Matador Resources Company

Good morning, ladies and gentlemen. Welcome to the first quarter 2025 Matador Resources Company earnings conference call. My name is Tanya and I'll be serving as your 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 for one year as discussed in the company's earnings press release issued yesterday. I will now turn the call over to Mr. Mac Schmidt, Senior Vice President Investor Relations for Matador. Mr. Schmidt, you may proceed.

Thank you, Latanya. And good morning, everyone, and thank you for joining us for Matador's first quarter 2025 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. Reconciliation 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. 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 are contained in the company's earnings release and its most recent annual report in Form 10-K and in the subsequent quarterly reports on Form 10-Q. 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 2025 earnings release under the Investor Relations tab on our corporate website. And finally, as a reminder, I would like to invite all of you to join us for our first ever town hall conference call on Monday, April 28th at 3.30 p.m. Central Time. Please send any questions that you have in advance by email to investors at matadorresources.com no later than 3 p.m. Central Time on Friday, April 25th. The live conference call will be available under the Investor Relations tab on our corporate website. And with that, I would now like to turn the call over to Mr. Joe Foran, our founder, chairman, and CEO. Joe?

Thank you, Mack. As we've often done in the past, I'd like to begin by emphasizing some of the themes that we expressed in our earnings release is that the first one is that we've been here before in challenging times, and we've come out of it each time stronger than we went in. So we have confidence in the plans that we've submitted to you today. We feel we have the right tools in the toolbox that give us the flexibility and the optionality to make the plans work and advance Matador's interest and value, regardless of the atmosphere or how much it changes throughout the year. Second is to call to the attention that not only we tried to make the prudent decisions, but can really point to the operational excellence of our field people and our operating staff is that we've had growth in the revenues to the point that we were able to repay 190 million of our debt. We have record gas processing. The Marlin plant is coming online, and between the Marlin plant and Black River, we'll have processing capacity of 720 million. Which is quite a bit better than the original Black River plant that was only 60 million. And that provides us a large amount of flow assurance, which is critical these times to get all of it you can to market. And finally, the point three is that we wanted to emphasize how we have an alignment of interest with our shareholders. That's one of the reasons that we have the board authorized a repurchase of shares to be sure people knew of that alignment. But second is to point out what we did in the first quarter, what we, being the management leadership team, that we had over 31 transactions, virtually everybody on the management team bought shares, and then we had over 100 other employees buying stock where other companies were not as aggressive. But our guys, like our leadership team, recognize a good deal when they see it. So we felt it was important to offer the opportunity to have a repurchase of shares. At this price, we think it's a good buying opportunity and a good entry point. And so we welcome your questions. And finally, there's been some concern about production, is it going up or is it going down? We slowed down a little bit on our production, but it wasn't because the wells were performing well, they're done better than they expected, but what you had was you had some shut-ins due to maintenance, and in light of that, the maintenance and force majeure events, in light of that, we were off by one or 2%, which we could have easily made that up, but it was better to move slowly, but surely to be sure to provide growth for this year, reduce expenses, and to wait for the processing to come online so we receive the full economic benefit of our production. And we'll have growth at the end of the year, remind everybody that if we're 1% down now, by the end of the year, we'll be up 17%.

Latonya, with that, we'd like to take a few questions.

Certainly. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We ask that you please limit yourself to one question until all have had a chance to ask a question, after which we will welcome additional follow-up questions from you. First question will be from Tim Resbin of KeyBank Capital Markets. Your line is now open.

Good morning, folks, and thank you for taking my question. I'd like to start on the midstream. Obviously, there's been a lot of volatility in the broader markets. They may be impacting the decision on that. You did use the phrase IPO in your fourth quarter earnings deck. We didn't see that in this deck. So can you talk maybe about what you're thinking about with the path forward on the midstream side, given you've been pretty candid that you're looking to kind of realize value from that segment? Thank you.

Greg. Yeah, this is Greg, Craig, the EVP of Marketing and Midstream Strategy. Yeah, we're looking at all these options as far as possibility of IPOs and various other things. We're looking at opportunities to grow our business. And if we think about kind of where we started, we started at 60 million a day at the Black River plant. And as Joe mentioned, we're at, once we get this plant up and going, which is gonna be this quarter, we should be up at 720 million a day of capacity. So we lack our growth that we're seeing now and we see opportunities to go further. We've got a lot of inquiries on third party gas that we're chasing. And we think there's lots of opportunities there. So as far as, yeah, your question on IPO, yeah, that is always a possibility and we're investigating all those opportunities.

