Q2 2025 Matador Resources Co Earnings Call
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Operator: Good morning, ladies and gentlemen, welcome to the second quarter 2025 Matador Resources Company earnings conference call. My name is Gigi, and I'll be serving as the operator for today. At this time, all participants are in a listen only mode.
Operator: We will facilitate a question and answer session at the end of the company's remarks.
Operator: As 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.
Gigi: Good morning, ladies and gentlemen. Welcome to the second quarter 2025, Matador Resources, company earnings conference call. My name is Gigi, and I'll be serving as the operator for today. At this time, I'll participants are in a listen-only mode. We will facilitate a question and answer session at the end of the company's remarks.
Mac Schmitz: I will now turn the call over to Mr. Mac Schmitz, senior vice president investor relations for Matador. Mr. Schmitz, you may proceed. Thank you, Gigi. And good morning, everyone.
As a reminder, this conference is being recorded for replay purposes and the replay will be available on the company's website for 1 year as discussed in the company's earnings press release issued yesterday.
Speaker Change: I will now turn the call over to Mr. Mack Schmidt's, senior vice president and vest relations for Matador Mr. Schmidt, you may proceed.
Joe Foran: And thank you for joining us for Matador's second quarter 2025.
Mac Schmitz: Some of the presenters today will reference certain non-GAAP financial measures regularly used by Matador Resources in measuring the Associations of such non-GAP As a reminder, certain statements included in this morning's presentation may be 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. Additional information concerning factors that could cause actual results to differ materially.
Speaker Change: Thank you, Gigi and good morning everyone and thank you for joining us for matador's, second quarter 2025 earnings conference call.
Speaker Change: Some of the presenters today will reference certain non-gaap Financial measures regularly used by Mata resources and measuring the company's financial performance.
Speaker Change: Reconciliations of such non-gaap Financial measures with the comparable Financial measures calculated in accordance with gaap are contained at the end of the company's earnings press release issued yesterday.
As a reminder, certain statements included in this morning's presentation, may be forward-looking and reflect the company's current expectations or forecasts of future events based on the information that is now available.
Speaker Change: actual results and future events could differ materially from those anticipated in such statements
Unknown Executive: Transcript by Transcription Outsourcing, LLC.
Mac Schmitz: Transcription by CastingWords In addition to our earnings press I would like to remind everyone that you can find a slide presentation Connection with the second quarter of 2025.
Speaker Change: 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, 10K in any subsequent quarterly reports on form 10q.
Joe Foran: under the Investor Relations tab on our And with that, I would now like to turn the call over to Mr. Joe Foran, our founder, chairman Thank you, Mac, and thank you all for listening in. We appreciate it, and we look forward to your questions and comments. Being able to report to you that we feel that we've had a very solid quarter, very well executed, and it's pleasing to us because we have some people in new leadership positions, and everybody else has really pitched in, and I think it's exciting to see some of the ideas and the programs that they've recommended, and it'll be to everybody's benefit.
Speaker Change: In addition to our earnings press release issued yesterday. I would like to remind everyone that you can find a slide presentation in connection with the second quarter 2025 earnings release under the investor relations tab on our corporate website.
Speaker Change: And with that, I would now like to turn the call over to Mr. Joe foreign our founder chairman and CEO Joe. Thank you may.
Speaker Change: Uh and thank you all for listening in. We appreciate it. And we look forward to your questions and comments and um,
Speaker Change: Being able to report to you, that we feel that we've had a very solid quarter.
Speaker Change: um, very well executed and it's pleasing to us because we have some people in New leadership positions and everybody, I'll, uh,
Joe Foran: In particular, I'd like to introduce Bill Lambert to you. Bill is our CFO and head of strategy, and I think you'll find that he has a lot to offer and you'll see smooth running from From this point forward, his aim and our aim when we were, as we were getting to know each other was very similar. We come from very similar backgrounds in culture. We've laughed about that some. and uh... uh... that I think you'll enjoy getting to know him. I think many of you already know him. But our plan, our aim is to increase our, our production, but to also increase our free cash flow, not to do one at the expense of the other.
Speaker Change: has a lot to offer and you'll see smooth running from
Speaker Change: uh,
Speaker Change: From this point forward uh his name and our aim, when we were as we were getting to know each other was very similar, we can come from very similar backgrounds and culture. We've laughed about that some uh
Speaker Change: and uh, uh,
Joe Foran: But to work them in tandem is that if you're Production is going up, your cash flow needs to be going up, and vice versa. If your cash flow is going up, spend it wisely on some production and drilling opportunities, but be careful to keep that strong balance sheet. in times like this where you have the turbulence and the Volatility. The strong balance sheet is I think you'll see is background for a lot of our initiatives. And it's helped us to achieve the progress that we have. More specifically, we believe we're well positioned for the back half of the year with drilling opportunities, We have cash flow opportunities.
Speaker Change: That I think you'll enjoy getting to know him. I think many of you are already know him but our plan, our aim is to increase our our production but also increase our free cash flow. Not to do 1 at the expense of the other but to work them in tandem is that if you're
Speaker Change: Production is going up your cash flow needs to be going up and vice versa. If your cash flow is going up, spend it wisely on some production and drilling opportunities, but be careful to keep that strong balance sheet.
in times like this, where you have the turbulence and the
Joe Foran: We have a billion aid available on our line of credit. Our banks have been very supportive of us. We have all 19 banks reaffirmed their plans to stay in the group. And I think 15 or 16 of the banks are also in our midstream facility. So thank you all very much for that support and vote of confidence.
Speaker Change: Volatility, uh, the strong balance sheet is, I think you'll see is background for a lot of our initiatives, uh, and it's helped us to achieve the progress that we have. Um, more specifically, we believe we're well positioned for the back, half of the year with drilling opportunities. Uh,
Speaker Change: Cash flow opportunities. We have a billion Aid available on our line of credit. Uh, our banks have been very supportive of us. Uh, we have all 19 Banks, uh, reaffirmed, uh, their plans to stay in the group,
Joe Foran: Obviously, as you have seen in the report that we've increased our full year guidance for 2026, both in oil production growth and cash flow. Obviously, this is a result of successes in the drilling program, which pleases us. And we're now producing in the Delaware from 20 different zones. My whole career 40 years has been spent primarily in the Delaware. We consider that as the land of opportunity, but I'm also glad to report part of our time in Louisiana has resulted in us having in our deal with Chesapeake to reserve the Cotton Valley Formation . above the Hainesville, and we believe we have 200 billion cubic feet of gas there or more waiting all HVP and just waiting for more stability in gas price.
Speaker Change: And I think 15 uh or 16 of the banks are also in our Midstream facility. So thank you all very much for that support and vote of confidence.
Speaker Change: obviously, uh, as you, uh,
Speaker Change: Have seen in the report that we've increased our full year guidance for 2026, both in oil, production, growth and cash flow. Obviously, uh, this is a result of successes in the drilling program, which pleases us. And we are now producing in the Delaware.
Speaker Change: from 20 different zones, my whole career of 40 years has been spent primarily
Speaker Change: in the Delaware. Uh,
Speaker Change: it, we consider that as the land of opportunity, but I'm also glad to report, uh,
Speaker Change: Part of our time in Louisiana has resulted in us having uh in our deal with Chesapeake to reserve the Cotton Valley formations.
Speaker Change: Uh, above the hanesville.
Joe Foran: Another opportunity that we're pleased to mention to you is our midstream opportunities. That has been a game saver with the tightness in the midstream markets out there in New Mexico. We got into it for flow assurance and Gregg Krug has guided us in this regard and we've grown our midstream capacity from zero at the time of our original IPO. to where we now have $720 million a day in capacity. and, and, you know, recently turned that on. So it's about half full now, but we'll soon we believe will before the end of the year likely to be at full capacity or close to it.
Speaker Change: And we believe we have 200 billion cubic feet of gas there or more. Uh waiting all HBP and just waiting for more uh stability in gas prices. Another opportunity that we're pleased to mention to you is our Midstream opportunities that has been a game saver with the uh, tightness in the Midstream markets out there in New Mexico. We got into it for flow assurance and Greg Krug has guided Us in this regard and we've grown our Midstream capacity uh from zero. At the time of our original IPO.
