite a bit this year in all of our different asset teams are contributing.
And so we're very excited to bring these properties on but theirs.
The 150000 net acres in all of our different teams are trying to trying to get activity in their area and so.
In the second quarter. This year, we're going to have 11 wells and Ranger and four wells in Rustler breaks another four wells in Antelope Ridge, and eight well that state line, where as we've talked about some of the outperformance.
At Stateline due to having great flow assurance with with <unk> and with our facilities team.
And so broken for all these types of benefits that start you start to see on the advanced properties.
Yes.
Thanks, Tom that's helpful color. Thanks, Brian .
Good quarter guys.
Thank you Gabe.
Thank you one moment for our next question.
Okay.
Our next question comes from Neal Dingmann of choice Securities. Your line is now open.
Good morning, all and nice update as always Joe My first question is for you and.
What I am wondering Joe is how you currently if it's changed at all are you currently view production growth versus shareholder return and again why I ask this is bill I definitely appreciate that solid continued growth I believe you said in the past.
Wi Fi always appreciate some nice dividend occasionally so I'm just wondering how you view things.
Yes.
Well nail is.
Thanks for the question, but we're for both of them were for both dividend and shareholder returns as we are for.
Growth in value I wouldn't say just plain growth, we've never been growth for growth's sake, we've always been profitable growth.
At a measured pace and as part of that is.
Again, we want to have the profitable growth, but we're not growing for growth's sake, and the same thing on our dividend.
We're going to grow our dividend in a manner that once we raise our dividend we don't want to be in a position where we ever have to walk it back and so we began.
With that.
Ken David and went to 20 cents.
Went to <unk> 40 cents.
And we've continued to grow at now at 60 cents.
And I think if prices stay anywhere at this level that our shareholders can look for.
Our return sometime over the next year.
But we wanted to be prudent about it but we want it can be one of those companies that.
Steadily increases its dividend while steadily increasing the value.
The chairs and you're exactly right.
Matador all of the people in this room are heavy shareholders. Most of our net worth is tied up in dividend. So we'd like David. It's we think it's the fairest way to reward your shareholders, particularly your long term shareholders.
And.
Yes.
There is plenty of support and were think were per se.
At a prudent pace and you look at our board they are heavy shareholders I own.
Hundreds of thousands of dollars just to get on the board. So we.
We believe that makes a difference too.
To have that heavy ownership.
And so far so good that seems to be the right balance.
And the value of the stock while growing the amount of the debit and we wanted to keep those in balance so I hope that.
And and it's discussed all the time.
We just don't want to announce a dividend increase but they'll have to walk it back.
So shareholders seem to be real happy with that that I talked to and you remember, we didnt come up through private equity, but France and family. So one thing if you have any family members and its shareholders Youre getting here get some feedback.
And ever family gatherings, and the same thing with your friends and so everybody.
And the long time shareholders.
Seem to be pleased in our institutions.
And we'll continue to keep an open air.
To them.
And if they have concerns or preference, we're always willing to listen.
No that's crystal clear, Joe and then.
So maybe my second question a little bit been asked let me ask it a different way just on advanced <unk>.
For Chris or Michael Glen one of the guys.
<unk> advance and its impact on the remaining 23 production I noticed I think it was on one of your earlier decks on slide 33, you talked about in your prior deck, where you all mentioned the minimal impact from the 21, new advanced wells in the third quarter due to these wells coming on late in the quarter and then it looks like the step up.
Even a bigger so you definitely have a nice step up in third quarter, but even another significant step up in <unk> and I'm. Just wondering maybe maybe it's early as one of the same but I'm just wondering based on what Youre seeing so far is that still the case.
Of that late <unk>, maybe <unk> or is there maybe even not increased expectations now because of what you already said.
And yet it is Glenn Stetson EVP production, yes. Thanks for the question so.
Brian mentioned, it but we've been at the at the house, so to speak or in the driver's seat for a couple of weeks.
