Matador Resources Company (MTDR) Earnings Call Transcript & Summary

Yes, sir, that is correct. 89% have voted.

And the voting of the directors, they all received approximately 98%.

Yes. I think for all the proposals, sir, and we'll put the specifics in the 8-K, but they all received over 97% approval. So it was a great turnout.

Thank you very much, and thank you all for that expression of support, and we'll get out and do our best this year to not just get it back to 33, but into some new highs this year. That, with Brian's report, this completes the scheduled items of business to be conducted at this meeting. Any new business? Seeing none, the formal portion of the 2021 annual meeting is now adjourned. At this time, I would like Matt Hairford, Matador's President, and San Mateo's President; and David Lancaster, our CFO, to provide some remarks and color on our recent and current operations. Before introducing Matt, and I have a long history together and our families do, we have farmed together in the Hooker, Oklahoma area now for over 100 years, and it's been a delight to have that kind of friendship and time together. Matt?

Thank you, Joe. And I just want to -- Joe talked about the 100-year relationship. I think it's an important part of the Matador culture, Joe, that's all been done on a handshake. Never a single document created from that. It's just my grandfather working with his grandmother and down to where now, it's Joe working with my nephew. So very proud of that. Joe, Dave and I are going to do our normal Lewis and Clark thing here. I'm going to try to be pithy, but I can't promise anything because we really like to talk about Matador. But before we start that, I want to introduce my wife Kristy sitting here next to me. So thank you Kristy, thank you, Nancy. Thank you all the spouses, all the family members of the Board, the staff and the shareholders, we couldn't do what we do without your support. So, thank you. So we'll get into the presentation here, but I just want to make a couple of comments about some things that Joe and Tim have talked about. We were here at this meeting last year, we were talking about the fact that we had started the year with a 6-rig program. The Russian-Saudi thing happened, COVID happened, and so we pivoted to a 3-rig program. The goal for the 6-rig program was for us to get to free cash flow. And we were very confident with that 6-rig program, we could. The team did a fantastic job pivoting to a 3-rig program. And as Tim and Joe said, we've achieved that free cash flow with just 3 rigs. So hats off to the entire team. We're also going to talk about cost efficiencies. We're going to get a little into the weeds there that Tim was talking about. The team has done a great job there. And on the San Mateo front, last year we were talking about the San Mateo II expansion and how that was going to be complete. And so that's all done. So we look forward to updating you on that. So all in all, I think the back half of 2020 and the first 5 months of this year, I think, have been very good for Matador. So I think we like what's happened. We like what we've got planned for the rest of the year and into 2022. So with that, we'll jump off into this. Just a quick trip around the horn, like we usually do. There in North Louisiana, our Haynesville and Cotton Valley assets, we've got around 18,000 net acres there. It's all held by production. It's all gas. There's very little oil production there, but it is a great gas asset and it's all held by production. Moving down into South Texas, you get to our Eagle Ford asset, we've got around 26,000 net acres there. And couple of days go, I asked John [ Silver ] -- John's sitting over here somewhere, if it was all held by production, and John said, I think most of it is, but I'll get back with you. So about 5 minutes later, he sent me an e-mail. And it says, it's not 100% held by production, but 99.7% of it is. So it's a great asset for us. It's oil, it's about 74% oil, 26% gas. Moving into the Delaware. That's where we're really focused right now. We've got 125,000 net acres there. We've got 4 rigs running, 2 running down at Stateline, 2 running at Stebbins. It's the primary focus for the company for the last few years, and it's going to be the primary focus for the next few years. So if you look at the production volumes, there are the 89,000 barrels of oil equivalent per day, 95% of that comes out of the Delaware. On the reserve side, there's the 270 million barrels of oil equivalent, 97% of the reserves are in the Delaware. So this is where we [ planted our pick ] and we're excited about doing that. You see the market snapshot. We won't go through those numbers, but I'll just say it again, for the first quarter 2021 there were $64 million in free cash flow. So we're very proud of that, we used some of that to pay down debt. And then also the dividend. We're very happy to be in a position that we can pay the dividend, and we're happy to return that to the shareholders. So David?