Speaker Change: To where we now have 720 million a day in capacity. Um,
Speaker Change: And uh, and and, you know, recently turned that on. So it's about half.
Joe Foran: The the team is in that regard.
Speaker Change: So now, but we'll soon we believe we'll before the end of the year likely uh to be at full capacity or close to it.
Speaker Change: um,
Joe Foran: We were faced with a choice. of either building that plan. which was $200 million or more, or putting that into drilling, and we concluded that It was best to build the plant, that that would balance our asset base so that we were in a fee-based business along with a commodity-based business. and which would be longer lived assets. and would be a balance to our production, plus, and perhaps most importantly, provide flow assurance to us and our operations. And been very glad that Gregg... suggested this and helped guide us along the way. In addition, in this regard, we've also are now recycling over half of our water production.
Speaker Change: the uh,
Speaker Change: the team that is, uh,
Speaker Change: In that regard, we were faced with the choice of either building that plant.
Speaker Change: uh, which was 200 million dollars or more or putting that into Drilling and we concluded that
Uh, it was best to build the plant that that would balance.
Speaker Change: Our uh, asset base.
Speaker Change: So that, uh, we were in a fee-based business along with the commodity based business.
Speaker Change: And which would be longer, uh, lived assets.
Speaker Change: Us in our operations. And, uh, been very glad that Greg uh
Joe Foran: back in, which is a moneymaker for us. We're saving having to buy additional water. In the meantime, we've grown our base dividend. We've raised it six times in four years. And as our habit is, is to review the base dividend at the end of each year. And we take a lot of pride in. in the base dividend and trying to make it be the right amount. We believe it's most fair to all the shareholders. We're very pleased with our results and our buyback of shares, but the base dividend is something that all enjoy and believes helps make people stickier.
Suggested this and helped guide us along the way. Uh, in addition, uh, in this regard we've also are now recycling over half of our Water Production back in, which is a money maker for us, we're saving having to buy, um, additional water.
Speaker Change: In the meantime, we've grown our base dividend. Uh, we've raised it 6 timeslot.
Uh, as our habit is, is to review the base dividend at the end of each year.
and uh, we
take a lot of pride in
Speaker Change: in the base dividend and trying to make it.
uh,
Speaker Change: be the right amount.
Speaker Change: Uh, we believe it's most fair to all the shareholders. Uh, we're very pleased with our results and our buyback.
Joe Foran: We continue our brick-by-brick program, and we've paid down debt, so our debt levels is now with a ratio of less than one. And finally, we've been reducing our lease operating expenses, principally through efficiencies at the area in our chemical program, which is been implemented, I think, in a very solid fashion. and is generating CITI.
Speaker Change: Of shares. But the base dividend is something that all enjoy and believes helps make people stickier
Speaker Change: um,
Speaker Change: we continue our break by Brick program.
And we pay down debt. So our debt levels is now
Speaker Change: Uh, with a ratio of less than 1. So, uh, and finally
uh, we've been reducing or lease operating expenses, uh principally through efficiencies
Speaker Change: and,
out out there in our chemical program, which is uh,
Speaker Change: Been implemented, I think in a very solid fashion.
Joe Foran: And the last thing is the way we look at things. I know there's going to be questions on what is the quarter result and how that compared to the sequential quarter. And we tend to look more at how is it over the course of the year. So how does one year compare to the last year? And it's just that the cycle in oil and gas we think is more than a quarter to quarter business. We do like to look at the quarter numbers, but the year over year numbers are more important. For example, on production is up a little now, but when you look at it year over year, which you don't have as much timing differences, is up 31%.
And in this generating, uh, savings.
Speaker Change: So uh and the last thing is uh, the way we look at things, I know there's going to be questions on what is the quarter result and how that compared to the sequential quarter.
Speaker Change: And we tend to look more at how is it over the course of the year. So, how does 1 year compared to the, uh, last year? And it's just that the cycle and the oil and gas, we think is more than a quarter to quarter business. We we do like like to look at the quarter numbers but the year-over-year numbers are more important. For example, on production is up uh, a little now but when you look at it year-over-year, which
Joe Foran: So with that, let me open the floor for questions and give Bill a chance to talk about our strategy and financial plans.
Speaker Change: You don't have as much timing differences is up 31%.
Speaker Change: So with that, uh,
Bill Lambert: Thank you, Joe. It's a pleasure to join the team here. I think really just before we jump into the Q&A, the opportunity to join Matador and the business that we have here, I think our integrated business is extremely well positioned to deliver on both. a robust free cash flow margin, as well as oil production growth. And being able to do both of those things is something that we think is unique in this world.
Speaker Change: Let me open the floor for questions and, uh, give Bill a chance to talk about our strategy and uh, Financial plans.
Bill: Thank you, Joe. It's a, it's a pleasure to join the team here. Um, I think really, just before we jump into the Q&A the, the opportunity to join Matador and, and the business that that we have here, I think our integrated business is, is extremely well positioned to deliver. Um, on both
Bill Lambert: So so look forward to answering your questions, but very excited to to Gigi, we'll turn it back to you for Q&A. Thank you.
Bill: A robust free cash flow margin as well as oil production growth and being able to do both of those things. Is something that we think is unique in this world. Um, so, so look forward to answering your questions but very excited to to uh join the team.
Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: GG will turn it back to you uh, for Q&A.
Operator: Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to one question. Again, we ask that you please limit yourself to one question until all have had a chance to ask a question, after which we would welcome additional follow-up questions from you. Please stand by while we compile the Q&A roster.
Speaker Change: Thank you as a reminder, to ask a question. Please press star, 1, 1 1 on your telephone and wait for your name, to be announced to withdraw your question. Please press star, 1 1 1 again.
Speaker Change: Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to 1 question again. We ask that you please limit yourself to 1 question until all have had a chance to ask a question after which we would welcome additional follow-up questions from you please stand by while we compile the Q&A roster.
Tim Rezvan: First question is from Tim Rezvan from KeyBank Capital Markets. Your line is now open. Good morning, folks. Thank you all for taking my question. I wanted to start on midstream. I was a little surprised to see there was no change to midstream EBITDA guidance for the year.
First question is from Tim risvan from keybanc, Capital markets, your line is now open.
Brian Willey: You had a record second quarter, you lowered midstream OPEX guidance Tim, I think we lost you. Tim, this is Brian Willey. I'm happy to take that question about the Record Quarterly, but we appreciate you, you know, recognizing what a great quarter we had at San Mateo and really that starts with the men and women in the field led by Thomas Green and Brian Nicholson. and some of the others as they brought the new Marlin plant online and increased the capacity from 520,000,000 cubic feet per day to 720,000,000 cubic feet. And really, San Mateo's record performance during the second quarter was driven by Matador's record production growth during the quarter.
Tim risvan: Good morning, folks. Thank you all for taking my, my question. I wanted to start on on Midstream. Um, I was a little surprised to see there was no change to, Midstream IBA, guidance for the year, you had a record second quarter, you lowered, Midstream Opex guidance.
Tim risvan: I think we lost, you know.
Speaker Change: Tim, this is Brian Willie, I'm happy to to take that question. Um, about the record quarterly, but now we appreciate you, uh, you know, recognizing what a great quarter we had at San Mateo and really that starts with the men and women in the field, led by, you know, Thomas green, and Brian Nicholson and and uh some of the others as they brought the new Marlon plant online and increased us from processing capacity from 520 million cubic feet today per day to 720 million cubic feet per day.
Brian Willey: And so San Mateo during the end of the first quarter and during the second quarter connected to approximately 30 new Matador wells. And those were areas where San Mateo provides oil, gas and water. And so as Matador's production increased and had record production, that was the same thing with San Mateo, we had record EBITDA. In addition, the team has been hard at work with third-party contracts and finding ways to save costs. For example, we often talk about the coordination between the upstream and the midstream. The operations folks on the San Mateo side, led by Sean O'Grady and Justin Haas, work closely with Glenn Stetson and his team.
Speaker Change: And really satos records performance. During the second quarter was driven by matadors record production growth during the quarter. And so, sonteo during the end of the first quarter and during the second quarter connected to approximately 30, new Matador, Wells, and those were areas where Sabato provides oil, gas and water.
