Matador Resources Q2 2025 Earnings Report

Matador Resources EPS Results

• Actual EPS: $1.53
• Consensus EPS: $1.29
• Beat/Miss: Beat by +$0.24
• One Year Ago EPS: $2.05

Matador Resources Revenue Results

• Actual Revenue: $895.31 million
• Expected Revenue: $892.86 million
• Beat/Miss: Beat by +$2.46 million
• YoY Revenue Growth: +8.20%

Matador Resources Announcement Details

• Quarter: Q2 2025
• Date: 7/22/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, July 23, 2025
• Conference Call Time: 11:00AM ET

Matador Resources (NYSE:MTDR), an independent energy company, engages in the exploration, development, production, and acquisition of oil and natural gas resources in the United States. It operates through two segments, Exploration and Production; and Midstream. The company primarily holds interests in the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. It also operates the Eagle Ford shale play in South Texas; and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. In addition, the company conducts midstream operations in support of its exploration, development, and production operations. Further, it provides natural gas processing and oil transportation services; and oil, natural gas, and produced water gathering services, as well as produced water disposal services to third parties. The company sells natural gas to unaffiliated independent marketing companies and unaffiliated midstream companies. The company was formerly known as Matador Holdco, Inc. and changed its name to Matador Resources Company in August 2011. Matador Resources Company was founded in 2003 and is headquartered in Dallas, Texas.

Matador Resources Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Production up 31% year-over-year in Q2 on strong well execution, driving record free cash flow and prompting an increase to full-year 2025 guidance.
• Positive Sentiment: Maintained a $1 billion undrawn credit facility with all 19 banks reaffirmed and reduced net debt to below 1x EBITDAX, underpinning financial flexibility.
• Positive Sentiment: Midstream unit San Mateo hit a 99% uptime and grew processing capacity to 720 MMcf/d, with half already under commitment and multiple options explored to unlock value.
• Positive Sentiment: Achieved a 10–15% reduction in D&C cost per foot via drilling and completion efficiencies, supporting industry-leading margins and free cash flow.
• Neutral Sentiment: Upstream activity remains set at eight rigs for Q3, with any additional rigs or capex decisions deferred pending commodity stability, potentially impacting production cadence.

Presentation

[Operator]

Good morning, ladies and gentlemen. Welcome to the Second Quarter twenty twenty five Matador Resources Company Earnings Conference Call. My name is Gigi, 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.

[Operator]

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 Schmitz, Senior Vice President, Investor Relations for Matador. Mr. Schmitz, you may proceed.

[Mac Schmitz, VP, IR at Matador Resources Company]

Thank you, Gigi, and good morning, everyone, and thank you for joining us for Matador's second quarter twenty twenty five 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 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 the information that is now available. Actual results and future events could differ materially from those anticipated in such statements.

[Mac Schmitz, VP, IR at Matador Resources Company]

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 ks and any 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 second quarter twenty twenty five 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 Founder, Chairman and CEO. Joe?

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

Thank you, Mac. And thank you all for listening in. We appreciate it.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And we look forward to your questions and comments and being able to report to you that we feel that we've had a very solid quarter, very well executed. And it's pleasing to us because we have some people in new leadership positions. And everybody else has really pitched in. And I think it's exciting to see some of the ideas and the programs that they've recommended. And it'll be to everybody's benefit.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

In particular, I'd like to introduce Bill Lambert to you. Bill is our CFO and Head of Strategy. And I think you'll find that he has a lot to offer and you'll see smooth running from this point forward. His aim and our aim when we were as we were getting to know each other was very similar. We can come from very similar backgrounds and culture.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

We've laughed about that some. And that I think you'll enjoy getting to know him. I think many of you already know him. But our plan, our aim is to increase our production, but to also increase our free cash flow. Not to do one at the expense of the other, but to work them in tandem.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

Is that if your production is going up, cash flow needs to be going up and vice versa. If your cash flow is going up, spend it wisely on some production and drilling opportunities but be careful to keep that strong balance sheet in times like this where you have the turbulence and the volatility. The strong balance sheet is I think you'll see as background for a lot of our initiatives and has helped us to achieve the progress that we have. More specifically, we believe we're well positioned for the back half of the year with drilling opportunities, cash flow opportunities. We have $1,000,000,000 available on our line of credit.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