Good morning, everybody. It's always a pleasure to be with you, and I'm glad we could do this in person this year. It feels a whole lot better. So my wife, Sue, is a little under the weather this morning, so she wasn't able to be here, but I know that she's listening because I set her up on her iPad before I left. So I just want to tell Miss Sue, I love you, and I hope you get to feeling better soon. So anyway, I wanted to just start off by saying that we reported really very strong results in the first quarter. I'm sure you saw your earnings release and the information that we put out. But it was really a very strong quarter and a great start to the year. Our first quarter production was a little better than we expected. It was about 74,000 barrels of oil equivalent, BOE per day. But in the second quarter, we think that's going to go up about 20%. So you're going to see us approach about 90,000 BOE per day in the second quarter because we bought a lot of big wells on -- at the end of first quarter and the early part of the second quarter at the Rodney Robinson leasehold and at the Stateline. We were pleased to announce that we had record oil and natural gas revenues. We had over $300 million in oil and gas revenues in the first quarter alone. And it's not too long ago that I remember that, that was more than we had in the year. So it was really quite an achievement to see us have over $300 million of revenue. As Matt said and we'll talk about it a little more. We just continued with our capital efficiency improvements in the first quarter. The drilling and completion teams, production teams have just done a marvelous job of getting our well costs down. And we actually brought in some wells that were just about $600 a completed lateral foot, which was an all-time low. And our capital expenditures were about 11% below our expectations. We achieved record high EBITDA, earnings before interest, taxes and depreciation, and that was almost $200 million. So that was the all-time best we'd ever done in a quarter. And as Matt just mentioned, we generated about $64 million of free cash flow, which was what we had left over after we paid for our capital expenditures. We're really happy to report that we repaid $100 million in debt in the first quarter. So that was awesome. And on top of the $35 million that we had repaid in the 4th quarter, we've repaid $135 million against our revolving credit facility that are based on reserves in Q4 and Q1, and we're still making progress on that, and I'll show you that a little bit later. As Matt said, we did initiate and pay the first dividend to Matador shareholders. Happy to do that. I think you got your second check yesterday. So I hope you've seen that. And if you didn't, well, I guess I'm the guy to come tell. So -- and we'll be sure that you do get it, but it's nice to do that. And I'm also pleased to report that the company beat Wall Street's estimates in Q1 of 2021, which marked the 27th consecutive quarter that our teams either met or exceeded the Wall Street estimates. And believe me, that's a team effort, and it's one that we're all very proud of. So thank you all for that. This is a slide that we usually show at this meeting. I show it a lot of the time at any kind of meeting or conference that I'm at. This is just the acreage position in the Delaware Basin, which, as Matt said, is where we're doing most of our work these days. And it shows the key asset areas. And in past years, we've talked to you about what we're doing at the Wolf asset area down there in Loving County, Texas or up in Antelope Ridge or Rustler Breaks or the Northern assets that we acquired a lot of that acreage when we did the merger with HEYCO back in 2015 with George Yates's company. And we call those areas Arrowhead and Ranger. Last year, we started talking to you a little bit about the acreage that you'll see right on the New Mexico-Texas border that we call Stateline. And we're currently running 2 rigs there. We were running 2 rigs there at this time last year, but we hadn't turned our first wells to sales. And that's been a great project for Matador. It's one that we were very excited about, but we just didn't have any of the wells turned on. We turned the first wells on, 13 of them in September of last year and then 13 more in April of this year. The wells that are on the Eastern side of that leasehold, which we acquired from the Bureau of Land Management, are called the Boros wells. And the wells that are on the Western side are called the Voni wells. And like all the wells that you saw, I hope out there in the map on the Delaware Basin, many of them are named after long time friends and shareholders of Matador. That's kind of our tradition and one that we enjoy. So the Boros and the Voni wells have been terrific wells for Matador, and they've been responsible for a lot of the growth as well as the wells that you see there in the Western part of Antelope Ridge that we call the Rodney Robinson wells. All these have been some of the best wells that Matador has ever drilled. And most of them have come online since the last time we stood before you and got to talk to you. So this morning, since we can't -- don't have time to talk about everything -- I wish we did -- we're going to focus on the Stateline. And Matt and I are going to tell you a little bit more about what's going on in the Stateline.