Speaker Change: And so as matador's production, increase and had record production, that was the same thing with cimato, we had record ebita.
Brian Willey: and their chemical consultants. And we're actually able to save about a million dollars on chemical costs during the quarter.
Brian Willey: So really does a fantastic job on the coordination between the teams. And we look at the EBITDA for the remainder of the year, you know, the first half of the year EBITDA was about 145.5 million in total, which is about half of the expected EBITDA range for the year 275 to 295 million. And so we still expect that range is Matador just is drilling to Antelope Ridge and away from some of the areas where San Mateo We're excited to continue to provide flow assurance and great value for Matador shareholders. Thank you.
Speaker Change: In addition, the team has been hard at work uh, with her party contracts and finding ways to save costs. For example, we often talk about the coordination between the upstream and the Midstream you know, the operations focus on the cimato side led by Shana Grady and Justin hos were closely with Glenn Steen and his team. Uh and there are chemical consultants and we're actually able to save about a million dollars on chemical costs during the quarter. So really just a fantastic job on the coordination between the teams and as we
Speaker Change: Look at the event offer the remainder of the year. You know, the first half of the year ibida was about 145.5 million in total which is about half of the expected ibida range for the year 275 to 295 million and so we still expect that range is Matador. Just is drilling to the animal bridge and away from some of the areas where sanity operates, but we're excited to continue to provide flow assurance and great value from outdoor shareholders.
Operator: One moment for our next question.
Scott Hanold: Our next question comes from the line of Scott Hanold from RBC Capital Markets. Your line is now open. Yeah, thanks. I'm gonna stick on the midstream topic. And I know you all get asked this, it seems like almost every quarter. And just wondering what what's your view right now is on the progress of looking at, you know, options for that, including potential IPO? Just if you could set a view of how do you think about that timeline? And what do you need to see from the midstream entity to be ready for, you know, that potential value creating opportunity?
Speaker Change: Thank you. 1 moment for our next question.
Speaker Change: Our next question comes from the line of Scott. Hannold from RBC Capital markets. Your line is now open.
Scott Hanold: Is it is it a size and scale thing? Is it just one of those things? You're just still assessing whether it makes best sense for Matador at this point in its shareholders?
Bill Lambert: Scott, thank you for that. I think as we think about it, we do believe the value of our midstream business is not reflected in Matador's share price today, and we continue to think about ways to highlight that appropriately for shareholders. I think as we think about that, there are a number of opportunities and things we think about with respect to that, and I'll let Brian Willey jump in here as well. Yeah, thanks, Bill.
Scott Hannold: Yeah, thanks. I'm going to stick on the Midstream topic and and I know you all get, um, asked us. It it seems like almost every quarter and just wondering what what your view right now is on um, the progress of looking at, you know, options for that in, including potential IPO. You just, if, if you could set a a view of of, how do you think about that timeline and and what do you need to see from the Midstream entity to be ready for, you know, that potential value creating opportunities? Is it, is it a size and scale thing is it just 1 of those things, you're just still assessing, whether it makes best sense for um Matador at this point and its shareholders
Scott Hannold: Scott, thank you for that. I think, I think, as we think about it, we we do believe the, the value of our Midstream business is not reflected in Matador, share price today and we continue to think about ways to highlight that appropriately for shareholders. I think as as we think about that, um, there there are a number of opportunities and things we think about uh, with respect to that and
Brian Willey: This is really an exciting time at Matador. Joe mentioned Bill joining the team earlier this year, and he's been just a fantastic addition to Matador, and it's allowed me to go and focus more on the midstream business. and really push forward evaluating some of those strategic transactions and so whether that's something on the debt side or something on the equity side, there's a lot of opportunities in front of us, but we can be patient at Matador and make sure we do the right transaction for Matador shareholders, you know, we're pre-capsule positive, so we don't necessarily need to do any type of transaction at San Mateo, but we do recognize that the value of the ministry of business is not reflected in Matador stock price and so we look forward to continuing to, you know, provide excellent service to Matador as I mentioned earlier, as we explore the right strategic alternative to provide the most value for Matador shareholders over the long I would like to add, we're not just doing it for Matador and Matador shareholders, but the midstream team has done an excellent job of developing some great relationships with third parties that are all are repeating business.
Speaker Change: And, and I'll let Brian Willie jump in here as well. Yeah, thanks, Bill. This is a really an exciting time at Matador. Joe mentioned, Bill joining the team earlier this year and he's been just a fantastic addition. Uh, to Matador, and it's allowed me to go and focus more on the Midstream business and really push forward evaluating some of those strategic transactions. And so whether that's something on the debt side or something on the equity side, there's a lot of opportunities in front of us, but we can be patient, uh, at Matador. Make sure we do the right transaction. Uh, for Matador shareholders, you know, with we're a free Capital positive so we don't necessarily need to do any type of transaction at cimato. But we do recognize that the value of the ministry of business is not reflected and matted or stock price. And so we look forward to continuing to, you know, provide excellent service, to Matador, as I mentioned earlier, uh, as we explore the right strategic alternative to provide the most value for madore shareholders, over the long term.
Gregg Krug: That that's one thing that we've considered is how much of our third parties repeat and they're almost all repeat and they're the so many of the really great companies of the basin been there a long time. Very strong. companies financially and on production. So we're delighted by that progress. And, and think it gives us a lot of options of how to optimize that value. Gregg, would you add anything to that? No, Joe, I think that's spot on. We're definitely looking at. Anyway, we can optimize our, our value for for San Mateo and in this part of that goes all And so we're.
Speaker Change: I would like to add. We're not just doing it for Matador, and matador shareholders, but the Midstream team has done an excellent job of developing, some great relationships with third parties that are all are repeat business. That that's 1 thing that we've considered is how much of our third parties are repeat and they're almost all repeat and they're the
Speaker Change: Uh, so many of the really great companies of the Basin been there, a long time, uh, very strong.
Uh, companies financially and on production. So we're delighted by that progress and uh and think it gives us a lot of options of how to optimize that value.
Anything to that. No Joe. I think that's uh, I think that's spot on. Uh we're definitely looking at any way we can optimize our uh our value for uh, for San Mateo. And and as far as that goes, all the midstream
Joe Foran: We're trying to keep every look under every stone possible. We're trying to position ourselves in a Thank you. One moment for our next question.
Speaker Change: and uh, so we're, uh,
Speaker Change: We're trying to keep every look under every stone possible. So, we're trying to position ourselves in a, uh, that as far as to have the management, uh, staff there to be able, to, to realize that
Zach Parham: Our next question comes from the line of Zach Parham from JPM. Your line is now. Hey, thanks for taking my question.
Speaker Change: Thank you. 1 moment for our next question.
Zack Parham: Our next question comes from the line of Zack. Parham from JPM. Your line is now open.
Zach Parham: I just wanted to ask on activity levels, can you give us some detail on on how you're thinking about rig activity in the back half of the year? Going into 2026, if you continued running that eight rig program that you're going to be at shortly, you know, what type of production growth does that deliver in 2026? Or is that more of a maintenance program? You know, do you need that nice rig to deliver some production growth next year? And maybe talk about how you're thinking about the decision to add that rig back potentially? Thank you, Zach.
Zack Parham: Hey, thanks for taking my question. I just wanted to ask on activity levels. Can you give us some details on on how you're thinking about rig activity in the back half of the year and
Bill Lambert: I think, you know, that that's obviously very, very topical right now. And as we look at it, you're right that we will be at eight rigs here kind of basically the end of the week. And as we think about when we might potentially add back, I think we should we should really step back and think about what was the decision to ultimately change back in April. And what we looked at in April was a macro environment that was highly volatile. And we had the ability and flexibility in our program to optimize 2025 capital efficiency by moving some things around and reducing rig activity.
Zack Parham: Going into 2026. If you continue running that 8 rig program that you're you're going to be at shortly, you know what type of of production growth does that deliver in 2026 or is that more of a maintenance program? You know, do you need that ninth rig to deliver some production growth next year? And maybe talk about how you're thinking about the the uh the decision to to add that rig back potentially
Bill Lambert: With that, with that, we were we were maintaining the free cash flow margin that we think is so important and balancing that against oil production growth. As we look into 2026. And I don't want to guide in detail at this point. But I think as we think about the second half of this year and 2026, what we really think about is how do those two metrics work in tandem. And if there are opportunities to add activity and drive incremental growth, we want to make sure that we can maintain those superior margins and have incremental free cash flow from doing it.