Our banks have been very supportive of us. We have all 19 banks reaffirmed their plans to stay in the group. And I think 15 or 16 of the banks are also in our midstream facility. So thank you all very much for that support and vote of confidence. Obviously, as you have seen in the report that we've increased our full year guidance for 2026 both in oil production growth and cash flow.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

Obviously, this is a result of successes in the drilling program, which pleases us. And we're now producing in the Delaware from 20 different zones. My whole career, forty years has been spent primarily in the Delaware. We consider that as a land of opportunity. But I'm also glad to report part of our time in Louisiana has resulted in us having in our deal with Chesapeake to reserve the Cotton Valley formations above the Haynesville.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And we believe we have 200,000,000,000 cubic feet of gas there or more waiting all HBP and just waiting for more stability in gas prices. Another opportunity that we're pleased to mention to you is our midstream opportunities. That has been a game saver with the tightness in the midstream markets out there in New Mexico. We got into it for flow assurance and Greg Krug has guided us in this regard. And we've grown our midstream capacity from zero at the time of our original IPO to where we now have $720,000,000 a day in capacity.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

Recently turned that on, so it's about half full now. But we believe we'll, before the end of the year, likely to be at full capacity or close to it. The team is in that regard, we were faced with the choice of either building that plant, which was $200,000,000 or more, or putting that into drilling. And we concluded that it was best to build the plant, that that would balance our asset base so that we were in a fee based business along with the commodity based business, which would be longer lived assets and would be a balance to our production plus and perhaps most importantly provide flow assurance to us and our operations. And been very glad that Greg suggested this and helped guide us along the way.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

In addition, in this regard, we've also are now recycling over half of our water production back in, which is a moneymaker for us. We're saving having to buy additional water. In the meantime, we've grown our base dividend. We've raised it six times in four years. And as our habit is, is to review the base dividend at the end of each year.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And we take a lot of pride in the base dividend and trying to make it be the right amount, we believe it's most fair to all the shareholders. We're very pleased with our results and our buyback of shares, but the base dividend is something that all enjoy and believes helps make people stickier. We continue our brick by brick program and we paid down debt. So our debt levels is now with a ratio of less than one. And finally, we've been reducing our lease operating expenses principally through efficiencies and out there in our chemical program, which has been implemented, I think, in a very solid fashion and is generating savings.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And the last thing is the way we look at things. I know there's going to be questions on what is the quarter result and how that compared to the sequential quarter. And we tend to look more at how is it over the course of the year. So how does one year compare to the last year? And it's just that the cycle in oil and gas we think is more than a quarter to quarter business.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

We do like to look at the quarter numbers, but the year over year numbers are more important. For example, on production is up a little now. But when you look at year over year, which you don't have as much timing differences, is up 31%. So with that, let me open the floor for questions and give Bill a chance to talk about our strategy and financial plans.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Thank you, Joe. And it's pleasure to join the team here. I think, really, just before we jump into the Q and A, the opportunity to join Matador and the business that we have here, I think our integrated business is extremely well positioned to deliver on both a robust free cash flow margin as well as oil production growth. And being able to do both of those things is something that we think is unique in this world. So look forward to answering your questions, but very excited to join the team.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Gigi, we'll turn it back to you for Q and A.

[Operator]

Thank you. And gentlemen, due to time constraints, we ask that you please limit yourself to one question until all have had a chance to ask a question, after which we would welcome additional follow-up questions from you. Please standby while we compile the Q and A roster. First question is from Tim Rezvan from KeyBanc Capital Markets. Your line is now open.

[Tim Rezvan, Managing Director & Equity Research Analyst at KeyBanc Capital Markets]

Good morning, folks. Thank you all for taking my question. I wanted to start on midstream. I was a little surprised to see there was no change to midstream EBITDA guidance for the year. You had a record second quarter, you lowered midstream OpEx guidance.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Tim, I think we lost you.

[Brian Willey, EVP - Midstream at Matador Resources Company]

Tim, this is Brian Willi. I'm happy to take that question about the record quarterly EBITDA. We appreciate you recognizing what a great quarter we had at San Mateo. And really that starts with the men and women in the field led by Thomas Green and Brian Nicholson and some of the others as they brought the new Marlin plant online and increased this from processing capacity from five twenty million cubic feet per day to seven twenty million cubic feet per day. And really San Mateo's record performance during the second quarter was driven by Matador's record production growth during the quarter.