Thanks, David. So Tim mentioned the step change for capital efficiency, and that's what we're going to talk about here on this slide. So you can see in the upper left of the bar graph there. If you look back to 2018, we were spending a little over $1,500 per completed lateral foot. And so we set out on this mission to drive those costs down. And Billy and Cliff and Chris and Josh and Patrick and the entire operations team have done a really fantastic job. So you can see in 2020, we've got those costs down to around $850. So the goal for the year for 2021 is $730. So you can see in the first quarter, we're off to a good start. We've gone from $850 down to $785 per foot. But as David mentioned, the 13 Voni wells that we just finished came in at just a little over $600 per foot. So I think we're pretty excited about maybe actually beating the $730 target. Cliff, I'll put you guys on the spot here. But anyway, the operations team has done a fantastic job. A big portion of this is going to these longer laterals, these 2-mile laterals. So if you just simply think about it, if you're going to drill 2 miles worth of laterals, you can do it 1 of 2 ways. You can do 2 vertical portions and 2 horizontal portions, or you can just do one vertical portion and a longer horizontal portion. So you save all the cost it takes to drill that second vertical section. So that's a huge benefit to us. There's lots of efficiencies that we gain along with that. And so the land and legal team are primarily responsible for what you see on the right side of this graph, and that's moving to the longer laterals. So you can see last year, we had about 74% of our wells that were 2 miles or greater. That's up from 8% the year before. And so it takes a while to get some [ seam ], get these things going, but the land and legal team has done that. So for 2021, we anticipate that 98% of all the wells we are going to drill are going to be 2 miles or longer. So there's one well, down at Wolf in Loving County, that is 1.5 mile. It's 1.5 mile because of the geometric shape of the lease. We couldn't put a 2 mile lateral in there. And so the team, I think they're like, we'll show you. So it's 1.5 mile lateral, they drilled it in 9.8 days. So less than 10 days. So that's a $300,000 savings right there. So as we go into 2022 and beyond, this is going to be more of the norm, somewhere in the high 90s percentage on longer laterals. So Tim also talked about service cost. And so we don't have much control over that. When oil prices go down, service costs go down, when they go back up, service prices go back up. But what we do have is control over these efficiencies that Tim was talking about. And so I think the team has done a fantastic job in not only drilling the longer laterals, but pushing technology. So Patterson, our drilling rig partner, we work very closely with them. It's really a partnership that creates value. And so they provide the rigs. They're the high -- the most high-tech rigs they have. And our operations guys push those rigs. I mean, they hit the gas and try to make them drill as fast as they possibly can. That's good for us. It's good for Patterson. Patterson loves it when we announce drilling records, and they can tell their other customers. So it's really how we treat our vendors. We're looking for vendors that are going to help us create value, and that's what we're doing there. On the technology side, on the bottom hole assemblies, so the bits, the motors, the measurement wall drilling tools that we use, the team has continued to push that envelope to making more and more robust tools to the point where not always, but on occasion, we're able to drill one of these 2-mile laterals all with one bit, one motor and one MWD. So that saves a lot of time which saves a lot of money. So my favorite example is on the top left of this chart, you can see we had drilled some Wolfcamp B wells in and around the Stateline, and they were averaging about 38 days. It's a bit deeper, a little bit harder to drill. And so the operations team working with the Geoscience team, Ned and his group, they identified a target in a little different interval, still within the Wolfcamp B. They thought well, the rock is probably as good, maybe it's even better than what we had drilled before. So let's try that. And so this Boros 228, they drilled in that interval, and they went from 38 days to 16 days, from spud to TD. And so that's really important. I mean, that's