Zack Parham: Thank you Zack. I think you know that that's obviously very very topical right now. And as we look at it, um, you're right that we will be at 8 Riggs here, kind of basically the end of the week. And as we think about when we might potentially add back, I think we should. We should really step back and think about what was the decision to ultimately change back in April and what what we looked at in April, was a macro environment. That was highly volatile and we had the ability and flexibility in our program to optimize 2025, uh, Capital efficiency by moving some things around and reducing rig activity.
Bill Lambert: What we think one of the strengths of our portfolio is, is we believe that we can defer making that decision until later this year or the beginning of next year, and still be able to drive relative growth in 2026, versus what we believe the industry average growth rate will be. And I think that is that is important, because we do believe that Matador has traditionally been known as a growing oil company. And we believe maintaining that alongside the free cash flow generation is kind of the the focus of how we think about things going forward.
Zack Parham: With that with that we were we were maintaining the free cash flow margin that we think is so important and balancing that against oil production growth as we look into 2026 and I don't want to guide in detail at this point but I think as we think about the second half of this year and 2026 what we really think about is how do those 2 metrics work in Tandem and if there are opportunities to add activity and drive incremental growth, we want to make sure that we can maintain those Superior margins and have incremental free cash flow from doing it. What we think 1 of the strengths of our portfolio is is we we believe that we can defer making that decision until later this year or the beginning of next year.
Operator: Thank you.
Zack Parham: And still be able to drive relative growth in 2026, uh, versus what we believe. The industry average growth rate will be. And I think that is that is important because we do believe that matter has traditionally been known as a growing oil company and we believe maintaining that alongside the free cash flow generation is kind of the the focus of how we think about things going forward.
Operator: One moment for our next question.
John Freeman: Our next question comes from the line of John Freeman from Raymond James. Your line is now Thanks. Good morning.
Zack Parham: Thank you. 1 moment for our next question.
John Freeman: Just sort of following up on Zach's question, if you know, hypothetically, we're in sort of a lower for longer sort of oil price environment. You know, I was going to touch on something you said earlier, in the prepared remarks, Joe, about, you know, y'all had a decision a couple years ago, whether to, you know, take the 200 million and put it towards just drilling more or putting it towards building that plant. And I'm just curious if y'all sort of just, in a hypothetical kind of lower for longer environment, if theoretically, your, you know, your growth profile just naturally kind of is a little lower in that environment, does maybe more of the, that quote, unquote, growth capital potentially get shifted into the midstream And so one of the ways that we did that was traditionally investing in that midstream to drive the flow assurance to recognize that we could, you know, we could sell our oil and capture that free cash flow margin.
Speaker Change: Our next question comes from the line of John Freeman from Raymond James. Your line is now open.
Speaker Change: Thanks, good morning. Uh, just sort of following up on, uh, on Zach's question. If, you know, hypothetically, we're in sort of a, a lower for longer sort of oil price environment. Um, you know, I was going to touch on on something. You said earlier uh in the prepared remarks, Joe about, you know, y'all had a decision a couple years ago whether to, you know, take the 200 million and put it towards this drilling more or or putting it towards building that that plant. And I'm just curious if you all sort of just in a hypothetical kind of lower for longer environment if theoretically, you're you know, your growth profile. Just naturally kind of is a little lower in that environment does. Maybe more of the that quote unquote growth Capital potentially get shifted into the Midstream business.
Speaker Change: So so I think John to to your point, you know, we had, we had the decision on investing in the Midstream and I think really what it goes to is. We believe our integrated business can drive best-in-class, free cash flow margin and and so I think you know, predicting commodity price has been a challenge for everyone. Frankly. And so whether it is lower for longer or volatile, um, I think what we try to look at is, how do we deliver best-in-class, free, cash flow margin.
Joe Foran: If we if we had not had the flow assurance that San Mateo provides us, and the excellent service that they have, the reality is, we wouldn't have had the oil production to have driven the free cash flow that we have today. And so we look to think about these things in tandem on a go forward basis. And, you know, to the extent commodity price follows the forward curve and the steep backwardation that is within it, we'll obviously adjust and manage activity levels on both the upstream and the midstream with that. I think one of the things that we look at, though, is we believe our relative free cash flow margin to the industry alongside the depth of our inventory means that not only can we deliver the exemplary free cash flow margin today, we believe we have duration because of our portfolio to do that.
Speaker Change: Ways that we did that was traditionally investing in that Midstream to drive the flow Assurance to recognize that we could you know we could sell our oil and capture that free cash flow margin. If we if we had not had the flow assurance that Sam Mateo provides us and the excellent service that they have. The reality is we wouldn't have had the oil production to have driven the free cash flow that we have today. And so we look to think about these things in tandem on a go forward basis.
Speaker Change: And you know, to the extent commodity price follows the forward curve and the Steep. Backwardation that is within it, will will obviously adjust and manage activity levels on both the upstream and the Midstream with that.
Joe Foran: And the midstream and the integrated nature of it helps sustain that over a longer period of time.
Gregg Krug: This is Gregg Krug. I also wanted to emphasize the fact that we do have, I mean, San Mateo has a 99% run rate, and that's huge in the midstream business. And that's the assurance that we get as a producer is that we're going to have an outlet for our gas and oil and water takeaway on a regular basis and something that runs really efficient. So that's another reason we elected to do a Thank you.
Speaker Change: I think 1 of the things that we look at though, is we believe our relative free, cash flow margin to the industry. Alongside the depth of our inventory means that not only can we deliver the, the exemplary free cash flow margin today. We believe we have duration because of our portfolio to do that and the and the Midstream and the integrated nature of. It helps helps sustain that over a longer period of time. I'm, I'm this, this is Greg Craig. I also wanted to emphasize the fact that we do have, I mean, Samuel has a 99% run rate and that's that's huge in the, uh, Midstream business and
Speaker Change: Uh, that's the assurance that we get as a mid as a, uh, producer is that we, we're going to have an outlet for our, our gas, and oil and and water take away, uh, on a regular basis and something that that runs really efficient. So, uh, that's another reason, we, we elected to do what we did.
Operator: One moment for our next question.
Thank you. 1 moment for our next question.
Noah Hungness: Our next question comes from the line of Noah Hungness from Bank of America. Your line is now open. Morning, Joe and Matador team. I wanted to touch on DNC costs. This quarter you guys had DNC per foot costs well below the low end of your guidance range.
Noah Hungness: Our next question comes from the line of Noah. Hungness from Bank of America. Your line is now open.
Noah Hungness: I was just wondering what drove that and then how sticky are So thank you, Noah.
Morning, Joe. And it's not a door team. Uh, I wanted to touch on DNC cost. This quarter. You guys had uh, DNC per foot cost. Well, below the low end of your guidance range, I was just wondering what drove that. And then how how sticky are those drivers?
Bill Lambert: And I'll start and then Chris will probably jump in. I think one of the benefits of our portfolio is, you know, from east to west across the basin, we have varying depths and varying cost profiles within our portfolio is how we think about it. And one of the things that took place in this quarter is we had exemplary performance in a lower cost area of the basin, more to the westward side. I think the reality, and Chris will jump in here, is as we, as we look to the second half of the year, we have not incorporated Significant Service Cost Reductions.
Noah Hungness: So so thank, you know, and I I'll start and then Chris will probably jump in. I think 1 of the benefits of our portfolio is, you know, from east to west, across the Basin. We have varying depths and varying cost profiles within. Uh, our portfolio is how we think about it, and 1 of the things that took place in this quarter is we had exemplary performance in a lower uh, cost area of the Basin more to the westward side. I think the reality in Crystal jump in here is as we, as we look to the second half of the year, um,
Noah Hungness: We have not Incorporated.
Bill Lambert: We have only thought about these things in terms of the cycle time efficiency at this point.
Chris Calvert: I'll let Chris jump in and talk a little more.