[Brian Willey, EVP - Midstream at Matador Resources Company]

And so San Mateo during the end of the first quarter and during the second quarter connected to approximately 30 new Matador wells. And those were areas where San Mateo provides oil, gas and water. And so as Matador's production increased and had record production, that was the same thing with San Mateo, we had record EBITDA. In addition, the team has been hard at work with third party contracts and finding ways to save costs. For example, we often talk about the coordination between the upstream and the midstream.

[Brian Willey, EVP - Midstream at Matador Resources Company]

Operations folks on the San Mateo side led by Sean O'Grady and Justin Haas worked closely with Glenn Stetson and his team and they're chemical consultants and we're actually able to save about $1,000,000 on chemical costs during the quarter. So really just a fantastic job on the coordination between the teams. As we look at the EBITDA for the remainder of the year, the first half of the year EBITDA was about $145,500,000 in total, which is about half of the expected EBITDA range for the year, $275,000,000 to $295,000,000 And so we still expect that range as Matador shifts its drilling to Animal Bridge and away from some of the areas where San Mateo operates. But we're excited to continue to provide flow assurance and great value for Matador shareholders.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Scott Hanold from RBC Capital Markets. Your line is now open.

[Scott Hanold, Managing Director - Energy Research at RBC Capital Markets]

Yes, thanks. I'm going stick on the midstream topic and I know you all get asked this, seems like almost every quarter and just wondering what your view right now is on the progress of looking at options for that including potential IPO. Just if you could set a view of how do you think about that timeline and what do you need to see from the midstream entity to be ready for that potential value creating opportunity? Is it a size and scale thing? Is it just one of those things you're just still assessing whether it makes best sense for Matador at this point and its shareholders?

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Scott, thank you for that. I think as we think about it, we do believe the value of our midstream business is not reflected in Matador's share price today. And we continue to think about ways to highlight that appropriately for shareholders. I think as we think about that, there are a number of opportunities and things we think about with respect to that. And I'll let Brian Willey jump in here as well.

[Brian Willey, EVP - Midstream at Matador Resources Company]

Yeah. Thanks, Bill. This is really an exciting time at Matador. Joe mentioned Bill joining the team earlier this year, and he's been just a fantastic addition to Matador. And it's allowed me to go and focus more on the midstream business and really push forward evaluating some of those strategic transactions.

[Brian Willey, EVP - Midstream at Matador Resources Company]

So whether that's something on the debt side or something on the equity side, there's a lot of opportunities in front of us. We can be patient at Matador and make sure we do the right transactions for Matador shareholders. We're free cash flow positive, so we don't necessarily need to do any type of transaction at San Mateo. But we do recognize that the value of the midstream business is not reflected in Matador stock price. And so we look forward to continuing to provide excellent service to Matador as I mentioned earlier, as we explore the right strategic alternative to provide the most value for Matador shareholders over the long term.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

I would like to add, we're not just doing it for Matador and Matador shareholders, but the Midstream team has done an excellent job of developing some great relationships with third parties that are repeat business. That's one thing that we've considered is how much of our third parties repeat and they're almost all repeat. And they're the so many of the really great companies of the basin, been there a long time, very strong companies financially and on production. So we're delighted by that progress and think it gives us a lot of options of how to optimize that value. Greg, would you add anything to that?

[G. Gregg Krug, EVP - Marketing & Midstream Strategy at Matador Resources Company]

No, Joe. I think spot on. We're definitely looking at any way we can optimize our value for for San Mateo and our and as far as that goes, all the midstream. And so we're we're trying to keep every look under every stone possible. So we're trying to position ourselves in a that as far as to have the management staff there to be able to to realize that.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Zach Parham from JPM. Your line is now open.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Hey, thanks for taking my question. I just wanted to ask on activity levels.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Can you give us some detail on how you're thinking about rig activity in the back half of the year and going into 2026? If you continued running that eight rig program that you're going to be at shortly, what type of production growth does that deliver in 2026? Or is that more of a maintenance program? Do you need that nice rig to deliver some production growth next year? And maybe talk about how you're thinking about the decision to add that rig back potentially.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Thank you, Zach. I think that's obviously very, very topical right now. And as we look at it, you're right that we will be at eight rigs here kind of basically the end of the week. And as we think about when we might potentially add back, I think we should we should really step back and think about what was the decision to ultimately change back in April. And what what we looked at in April was a macro environment that was highly volatile, and we had the ability and flexibility in our program to optimize twenty twenty five capital efficiency by moving some things around and reducing rig activity.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