over 20 days. And so we've talked about it in the past, when service costs are where they are now, a day on the rig is about $50,000. So in that 20 days, you've saved $1 million already. And so if the rig count goes up, service costs go up, maybe that number is $100,000 per day. So that 20 days is now $2 million. And so we talked about, is this just the transition in the reservoir [ where that's ] drilling faster? And so the subsequent Wolfcamp view, we came back and drilled later, we drilled in 19 days in the same interval as the ones that were 38. So that's pretty sticky. So the drilling guys are knocking it out of the park here. Chris and Cliff, Billy, the guys on the completion side, they are also working on efficiency. So for the past several quarters, we've moved to a technique with our fracs, we call zipper-frac. So we'll have a frac crew working on one well. We'll have a wireline crew working on the other. And when they get in, they just switch. So it's a very efficient way to get that done. So moving even to more and more efficiencies. We've recently gone to what we call simul frac. So with the simul frac, you're actually fracking 2 wells. So you have enough frac equipment on location to pump into 2 wells at the same time. And you've got 2 wireline units that are out there working on 2 other wells. And so you just go back and forth. So it eliminates what Chris calls white space. So we're busy all the time with the frac crew, busy all the time with the wireline crew. And we estimate based on our first effort here, around $250,000 per well in savings. And so about 60% of the wells that we've got for 2021, we'll be able to do this simul frac. So looking forward to seeing those cost savings. Down on the bottom here quickly. You can see the photograph there is a picture of our MAXCOM room, just down the street on the 11th floor of our office building. And if you haven't seen this and you're in town, we would love to show it to you. It's something we're very proud of. We've got drilling engineers, geoscientists working 24 hours a day, side-by-side, shoulder to shoulder. They're real-time geo-steering these wells. And so we talk about a lot about better wells for less money. The cost saving is the less money side. The staying in zone is the better well side. So we're up over 95% for the time we're in zone. And very often, a lot of these wells are 100%. So hats off to that team. Additionally, they've set 123 internal drilling records. When I opened my e-mail on Tuesday, Joe, we had 119, and then they added 4 over the weekend. So that saves us money, too; there's $15 million in savings just [ by ] with those drilling records. This is a photograph of one of our production facilities at Stateline. It's actually the Voni East tank battery. And in the background, you see the Patterson rig that's running on the Voni slot 4, I think it is. And so we talk often about the drillers have these wells for 2 or 3 weeks. The completion team comes in and does their thing for 2 or 3 weeks, and then Glenn and Kristen and Ben, the production team, they've got these wells for 20 or 30 years. So it's incredibly important that upfront, you get the design, the construction and the operation of these facilities right. Get your ducks in a row because when you're bringing on 12 or 13 of these Stateline wells, there's a lot of volume coming into these facilities. So on the first tank battery we built, the Boros East, we brought several wells into that facility. And at one time we had over 10,000 barrels of oil a day coming into that facility, over 55,000 barrels of water and over 62 million cubic feet of gas in that one facility. And so we've got 4 of those on the Stateline. So I think the production and facilities team has done an outstanding job, again, designing, building and operating these facilities. So hats off to them. What you can't see in this photograph is the San Mateo contribution to this effort. So we've got the 3 pipe system installed at Stateline. It was there when we were ready to start pulling the wells back. You can't see the pipelines because they're underground, but we were there. Whenever we started pulling the wells back, the first barrel of water went into pipe, the first barrel of oil went into pipe, and the first Mcf of gas that we sold was also one pipe. So a good example of both those teams working together. It's -- there's a lot of value created there. So I'll let David talk about the wells.