Chris Calvert: Yeah, hi, Noah, this is Chris Calvert, EVP and COO. I think it's a great question. Obviously, we appreciate you recognizing the DNC cost per phone number. I guess a few things I would like to say to that, you know, obviously, the improvement year over year, if you look at second quarter, in 2024, we're down about 11% from that. And I mean, we can refer to slide D in the presentation, if you would like to look at it graphically. But I think the majority of that improvement comes from the efficiencies like Bill just spoke to, you know, why while we do, potentially think there is potential for service costs, more competitive service costs coming in the back half of this year, kind of post-April 2nd.
Noah Hungness: Significant service cost, uh, reductions we have. We have only thought about these things. In terms of the cycle time efficiency at this point, I'll let Chris jump in and talk a little more.
Noah Hungness: Yeah. Hi. I know this is Chris coward EVP and and coo I think it's a great question. Obviously we appreciate you, recognizing, uh, the the DNC cost per phone number I guess few things I would like to say to that, you know, obviously the Improvement year-over-year. If you look at second quarter in 2024, we're down about 11% from that. And I I mean, we can refer to slide D in the presentation. If you would like to look at a graphically but I think
The majority of that Improvement comes from the efficiencies like bills, just spoke to, you know why? While we do potentially think there is potential for
Chris Calvert: These improvements have been drastically due to efficiencies, both on the drilling and completion side. We can start on the drilling side, really kind of focusing on our U-turn program. If we look at 2025 U-turns versus even when we started in 2023, I'll refresh everybody's memory. We drilled two wells in the U-turn style in 2023. On average, it took us about 25 days to drill those wells. In 2025, on average, we've shaved 10 days off of drilling two-mile U-turns in a two-year period. I think those drilling efficiencies are not just specific to the U-turn program. We're drilling wells faster on the completion side.
Speaker Change: Service costs, you know, more competitive service, cross coming in the back half of this year kind of post April 2nd. Um these improvements have been drastically due to, to efficiencies both on the drilling and completion side. And we can start on the drilling side really kind of focusing on our U-turn program. If we look at, you know, 2025 youturn versus, even when we started in 2023, I I'll refer refresh, everybody's memory. We drilled 2 wells in the U-turn style. In 2023 on, average, it took us about 25 days to drill those Wells and, and in 2025, on average, we've shaved 10 days off of drilling 2-mile u-turns in, in a 2-year period. And so, I think those drilling efficiencies are not just specific to the U-turn program. We're
Chris Calvert: In February, we guided around 40 wells would be completed using trimulfrac and the trimulfrac process. Year-to-date in 2025, we've already done 30 wells with trimulfrac, and now we expect that full-year 2025 number to be closer to 50. To refresh everyone on that, it's about a $350,000 cost savings every time you can trimulfrac versus zipper operations. With that, you're also seeing efficiencies of about 20 or 30 percent faster, even versus just the trimulfrac process. I think you have drilling efficiencies, completion efficiencies are speeding up that all kind of lead to this collective 10 to 15 percent improvement.
Noah Hungness: Ing Wells faster on the completion side.
Chris Calvert: From January 1st of this year, we're drilling and completing wells about 10 to 15 percent faster than we were six months ago. I think that leads to this improved D&C cost per foot number. Like Bill said, if we see that oil field services come in and there is some sort of deflationary pressure or more competitive pricing, that has not been included in our forward-looking back half of 2025 estimates.
Joe Foran: And something I'd like to commend Chris has done very well with is we've, in the 40 years that I've run Matador, going back to the very inception, we've always taken the approach When these times are that we don't pit one vendor against the other vendor and just try to That has worked better for creating a long-term reduction and finding of efficiencies, because you're not trying to beat them down, but you're working together, and they have ideas how to do things faster and better, and we have them. And by working together, You know, for example, our driller, either they or their predecessors have drilled virtually every well that I've drilled in this 40-year career.
Noah Hungness: Process. And so I think you have drilling efficiencies completion, efficiencies of speeding up that all kind of lead to this Collective, 10 to 15% improvement from January 1st of this year. We're Drilling and completing Wells about 10 to 15% faster than we were 6 months ago. And so I think that leads to this improved DNC cost per foot number and like Bill said, if we see that oil field services, come in and and there is some sort of deflationary pressure or more competitive pricing that has not been included in our forward-looking back half of 2025 estimates.
Speaker Change: 10 and some, I'd like to commend Chris has done very well with is we in the 40 years that I've run Matador, going back to very Inception, we've always taken the approach.
Speaker Change: uh, when these times are that, we don't pit 1 vendor against the other vendor, and just try to
Uh, see which 1 will get down to the very lowest price. We've tried to build relationships and we have found for whatever reason.
Speaker Change: That has worked better for the, uh, creating a long-term, uh, reduction or and finding of efficiencies because you're not trying to beat them down, but you're working together and they have ideas how to do things faster and better. We have them and by working together, uh,
Chris Calvert: And they're finding ways to improve, and we are, and it's been a great collaboration. And the same thing on the pipe business, we're using the same guy for And Chris and his team and Cliff Humphreys have done just a great job of building those relationships and the communication between them that has led to a lot of these efficiencies. And the crews, they, you know, that Chris and our drilling engineers have done a good job of training the crews to look for those little ways to make things more efficient and bring down the cost.
Speaker Change: You know, for example our driller either, they or their predecessors have drilled virtually every well that I've drilled in this 40 year career and they're finding ways to improve and we are. And uh, it's been a great collaboration and the same thing on the pipe business, we're using the same guy for
Speaker Change: Uh, years and years. And and then virtually all of our completion, our tracking has been done, either by Slumber, J or Haller. And in there after each job, we do a postmortem
Joe Foran: Chris, I'm sorry for jumping in on you like that, but I just couldn't resist to brag on y'all a little bit on how you've done it without beating people down, but getting them to suggest ways, too, and for y'all to find ways.
Chris Calvert: Yeah, thank you, Joe. I appreciate you pointing that out.
Chris Calvert: And one thing I would also just, you know, want to point to is I think back to even Zach's question about activity levels as we look into the back half of the year. You know, we understand the headwinds of volatile commodity times, but we also see opportunities. And one of those opportunities is high-grading operational equipment, whether that's rigs, frack fleets, and so like Joe had mentioned, you know, our primary pressure pumping providers, which is Haliburton next year, you know, we've managed to high-grade a lot of equipment service personnel to where we are able to implement and integrate those simul and trimul frack opportunities.
Speaker Change: on whatever area and say, how can we improve? How can we give you better? Notice? How can we create the efficiencies and Chris and his team and Cliff Humphrey's have done just a a a great job of building those relationships and the communication between them that has led to a lot of these efficiencies and the crews. Uh they uh you know that that Chris and our drilling Engineers have done a good job of training, the crews to look for those little ways uh to make things more efficient and bring down the cost. Chris, I'm sorry for jumping in on the like that, but I just couldn't resist to brag on y'all a little bit on how you've done it without without beating people down, but getting them to suggest ways uh, 2 and for y'all to find ways. Yeah, thank you.
Operator: And so, like Joe said, it is all about relationships and something that Joe has cultivated over 40 years that we continue to push forward today.
Chris Coward: Your heart, I appreciate you pointing that out. And 1 thing, I would also just, you know, want to point to is, is I think back to even Zach's question about activity levels that we looked at, as we look into the back half of the year, you know, we understand the headwinds of volatile commodity times, but we also see opportunities, and 1 of those opportunities is high-grading operational, whether that's rigs, uh, for athletes. And so, like, Joe had mentioned, you know, our primary pressure pumping providers, which is however, next year, you know, we, we've managed to high-grade a lot of equipment service Personnel, to where we are able to, to implement and integrate those simal and trimal Frac opportunities. And so like Joe said it it is all about relationships and something that that Joe's cultivated over 40 years that we continue to push forward today.
Operator: Thank you.
Philip Jungwirth: One moment for our next question. Our next question comes from the line of Philip Jungwirth from BMO, your line is now open. Thanks. Good morning.
Thank you. 1 moment for our next question.
Speaker Change: Our next question comes from the line of Philip Jeong worth from BMO. Your line is now open.
Philip Jungwirth: Recognizing that an IPO is just one of the options you could look at to unlock midstream value. But as you think about San Mateo from a public investor standpoint, how important do you think it is that you have a competitive organic growth profile for Matador or visibility around third party volumes enough? And if it is important, do you think of that as more of an absolute type, low, mid, high single digits type number? Or is it more relative to overall permeate basin level? Thanks, Phil.