And our next question will be coming from Zach Sperum of JP Morgan. Your line is open, Zach.

Thanks for taking my question. Just given the changes in the operational plans, I wanted to talk about how you're thinking about longer term. I mean, historically, Matador's been a growth company. With this guidance update, your second half implied volumes are roughly in line with 4Q oil and gas. I think more of a maintenance level. In the current environment, how are you thinking about the longer term outlook for the company in the current commodity price environment? Would you continue at maintenance levels or would you anticipate growing again at some point?

Well, thank you, Zach. That's a good question. And the answer is yes, we're very open to and want to have reason to grow again. It's not that we're downsizing now because as I mentioned, we're gonna have 17% growth in oil production by year end. This is primarily a timing matter and is this a temporary thing on oil prices or is this a new world you live in? And we're gonna do what's profitable. We've never been a growth for growth sake. Our motto here has been prompt growth at a measured pace. And if you mean what you say about a measured pace, that means when prices get a little lower, you're a little more, take a few more moments to think about what you're doing and don't rush into things and to manage your contracts with your vendors so you have optionality and flexibility to either add or to take down and you build relationships with them that give you that kind of flexibility and optionality. So we're very much intend to grow and we're shareholders too. Nobody here wants known stock unless there is gonna be increases in value over time. And I think we're very well positioned for it because you may say, well, your production was a little bit off this quarter. Yeah, but we paid down 190 million in debt. So that leaves us with a lot of optionality there is do we want to speed up CapEx expenses as the year goes along? Do we wanna make an acquisition? I think we're very well positioned for it. But either way, we've got the tools in the toolbox including the share repurchase to make Matador more value quarter by quarter. What we don't wanna do is to do it blindly or to rush in in a time of turbulence. We're gonna do it slow and steady, but that proper growth at a measured pace is governing our approach. But we have lots, 10 to 15 years of inventory. So there's no shortage of inventory and everywhere we drill these wells, they're gonna have a high net rate of return. And it's just optimizing both locations and our field staff and our midstream business to consistently generate growth and profitability. And if you look at our last, since we went public, you see over and over again, we have generated profits per quarter and we had a profit this quarter. So I don't know how many straight quarters that makes for it, but it's been very consistent that we haven't had a losing quarter. And that's because of the professional approach of our office staff, our field staff, and that they have great properties to work with. The two big acquisitions we've made in the last couple of years, both of which were about $2 billion, they've been integrated very smoothly. And the performance has been better than expected. And so we're pretty excited. And that's why you saw as much buying from insiders as you did and you can expect it again this quarter. For me, I've never sold a share. And I've had kids in college for that matter, not trying to be flippant, but we all have things like that, but this has been where the value is generated, rising from, we started with 270,000 and we feel we have over 11 billion in assets now. So this group collectively has made good decisions all along and we've encountered these times, numerous times, and we've always come out ahead. If you may, and you can, Zach, you've been around long enough to remember those, but each time we've come out, whether it's been COVID or the BLM leases that people were worried about that we'd paid too much for, but we're paying now at $20 a barrel of oil in six months and just consistently, and that's the nature of this business, is trying to be ready for whatever the circumstances are being thrown at you. And I feel this group has really done a good job and we're all very confident in the plans and the way execution, and this second quarter, by turning on 40 wells, people were concerned about timing on those wells, but turned on 40 wells, so this second quarter should be a record quarter.

Hey, this is Van Singleton. Just wanted to add one thing to what Joe was saying that in the first quarter, we not only replaced the reserves that were produced, but we added to them. And so I think you see that over our history is that not only do we have 10 to 15 year runway of really good locations right now, but every year we continue to replace those and grow the reserves. And so I think what you see right now is, as we've said before, there's never really one smoking gun decision that makes all this happen. It's hundreds of small decisions and we all work together as a team across the company to figure out what's the best thing to do at the right time. And by preserving our optionality and balance sheets, we're gonna be able to set ourselves up for more profitable growth in the near future.

Thank you. And our next question will be coming from Gabe Dow of TD Cohen. Your line is up, Gabe.