I just want to show you a few of the well results that we've received -- or that we've gotten out here. A lot of the wells that you see there in the green are some of the first results we disclosed from the Voni wells. And in particular, I want to point out that the Voni 216, which was a Wolfcamp completion. Actually, we had a 24-hour initial potential, which means we tested the well over a 24-hour period. And we've achieved 5,000 -- over 5,000 BOE per day. So that was an all-time record for Matador. And represented the best IP test that we had, had. But even though that was the best one, there's plenty of 3s and 4s and 5s in that group. So we're really excited about the results. In addition to the cost, I want to kind of focus your attention on the lower right-hand corner of this screen, because it really shows how strong the performance of these first 13 Boros wells that we put on last fall has been. So those wells have been producing for about 8 months now. And if you look at that slide, what you'll see are 2 dotted lines. And those 2 dotted lines are kind of what we call type curves or estimates of how we think those wells are going to perform. And the lower one says, if we followed that curve, we think these wells would make about 1.5 million BOE, barrels of oil equivalent in their lifetime. And if we follow the upper curve, that's about 2 million BOE. And that's sort of the range that we were projecting for these wells when we made our investment decisions and got started. The actual performance of these wells, then, is shown with the red and blue and purple lines that you see there. And as you can see, none of them are below our 1.5 million estimate. And some of them, quite a few of them, in fact, are above the 2 million estimate. So we're extremely pleased in the early performance of these wells. And the other thing I'd say is if we were fortunate enough this morning to be in Professor Ehrman's petroleum engineering class, she would tell us that these lines look awful flat. And what we're projecting here is cumulative production over time. And just trust me, because I have attended her class, and I know that as long as these lines stay pretty flat, are pretty straight. And you can see how straight they are, not really bending yet. That means that on a daily basis, the production is staying very flat, not declining a lot. And that's kind of what we're seeing with some of our longer 2-mile laterals out there in the Basin. They don't have quite as much decline early on. We put them on, we kind of cut them back a little bit, put them into our facilities, and then they just rock along at fairly constant rates for a number of months. And that's a very encouraging sign and something that we like to see. I think I got that right, Professor, didn't I? Very good. So Matt?

Okay. So we'll switch back over to San Mateo now. So last year, at this meeting, we showed a slide very similar to this, and we were talking about we were going to expand our 3 pipe system up into the Stebbins area and down into Stateline, and I'm happy to report that's done. So there is no longer San Mateo I and San Mateo II. They've been merged. It's just San Mateo. These assets have been built, and they're operational. So what we did in the greater Stebbins area up to the north, we added a 3-pipe system. So you can see the black line on the map there. That's actually a gas pipeline, a trunk line that runs from Stebbins down to our Black River plant down at Rustler Breaks. And so all the gas from Stebbins gets compressed and sent down to the plant. Additionally, in that same right of way, we put an oil pipeline. And so we've got a central delivery point down closer to the plant in Rustler Breaks that all the oil from Stebbins goes down to that CDP. The water gathering and disposal is done locally. You can see the 2 blue dots there. Those are actually saltwater disposal wells. So we've got all that 3-pipe system is up and operational. Down at Stateline, we did something very similar. And by the way, the pipeline from Stebbins down to the Black River plant, so it's the Bellau Wood pipeline, which will make a little more sense here in just a minute. At Stateline, we built the same type of trunk line from Stateline up to the Black River plant. We called it Tripoli. So with D-Day here a couple of days away, I think it's appropriate [too ] we talk about these pipelines. So all the gas from Stateline going up to the Black River plant. We have an oil gathering system there. We actually have another central delivery point. So that's our second one at the Stateline acreage, where we sell into the Plains pipeline. So that takes care of the oil. The water we gather and we move it a few miles to the east so it's offloaded on a third party. At Wolf, it's about the same as we talked about last year. We have the gas gathering, we don't have the processing any longer. We'll talk about that. We sold that to EnLink here in 2015. But we still have gas gathering. We've got water gathering and disposal, and we have a third CDP, central delivery point on the acreage there at Wolf. So like I said, it's done. And so since it's done, we thought it might be interesting to actually look at what this is. And so what you'll see here in the top right is actually Plant #3 at the Black River plant. So it's a 200 million cubic feet a day facility. There's one right across the road looks just like it, for another 200 million. And then there's the first one we built, which is 60 million. So a total of 460 million cubic feet of gas processing capability we have. In the bottom right, this is a noisy place. This is where we've got gas compression down at Stateline. So all the gas, whether it's high-pressure, low-pressure or intermediate pressure comes into this compression station, gets compressed and sent on up to the Black River plant. The photograph in the bottom left -- and by the way, James Meier sitting back here, we asked James to put these pictures together and told him these are like your kids, and so he's like, "well, I'd like to show photos of my kids". So that's why you see this photograph here. Anyway, on the bottom left, this is interesting because it's