Thanks, good morning.
Speaker Change: Uh, recognizing that an IPO is just 1 of the options. You could look at
Speaker Change: to unlock Midstream value, but
Speaker Change: Uh, as you think about San Mateo from a public investor standpoint, how important do you think it is that you have a competitive organic growth profile for Matador, uh, or is visibility around third-party volumes enough, uh, and and if and if it is important, um, do you think of that as more of an absolute type?
Bill Lambert: I think that I think the To start that off, I think Matador thinks of itself as a relative grower in the basin, and I think, you know, obviously that growth rate is balanced with the free cash flow margin, as we've discussed previously, but I think our portfolio and the depth of our inventory life allows us to grow and sustain that growth with the type of returns we want to have over a long period of time, and I think within that, it does, the partnership that we have with San Mateo, the integrated nature of that business is key to Matador delivering on that, and is key for San Mateo from a growth profile, so I'll let Brian talk more about kind of how we think about Matador growth versus third-party growth, but I think first and foremost, you know, the nature of how this business has come into play has really been around driving a superior result for Matador's free cash flow.
Speaker Change: Low mid High single digits type number. Uh, or is it more relative to overall perming Basin levels.
Brian Willey: Thank you. I think that when we look at growth at San Mateo, we see opportunities both at Matador and with third parties, as Joe mentioned earlier, we have a lot of repeat customers on the third party side, in addition to new customers that we continue to look at and pursue. So especially up in that northern Lee County area, where the Marlin plant just came on, we think there's some really good opportunities there. As Joe mentioned earlier, the Marlin plants about half full right now. https://www.matadorresources.com And I'd like to emphasize is that we got into this with the whole idea that, yes, we might be, Matador might be the major customer, but to succeed and meet the test of quality, we needed to be sure to attract third-party business, and we have really tried very hard to be sure they, that the runtime of 99 percent, they enjoy that benefit and all the other benefits.
Speaker Change: With, with the type of returns, we want to have over a long period of time and I think within that, it, it does the partnership that we have with San Mateo. The integrated nature of that business is is key to Matador, delivering on that and is key for San Mateo, from a growth profile. So, I'll let Brian talk more about kind of how we think about Matador, growth versus third-party growth. But I think, first and foremost, you know, the, the nature of how this business is coming into play, has really been around driving a, a superior result for for matadors free cash flow. Thank you Bill.
Speaker Change: Yeah, I think that when we look at growth of samata, we see opportunities both at Matador and with their parties. This is Joe mentioned earlier. We have a lot of repeat customers on the third-party side and addition to new customers, that we continue to look at and pursue so especially up in that Northern Lee County area. Uh, where the Marlon plant just came on, we think there's some really good opportunities there. As Joe mentioned earlier, the Marlon plants about half full right now. I think it's about fully committed on the reserve capacity side and I'll take a couple of years to fully fill up, but it is fully committed. And so, you know, those opportunities for growth present themselves on both matador's side and being able to continue to follow Matador and the drill bit. And then with third parties, we have just a great team and a BD team that's doing a fantastic job. So we see growth on both sides.
Joe Foran: The same is Matador, and I think that's why it's led to repeat business, is they did feel they were fairly treated and communicated and liked the operations, and so, so far, that's been without problems, and we appreciate their involvement, and we appreciate the guys in the field who have really done the extra job to reach that 99 percent. So, when you had High Storm Uri go through, they didn't shut it all in and say, we'll get back next week when it warms up. They slept in their trucks and kept the plants going. And in addition, we've improved the system by adding that connector line between the Black River system and the Marlin system.
Speaker Change: And I'd like to emphasize is that uh, we got into this with the whole idea that yes, we might be Matador, might be the major customer but to secede, uh, and meet the test of quality we needed to be sure to attract third-party business, and we have really tried very hard to be sure they, uh, that the runtime and 99%, they enjoy that benefit and all the other benefits, uh, the same as Matador. And, uh, and I think that's why it's led to repeat business, is they did feel, they were fairly treated and communicated and like the operations and so, so far that's been without problems, and we appreciate their involvement. And we appreciate the guys in the field who have really done the extra job to reach at 999%. So when you had high storm Yuri go through, they didn't show
Speaker Change: that at all in and say, we'll get back next week when it warms up, they slept in their trucks and kept the plants going.
Joe Foran: So we've had gas going in each direction on that connector line as the offloads are needed. So proud of that, proud of that record and proud of the support that we've had. And I think that's given us additional opportunities of what we should do for the midstream business and which drives the value of the midstream business.
Speaker Change: And, uh, in addition we've improved the system by adding that connector line between the Black River system and the Marlon system. So we've had gas going in each Direction on that connector line is the offloads are needed. So, uh, proud of that proud of that record, and proud of the support that we've had.
Speaker Change: and I think that's given us additional opportunities and what we should
Joe Foran: So there's some good options that we have ahead of us and so we're very glad we elected to build the plant, to take that $200 million, build the plant. which left us with enough money to pay down debt and not just put it in additional drilling. I mean, that just adds to the inventory and while we feel we're well-positioned to either keep building the midstream and the regular oil and gas operations. and to them in tandem. to do that together and didn't do one to the exclusion of the other. We think that gives us more balance and more stability and gives a big upside to the stock.
Do for uh, the Midstream business and which drives the value of the Midstream business. So there are some good options that we have ahead of us. And uh, so we're very glad we elected to build the plant to take that 200 million, build the plant.
Speaker Change: Uh, which left us with enough money to pay down debt.
And, uh, not just put it in additional drilling. I mean, that just adds to the inventory and, uh, and while we feel we're well positioned, uh, be either keep building. Uh, the Midstream and the uh, regular oil and gas operations.
Speaker Change: uh,
Speaker Change: and uh, to them in tandem,
Operator: Thank you.
Speaker Change: To do that together and didn't do 1 to the exclusion of the other. We make, we think that gives us more balanced and more stability and gives a big upside to the stock.
Kevin McCurdy: One moment for our next question.
Kevin McCurdy: Our next question comes from the line of Kevin Mccurdy from Pickering Energy Partners.
Speaker Change: Thank you. 1 moment for our next question.
Rob Macalik: Your line is now Hey, good morning, Matador team. I appreciate the details in the cash tax reductions this year and the change to guidance. Any thoughts on when Matador might now become subject to the AMT and how cash taxes will trend on a yearly basis until then? This seems like maybe an underappreciated improvement to your free cash flow outlook. Thank you. Thanks, Kevin.
Speaker Change: Our next question comes from the line of Kevin mccurdie from Pickering Energy Partners your line is now open.
Rob Macalik: Yes, this is Rob Macalik. I'm the As we did note in our release, we're very We're very optimistic on the cash tax savings. We do believe that this pushes out our You know, we're still analyzing. I do think that that that's going to benefit for us. 2025.
Kevin McCurdie: Hey, good morning, manner or team, um, appreciate the details in the cash tax reductions this year and the change to guidance. Any thoughts on when matter or might now become say object to the, uh, AMT. And how cash taxes will trend on a yearly basis until then, um, this seems like a, maybe, an underappreciated Improvement to your free cash flow Outlook. Thank you.
Joe Foran: and also to show our seriousness of In these areas is that Rob is is moving over to do more strategy and chief financial work for the midstream and Ben Kolodny is taking over the Chief Accounting Officer, and he's come in and done an excellent job, and he and Rob have really worked together, which is important. So, Ben, thank you for joining us. doing good work. Thank you.
Speaker Change: Things that that will bring us. Uh, we do believe that this pushes out our, uh, obligations under the Alternative Minimum Tax, you know, for several years, um, based upon our current rates, but, you know, we're still analyzing uh, that part. So, I do think that that is, is going to be a benefit for us, starting in Q3 of 2025 and and, uh, and Beyond
and and also to show our seriousness of
Speaker Change: uh in these areas is that Rob is is moving over to do more strategy and Chief Financial work for the midstream
Speaker Change: and uh,
Speaker Change: uh,
Speaker Change: been collabed me is taking over the chief accounting officer and uh, he's coming in and does an excellent job and he and Rob have really worked together, which is important. So Ben thank you for joining us and
Speaker Change: doing good work.