Give us a little time and I think we'll have a nice update for you in July but we're encouraged so far both by the existing production and how those wells were doing the day, we took over and that all went really smoothly and then speaking to the operations guys I just want to give it.
A little tip of the hat to them we had there.
They're drilling rig in integrated into our Maxx Com Ram from day, one the completion guys.
Brian already mentioned this but we started fracturing operations on the <unk>.
Margarita wells.
Yesterday evening, and that was with <unk> and utilizing dual fuel as well and and then.
I think that at the same efficiencies that we saw from completing.
And in the first quarter example, being Rodney Robinson is that we.
We hope to complete these wells kind of faster than anticipated and hopefully if everything goes smoothly.
Yes.
It will.
Contribute to Q3 in a meaningful way.
No that makes sense, thank you and I won't I won't bump up to estimates too quickly.
Okay.
Yes.
Thank you one moment for our next question.
Our next question comes from Scott Hanold of RBC capital markets. Your line is now open.
Hey, guys good morning.
Tom You had mentioned a little bit earlier about the advantages of the midstream and how that's helped some of the well performance in <unk> 'twenty. Three you did have pretty strong performance can you give a little more color on the advantage that midstream has provided you and as you guys connect all of the systems and I think thats going to be what by early.
Next year like how does that provide you better flexibility and stronger flow assurance and performance.
Sure Scott. Thanks for the question. This is Tom Wilson, our EVP of reservoir engineering.
Start and then pass it over to Brian Willey.
I think that the team is kind of all around when we were designing the stateline development I think they looked at it as a unique opportunity to design all of the infrastructure kind of problem from the ground up and.
<unk> certainly has a lot to.
A lot of credit to that as well, but.
Some of the things that they've done statewide or create this kind of unique kind of low pressure medium pressure and high pressure system, whereby the different 54, producing wells at stateline can be fit to the right pressure system, where they produce their oil gas and water into.
Sure.
And this allows us to custom custom flow these wells into the right right systems. So we can I can always optimize the production.
And this has been something that has been a great benefit to the state line.
Keeping those wells flowing without kind of constantly having to shift around Europe .
<unk> has has benefited stateline in a big way.
And certainly none of this could happen without San Mateo keeping their plant running.
Stateline has been producing now for several years and I can't remember a single day of downtime at Stateline I think.
Gregg Krug, and Brian Willey and everybody at <unk> had.
<unk> been able to keep that plant running back in Rustler breaks.
Throughout all of these different storms throughout all of these different events.
Having 54 wells coming online as well.
That's a lot of production.
And so I think they've done a wonderful job with that and I'll hand, it over to Brian . Thanks, Tom I would just say that.
We're excited about that and Stateline and the synergies there, but we also that's true across the basin too. If you look at San Jose as other operating areas. If you look at lesser breaks we're in the process right now drilling another saltwater disposal well.
Going up to <unk>. So we're building out right now to southern Matadors other wells that are going to drill there and so that build out in that.
Partnership is great, where we are able to go down and just talk to the San Mateo guys in the San Mateo guys can be an actual meetings, where we're planning the wells on the <unk> side, and so kind of hand in hand, being able to support Matador and ensure that there's a lot of flow assurance, there and I think even if you're looking over to pronto. Its the same thing same story.
Late this year kind of early next year, we expect to commence connect the advance wells over to Pronto and also connect to San Mateo, where San Mateo completed a pronto pronto compared to San Mateo and that'll kind of complete that gas system all across the northern part of the basin and so the synergies that Tom talked about over at Stateline.
It's great and we continue to implement that across the base and so we're really excited about the value of the midstream assets or one other point, Brian is to emphasize is the third growth in third party.
Going into these pipelines and the importance of that is that what makes us feel good is that we're getting repeat business. So that those companies now they are still getting better service.
From us as they would anybody else and there isn't a preference for ours over theirs that we do both and we have tried to be very very clear.
They're going to get every bit as good a services anything internally Matador and.
I think that confidence is growing as they do the repeat business and that they say that our plan staying online even amidst a storm here.
Our guys are sleeping in their trucks.