With that, we were maintaining the free cash flow margin that we think is so important and balancing that against oil production growth. As we look into 2026, and I don't want to guide in detail at this point, but I think as we think about the second half of this year and 2026, what we really think about is how do those two metrics work in tandem. And if there are opportunities to add activity and drive incremental growth, we want to make sure that we can maintain those superior margins and have incremental free cash flow from doing it. What we think one of the strengths of our portfolio is we believe that we can defer making that decision until later this year or the beginning of next year and still be able to drive relative growth in 2026 versus what we believe the industry average growth rate will be. And I think that is important because we do believe that Matador has traditionally been known as a growing oil company, and we believe maintaining that alongside the free cash flow generation is kind of the focus of how we think about things going forward.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of John Freeman from Raymond James. Your line is now open.

[John Freeman, Managing Director at Raymond James Financial]

Thanks. Good morning. Just sort of following up on Zach's question, if hypothetically we're in sort of a lower for longer sort of oil price environment. I was gonna touch on something you said earlier in the prepared remarks, Joe, about, you all had a decision a couple of years ago whether to take the 200,000,000 and put it towards just drilling more or putting it towards building that plant. And I'm just curious if you all sort of just in a hypothetical kind of lower for longer environment, if theoretically your growth profile just naturally kind of is a little lower in that environment, does maybe more of that growth capital potentially get shifted into the midstream business?

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

So I think, John, to your point, we had the decision on investing in the And I think really what it goes to is we believe our integrated business can drive best in class free cash flow margin. And so I think predicting commodity price has been a challenge for everyone, frankly. And so whether it is lower for longer or volatile, I think what we try to look at is how do we deliver best in class free cash flow margin. And so one of the ways that we did that was traditionally investing in that midstream to drive the flow assurance to recognize that we could sell our oil and capture that free cash flow margin.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

If we had not had the flow assurance that San Mateo provides us and the excellent service that they have, the reality is we wouldn't have had the oil production to have driven the free cash flow that we have today. And so we look to think about these things in tandem on a go forward basis. And to the extent commodity price follows the forward curve and the steep backwardation that is within it, we'll obviously adjust and manage activity levels on both the upstream and the midstream with that. I think one of the things that we look at though is we believe our relative free cash flow margin to the industry alongside the depth of our inventory means that not only can we deliver the exemplary free cash flow margin today, we believe we have duration because of our portfolio to do that. And midstream and the integrated nature of it helps sustain that over a longer period of time.

[G. Gregg Krug, EVP - Marketing & Midstream Strategy at Matador Resources Company]

This is Greg, Craig. I also wanted to emphasize the fact that we do have I mean, San Mateo has a 99% run rate, and that's that's huge in the midstream business. And that's the assurance that we get as a producer is that we we're gonna have an outlet for our our gas and oil and water takeaway on a regular basis and something that that runs really efficient. So that's another reason we elected to do what we did.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Noah Hungness from Bank of America. Your line is now open.

[Noah Hungness, Equity Research Associate at Bank of America Merrill Lynch]

Good morning, Joe and Matador team. I wanted to touch on D and C cost. This quarter, you guys had D and C per foot cost well below the low end of your guidance range. I was just wondering what drove that and then how sticky are those drivers?

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

So thank you, Noah. And I'll start, and then Chris will probably jump in. I think one of the benefits of our portfolio is from east to west across the basin, have varying depths and varying cost profiles within our portfolio as to how we think about it. And one of the things that took place in this quarter is we had exemplary performance in a lower cost area of the basin more to the westward side. I think the reality and Chris will jump in here is, as we look to the second half of the year, we have not incorporated significant service cost reductions.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

We have only thought about these things in terms of the cycle time efficiency at this point. I'll let Chris jump in and talk a little more.

[Christopher Calvert, EVP & COO at Matador Resources Company]

Yeah. Hi, Noah. This is Chris Calvert, EVP and COO. I think it's a great question. Obviously, we appreciate you recognizing the D and C cost per phone number.

