Matador Resources Company

Good morning, ladies and gentlemen. Welcome to the second quarter 2026 Matador Resource Company earnings conference call. My name is Michelle, and I'll 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 for one year, as discussed in the company's earnings press release issued yesterday. I'll now turn the call over to Mr. Mac Schmitz, Senior Vice President and that's for license from Matador. Mr. Schmitz, you may proceed.

Thank you, Michelle. Good morning, everyone, and thank you for joining us for Matador's second quarter 2026 earnings conference call. Some of the presenters this morning 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 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 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 and any subsequent quarterly report on Form 10-Q. In addition to our earnings press release issued yesterday, I would also like to remind everyone that you can find a slide presentation in connection with our second quarter of 2026 earnings release 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 chairman, founder, and CEO. Joe?

Thank you very much, Mac. It's a pleasure to be here with you all again, having exchanged your questions and our answers and your comments. We appreciate it. We'd like to hear from you. We want to be sure that all of you know that you're welcome here. Come visit, and if you do, you'll be assured of meeting and most of the senior staff, but also the opportunity to visit with some of our young staffers that have come in in geology and engineering and you hear directly from them that are doing the work, how they feel about it and their views on the future and the strength and technology that they're using being state of the art. Second, I'd like to give you an overall picture. We've had near record adjusted free cash flow for this quarter of $303 million. $200 million of which has been used to pay down the bank debt that we had on the acquisition of the federal leases. So now we're under a billion dollars on that debt and making progress to get it paid down further and these upcoming quarters. And I think that's an important point to remember when people wonder about how we really stand. We have 19 banks in our bank group and they all scrubbed down our numbers pretty thoroughly and had some real good exchanges and they raised good questions. But all 19 have participated and have indicated more is available if we come across opportunities like that. So thank you, banks. We appreciate your backing us and working with us in our relationship with you. Last, two things on this report. If you're asking us how we're doing, we'd just say that True answer is that we've exceeded the high end of our production guidance. So it's nice to be sitting in that spot. Glenn also mentioned we've had a 5% increase in our oil and natural gas reserves up from 667 million barrels of oil or gas equivalent to 73 million barrels of oil or gas equivalent. So a nice increase for a quarter. And I want to say to all of our Our teams, our exploration and production teams, that good work and keep it up. As I mentioned, these results and cash flow generation has enabled us to pay down $200 million in the borrowings we had for the May federal lease sale on our RBL. We expect to now generate approximately $900 million in pre-cash flow for the year. So we'll have this largely paid down, if not paid off by the end of the year. Second, in this area, we remain very focused on prioritizing continued debt reduction. But it's not very often that you have an opportunity to buy three properties Like Cardinal, like Paloma, and like Range Rider of this quality to bring into your asset group and in the upside of Ridge Runner and Omni's properties to continue growing are based in New Mexico, and we've steadily risen in the ranks to where we're in the top ten and top five in Lee County. I'm also pleased and excited to provide an update. We began the year deciding we had four strategic catalysts that we were planning to Execute On. First is the closing and integrating of Cardinal. And on that score, that was a very professional work with the Cardinal team. We had good relations with Smoothly and to the point where we gained increasing confidence on the capability of their people who might be interested in Matador. And we made offers to 26 of their field people Their whole staff out there, basically. And all 26 accepted the offer. We thought that was a good sign of how professional the negotiations went and the opportunities they feel are ahead of them being with a company committed to the Delaware as we are. Also want to emphasize that mid-stream money was used to purchase Cardinal and for midstream assets, that's our policy. Midstream money for midstream assets and on the E&P side, again, we're using Matador money for properties that will end up in Matador. So first, we've closed and we're integrating Cardinal and as I said, those are Two separate companies, but we collaborate with each other and we think we help each other to better performance. So that was the first strategic catalyst. The second one was BLM Lease Sale. We paid a lot of money for it. Would have been nervous about that, but if you remember back to 2018, we were criticized some for buying and Payne, what we did for resales and look what that did for us. That boosted us in to the best cash flow and the best properties that we had for a number of times. And the Rodney Robinson Wells that were drilled and Anita Cortell were all making over a million barrels apiece. And that extra free cash flow has given us a lot of opportunities. We tried to take advantage of it. So when the opportunity came up again, for BLM Lease Sale years later, we really prepared for it, and we're excited by the leases that we received. And it extended our inventory life to over 15 years. And, you know, good properties like that with nine different zones are likely to have a lot more and just 10 to 15 years of extension. They also are enhanced by the fact we have a midstream system that should be able to increase their cash flow, picking up this gas and giving it to market. I think in the succeeding years, flow assurance is going to play a bigger and bigger role. On page, I think it's page 7 of the slide, we have a map. Showing how all these properties fit together. And on Cardinal, he lays down to give us, you know, pipeline movement all around the basin. And you couldn't really have a better fit than the way it fits in with our other pipeline systems. But in that regard, you have 100 rigs, approximately, Thank you. Thank you. Weaved it in to our existing pipeline systems. Finally, the future results of Cardinal and these BLM leases should we expect them to turn out to be better than expected given the quality of the acreage from not only our acquisitions but the E&P activities of other people in the area. As I mentioned, it's 100 rigs out there working. And so you can expect if you are not lining up how to get your gas out of the Delaware, you need to be doing so because I think there will be some tightness in the markets. We'll try to take care of you as best we can. But at this point, you might want to take Some action to be sure that's lined up for any investment you make in new wells. All this, we believe, sets us up for a strong finish to 2026 and even stronger performance in 2027 as we're able to plan and coordinate our various activities. As a result, we've raised our production guidance from year-over-year oil growth of 4% to 7%. And All this is done with 1% less capital expenditures. One note about capital expenditures, of course, you know, I started this company with some friends 43 years ago and with $270,000, and now we have over $12 billion in assets. And on that, we borrowed money the whole way, always paid it back, and will lead to borrow some as we finish development of these undeveloped acres and extend the coverage the midstream has in these more prolific areas. So we think that outlook looks good. The capital will be put to good use and appreciate the support that we've had and think things look good going forward. And if not, I'd Tell you so that we've got to work through some things, but it's very exciting to have the best acreage, you know, the best team that you've had with the opportunities provided with a bank group that is as solid as we've been fortunate to have in the group and the shareholders that we have. So we've been blessed with a lot of good things. We plan to be good stewards. That's always been our mark. We didn't come up through private equity with friends and family, and I can assure you your friends and family are rooting for you, but they have a lot of questions, and they're not afraid to ask the tough questions. So we tried to answer for them as this transaction unfolded, but now we're ready for yours, and with that, I turn you over for that first question. Thank you, Michelle. Thanks.