actually an electrical substation. So you wouldn't think -- that's not saltwater gathering or disposal, or oil gathering or gas processing. So what it does is it provides power to our Black River plant and also to our saltwater disposal facilities in the area. And so the San Mateo team came to us while they were building the plant and said, look, we can get power. There's power in the area. But if we build this electrical substation, we'll have more reliable power, it will be better power, we'll have more control over that. And so we did. And thank goodness we did. It's turned out to be a great asset. Joe was talking about the winter storm, Yuri. And through that time period, there were lots of rolling power outages out in New Mexico. We didn't have that. Since we had the substation, we were able to keep up and running. So it turned out to be a great asset. But like Joe has said, the truly golden plated asset are the people that were out there running this thing. And so the storm coming with San Mateo team, they're like -- we're not going to shut down. We're going to keep going. And so they called out to the field guys and said, whatever it takes to keep that plant running, those saltwater disposal facilities, the oil gathering, keep it going. And so they worked day and night to keep those things up. And as Joe said, we were 1 of 5% of the plants in the Basin that stayed operational through the whole time. And so at the same time, the E&P guys, the production guys are over here, keeping the wells going doing the same thing. Joe said they were sleeping in the truck. I've argued with Joe about this. I don't think they were sleeping much. I think they were out there working. And so it takes both, right? If you're a midstream company, you have to have a tenant, a customer that's going to provide you volumes to run through your plant, to run through your facilities to keep them operational. Because if we quit moving that gas, it just doesn't work. So they had that in Matador. Matador looks for a midstream company that's going to be there when they need them. I mean that's kind of our slogan, we're there when you need us. And so both those teams kept going, and there's a chart, we didn't show it here, about other midstream companies that really just kind of shut down. So anyway, hats off to the team there. These are water facilities. So the top right is the first saltwater disposal facility that we built at Rustler Breaks. It's the Black River SWD #1. Most of the volume that comes into this system is on pipe. That being said, we do have -- and you see the sun setting there in the west, and there's an overhang over that. That's actually covering truck lanes. So we have the capability not only to bring water in on pipe, but also for people to bring it in on trucks, which they do. So if you look at the one on the bottom right, and I'm going to try something maybe a little tricky, but if you can see around the corner there, this looks like a fence around these tanks. What that actually is, is a concrete containment system. So we're required to build a containment system around these facilities. So if, in case there's a leak or when a tank runs over or something like that, it stays within that containment. What we're not required to do is build those out of concrete. So what we decided early on was we're going to go ahead and take the environmental safeguard that these concrete containments provide for us and spend the extra money and build our facilities right. So that's paid off because we try to attract blue-chip customers. And often, they come in and say the rate sounds good. It looks like you guys could provide a good service, but we want to come and make sure what your facilities look like. And so I can tell you 100% of the time, it's been thumbs up. So we're proud of these facilities. On the bottom left there, that's a booster station at Stateline for water. So I mentioned we were moving it a few miles to the east. All the water goes through it gets produced at Stateline goes through this booster station, on to another one and ultimately gets disposed. So this slide really has 2 things on it to talk about. The top is a time line, the progression for San Mateo. And we won't go into a lot of detail. But just going back to 2015, the first thing we did as a midstream company is we built a small cryo plant down at Wolf. It was 35 million cubic feet a day, not a big one. We spent about $32 million building it. Before we ever sent a molecule of gas through it, EnLink paid us $143 million for that plant. And so that was a really nice bump for us. So we took some of that money, went up to the Rustler Breaks area and built our first Black River plant. And it was 60 million cubic feet a day. We met our friends at Five Point Energy. We created San Mateo I, added another 200 million for that facility, which got us to 260 million. And then what we were just talking about, the San Mateo II expansion added another 200 million. So we're at 460 million cubic feet a day, which is roughly 0.5 Bcf per day of gas processing capacity. We've got 335,000 barrels a day of saltwater disposal capacity. And then we've got the oil system to complete out the 3 pipe system on the acreage. So the bottom part of the chart, and Joe, I'm going to do it. You said I was probably going to do it. We'll talk about profitable growth at a measured pace, right? And so I think that's what you see here. This is EBITDA at the bottom. So if you look at 2015, we had about $4 million. And you can see how that's ramped up over the last several years to where last year, it was $113 million in EBITDA. And we're projecting to get to $130 million for 2021, confident that we'll get there. So the red bars are gas, the blue bars are water and the oil is green, which the oil is starting to pick up some speed along the way. But anyway, you throw all that together, what ends up happening is San Mateo contributes $66 million to the EBITDA story for Matador. So we see huge advantages that I'd like to talk about for a long time, but I won't, but we see huge advantages to being both on the E&P side of the oil and gas business, and on the midstream with San Mateo. Dave?