Thanks, Atanya. Hey, everyone, good morning. Thanks for the time. Was hoping, Joe, maybe we could circle back to your comments around stock representing a good entry point. Is it fair to assume then you're maybe getting after it on the buyback relatively soon? Just how do you prioritize the buyback against potential inorganic opportunities this year? As you've also noted, volatility presents typically good opportunities for attractive bolt-on like you guys did with ACO, maybe about 10 years ago. Thanks, guys.

If, Gabe, I may need you to repeat part of your question, but let me try to answer as best I can. Is that first thing is what's nice about where we are today is if in our release, we mentioned five or six things that we did when we saw the fall, enough turbulence and chaos and what does this mean and what direction our process is going up or down and what's the world situation is that we started taking steps from our experience. What do we need to be in to give us maximum flexibility and optionality on how our plan goes? So what you saw is we paid down debt, we took these other steps to pay down debt. We had oil hedges, implemented oil hedges to protect us on price. We sold non-core assets and in the Eagleford, sold all of the rest of our position there and sold part of our Ponto plant to our joint venture partner on San Mateo and we worked with our 19 banks and they authorized a bigger RBL for us, Reserve-Based Loan, and so now we're in a position to go either way and it's not that we're forced to go either go the route of acquisitions or drilling or share buybacks, but I think we'll have to see which of those creates the most value for us, but it's nice to have all three options to go with.

This is Van again, Van Singleton. I think also to add to that Joe is just the dividend. Six times in four years we've increased it and I think we want to preserve our optionality to continue to increase that at the appropriate times going forward.

Yeah, we want to be known as that regular, that company that pays a regular dividend and tries to increase it year to year. So that's another thing. So the alignment, a lot of this comes from that alignment that other companies haven't been as quick to buy their shares back or to buy them for themselves and we have, if you look at companies, I think ours is our ownership between officers and directors is 6.5, 6.6%, somewhere going towards 7%.

And our next question will be coming from Leo Mariani of Raw. Your line is open Leo.

Hey guys, wanted to just ask a little about the kind of activity reductions here. If I'm looking at your slides right, looks like you guys ended up cutting some of the activity on the new AmeriDev asset and also at Antelope Ridge but actually increased activity a little bit in West Texas. So I was just kind of curious about that from a turn in line perspective. If there was something maybe was kind of a little bit driving you to put a little bit more CapEx in West Texas in favor of some of these other areas and then just on your production, obviously it's like you stay in record second quarter but just wanted to get a sense, should that be kind of peak production for the year and does production roll off a little bit with the activity cut to the second half?

Hey Leo, this is Tom Elsener, EVP of Rosmar Engineering. I'll probably take the first part of that and then I'll probably pass the second part over to Glenn Stetson. But just in the normal course of funneling the operations from a nine rig program down to an eight rig program, there's just some shifting of the timing of the wells around all that. I know Chris and the team are optimizing the completion schedule and I think it's just shifting some wells around between different buckets, maybe carrying over some wells in different quarters. We're proud of all of our assets. Certainly West Texas has been a big part of us for a very long time but we're real happy with the returns of all the wells and things are going better than expected.

Yeah, and hey Leo, this is Glenn. I just wanted to pile onto what Tom was saying on the Meridev properties is that we highlighted in the release the 11 wells that we turned online that had an average IP of 1,450 BOE per day. You know, all combined was around 15,000 altogether. We're really happy with those results and I think confirms the prospectivity of the eastern side of that acreage position. And so, and then on your second question there, I would just say that Q3 will be lower than Q2, as you said, and then Q4 is projected to be slightly higher than Q3 but could change depending on the timing of these capital efficient batches that we're doing.

Thank you, our next question will come from Kevin McCurdy, a Pickering Energy Partner. Kevin, your line is open.

Hey, good morning, thanks for taking my question and I for one appreciate the leadership you're showing here by reducing activity amidst the macro uncertainty.

Well, thank you, we appreciate that a lot and I would like to say is that the fourth quarter may not go down but we have the optionality to ramp up production in that area or to keep it as is. We didn't want to promise something that we weren't certain of delivering. We can deliver, feel very certain about that but don't want to do that unless the oil price is optional or is optimal and that, so there's plenty of time left to bring that around if the incentive of higher commodity prices are there.