Keep everything going into an ever think Allison as also I did.
The growth in San Mateo and will have a similar effect on pronto and we're committed to that.
While there is a tie in to asset present, everybody has is traded the same and hope everybody feels youre getting the same quality service that have not I'd like to hear about it and they should feel free to call me directly but thats.
That's the plan and Thats, what <unk> committed to that's what.
James Meyer.
And John .
Great.
Glad to themselves to everybody else. So we're going to run a strike game.
Be good partners.
Youre exactly right and I think even evidence of that is even as matador has spread the ball a little bit around the basin and maybe had less production in the rest of the <unk> area.
We actually saw record natural gas gathering and natural gas processing. This this quarter and that really was due to third party exactly as Joe said and so great job by the business development teams as they've signed third party contracts we've seen.
Contracts, both at San Mateo, and Elliot Pronto, and so great job on both of them and so exactly as Joe said.
We treat them just like we treat matador and uneven basis and you can call him you can call me as well you know I'm happy to happy to answer that call, but where are we.
We're grateful for the third parties around our system.
Brian probably approach given the call first but.
Yeah.
Like the abbot.
Yeah.
Alright, Thats good color guys, and then I'm going to ask a question on advance and just just if you could give me a sense of.
I don't think you guys typically complete.
Completed things and brought them online and these large queue packages, but <unk> got 121, well package. Obviously July August and then another one starting sometime early next year can you just give us a sense of.
How you plan on bringing.
It's going to be brought online is this.
Going to be sort of a stairstep thing a little by little or is it one of those things where youre not going to Max out the capacity, so youre going to see <unk> gradually.
Anyone wells gradually come on line over a period of a few months to keep production fairly stable over a longer period of time can you just give us a little bit of color for that.
Yeah, Hi, Scott, It's Glenn again, yes, just just.
Thank you for the question I do think it's important to highlight just as I mentioned, we've been at it just for a little while here on these advanced properties and as you mentioned the 21 wells.
It is a bit of uncharted territory for us the biggest batch I think we've done is as that is 13 or 15 wells at a time and so there are there are logistical challenges associated with that we've got to make sure that.
We have sufficient capacity on all of the different.
On an oil gas and water and so the way that we have them planned is really kind of in a staggered fashion.
Coming on.
A few well a few wells at a time.
With a couple of days in between so that's really the way that its modeled.
There is.
Again.
We've.
At.
Cautiously optimistic.
We still got to go and execute but we like our chances.
Got it okay and I appreciate that color. Thanks.
Yeah.
Thank you one moment for our next question.
Okay.
Our next question comes from Leo Mariani of Roth MK and your line is now open.
Hey, guys I was hoping you could talk to the the acquisition that you all made here in the first quarter I'm looking at this right I'm seeing about a $104 million on the cash flow statement.
Just curious I don't know a part of that might have been like an advance payment.
On the advanced deal.
That was all just kind of a separate deals out there could you maybe give us some color around that $104 million in and was there any production than maybe was added as a result of that as well.
That's a good question in that complementary on being so a state.
So it started to pick up that that might be related in some way to the advance that $80 million of that was that deposit on the advance.
Purchase and closing so the other 20 million was our usual, where we buy acreage here and there trade for acreage.
<unk>.
Add one more color van is here van do you want to add to that yes, just a little bit of detail behind that $20 million it's about.
40 different deals since our brick by brick approach that we've always done and so it was just more of that again kind of 40 40, or so deals across all of our acreage.
Okay, that's definitely helpful for sure.
And then just looking at obviously the the production here I'll, just say first half of the year certainly looks very strong obviously, you significantly beat first quarter Youre guiding up second quarter by roughly 7% on the production.
I'll provide a little bit more color around the the second quarter guide up on the production and certainly sounds like part of it was advanced related and then just kind of in light of that strong first half a little surprised to see that youre not maybe guiding up full year production, but maybe that's just some conservatism just given that advantages closed two weeks ago, so any color on that.
Would be great.
Yes.
A lot of it is just trying to be conservative and cautious.