And to summarize for you kind of what our capital plan is for the year and what we expect to achieve, you probably have seen this in some of our previous releases. But basically, we're going to spend between about $545 million and $605 million. So the midpoint of that's about $575 million this year. That's both for the E&P and the midstream. And the majority of it, of course, will be going to the E&P side of the business. This year, since we finished up the things that Matt was just talking about at the expansion of the plant and the pipelines. We're in a bit more of a maintenance capital mode for the midstream this year. So we won't be spending quite as much as we have in the last couple of years. And Matador share, that will probably be on the order of about $25 million. For that, we expect to drill and complete, in terms of sales this year, about 50 gross operated wells, 46 or so on a net basis. And in the lower left-hand corner, you can sort of see that in the first quarter, we actually came in a little under our estimate. So about $14 million, $16 million under our estimates. That was due partially to just savings that our drilling and completions teams continue to achieve with their efforts to drive down costs. And also some costs that we just didn't incur that probably will be incurred later on in the year. But all just to say where -- I just want you to leave knowing that we're right on track with the plans that we've set for the year and our cost objectives and our production objectives all look very good. This is just a slide then to show you what we expected to achieve with production. And really, the takeaway from here is that we expect our production to grow about 11% this year off of what it was last year. We are running the 4 rigs currently. We picked up the fourth one in March. We expect to run those 4 rigs through the remainder of the year. And if we achieve the kind of results we expect, then our production will be about 11% better this year than it was last year. So hopefully we'll be back next year, talking about how this year -- how 2021 was another record. I think of all the slides I had to show today, maybe this one's my favorite. So -- because it shows you the progress that we're making on paying down the debt under our revolving credit facility. That debt peaked at -- in the third quarter of 2020 when we had about $475 million in debt outstanding and about $40 million, $45 million in outstanding letters of credit. As I mentioned earlier, in the fourth quarter, we paid down $35 million. In the first quarter, we paid down $100 million. So we ended the quarter with only about $340 million in outstanding debt under the revolver. And this quarter, I didn't give you any numbers, but I can tell you that we're off to a good start. We've already paid down another $30 million of debt, and I hope we'll be able to do more than that before the end of the quarter. So I hope when we report again in July, you'll see that, that graph, that little or dashed bar on the far right has gotten even smaller, so. The number on the bottom, which is our net debt to EBITDA, sort of our leverage ratio metric, what I'd like you to take away from that is the banks don't want that number to get bigger than 4. If it does, we become in default under our credit agreement. So we want to keep that number as low as we possibly can. You can see it got up kind of close to 3 at the end of the year, and there were some nights last year that I was worried it was going to get a little higher than that. But it didn't, and that's a tribute to the entire group. And this quarter, we think we'll get it back down to about 2. And I think if things continue to go well, you'll see that number continue to decline as well, which is something that our bankers and our creditors and all are always looking at. So just to kind of wrap up Matt's and my comments, we've listed for you kind of what we see as the current investment highlights in Matador. We know all of you are owners, but this is what we tell people, why we think Matador is a really great investment. We think we are positioned for continued free cash flow and differentiated production growth. We've begun to return value to our shareholders through the payment of a dividend. We really do have a pretty strong and simple balance sheet, and it's improving all the time. We absolutely have high-quality E&P assets, and a rapidly growing midstream business that we're working to grow together, and great people to manage and operate and grow all of that. We have made a step change in capital efficiency. And I think that Matt has explained that to you and showed you how the drilling of these 2-mile laterals has really helped us to reduce the cost per foot. As Tim mentioned, we are committed to and focused on the ESG initiatives. And if we're not, I know that Professor Rogers is going to make sure that we stay on that. So we will be continuing our focus on ESG. And finally, as Joe mentioned, we feel like that our interests are aligned with yours. We're big shareholders, too. It's important to us how the stock