Matador Resources Company

Full year 2022 earnings conference call. Some of the presenters today will be referencing 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 forecast 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 annual report on Form 10-K. In addition to our earnings press release issued yesterday, I would like to take a moment to remind everyone that you can find a slide presentation in connection with the fourth quarter and full year 2022 earnings release under the Investor Relations tab on our corporate website. With that, I would now like to turn the call over to Mr. Joe Foran, our Chairman and CEO. Joe?

Thank you, Mac. It's a pleasure to be here again and report to you our progress at Matador. And I'd like to begin with... celebrating what happened in the fourth quarter of 2022 first, and then we'll get to the outlook for 2023 and 2024. But beginning with the fourth quarter is we had over 100,000 BOEs per day, and we had records across – performance records across our whole – operating outlook despite the bad weather or other complications. But 100,000 BOEs per day is a step forward and puts us at a different inflection point. We had notably free cash flow of $1.2 billion and $249 million just in the fourth quarter. Adjusted EBITDA for the year was $2.1 billion. and it was $460 million in the fourth quarter. This is important because when we went public, we weren't even $460 million. So you think about we weren't even $460 million in value, and we had more than that earned in one quarter alone. Now, when I speak of quarters, we look at quarters here But we prefer to look a little longer term, six months to a year. In this instance, much of what we did in the fourth quarter was to help set us up for the end of 2023 and all of 2024. So that's coming together very well. And I think it's important we think long term around here to look at more, look at the quarter as much as you want. But we asked, looked longer too at one year because some of the things that we're deferring on now sets us up for 2024. As an example, we've got 85 by the end of the year, we'll have 85 wells drilled in the Rodney Robinson and the Boris and Vonnie properties with we have right now eight that are flowing back. We'll have eight more next year, this year, and then four at the end of the year. Is that right, Tom? Yes, Joe, that's approximately correct. All right. So now remember, we bought that Rodney Robinson and the Boris leases over four years ago, and they're still contributing. And if you add them all up, that's 89 wells and we still have more to go there. So this, uh, what happened here at this reading the analyst reports concerned about the advanced deal is it really is very similar and comparable to what happened at BLM. If you remember when we bought the BLM tracks, our stock was hammered, uh, much as it was this morning. And, Look how that has turned out. A lot of the analysts wrote, you know, that was a bad deal. We paid too much. But they just failed to look at the quality of the rock that was in the BLM and what we could do with it because that was a transformation. We went from drilling 98% of our wells as one-mile laterals to going to 98% of our wells being two-mile laterals or more. And which has been a great improvement that set us up to do this advanced bill, which is, you know, four times potentially the value of the BLM acreage. So I think that a little adjustment and absorbing that is to be expected. But we are very excited here. If you were to go around and meet with all the staff, you'd see we're – really excited about what it'll do and the program and we included in those slides a map showing how it fits in with our acreage and it's adjacent and this is some of the best rock in the whole basin and we're making great wells on what we're drilling. We're going to have this and then when we spend the extra CapEx to connect it to our pipeline systems, Prompto and FivePoint, you're going to see that much more strategic value coming out of these properties. That just sets us up for 2024. In 2022, just to remind you, we drilled 64.5 net wells. In the first quarter of 2024, at the end of the year, we'll be turning on 49 net wells. We have a practice. If we're going to connect wells, if possible, we try to set them up for the first quarter of the year so we get a full year's benefit. Think about that. The proportion that we're going from 64.5 net wells in a given year to 49 net wells of similar quality and interest in the first quarter of 2024, some of the analysts noted that we were getting things set up for 2024. And I commend you for, uh, noting that. And the last thing in talking about, uh, there seemed to be some question is on the midstream of 2023 that we have heavier CapEx. And part of that is integrating the advanced properties into our system. And if you go to the next slide, which shows where our pipelines are, we intend to connect up the pipelines so you have that system can go all across the best areas of the Permian. So you add that additional CapEx to connect all the systems and to build out to other pipelines to advance and to other third-party customers that we're signing up as we extend these pipelines, the additional CapEx, we believe, will be returned several times over. Finally, I want to just remind everybody, we're trying to signal to you that we're putting our money where our mouth is. We've increased the dividend 50% to 15 cents a share per quarter. I'm the largest individual shareholder, I believe, and I like dividends. The other officers here are large shareholders, have much of their net worth, and they like dividends too. Our staff, we implemented a buying program for them and got over 90% participation. We like dividends. We want to keep increasing dividends over time as our financial situation continues to improve because we believe it's the fairest way to reward long-term shareholders. And so now it's about 1%, a little over 1% of the value, and I think it's a great buying opportunity because you can clearly see the vision ahead This year is going to be a very strong year, but 2024 is going to be even better as everything gets set up. So with that, let me turn it over to you all for questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, you may also press star 1-1 again, and this will withdraw the question. Please stand by while we compile our list. And to note, ladies and gentlemen, due to time constraints, we please ask that you limit yourself to one question and one follow-up. Again, we ask that you please limit yourself to one question and a follow-up until all have had a chance to ask a question, after which we would welcome additional questions from you. Our first question is from Scott Handels of RBC Capital Markets.