Operator: One moment for next question.
Oliver Huang: Our next question comes from the line of Oliver Huang from Tudor Pickering Holt and Company. Your line is now open. Good morning all and thanks for taking my question.
Speaker Change: Thank you. 1 moment for our next question.
Speaker Change: Our next question comes from the line of Oliver Huang from Tudor Pickering, Holt and Company. Your line is now open.
Oliver Huang: Just wanted to circle back on activity, understand the timing of the drop down to eight rigs as part of the full year plan here shortly. But the year's upstream trend trajectory would seem to apply another leg down in Q4. So I was hoping that you all might be able to walk through the cadence of frack activity anticipated for the rest of the year and any flow through effects we should be aware of when thinking about the start of 2020. Yeah, I think, Oliver, to your to your point, we do see with the current level of activity that to be generally the case, and I think it's a function of, you know, frankly, a lot of good work by the team to pull activity because of the efficiencies that we've mentioned before, into the third quarter.
Oliver Huang: Good morning all and thanks for taking my question.
Oliver Huang: Just wanted to Circle back on activity. Understand the timing of the drop down to 8 rigs as part of the full year plan here, shortly. But the years upstream's been trajectory would seem to imply another like down in Q4. So I was hoping that you all might be able to walk through the Cadence of Frac activity. Anticipated for the rest of the year and any flow through effects, we should be aware of when thinking about the start of 2026,
Bill Lambert: And so you're seeing a little bit of higher third quarter capital with wells that are being turned on in frankly, the last couple of weeks of the third quarter. So they're really not contributing to third quarter production as much as they are in the fourth. It's very similar to what we saw in the first and second quarter of this year. And and with that, I think that is that is an important thing for our investors and for you all as analysts to understand about the go forward nature of the matador business is because the Delaware has such prolific rock and multi zone development is is an important piece of how to develop that rock, there will be some larger batch sizes.
Bill Lambert: And those larger batch sizes will naturally have some lumpiness to production as they come on, because when they come on, they're really, really prolific. But, but even with the efficiencies that we are capturing across drilling and completions, there's longer cycle time to to having some of the bigger programs than than there has been when it was kind of individual or paired development. Thank you. One moment for our next question.
Oliver Huang: Yeah, I think Oliver to your to your point. We do see with the current level of activity that to be generally the case and I think it's a function of, you know, frankly a lot of good work by the team to pull activity because of the efficiencies that we've mentioned before into the third quarter. And so you're seeing a little bit of higher third quarter Capital with Wells, that are being turned on. And frankly, the last couple of weeks of the third quarter. So they're really not contributing to third quarter production as much as they are in the fourth. It's very similar to what we saw in the first and second quarter of this year. And and with that, I think that is that is an important thing for our investors. And for you all as analysts to understand about the go forward nature of the Matador business is because the Delaware has such prolific Rock. And multi-zone development is is an important piece of how to develop that rock. There will be some larger batch sizes and those large
Oliver Huang: Larger, bat sizes will naturally have some lumpiness to production as they come on, because when they come on, they're really, really prolific. But, but even with the efficiencies that we are capturing across Drilling and completions, they're they're longer cycle time to to having some of the bigger programs, than, than there has been. When it was kind of individual or paired developments,
Leo Mariani: Our next question comes from the line of Leo Mariani from Roth, your line is now open. Hi, I was hoping you guys could talk a little bit, kind of uses of free cash flow here. Obviously, you guys referred to the brick by brick, you know, program here in terms of M&A. So I was hoping you could kind of comment a bit on what you're seeing in the M&A environment. And then obviously, here in second quarter, you guys bought back a decent number of shares, I guess, for the first time in the company's history, you know, roughly 1%.
Speaker Change: Thank you. 1 moment for our next question.
Our next question comes from the line of Leo Mariani from raw. Your line is now open.
Bill Lambert: So could you maybe kind of talk, you know, to both of those and how you, you know, sort of balance that initiative? And is the buyback going to be, you know, fairly price sensitive here? Thank you, Leo.
Brian Erman: I think, first off, just to kind of level set how we think about it, so we think about free cash flow post the dividend because we view the dividend as sacrosanct. And so, you know, with that, after you pay the dividend, the remaining free cash flow in any quarter, we think about is how are we going to drive the best value for shareholders over the long term? And with that, we kind of see a couple of different buckets. There's really three that we think about, the first of which is the brick by brick land acquisition, you know, to kind of reinvest and replenish our inventory life, which we think is very important and runs continuously.
Hi. I was hoping um, you guys could uh, talk a little bit to to kind of uses of free cash flow here. Um, obviously you guys refer to the Brick by Brick, uh, you know, program here in terms of of m&a. So, I was hoping you could kind of comment a bit on what you're seeing in the m&a environment. And then obviously here and second quarter. Uh, you guys bought back a decent number of shares, I guess, for the first time, uh, and the company's history, you know, roughly 1%. So could you maybe kind of talked, uh, you know, to both of those and and how you, you know, sort of balance that initiative and, and is the buyback going to be, you know, fairly price sensitive here.
Bill Lambert: It's a strength of the Matador team. The second is As you noted, the share repurchase program that we have a $400 million authorization on, and we're active in the second quarter in our first quarter of having it. And then the final is balance sheet management and paying down debt. And I think really, you know, a lot of people have asked us about is there going to be a formula? Or is there a specific way to think about how we do that in the future? And as we look at it, we think about, you know, the value that can happen.
Speaker Change: Sure. Thank you, Leo. I think, I think, first off, just to kind of level set how we think about it. So we think about free cash flow posts the dividend because we view the dividend as sakra. And so, you know, with that, after after you pay the dividend, the the remaining free cash flow in any quarter. We think about is, how are we going to drive the best value for shareholders, over the long term? And with that we kind of see a couple of different buckets. There's there's really 3 that that we think about the the first of which is the Brick by Brick land. Acquisition. You know, to kind of reinvest and replenish our inventory life, which we think is very important and runs continuously. It's a strength of the Matador team. The second is,
Bill Lambert: And frankly, the the way that the brick by brick works, we want to make sure that when we have those opportunities, we can capitalize on them. Similarly, we can't predict the macro economic volatility, but when it happens, we want to use the share repurchase program to capture that. And, and within all of this, we always want to be mindful of kind of leverage and driving total debt down over time. as well.
Brian Erman: So I think that's, that's really how we think about it.
Brian Erman: I'll let Brian Ehrman jump in on on more of the A&E specific Thanks, Bill. Yeah, this is Brian Erman, co president, chief legal officer and head of M&A. And I think it just to reemphasize what what Bill said, we really do view the brick by brick approach as a strength of the company. That's something we've, we've always done. It's something we've always had a lot of success at. And I think as the market, you know, currently is a little more focused on that versus the bigger deals. We view that as a competitive advantage for Matador.
Speaker Change: Balance sheet management and paying down debt. And I think, really, you know, a lot of people have asked us about, is there going to be a formula? Or is there a specific, uh, way to, to think about how, how we do that in the future? And, and as we look at it, we think about, um, you know, the the value that can happen. And, and frankly the the way that the Brick by Brick Works, we, we want to make sure that when we have those opportunities we can capitalize on them. Similarly, we can't predict the macroeconomic volatility, but when it happens, we want to use the share repurchase program to capture that. And and within all of this, we always want to be mindful of of kind of Leverage and driving total debt down over time as well. So I think that's that's really how we think about it. I'll let Brian man jump in on on more of the A and D specific.
Brian Erman: As far as the quarter, it was just another typical execution on the on the brick by brick approach, you know, all over the basin, you know, focused mostly in and around our existing units, but, you know, really all over the area. And again, just something that you know, we view as a real advantage to Matador.
Speaker Change: Thanks Bill. Uh, yeah, this is Brian Mann co-president, uh, Chief legal officer and head of m&a. And I think it's just to reemphasize what, what Bill said we really do view the, the Brick by Brick approach as a, a strength of the company. That's something. We've, we've always done. It's something that we've always had a lot of success at, and I think, as the market, you know, currently is, is a little more focused on that versus the the bigger deals. We view that as a, a competitive Advantage for, for Matador, as far as the quarter, it was just another typical execution on the, on the Brick by Brick approach. You know, all over the Basin. Um, you know, Focus mostly in and around our existing,
Speaker Change: Units. But you know, really all over the area and again just something that you know, we view as a a real advantage to to Matador.