Uh huh.
The very good chance of Lake saved what we've put out there, but we wanted to be 100% sure we can deliver.
What we say Brian would you.
No I think Thats right, Joe and as it relates to the second quarter. Leo I think you said part of it is certainly advance both advance wells doing better than we thought they were going to do and then in addition, we always had kind of early to mid second quarter for for the closing of advance it probably closed a couple of weeks earlier than we had forecasted and so that helps from the second quarter.
In addition, I would just say that.
The operations team did a great job in the wells continue to produce better than we anticipated. They would and we also had seven additional wells that were turned online in the first quarter kind of right at the end of the first quarter, but those contribute to the second quarter increase as well and so we're really excited about how the first quarter turned out and how the second quarter is looking in.
As Joe said, we look at the full year, it's early kind of.
Early innings still with advance we've only had it for a couple of weeks, but.
But we're excited about the opportunity set and as we kind of run the numbers and look at the forecast it.
Thanks to the high end of our guidance, which we're excited about it I think that that's a really great place to be it's overall it's a.
Roughly a 20% increase off of where we were last year and so that's a that's a great increase in place to be for for this year and we're excited about it.
Okay. Thanks for the color guys.
Thank you.
Leo.
One moment for our next question.
Our next question comes from Matthew Boss Chandra of Benchmark. Your line is now open.
Thanks, Good morning, everybody another follow up I guess on the U shape, well ever have a broader application.
It's stimulation costs any higher just to sort of get all of that frac energy around the curve and so on.
Thoughts there.
Yeah, Hi, <unk> this is Chris Calvert again.
Just to thank you for the question I guess you are asking if there is an increased stimulation costs and the answer to that is.
Really no I mean there.
The technical specifications of the completion, we really kind of set ourselves up nicely. If you look back two to three years ago, we really made a transition from coiled tubing drill outs to stick pipe drill outs and so these standalone snubbing unit sees fit for purpose snubbing units that Matador started using really not exclusively.
But 100% starting about two years ago that really eliminates a lot of the risk on the drill outside and so you know on the completion side.
That carries a lot of the way with with how do you actually clean these wells out but from the stimulation side itself.
The pumps don't really care, if theyre going straight downhole or if theyre, making a U turn the pumps on surface and so theres really not too much or really any increased stimulation costs and the way that we're planning these wells.
We'll be looking to utilize dual fuel dual fuel frac fleets simultaneous fracturing operations on these wells as well and so I think from the completion side.
There's not too many technical differences versus a straight well versus a U turn well so to speak.
Got it thank you for that and.
Could it have a broader application.
Would you.
Roll it out if it works really well.
Yes, <unk> Glenn Stetson, Yes, we've identified approximately 81 mile wells that could be converted to approximately 42 mile course, you Welles.
Yes.
This is something that we.
We feel like is a good path forward.
And one other thing that I that I would probably add onto that toolbox.
These you turn wells had been drilled in the basin before we were not the first to do this but if you look back in public data 11, more you turn wells have been permitted by peers and by other operators in the basin and so I think the industry is starting to see this and gaining traction with this and so we're excited about where we are.
With these wells and getting them successfully cased, we still have work to do to get them completed and bring them online, but I think the industry is looking at this as well not just matador, but we're proud of where we are having these wells drilled and cased.
Yes, thanks, and the follow up.
I guess is the one exposure with advance any updated thoughts there on.
Any bottlenecks at all are or how you're managing that risk.
This is Gregg Krug EVP of marketing and midstream strategy.
We feel pretty comfortable as far as our exposure to wall Hall.
Got it pretty.
Diverse.
Portfolio as far as.
Gas that we've got capable of going to Houston ship channel.
Socal.
So we feel pretty confident about that we have plenty of capacity out of the basin as far as at least getting to illiquid.
Hub so.
We're not feeling that.
The pitch that maybe some others are.
Okay. Thank you.
Thank you one moment for our next question.
Okay.
Our next question comes from Zach <unk> of Jpmorgan. Your line is now open.