My question is

on the criteria for the buyback. Just conceptually, how would you think about the number of shares you're gonna be buying back? Will you be looking at certain valuation metrics and will it be governed by kind of a percentage of cash flow on a quarterly or an annual basis?

Yeah, hey Kevin, this is Brian Willey, Executive Vice President, Chief Financial Officer. Appreciate the question. It's not a single metric or single variable that we're looking at, but I think it's a mix and so as Joe mentioned earlier, we really have a lot of great options in front of us, whether that's using our cash for debt repayment, for the share repurchases, making opportunistic land acquisitions that Joe mentioned that we've often made in these times and there have been challenging times, expansion of the midstream business. We could also add back the rig, as Joe mentioned earlier, and or increase the dividend. So there's a lot of opportunities for us to use our cash flow and so really what we'll do is we'll evaluate those and look at what is best for Matador in the long term and its shareholders. As Joe mentioned earlier, we're all very large shareholders and so as we look at it, we want to provide the most value for us and our shareholders over the long term.

And our last question will come from the line of John Freeman of Raymond James. Your line is open, John.

Thank you, good

morning.

I saw that y'all stepped up the hedging activity quite a bit, both on oil and gas, but the other thing that sort of jumped out was, y'all were willing to lock in many for wider gas gifts in 2026. So just interested in what y'all are seeing on the marketing side that drove that decision.

Yeah, this is Greg, Krug, again. We're constantly looking at those hedges and we just saw that we felt like there was an opportunity to layer on some. We just felt like 26 had some vulnerability there because of the capacity issues that we're seeing and I think that's a good thing. We wanted some additional protection. So that was the driver behind that, is we felt like we needed to have that extra protection insurance policy, so to speak.

Thank you, ladies and gentlemen. This ends the Q&A portion of this morning's conference call. I'd like to turn the call back to management for closing remarks.

Thank you very much. And to those that asked questions, is that if you have further inquiries, don't hesitate to call us. We'll be happy to visit with you. And once again, we want to invite all of you to come see us sometime and meet our people in person, as well as see some, what we think are the most latest tools in the toolbox, including the MaxCom room that goes 24-7 or our measurement room that does the same thing that has generated a lot of value. And also to emphasize to you, because I don't want anybody to feel, oh, we're throwing in the towel towards the end of the year or worried by it. No, we think matters will straighten out over these next couple of quarters and it'll be clear what needs to be done in the fourth quarter to make optimal our year for our shareholders. And Brian Willie made a lot of mention of the tools, including increasing the dividend as a way of returning value to the shareholders. And we can, you know, there's no shortage of rigs or vendors out there that we can get the work done in a first-class way. So I'm very optimistic about the year that it's going to get better from here. We've said second quarter is going to be a record quarter. Third quarter will be strong, but there we may be, we'll be making those concrete plans for the fourth quarter and for 2026. And as I said, we've done this for 40 years, rising from 270,000 to the present deal. So this is a group that's had to react to very rapid change in the business when we came in. You know, you had Kelly Drive type of rigs and now you've got Top Drive and you know, you're drilling three-mile laterals. That was unforeseen, but that's working out well for us. So there's a lot of knobs to play with and particularly when the outside factors of world prices, world governments, you know, you know, you just, you got to be ready to shift as the atmosphere changes. And I think this is the group that is doing it now and we have alternatives. And, but we see a lot of options in the past. That's what led to certain breakthroughs. You all mentioned the Yates transaction, but also the BLM when we bought those properties. And all was, you know, you had COVID, those made a difference. And you go back to getting people

that

we start out. The big help was when Mesa and in our slide deck, we show some of those big events in the past that have come back to help us. And they generally occurred in times where commodity prices were down. But right now I feel the field is really open and we've got more tools than we've ever had to use and to add value. So I think it's a, a great time to get in. And you'll see buying from us, but you also now see the company ready to put money on the line and buy back shares. If people are, can't see the value opportunities we've been creating, we'll buy their stock back. And we'll start with this amount, 400 million and we'll go, we're not gonna do it all at once, but gradually and in a controlled fashion and be happy to buy back whoever wants to sell, you know, at a price that we think is a bargain for our shareholders. And that's my last, my comments. I promise unless you want to call in or come see us.

Ladies and gentlemen, thank you for your participation today. This concludes today's program. Have a wonderful day.