Operator: Thank you, ladies and gentlemen. Now, go ahead.
Speaker Change: Thank you, ladies and gentlemen, what?
Operator: Are you ready for closing remarks? Thank you, ladies and gentlemen. This ends the Q&A portion of this morning's conference call.
Speaker Change: No, go ahead. Are you ready for closing remarks?
Joe Foran: I'd like to turn the call over to management for any closing remarks. Thank you very much and I thank you for all your questions. I thought all the questions today were very appropriate and good inquiries. I hope we've answered them. If not, call us back and we'll discuss them with you. So we invite you to do that to be sure you've gotten your questions answered.
Speaker Change: Thank you, ladies and gentlemen, this ends the Q&A portion of this morning's conference call. I'd like to turn the call over to management for any closing remarks.
Speaker Change: uh,
Joe Foran: The second thing I'd just like to note, I hope that you can see, is that Matador has now grown to a part where we have appropriate... Approximately $10-12 billion in assets, depending on oil and gas prices and the other opportunities. But we have a team here, a true team, of everybody pitching in and we collaborate and work on this together. And it's been a steady process over 40 years. I started in 1983 with $270,000 and we've enjoyed, over those 40 years, approximately a 20% year after year growth in value. So 20%, $270,000 to $10-12 billion in assets.
Speaker Change: thank you very much. And I thank you for all your questions. I've had all the questions today. We're very appropriate and good inquiries. I hope we've answered them, if not, uh, call us back and we'll discuss them with you. So we invite you to do that to be sure you've gotten your questions answered. Uh, the same thing. I just like to know, I hope that you can see is that Matador has now grown to a part where we have appropriate, uh,
Speaker Change: uh, approximately 10 to 12 billion in assets. Uh,
Speaker Change: In depending on uh oil and gas prices and the other opportunities. Uh but we have a a team here, a true team of everybody pitching in and we collaborate and uh work on this together. And it's been a steady process over 40 years, and I started in 19.
Joe Foran: And obviously, you all know me, it wasn't because of my brilliance at all, but I've somehow been able to, year after year, attract the talent to spur that growth. And we're really very excited the way everybody has been pitching in and helping ideas and getting a little better every day. We're in a more complex environment today than we have probably at any time in our past Washington is bouncing the ball around, and you're not sure where it's going to land, and we're trying to maintain maximum flexibility, but continue that growth, not only in quality of production, amount of production, but in the quality of the production, and creating the flow assurance that we can get our product out of the basin, and continue to try to upgrade our people, and bring on young people.
Speaker Change: Uh, 83 with 270,000, and we've enjoyed, uh, over those 40 years, uh, approximately a 20% year after year, uh, growth and value. So, 20% 2 270, 000 to 10 to 12 billion in assets and, uh, obviously, you all know me. It wasn't because of my Brilliance, uh, at all. But somehow I've been able to year after year, attract the talent to Spur that growth and, uh, we're really very excited. The way everybody has been pitching in and helping ideas and getting a little better every day. Uh, we're in a more complex environment today, uh, than we have probably at any time in our past where, uh,
Joe Foran: We have a big internship program, 30 people this year. and the people in the field. We think they're remarkable and how they take the initiative and keep the plants and the wells going and are very grateful for them and the banks and everything seems to be coming together that we can continue to offer consistent growth over that time. Industry leading cost and the knowledge that we've been the first movers on a lot of new formations. out there in the Delaware over the years. So, we think things look very promising to us. We're excited and the real issue is there's a lot of things up in the air, as we know, in Washington, you know, in the environment, you know, in the markets.
Speaker Change: Washington is bouncing the ball around and you're not sure where it's going to land and we're trying to maintain maximum flexibility but continue that that growth. Uh, it not only in quality of production amount of production, but in the quality of the production and creating the flow assurance that uh, we can get our product out of the Basin and and continue to try to upgrade our people and bring on young people. Um,
Speaker Change: you know, we have a big internship program, 30 people this year,
Speaker Change: that time, uh,
Speaker Change: Industry-leading, uh, cost. Uh
uh, and the
Speaker Change: And the knowledge that we've uh been the first movers on a lot of new formations.
Joe Foran: And so, we're trying to keep this balanced approach guided by the fact we don't want Production, if we're not increasing cash flow, and we don't want to be just increasing cash flow and not replacing and adding to our reserves. So very pleased with the growth and continued growth in reserves, continued growth in profitability and ideas. Andrew Parker and his group. VPs are doing a great job of coming up with more ideas all the time and refining. their studies. So that's on this call. I know you've asked questions. I hope we've answered them. But at the same time, supplied you with the notion that internally, we're very optimistic.
Speaker Change: Out there in the Delaware over the years. So, uh, we think things, uh, look very promising to us, we're excited. Uh, and, and the real issue is, there's a lot of things up in the air, as we know in in Washington, you know, in the environment, you know, in the markets uh,
and so we're trying to keep this balanced approach Guided by uh, the fact we don't want to increase
Speaker Change: Uh, production, if we're not increasing cash flow and we don't want to be uh, just increasing cash flow and not replacing and adding to our reserves. So very pleased with the growth and continued growth in reserves. Uh, continued growth in profitability and ideas, uh, Andrew Parker and his group, uh,
Joe Foran: And you probably saw that in the last open period, where our leadership, we had more insider buying than any other company. And significantly, to me anyway, of having run this company for 40 years, the, we have a shareholders, we have an employee share purchase plan, and we have over 95% participation. So tremendous support from the people on staff to take advantage of it and can see the, can see the growth. So we like our chances.
Speaker Change: VPS are doing a great job of coming up with more ideas, all the time and refining, uh, their studies. So, that's on this call. I know you've asked questions. I hope we've answered them, but at the same time, supplies you with the notion that internally, uh, we're
Speaker Change: Very optimistic. And you probably saw that in the last open Period, where, uh, our
Speaker Change: leadership.
Speaker Change: Uh, we had more Insider buying than any other company.
Joe Foran: The organizations come together, the finances are there, plenty of dry powder, some great technical work, and having worked all over the basin, we have, as Tom was primed to give you a rundown, in all these different areas, we had good ideas and good plans, so And want to once again, someone mentioned this, truly.
Speaker Change: And significantly to me. Anyway uh of having run this company from 40 years, the we have a shareholders uh we have an employee share purchase plan and we have over 95% participation so tremendous support from the people on staff to take advantage of it and can see the uh can see the growth. So we like our chances, the organizations come together, the finances are there
Speaker Change: Plenty of dry powder.
Speaker Change: Uh, some great technical work and um and having worked all over the Basin. Uh, we have is Tom, uh, Tom was primed to give you a rundown that and all these different areas. Uh, we had good ideas and good plans, so,
uh,
Joe Foran: Want to invite all of y'all at one time or another, come visit with us, get to know us a little bit better, have lunch or breakfast with us, meet our young people, and we'll do our best to answer all of your questions. trust and confidence.
uh, and want to once again, someone mentioned this uh truly
Joe Foran: So with that, I'm going to sign off but really offer the sincere invitation to come and see us and Take us up on that and let's continue to y'all do your job and we'll try to do ours.
Speaker Change: Want to invite all of y'all at 1 time or another. Come visit with us, get to know us a little bit better have lunch or breakfast with us. Meet our young people and um and we'll be uh, we'll do our best to answer all of your questions and um, and just try to get to know each other better, and I think you'll see that this is what's great about the oil and gas. It's a win-win, uh, business. And we're, we're here to win it for our shareholders, but we're also here to win it for you and others and, uh, gain your
Speaker Change: Trust and confidence. So with that, I'm gonna sign off but really
Speaker Change: uh, offer the sincere invitation to come and see us and uh,
Speaker Change: Uh, take us up on that and let.
Continue to uh y'all do your job? And we'll try to do ours.
Operator: Ladies and gentlemen, thank you for your participation today.
Gigi: Back to you, Gigi.
Operator: This concludes today's program. Thanks for watching!
Ladies and gentlemen, thank you for your participation today. This concludes today's program.