performs. And we're very grateful for every one of you who's an investor and an owner in Matador. And finally, just to wrap up, if you'll permit me a couple of personal comments. First of all, I'd just like to say thank you on behalf of the -- Joe, the Executive Committee to all the staff. We -- you all gave us a standing ovation a few minutes ago for the purported sacrifices that we made. But I want to tell you that every single staff member at Matador last year took a pay cut and no staff member at Matador received a bonus last year. So Joe and Matt and I and the entire executive team are grateful for all -- to all of you for the sacrifices that you made as well, so -- and we really appreciate it. We were all in the boat together, as Joe said, some of us rowing, some of us bailing, but you all did a marvelous job of keeping your focus and keeping your nose to the grindstone during a tough time, and I hope you know how much we all appreciate it. Second, takes a lot to put on a meeting like this. Joe mentioned that. We recognized Allison and Amanda and Janie and Mitzi, to the members of my team who help put it together, Michael Frenzel and Mac Schmitz and Andrew and Charlotte, who I don't know if you're here, but are probably listening at home, Matt Sorenson, I really appreciate all the effort that you put in. Certainly, everybody in this room contributes a little something to the slides that we've shown to the shareholders today, and we appreciate that. And finally, I want to show you that back in May, Matador was fortunate to receive from Investor Relations Magazine, their award as the 2021 Best Overall Relations for a small-cap company that's traded publicly in the U.S. And we were like, super-proud to get this award. And so -- and as you can see on the right-hand side, as a result of the award, they actually -- NASDAQ actually lit up their tower, and we were recognized on the NASDAQ Tower in Times Square. So I always knew I wasn't going to make it as an underwear model on Times Square, but I'm the -- I am really glad to have finally made it to Times Square. So to Mac and the entire team, for all that you do to help with our Investor Relations outreach, I really appreciate it all. And with that, Joe, I think we'll turn it back to you. Thank you all very much.

It's as you said, that it's surprising sometimes if you remember in college, having that tough course and you go the first day, I don't know how we're going to get through this and that everybody just picked it up, worked a little harder. And then we had a lot of extra little benefits to set company records in production and cost and have our name on Times Square. That's all been very gratifying, but the most gratifying thing is that you all would care enough to come today and devote your time and attention. And I just want you to know how much we appreciate it. We're going to renew our efforts, we expect to provide you with more company records this time next year. And I wanted to just make a couple of notes. I wanted to recognize Barry Banker. I think he gets a prize for coming the farthest distance. And Barry, thank you for being here from Nashville, one of our original 17 shareholders. And he came into town for a wedding and made the mistake of calling me as I was getting started and kind of trapped him in the backyard where we wouldn't let him go home until he committed. Second thing that some gives us a lot of personal pleasure is the dividend, that not only we reduced debt, but we have a dividend for you. And I want you to know it's purely coincidental that came into your accounts yesterday before the vote. Besides the MAXCOM room, which we recognize, we have a measurement room, that's been overseen by Gregg and Rick Alexander, and who've done great work, recruiting a really good team that measures and make sure we're being paid for the right amount, right volume as well as the right price. And they've made a difference. And in the MAXCOM room, we had 2 young geologists that entered the world competition for directional drilling, and I'm pleased to say that those 2 finished in the top 20. One finished number two in the United States. And I think that's a tremendous accomplishment. And as Matt mentioned, we're at the midway point between D-Day June 6 and Memorial Day. And I think we ought to just take a moment and recognize our military veterans here. So all those that have served, would you please stand and let us recognize you. And thank you again for your service, and appreciate the great country that we live in. And with that, Brian, is it time to offer a close of -- yes, when I look at Tim [ and I see ] they're going like this, I get the hint. And we have a nice job. So this completes today's meeting. Our staff will be available towards the back of the room following adjournment to meet with you and answer any further questions you may have. Thank you again for your time and attention this morning. And thanks again for being Matador shareholders. We really feel we've got the best group in the business. The 2021 Matador Resources Company Annual Meeting is now concluded.