Hey, guys. Thanks for taking my question.
You mentioned earlier on the call that you really only started to see some smaller cost components like diesel moved lower in <unk>, but have you started to have any conversations with your service providers on the bigger ticket items like rigs and completion services moving lower going forward maybe.
Maybe give us some color on how contracted you are on those larger line items for the rest of the year.
Yeah of course Act this is Chris Calvert again.
And I'll, probably have really speak to the rigs specifically after this but we are continually having conversations with our service providers and we've we've always kind of spoken to the optionality that we have built in to these vendor relationships and you look back whether it's patterson on the drilling side.
Halliburton or universal pressure pumping on the stimulation side.
These relationships go back really 10 years to 40 years, depending on how far you want to look back on but we're constantly having those conversations with our service providers and so I can speak on the on the pressure pumping side.
We do have near term indicators that that maybe those horsepower charges.
Maybe somewhat starting to plateau.
Like I said earlier on the call none of these costs have actually come down yet but.
We are optimistic but once again, a rising oil price change and demand things things can change relatively quickly, but we are optimistic that maybe some of these costs plateaued and you haven't seen really the rate of change that you saw in 2022.
But we are constantly working with our vendors on on these things such as completion and drilling services and Barry can speak to the drilling side.
Vik as Billy Goodwin, the president of operations there and.
Yes, I will just kind of back of what Chris is saying and also on the drilling side, they're Lucky mentioned there are.
Something that we're seeing there on the as far as still looking out further in the future and rigs it seems like maybe the plateau now and we're expecting.
Prices, where they are right now we think we most of whom rollover here as we get further out into the year I mean.
Diesel has come down we've seen that come down so that's a.
In fact in the truck and they're a little bit. So we're hoping to see that here coming up in the future just so early.
We're just starting to see these things so we're not really realizing those things yet.
Sure.
Looking forward to it as we move further out.
With the steel for Us that's a big thing with those you turn wells, we've been talking about the horseshoe wells because.
Eliminating 50.
50000 feet of casing drilling those two wells versus four wells.
The big savings that alone was $4 million savings there. So just these things that we're doing.
Sure.
Cut down.
On costs through better efficiency better execution better planning.
Really helping us out and we see this <unk> type funeral efficiency, helping us down the road.
Thanks, guys I appreciate that color I guess, just one clarification can you give us any color on the total cash outflow for advance after the purchase price adjustments I know you mentioned the $80 million deposit that was paid in <unk>, but just curious what what we could see on the <unk>.
Those statements.
Yes. This is Brian .
Thanks for the question, we really did.
After the adjustments that were made it really was closer to the $1 6 billion of course, we have the $80 million in deposits that was part of that so right.
Right about $1 5 billion from a from a cash perspective.
Youll see next time, so I think as we look at that the purchase price adjustments. They really equalize themselves out there is a time period after closing where we continue to work on those.
But that's really kind of the cash component was the $1 6 billion minus the $80 million that was in the deposit.
The other boy.
Zack that.
At this point now.
T on this transaction.
Is that.
Taken at the acreage.
Picking up the additional business and are easy to quantify.
But have certainly added the value.
Larger size makes it.
As eligible for a potential upgrade.
And we.
We have the money.
Between our cash on hand.
And our availability under our line of credit.
To close out the deal but for safety sake. We went ahead and they had the bond issuance for.
For 500 million to give us a safety net for a dramatic change in oil and gas commodity prices or some other calamity.
Come up to maintain that strong balance sheet.
And make sure that we had optionality.
On.
Other opportunities that may come up so we felt.
We were we havent been asked yet about the bonds, but wanted to say again, how pleased we were that there was such a strong response and we had we went out with a $400 million.
We had orders and for over $3 billion.
So we upsized it to $500 million.
Improve the terms.
And felt we got.
Blue chip.
AAA good.
Quality.
Bondholders out of that so.
Now we feel like.
Likely that is.
It's one of those rare acquisitions that way.
We think has had a dramatic.
Effect on on value for the good.
