Matador Resources Company

Good morning, ladies and gentlemen. Welcome to the first quarter 2020 Matador Resources Company earnings conference call. My name is Danielle, and I will be serving as the operator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session at the end of the company's remarks. As a reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website through May 31, 2020. As discussed in the company's earnings press release issued yesterday. I will now turn the call over to Mr. Mac Schmitz, Capital Markets Coordinator for Matador. Mr. Schmitz, you may proceed.

Thank you, Danielle, and good morning, everyone, and thank you for joining us for Matador's first quarter 2020 earnings conference call. Some of the presenters today will reference certain non-GAAP financial measures regularly used by Matador Resources in measuring the company's financial performance. Reconciliations of such non-GAAP financial measures with the company's comparable financial measures calculated in accordance with GAAP are contained at the end of the company's earnings press release. As a reminder, certain statements included in this 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 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 quarterly report on Form 10-Q. Finally, 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 first quarter 2020 earnings release under the Investor Relations tab on our website. I would now like to turn the call over to Mr. Joe Foran, our Chairman and CEO.

Joe? Thank you, Mac, and good morning to everyone out there, and thank you for participating in today's call. We appreciate your time and interest in Matador very much. Today we're trying something new in this quarterly release. On both our website and on the webcast plan for today's earnings conference call is a set of five slides identified as chairman's remarks, slides A through E, to add some color and detail. Please let me know if this additional information works out to be helpful to you. If you'll begin by looking at slide A, you'll see that the first quarter of 2020 was another good quarter for Matador and a beat across the board. The board of directors and I would like to commend once again the Matador team for their focused and professional response to the dual crises of the novel coronavirus and the abrupt decline in oil prices. Since early March, we have worked together to verify ways that Matador can reduce capital spending and operating expenses while increasing revenues and cash flows to weather these challenging times. The officers of Matador are in here with me and they're available for your questions to and that we all spent a lot of time up here together in the last six weeks. At a meeting of the MADDOR's board on March 10, 2020, I volunteered to take a 25% pay cut. The board joined me in taking a 25% pay cut too. MADDOR's president and the executive vice presidents all then took a 20% pay cut. The other vice presidents took a 10% pay cut and the rest of the staff took a 5% pay cut. According to one prominent energy industry compensation study, Mabdor was the very first company, oil company, to announce any such cuts. Among the other first steps we took were to hedge 90% of our anticipated 2020 Foran, Van Singleton, Throughout the first quarter, the operations group led the way to our goal of achieving lower than expected capital spending and operating expenses. Our capital expenditures for drilling, completing, and equipping wells this past quarter was $25 million less than our original estimates for the first quarter of 2020, and we estimate that $15 million of these savings were attributable to improved operational efficiencies and lower than expected drilling and completion costs. Drilling and completion costs for all operated horizontal wells completed and turned to sales averaged just over 1,000 per completed lateral foot, a decrease of 13% from average drilling and completion costs of 1,165 per lateral foot achieved in 2019. We expect drilling and completion costs per lateral foot to continue to decline throughout 2020, reflecting improved operational efficiencies, reduced service costs, and the impact of drilling longer laterals, with most being two-mile laterals. These results bring us to slide C, which indicates by the fourth quarter of 2020, Matador could be approaching cash flow neutrality. And that's down there in the lower right-hand corner. You can see that we're steadily bringing those costs down, and we think the outlook is positive there. At the end of this quarter, we achieved the first of four important production milestones we set for Matador in 2020. Matador had previously predicted in early 2020 we would incur a significant surge in production when the first six Rodney Robinson wells in the western portion of Antelope Ridge asset area were turned to sales. As recently reported in a separate press release, Robinson wells achieved record 24-hour initial potential test results for Matador from all three different formations tested, collectively testing at rates of approximately 15,000 barrels of oil per day and 25 million cubic feet of natural gas per day. The other three production milestones should occur when the five ray wells in the Rustler Brace Asset area and the five Leatherneck wells in the Greater Stebbins area are turned to cells during the summer and when the 13 boris wells in the state line asset area are turned to sales beginning in September and October. These are objective measures of our progress. These boris wells are likely to be even better than the Rodney Robinson wells and there will be twice as many of them. Collectively, these four groups of wells make up Almost 60% of our expected completions in 2020 and should account for more than 60% of our incremental production this year. As we move forward in 2020, our priorities are to protect our balance sheet and our liquidity and to strengthen our exploration and production and midstream businesses. We will do whatever is required to protect our balance sheet and preserve the necessary liquidity to meet our goals. Many of you have wondered about our bank relationships. If you will look at slide D, you'll see that we had approximately $340 million of our elected commitment available at the end of the first quarter and another $200 million available under the total borrowing base of our reserves-based loans. We wish to express here our sincere appreciation for the support and encouragement we have always received from our bank group and especially this year. These are obviously challenging times for all of us, but challenging times can bring about unexpected opportunities and we will remain open to all such possibilities as we navigate the remainder of 2020 and position ourselves For 2021 and beyond, we consider MADDOR's current stock price to be a good buying opportunity. MADDOR's assets include two successful businesses, one in exploration and production and one in midstream, as well as 152 million barrels of oil and 646 BCF-approved oil and natural gas reserves, respectively. and 128,000 net acres in the Delaware Basin, with 117 million shares outstanding. Slide E shows the steady growth in our approved reserves and the amount of reserves each individual shareholder proportionally owns. The Board, the staff and I remain confident that the outlook for Matador is very positive When you combine these assets with Matador's financial position, proven management team, and operating staff. As I mentioned, our staff, the officers are here, I'm here, and we would be happy to take your questions at this point.