Matador Resources Company

Good morning, ladies and gentlemen, and welcome to the third quarter 2020 Matador Resources Company earnings conference call. My name is Sarah, and I'll be serving as the operator for today. At this time, all participant lines are in a listen-only mode. We will facilitate a question-and-answer session at the end of the company's remarks. As a reminder, this conference call is being recorded for replay purposes. and the replay will be available on the company's website through November 30, 2020, as discussed in the company's earnings press release issued yesterday. I would now turn the call over to Mr. Mac Schmitz, Capital Markets Coordinator for Matador. Mr. Schmitz, you may proceed.

Thank you, Sarah, and good morning, everyone, and thank you for joining us for Matador's third 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 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. Thank you for joining us. With that, 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, and thank you for participating in today's call. We appreciate your time and interest in Matador very much. Similar to last quarter, we have the five slides, as Mac mentioned, and we want you to know that we'll stay and answer any questions you have for as long as you all want to talk. I have prepared remarks as part of the earnings release. In the interest of time, to give more time for questions and discussion, I'm going to skip over that and go directly to the slides. The slides are aimed at not just reporting on the quarter, but to give you a feel how well we've done with our goals and metrics for the year. On there, if you look at that slide, in particular you may remember at the very first of the year we said that we had a series of wells to do that we were going to drill the six Rodney Robinson wells in January and February and bring them online and then in April and May that we would have the Ray wells and then June and July we'd have the Leatherneck wells and then in September we'd We would have both the San Mateo expansion online and operating and drill the first 13 wells in the Boris area at state line. We've accomplished all of those projects on time, on budget, and in the drilling case, better than under budget. So that happened, as we said. We also resolved to improve the balance sheet, which we had. We went down from six rigs to three rigs and took other steps, reducing capital costs, G&A, and LOE. And you may remember that Matador was the very first company to take salary cuts. And I took a 25% pay cut. The board, when I told them what I was doing, voluntarily took 25% pay cuts, too. And we went all down the line. The executive vice presidents took 20%, regular vice presidents took 10%, and each of the staff took 5%. We also rotated young engineers out into the field to take the place of a lot of contract people, which led to capital cost savings and G&A savings. And And then this is the year we were really going to stress. In 2018, we drilled 1% longer laterals. In 2019, it was 29%. And this year, it's in the high 80%. And that was a very important step for us to move from one-mile laterals to two-mile laterals because in doing so, you really improve your capital efficiency as shown. So to step up into what we... Foran, Van Singleton, Bryan Erman, George Gregg Krug, We're anticipating stronger quarters by quarter and that's worked out as well. Our marketing group has worked hard to get the best possible prices and we've done a number of non-core asset divestitures on more or less a brick by brick. We have not One of our options was monetizing mineral interest or even part of San Mateo. Fortunately, our performance was strong enough in other areas that we didn't need to turn to those options to improve the balance sheet. We're on our way. The balance sheet will get better. We're delighted that the banks have approved, reaffirmed, Our bank line of credit and we thank RBC and Comerica and the other lead banks in the group for their support and it means a lot to us and we really value that relationship. Then as we mentioned the San Mateo got its pipeline and its right of way and its all the various equipment done on time and under budget. It's operational and we really appreciate the extra work that our field people did on that and on production this year and really put in the extra time to make it all come together, a very complex project. And down in the lower corner of slide A, you see the capital efficiency, the better drilling and completion costs, which are Not quite, but almost half of what they were a year ago. On slide B, it just shows that our guidance for our debt picture will be better than we had originally projected, and we'll continue to work on that in 2021 as one of our very important for the most important projects. Slide C just reflects the drilling accomplishments that we appreciate Billy and Chris and Glenn and Cliff for getting that done. That's been a major achievement and really improves the well economics. Many people ask why you still keep three rigs running. Why not reduce to two or one or none? And at these prices, Over the years, I've been out here 40 years, and the wells you drill when oil is down will be the most profitable wells that you will have because when you earn an extra dollar of revenue, the royalty owner takes a big chunk of it, the state takes a big chunk, and you're left with 55% or 65%, something like that. But when you lower a cost, that whole dollar can go to your bottom line. And we want to express appreciation for our operations group. You may hear more about this if you ask the question, but working with the relationships that we have with Patterson, with Halliburton, or with Slumber J, or Patterson International, their frat group, We really don't try, our approach is not to try to beat them down so much on price, but ask them where and how we can improve efficiencies. And they've been good. And so a lot of the savings here are not from beating them down on price at all, but the way they've worked with us, which we very much appreciate, how to be more efficient. And so we're getting better. But they're getting better too. They're getting more work done in a single day. And I want them to know how much we appreciate working with this hand-in-hand. Slide D simply tells you where we've had some very substantial savings, $360 million, more than we expected and where it came from. And our expectancy that we'll have further 328 year-to-date but we still expect more savings in this fourth quarter. And the final slide E is just how it's all turning out but going back to fourth quarter of 2016 which was a difficult challenging time too you can see the steady progress that we've made on our production and particularly in the Delaware that now we're We're up there approaching 70,000 BOEs and are excited about the lineup for this fourth quarter. The EBITDA goes up and down with price, but we've still managed increases relative to the price that has been hard work, but this The teams, the various departments, really work really well together, and I think I'm as proud of these numbers as I am in easier times when prices were higher. And then the last, you can see the progress San Mateo is making, and particularly ramping up now that we have this expansion. Thank you. To ask a question, you will need to press star then one on your telephone. To withdraw your question,