[Christopher Calvert, EVP & COO at Matador Resources Company]

Guess a few things I would like to say to that. Obviously, the improvement year over year, if you look at second quarter in 2024, we're down about 11% from that. I mean, can refer to Slide D the presentation if you would like to look at it graphically. But I think the majority of that improvement comes from the efficiencies like Bill just spoke to. While we do potentially think there is potential for service costs more competitive service costs coming in the back half of this year, kind of post April 2, these improvements have been drastically due to efficiencies both on the drilling and completion side.

[Christopher Calvert, EVP & COO at Matador Resources Company]

And we can start on the drilling side really kind of focusing on our U-turn program. If we look at 2025 U turns versus even when we started in 2023, I'll refresh everybody's memory. We drilled two wells in the U-turn style in 2023. On average, took us about twenty five days to drill those wells. And in 2025, on average, we've shaved ten days off of drilling two mile U-turns in a two year period.

[Christopher Calvert, EVP & COO at Matador Resources Company]

And so I think those drilling efficiencies are not just specific to the U-turn program. We're drilling wells faster on the completion side. In February, we guided around 40 wells would be completed using trimmer frac and the trimmer frac process. Year to date in 2025, we've already done 30 wells with trimmer frac, now we expect that full year '25 number to be closer to 50. And so to refresh everyone on that, it's about a $350,000 cost savings every time you can trim off frac versus zipper operations.

[Christopher Calvert, EVP & COO at Matador Resources Company]

And with that, you're also seeing efficiencies of about 20% or 30% faster even versus just a simul frac process. And so I think you have drilling efficiencies, completion efficiencies, speeding up that all kind of lead to this collective 10% to 15% improvement. From January 1, we're drilling and completing wells about 10% to 15% faster than we were six months ago. And so I think that leads to this improved D and C cost per foot number. And like Bill said, if we see that oilfield services come in and there is some sort of deflationary pressure or more competitive pricing, that has not been included in our forward looking back half of twenty twenty five estimates.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And something I'd like to commend Chris has done very well with is we've in the forty years that I've run Matador going back to very inception, we've always taken the approach when these times are that we don't pit one vendor against the other vendor and just try to see which one will get down to the very lowest price. We've tried to build relationships. And we have found, for whatever reason, that has worked better for creating long term reduction and finding of efficiencies because you're not trying to beat them down, but you're working together and they have ideas how to do things faster and better. We have them. And by working together, for example, our driller, either they or their predecessors have drilled virtually every well that I've drilled in this 40 career.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And they're finding ways to improve and we are. And it's been a great collaboration. And the same thing on the pipe business. We're using the same guy for years and years. And then virtually all of our completion or fracking has been done either by Schlumberger or Halliburton.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And in there, after each job, we do a postmortem on whatever area and say how can we improve? How can we give you better notice? How can we create the efficiencies? And Chris and his team and Cliff Humphries have done just a great job of building those relationships and the communication between them that has led to a lot of these efficiencies. And the crews, know, that Chris and our drilling engineers have done a good job of training the crews to look for those little ways to make things more efficient and bring down the cost.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

Chris, I'm sorry for jumping in on you like that. But I just couldn't resist to brag on you all a little bit on how you've done it without beating people down, but giving them to suggest ways too and for you all to find ways.

[Christopher Calvert, EVP & COO at Matador Resources Company]

Yes. Thank you, Joe. Appreciate you pointing that out. One thing I would also just want to point to is I think back to even Zach's question about activity levels as we look into the back half of the year. We understand the headwinds of volatile commodity times, but we also see opportunities.

[Christopher Calvert, EVP & COO at Matador Resources Company]

And one of those opportunities is high grading operational equipment, whether that's rigs, frac fleets. And so like Joe had mentioned, primary pressure pumping providers, which is Haliburton next year, we've managed to high grade a lot of equipment service personnel to where we are able to implement and integrate those simul and trimal frac opportunities. And so like Joe said, it is all about relationships and something that Joe has cultivated over forty years that we continue to push forward today.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Philip Jungworth from BMO.

[Phillip Jungwirth, Managing Director at BMO Capital Markets]

Recognizing that an IPO is just one of the options you could look at to unlock midstream value, but as you think about San Mateo from a public investor standpoint, how important do you think it is that you have a competitive organic growth profile for Matador or is visibility around third party volumes enough? And if it is important, do you think of that as more of an absolute type, low mid high single digit type number, or is it more relative to overall Permian Basin levels?