And that.
We're picking up wells that are.
Just waiting completion to put online will pick that more protection, we picked that number of their field people.
Quality gas that help us.
And.
And I'm very pleased with the way everything has gone.
And we're in good shape to finish this year, we need to put a finer point on the numbers.
Come July and we'll have those for you, but also it's clear that it said that 2024 in a fashion that we can look at carefully.
Basically almost for two years and now that we can.
We will be delivering for our shareholders.
Got it.
Thanks, Joe really appreciate the answer.
Thank you for the question.
One moment for our next question.
Okay.
Our next question comes from Tim <unk> of Keybanc capital markets. Your line is now open.
Hey, good morning folks thanks for taking my question.
I was a little surprised maybe I missed something in the release, but I would have thought with the incremental.
Debt on the balance sheet for the deal that we would have seen some oil hedges in place.
We've had a tremendous amount of volatility in crude.
But there have been sort of windows, where you've seen.
Strength in this year. So just kind of curious your thought on that as you look to sort of protect the balance sheet going forward.
Well Cam I'll start off and and that led Bryan finish out but.
And Greg.
Greg fairly sure but.
We look at hedging as opportunistic.
We had strength the balance sheet.
That.
<unk>.
We've hedged in the past.
Ads.
Reduction all the way back.
1988.
<unk>.
And we just.
Sal This is opportunity we thought that oil prices are more likely go up and down and then it just wasn't necessary Greg any thoughts.
Yes.
Yeah.
Joe hit it right as far as the us.
We look for opportunities and we're still in a backward dated we're still in a backward dated market I mean, if you look at 'twenty four it's actually less than what it is for the balance of 'twenty three.
We look at we are constantly looking at that so I mean, if we if we.
We do see an opportunity to do something we will.
We will definitely try to to do something there but.
We just have it.
Haven't seen just the right combination yet to pull the trigger.
Okay, that's fair enough.
And then if I could just circle back to the comments about.
The wells in progress at the end of 2023 because.
I think a lot of us are trying to understand how that ramp could look longer term you started this year more efficiently I think it was $3 one more net turn in lines and expected.
If you continue to operate as efficiently or are you, okay with more completions than planned and exiting the year with fewer wells in progress or is sort of at that capital program is going to be a governor on 2023 growth.
Yes. This is Bryan and thanks for the question I think as we look at the wells in progress.
We are excited about those wells I think we really think that that'll be the number that we do.
I do think from a capex perspective, there might be some opportunity on these 21 wells that we're drilling right now in advance and those will be completing as we kind of end the year, we might pull out some of those completions.
End of this year, but I don't think it really resulted a lot of extra wells at this time, there are going to be in the 2023. So.
I don't think we look at necessarily Theres, a governor with Capex I think we want to do what's right and develop the properties correctly. So I don't think we have some hard governor on it but.
Do the right thing by by the properties themselves. Tom do you have anything to add I was just going to emphasize we are always surprised optionality.
In our in our plant and it is early days, but a lot of golf to play before we get to the year and we'll see how things unfold.
As was mentioned earlier in the call those additional net net till that came online and in the first quarter.
Hey come online very late in the quarter.
Yes.
And so I just think how do you think the operations team did a nice job, finishing those projects is deliberate sooner and just pulled in those position well just barely into the to the first quarter. So.
Brian's comments it doesn't necessarily.
Directly translate into year end.
2023 change in our til count.
At least at this early in the year.
Yeah.
The other comment I'd make on the hedging.
Just that the floor is probably raise really okay.
But the upside is limited.
So that if you have.
Somewhat reversal in the.
In the top price.
<unk>.
You don't have much room, and you could be quickly paying money.
Al rather than receiving the benefit of higher oil prices. So that's where we think it is weak and the kits.
Oil prices currently are a little.
Less than that.
Middle ground is somewhat higher above the price that you can hedge that we would think we'd be losing money on the outset or undertaking too much risk on having.
Not getting the benefit of higher prices should they turn around.
<unk>.
Okay I appreciate all the comments thanks.