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Thanks, Phil. I think the to start that off, I think Matador thinks of itself as a relative grower in the basin. And I think, obviously, that growth rate is balanced with the free cash flow margin, as we've discussed previously. But I think our portfolio and the depth of our inventory life allows us to grow and sustain that growth with the type of returns we want to have over a long period of time. And I think within that, it it does the partnership that we have with San Mateo, the integrated nature of that business is is key to Matador delivering on that and is key for San Mateo from a growth profile.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

So I'll let Brian talk more about kind of how we think about Matador growth versus third party growth. But I think, first and foremost, the nature of how this business has come into play has really been around driving a superior result for Matador's free cash flow.

[Brian Willey, EVP - Midstream at Matador Resources Company]

Thank you, Bill. I think when we look at growth at San Mateo, we see opportunities both at Matador and with third parties, as Joe mentioned earlier. We have a lot of repeat customers on the third party side in addition to new customers that we continue to look at and pursue. So especially up in that Northern Lee County area where the Marlin plant just came on, we think there's some really good opportunities there. As Joe mentioned earlier, the Marlin plant's about half full right now.

[Brian Willey, EVP - Midstream at Matador Resources Company]

I mean, it's about fully committed on the reserve capacity side and it'll take a couple of years to fully fill up, but it is fully committed. And so, all those opportunities for growth present themselves on both Matador side and being able to continue to follow Matador and the drill bit. And then with third parties, we have just a great team and a BD team that's doing a fantastic job. So we see growth on both sides.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And I'd like to emphasize is that we got into this with the whole idea that, yes, Matador might be the major customer. But to succeed and meet the test of quality, we needed to be sure to attract third party business. And we really tried very hard to be sure that the run time of 99%, they enjoy that benefit and all the other benefits the same as Matador. And I think that's why it's led to repeat business, is they did feel they were fairly treated and communicated and liked the operations. And so far that's been without problems.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And we appreciate their involvement and we appreciate the guys in the field who have really done the extra job to reach that 99%. So when you had High Storm Uri go through, they didn't shut it all in and say we'll get back next week when it warms up. They slept in their trucks and kept the plants going. And in addition, we've improved the system by adding that connector line between the Black River system and the Marlin system. So we've had gas going in each direction on that connector line as the offloads are needed.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

So proud of that record and proud of the support that we've had. And I think that's given us additional opportunities of what we should do for the Midstream business and which drives the value of the Midstream business. So there's some good options that we have ahead of us. And so we're very glad we elected to build the plant to take that $200,000,000 build the plant, which left us with enough money to pay down debt and not just putting in additional drilling. I mean that just adds to the inventory.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And while we feel we're well positioned, be to keep building the midstream and the regular oil and gas operations and to them in tandem to do that together and didn't do one to the exclusion of the other. Think that gives us more balance and more stability and gives a big upside to the stock.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Kevin McCurdy from Pickering Energy Partners. Your line is now open.

[Kevin MacCurdy, Managing Director at Pickering Energy Partners]

Hey, good morning, Meadowood team. Appreciate the details on the cash tax reductions this year and the change to guidance. Any thoughts on when Matador might now become, say, object to the AMT? And how cash taxes will trend on a yearly basis until then? This seems like maybe an underappreciated improvement to your free cash flow outlook. Thank you.

[Robert Macalik, EVP - Administration & Finance at Matador Resources Company]

Thanks, Kevin. Yes, this is Rob Macklek. I'm the EVP of Administration and Finance. And as we did note in our release, we're very pleased with the tax act and are very optimistic on the the cash tax savings that that will bring us.

[Robert Macalik, EVP - Administration & Finance at Matador Resources Company]

We do believe that this pushes out our obligations under the alternative minimum tax, you know, for several years based upon our current rates, but, we're still analyzing that part. So I do think that that is going to be a benefit for us starting in 2025 and beyond.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And also to show our seriousness in these areas is that Rob is moving over to do more strategy and chief financial work for the midstream. And Mitt Kalodny has taken over the chief accounting officer. And he's come in and done an excellent job. And he and Rob have really worked together, which is important. So Ben, thank you for joining us and doing the good work.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Oliver Huang from Tudor, Pickering, Holt and Company. Your line is now open.

[Oliver Huang, Director at TPH&Co]

Good morning all and thanks for taking my question. Just wanted to circle back on activity. Understand the timing of the drop down to eight rigs as part of the full year plan here shortly, But the year's upstream spend trajectory would seem to imply another leg down in Q4. So I was hoping that you all might be able to walk through the cadence of frac activity anticipated for the rest of the year and any flow through effects we should be aware of when thinking about the start of 2026.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Yeah. I think, Oliver, to point, we do see with the current level of activity that to be generally the case. And I think it's a function of, frankly, a lot of good work by the team to pull activity because of the efficiencies that we've mentioned before into the third quarter. And so you're seeing a little bit of higher third quarter capital with wells that are being turned on in, frankly, the last couple of weeks of the third quarter. So they're really not contributing to third quarter production as much as they are in the fourth.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

It's very similar to what we saw in the first and second quarter of this year. And with that, I think that is an important thing for our investors and for you all as analysts to understand about the go forward nature of the Matador business is because the Delaware has such prolific rock and multi zone development is an important piece of how to develop that rock, there will be some larger batch sizes. And those larger batch sizes will naturally have some lumpiness to production as they come on because when they come on, they're really, really prolific. But even with the efficiencies that we are capturing across drilling and completions, there's longer cycle time to having some of the bigger programs than there has been when it was kind of individual or paired developments.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Leo Mariani from Roth. Your line is now open.

[Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

I was hoping you guys could talk a little bit to kind of uses of free cash flow here. Obviously, you guys referred to the brick by brick program here in terms of M and A. So I was hoping you could kind of comment a bit on what you're seeing in the M and A environment. And then obviously here in second quarter, you guys bought back a decent number of shares, I guess for the first time in the company's history, roughly 1%. So could you maybe kind of talk to both of those and how you sort of balance that initiative and is the buyback going to be fairly price sensitive here?

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

Sure. Thank you, Leo. I think first off, just to kind of level set how we think about it. So we think about free cash flow post the dividend because we view the dividend as sacrosanct. And so with that, after you pay the dividend, the remaining free cash flow in any quarter, we think about is how are we going to drive the best value for shareholders over the long term.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

And with that, we kind of see a couple of different buckets. There's really three that we think about, the first of which is the brick by brick land acquisition to kind of reinvest and replenish our inventory life, which we think is very important and runs continuously. It's a strength of the Matador team. The second is, as you noted, the share repurchase program that we have a $400,000,000 authorization on, and we're active in the second quarter, in our first quarter of having it. And then the final is balance sheet management and paying down debt.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

And I think, really, a lot of people have asked us about, is there going to be a formula or is there a specific way to think about how we do that in the future? And as we look at it, we think about the value that can happen and frankly, the way that the brick by brick works. We want to make sure that when we have those opportunities, we can capitalize on them. Similarly, we can't predict the macroeconomic volatility. But when it happens, we want to use the share repurchase program to capture that.

[William Lambert, EVP - CFO & Head of Strategy at Matador Resources Company]

And within all of this, we always want to be mindful of kind of leverage and driving total debt down over time as well. So I think that's really how we think about it. I'll let Brian Erman jump in on more of the A and D specific.

[Bryan Erman, Co-President, Chief Legal Officer and Head of M&A at Matador Resources Company]

Thanks, Bill. Yes, this is Brian Erman, Co President, Chief Legal Officer and Head of M and A.

[Bryan Erman, Co-President, Chief Legal Officer and Head of M&A at Matador Resources Company]

And I think just to reemphasize what Bill said, we really do view the brick by brick approach as a strength of the company. That's something we've always done. It's something we've always had a lot of success at. And I think as the market currently is a little more focused on that versus the bigger deals, we view that as a competitive advantage for Matador. As far as the quarter, it was just another typical execution on the brick by brick approach, all over the basin, focused mostly in and around our existing units, but really all over the area and again, just something that we view as a real advantage to Matador.

[Operator]

Thank you. Ladies and gentlemen, Jason?

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

No. Go ahead. Are you ready for closing remarks?