Thank you one moment for our next question.
Okay.
Okay.
And our next question comes from Jeffrey Rambo John of Tpa's. Your line is now open.
Good morning, everyone and thanks for taking my questions have wanted to add on free cash allocation I appreciated the commentary I'll gauge on being towards dividends and returns, but also for measured growth I was hoping you could just speak to.
One of the other options that you all highlighted in their lease in terms of bolt ons and acquisitions, which I know you spoke to a little bit in terms of the brick by brick approach in Q1, but as you think of bigger opportunities and the strength and liquidity that you referenced.
Couple of questions ago, where and you are spending more time today in terms of assessing opportunities that are out there and how should we think about what you see potential for work in the near term and it will be more midstream weighted just given the deal just closed on the advance or if you still see pretty good opportunity out there on the upstream side as well.
Hey, this is Dan.
I think what youre going to see is more of the same we've always been.
Interested in.
And opportunities as they come up.
But mainly to keep a good eye on our balance sheet and so if the right opportunity Pops up we're going to give it due consideration.
Thank you will see more of our brick by brick approach.
Going forward as you have for many years.
As other opportunities come up we'll take a good look at them, but we're not going to risk.
Balance sheet and other opportunities that may be out there on the midstream side.
Just in an effort to make another deal.
I think we're in a really good position right now we've got.
Great runway of eight plus locations that will carry on for many years and I think by being opportunistic.
It gives us the opportunity to make win win deals with.
Sellers, who may be in a position to.
I need to get out at that time, and we'll just keep our eyes open.
Try to just take a conservative approach and do the right thing for the shareholders.
Just a couple of poets asthmatic with that great completely with.
With van but a couple of points, we like brick by brick because theres a whole lot less risk that's generally adjoining properties or interest in properties you already have so youre not taking on the risk of a whole bunch of new properties that you don't know exactly how they were completed or.
Sure.
Hi, exploratory their acreage is.
Ken tend to know it so we always like that they are generally smaller, but they carry a whole lot less risk.
The second is again, what we try to SaaS, if we can't feel good about that it's profitable growth.
Got to avoid it and sometimes you offered some good luck and properties, but there. They are just too expensive and you got to take your time.
And.
And look for the ones, where that mesh well and will be profitable that you have something.
More to offer than just money to make it work so.
And again, we are.
On the other side.
Uh huh.
You know, we're a public company, we we play a straight game and if someone makes us a serious offer we'll look at it seriously and we're open to trades and we do a fair amount of trades in the industry out there in the Permian and the Delaware people been trading properties and cooperate with each other too.
Convert one mile proposed laterals into two miles so.
We like that because those are the win win deals at vans were referring to.
That.
That make both sides happy and that's why we like to come out of deals.
Great I appreciate that and then a squeeze in a follow up just thinking about some of the factors you highlighted that continued into Q1's production performance. Besides the turn in line timing My shut in time I think you also mentioned the outperformance at Stateline. If you could talk a little bit about drivers there repeatability across the program.
This year that there are any early indications on performance relative to your expectations from some of the wells that jumped bottom line towards the end of Q1 into Q2 here.
Hey, Jeff. This is this is Tom Elsner EVP reservoir engineering.
I think we're very encouraged by what we see so far.
Stateline, obviously, there's been a.
Very important asset to us for a long time, and I think I think the team's attention to detail and making sure that all of those wells are always very well maintained.
It is certainly something that helps us out quite a bit and I think as well.
Explore the advanced properties further and get to know those better I think there's going to be some different opportunities that may come up two to improve the flow assurance.
Those properties is as we've seen in other parts of our portfolio.
So I think I think I like our chances, but it's still quite early days.
Alright, thank you.
Thank you one moment.
Yes.
Okay.
Our last question comes from Kevin Mccarthy of Pickering Energy Partners. Your line is now open.
Hey, good morning, and thanks for fitting me in.
I was hoping for a little clarification on some of your comments on the release specifically.
When you mentioned that youre going to be at the high end of the production range is that.
Both oil and equivalent and just to clarify there is no change to the midpoint of Capex correct.
Yes. This is Brian and I are happy to take that and you are correct no change on Capex right now I think as I mentioned earlier, we think that.
We maybe had some savings in the first quarter, but we do think maybe will pull forward. Some of the completion at the end of the year. So capex is largely the same.
Looking at the high end it really is on a daily basis as we point to the high end I think of course that means that we're going to increase on the oil and gas.
Gas as well, but I think that the high end point that we did was really on the BOE basis for total production and so.
We're excited about that and be able to.
I would point to the high end and the great start to the year that we've had.
Brian I'll just take it.
Sure.
Nearing the end of the conference. It is just to point out that we've already paid down $75 million on our RBA all that.
Now the revenues to date have been a little better than expected. So I wanted to just to put a little specific that wasn't empty talk but we have paid down some already and think we will continue to do so and we gave you a slide which projects the pay down that we've had.
It's 2020 on our RV L that pay debt.
That off that may be the advanced acquisition possible.
No.
Planning.
To head in that direction again, as we pay down.
That our BL.
As we did before and get this down we like going into.
As the years pass and a stronger and stronger financial position, because we think that's healthy to combine.
The organic growth that we're experiencing and benefiting from with some potential acquisitions.
That are logical fits.
Our own property base so.
You should say that.
We have reason to be excited that we've already started paying down and beginning the program to pay off the <unk> as we did.
When we brought all of the BLM properties online a few years ago to start enjoying that cash flow.
Yes.
Yes, thank you for that color, Joe and you guys.
Free cash flow was certainly higher than our expectations for the quarter, so great job on that.
My follow up question was on the Horseshoe wells.
Are you guys expecting the productivity of those wells to be in line with kind of a normal two mile lateral are there any changes in productivity per foot as you factor in the U shape.
Yeah.
Yeah.
Hey, Kevin It's Glenn Stetson.
So.
We are where the short answer is we're expecting the same kind of Boe per foot as you would a two mile as you would a two mile well.
We're basing that off of there is not a whole lot of U turn wells.
That are producing today, there's a few in south Texas and then there are four in the Permian within a 20 mile radius of Av.
Where we're drilling these wells and so we do feel very confident.
And again the.
<unk> from the technical aspect to get these wells completed and we'll wait and see but for our projections.
It's just a similar performance on a per foot basis.
Okay.
Thank you for taking my questions.
Yeah.
And Thats just concluded on the Horseshoe is we don't have enough data points, but we're going cautiously. This isn't a deal where we are lining them up and get them to come out with a dozen but I think he is very encouraging.
That others are doing that and.
So far our experience is good some have not had such a good experience, but our team I think really took the preparation.
All of the preparation they could.
To bring this about <unk>.
Real proud of the team.
Travis in Tyler that.
I think did a real good job supervised by Glen.
Brandon and Tom.
And Chris just as an example of the team working together in the.
The depth and we're trying to create among our <unk> SaaS. So.
Thanks.
Also I want to be sure to shout out to our accounting group.
We were put to the test.
Very near in numbers advanced numbers with quarter numbers.
And Ah.
They really responded so thanks to the eye.
<unk> financial group for coming through.
Just the whole team this quarter has been.
Very gratifying to me as the CEO and our presence fan and Billy just way our teams responded and met that met the challenge so.
We're eager to keep going on the second quarter and you were eager to get back to you in July .
And have some more news for you.
In fact, I'll close on this might be amusing tell you my hometown newspaper of Ambarella.
Yeah.
Hi.
Gary Peterson.
Adam.
As the advanced deal is <unk> two we've been friends for a long tail.
And our hometown newspaper Ambarella recognized this deal in yesterday's paper on the front page and so.
<unk> worked all my life to get on the front page and.
Yes.
Finally did it add here.
But no one was more surprised than I was at that Ambarella would take an interest in that.
Bill in the Mexico.
Yes.
Ladies and gentlemen, thank you for your participation today. This concludes today's program.
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