[Operator]

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

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

Thank you very much, and I thank you for all your questions. I thought all the questions today were very appropriate and good inquiries. I hope we've answered them. If not, call us back, and we'll discuss them with you. So we invite you to do that to be sure you've gotten your questions answered.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

The second thing I'd just like to note, I hope that you can see, is that Matador has now grown to a part where we have approximately $10,000,000,000 to $12,000,000,000 in assets depending on oil and gas prices and the other opportunities. But we have a team here, a true team of everybody pitching in and we collaborate and work on this together. And it's been a steady process over forty years. I started in 1983 with $270,000 and we've enjoyed, over those forty years, approximately a 20% year after year growth in value. So 20%, $270,000 to 10,000,000,000 to $12,000,000,000 in assets.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And obviously, you all know me, it wasn't because of my brilliance at all, but I've somehow been able to, year after year, attract the talent to spur that growth. And we're really very excited the way everybody has been pitching in and helping ideas and getting a little better every day. We're in a more complex environment today than we have probably at any time in our past where Washington is bouncing the ball around and you're not sure where it's going to land and we're trying to maintain maximum flexibility, they continue that growth not only in quality of production, amount of production, but in the quality of the production and creating the flow assurance that we can get our product out of the basin and continue to try to upgrade our people and bring on young people. We have a big internship program, 30 people this year. And the people in the field, we think they're remarkable.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And how they take the initiative and keep the plants and the wells going and very grateful for them and the banks. And everything seems to be coming together that we can continue to offer consistent growth over that time, industry leading cost and the knowledge that we've been the first movers on a lot of new formations out there in the Delaware over the years. So we think things look very promising to us. We're excited. And the real issue is there's a lot of things up in the air, as we know, in Washington, in the environment, in the markets.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And so we're trying to keep this balanced approach guided by the fact we don't want to increase production if we're not increasing cash flow. And we don't want to be just increasing cash flow and not replacing and adding to our reserves. So very pleased with the growth and continued growth in reserves, continued growth in profitability and ideas. Andrew Parker and his group, VPs are doing a great job of coming up with more ideas all the time and refining their studies. So that's on this call.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

I know you've asked questions. I hope we've answered them. But at the same time, supplied you with the notion that internally, we're very optimistic. And you probably saw that in the last open period where our leadership, we had more insider buying than any other company. And significantly, to me anyway, of having run this company for forty years, we have a shareholders, we have an employee share purchase plan, and we have over 95% participation.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

So tremendous support from the people on staff to take advantage of it and can see the growth. So we like our chances. The organizations come together. The finances are there. Plenty of dry powder, some great technical work.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

And having worked all over the basin, we have as Tom was prime to give you a rundown In all these different areas, we had good ideas and good plans. And want to once again, someone mentioned this, I truly want to invite all of you all at one time or another, come visit with us, get to know us a little bit better, have lunch or breakfast with us, meet our young people, and we'll do our best to answer all of your questions and just try to get to know each other better. And I think you'll see that this is what's great about the oil and gas. It's a win win business. And we're here to win it for our shareholders, but we're also here to win it for you and others and gain your trust and confidence.

[Joseph Wm. Foran, Founder, CEO & Chairman of the Board at Matador Resources Company]

So with that, I'm going to sign off, but really offer the sincere invitation to come and see us. And take us up on that, and let continue to y'all do your job, and we'll try to do ours.

[Mac Schmitz, VP, IR at Matador Resources Company]

Back to you, Gigi.

[Operator]

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

Participants

Executives

• Mac Schmitz, VP, IR
• Joseph Wm. Foran, Founder, CEO & Chairman of the Board
• William Lambert, EVP - CFO & Head of Strategy
• Brian Willey, EVP - Midstream
• G. Gregg Krug, EVP - Marketing & Midstream Strategy
• Christopher Calvert, EVP & COO
• Robert Macalik, EVP - Administration & Finance
• Bryan Erman, Co-President, Chief Legal Officer and Head of M&A

Analysts

• Tim Rezvan, Managing Director & Equity Research Analyst at KeyBanc Capital Markets
• Scott Hanold, Managing Director - Energy Research at RBC Capital Markets
• Zach Parham, Executive Director at JP Morgan Chase & Co
• John Freeman, Managing Director at Raymond James Financial
• Noah Hungness, Equity Research Associate at Bank of America Merrill Lynch
• Phillip Jungwirth, Managing Director at BMO Capital Markets
• Kevin MacCurdy, Managing Director at Pickering Energy Partners
• Oliver Huang, Director at TPH&Co
• Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC