Matador Resources Company (MTDR) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to Matador Resources Company Shareholders Town Hall Conference Call. My name is Towanda, and I'll be serving as the operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website for 1 year as we discussed in the company's earnings press release issued Wednesday, April 23, 2025. I will now turn the call over to Mac Schmitz, Senior Vice President of Investor Relations for Matador. Mr. Schmitz, you may proceed.

Thank you, Towanda, and good afternoon, everyone, and thank you for joining us for Matador's Shareholder Town Hall Conference Call. During this call, we will make forward-looking statements based on the current expectations. Actual results may differ due to factors noted in our earnings release and in our periodic SEC filings. We may also make reference to some non-GAAP financial measures. Reconciliations to the nearest corresponding measures can be found in our earnings release and on our corporate website. Finally, thank you for your interest in today's conference call. The Matador executive team is pleased to address the questions that we received. And with that, I would now like to turn the call over to Mr. Joe Foran, our Founder, Chairman and CEO. Joe?

Thanks, Mac. Welcome to everybody on the call or listening in. The purpose behind this, the reason we've decided to implement such a call is on our regular news release is mainly dealt with the financial institutions. Since we were founded by friends and family and have kept up many individuals, we thought this might be useful way for individuals to more directly visit with us or have their questions answered. The individuals are still a very important part of our shareholder group as -- again, as we did not come from private equity, but friends and family investing in us. And we want to preserve that line of shareholders and make it easier for them to find out, particularly as we grow, having started with $270,000 in 1983 to where we have over $11 billion in assets today. What is exciting for us -- most exciting for us at the moment is we implemented, today, our first shareholder repurchase program of shares. What is exciting to us is that before, we had such a priority of building production, we didn't have the opportunity to buy back shares at those times when we felt that our shares were going for less anywhere near their full value. We have that situation today where we feel that repurchasing these shares is a good economic move as a buying opportunity. So I'm pleased to report that today, we bought back 250,000 shares at about approximately $41.50, plus or minus a little bit. And we will continue to do so as long as this buying opportunity continues and that we're certainly serious about using this as another one of our tools in the toolbox to add value to our shares for our shareholders. Now having said that, we're off to a good start. In addition to the company buying back, we've had a number of officers that have bought shares today, and we'll have more through the rest of the week. Now I'd like to turn this to Brian Willey, our Chief Financial Officer, to answer some other questions that he's been taking the most common questions that we have, relay them to you. And again, if you have further questions, don't hesitate to call us. We're also open for visits and I want to mention that we will have an old -- as we've done for 40 years during the 40 years of existence an old -- each year has always been an old-fashioned shareholders' meeting where plenty of individuals, often 200 or 300, show up to meet with us in person, ask their questions. And that will be held June 12, and I want to invite everybody to come, and it will be in our building.

Thank you, Joe. This is Brian Willey, Executive Vice President and Chief Financial Officer. Perhaps the first question that we could address is a number of shareholders have asked us about our adjustment to our activity levels, where we're going to save $100 million in capital costs, a 7% decrease, but still have a 17% year-over-year increase in our production in a much more capital-efficient program. Perhaps I'll turn it over to Chris Calvert, our Executive Vice President and Chief Financial Officer (sic) [ Chief Operating Officer ], after Joe speaks first a little bit about this adjustment in our activity levels. Joe?

Well, thank you. The thing about this measure that we're doing is that we are still determined to resolve to have growth this year. Chris Calvert has come up with, I think, an outstanding program where we will save 7% on CapEx, but our growth this year will only decline by 2%, 19% to 17%. So I'm very satisfied with 17% if it reduces the risk and makes -- takes in -- saves us money that can be either used for share repurchase or acquisition of properties or other uses that would be more valuable than just spending more on drilling. 17% is a very strong number in today's world, and we may exceed that still.

Yes. This is Chris Calvert, Executive Vice President and Chief Operating Officer. And I think the only thing I'd like to communicate is just the excitement surrounding this 2025 revised plan. Brian and Joe both mentioned the numbers are still projecting 17% BOE per day with the year-over-year growth. We're really prioritizing efficiencies, and Brian mentioned the capital efficiency associated with this new plan. And as we look forward to that, it is -- it's well as around adjusting activity levels, high-grading operate equipment, operating equipment, whether that's rigs with our relationship in Patterson, a 40-plus-year relationship with Patterson; high-grading opportunities with our rigs to where we are able to drill extended reach laterals, larger well batches and just drilling wells faster. A lot of the efficiencies surrounding our play are drilling and completing wells faster. And so by high-grading rig equipment, that affords us the ability to be more efficient with our capital program. On the completion side, we'll be prioritizing being more efficient with our 2 primary fleets. That involves more simul-frac. Trimul-frac will be doing almost 40 wells with trimul-frac processes this year. And so I think the ability of the operations team to be nimble and to maintain efficiencies and to even increase those efficiencies year-over-year are what allow us to adjust our activity and still give a 17% year-over-year growth from a BOE per day. So I think with that, another question that we do receive, but I'll hand back to Brian Willey and Chris Tennant is around our midstream opportunities and the value of that business. Brian?

Thank you, Chris. This is Brian Willey, Executive Vice President and Chief Financial Officer again. As we think about our midstream business, we really see value in 2 different areas. First is the flow assurance, and I'll pass it off to Chris Tennant in a minute to talk more about that. And second is just the unrealized value, approximately $1.5 billion, that we don't believe is reflected in Matador's stock price. So naturally, we are looking at an initial public offering as well as other strategic transactions to be able to help Matador shareholders realize the full value of our growing midstream business. With that, I'll turn it over to Chris Tennant, our Senior Vice President and Chief Commercial Officer of Midstream, to talk more about the flow assurance as well as the growing midstream business. Chris?

Thank you, Brian. It's a great time for the business -- for the midstream business. We're hyper-focused every day on executing this business. Thanks to new assets plus an advanced operations team, we're able to deliver a greater than 99% run time rate for Matador and our other repeat customers. Additionally, we're very excited about our new Marlan plant coming online later this quarter, and it's coming in on an on-time and on-budget basis. These new assets, plus the ability to treat natural gas for nitrogen, is setting us up very well for exciting growth and expansion opportunities in the basin.

Great. Well, this is Brian Willey again. I think that covers many of the questions that we received in connection with this meeting. I'll turn it back to Joe, if you have any other remarks you'd like to make [ a close. ]

I have some more remarks in particular. I just want to mention 2 things. One is that where we are today, we're adding -- we have 10 to 15 years of inventory. We're adding to that inventory at all times, and we see those opportunities growing as there is some turmoil and concern about commodity prices. And so it's been easier to come to terms with people on deals. Everybody is trying, it seems like, working harder to make things work -- for make win-win deals. The second thing is that we've taken a lot of steps to try to put us in a position where we have strong balance sheet and can go either way on either adding back rigs, buying in the stock, making acquisitions and having that strong balance sheet as giving us more opportunities. Van, you've been leading the charge on acquisitions in the brick-by-brick strategy. Do you want to add to that?

Sure. This is Van Singleton. I would just emphasize 2 points. And you've already talked about them, Joe, but from my perspective and, I guess, across the company, having the balance sheet that we have gives us the flexibility to take advantage of these opportunities that we know are going to be coming up. Not every company has the strength of balance sheet that we do. We're already -- as always, trying to keep a pipeline full of the brick-by-brick approach. So we're closing deals every week. But we think there's more opportunities on that to come. And then the other thing is just to reemphasize the share buyback program. We tell people all the time that we do what we say we're going to do. We said last week we're going to do this, and we're off to a good start on day 1 with 250,000 shares, and we've got a lot of dry powder left to implement this program. So I think there's just more great things to come and really excited about how 2025 is shaping up and then looking at how the measures we're taking now and how that sets us up for future years. So I hope to hear from people and come visit us. If not, we're going to come visit you.

Thank you, Van. And remember, Van does what he says he's going to do. So I encourage you all to come here. But if not, you'll be hearing from Van. In that regard, I do want to emphasize that we're not just buying back stock and spending money on rigs or leases, but we've also been steadily increasing the dividend. We've increased it now 6 times in 4 years. And at today's price, it's about a 3% yield, which is above the value line median. And that's an opportunity, too, for people. And the consistency that we've had, hopefully, will make you feel more comfortable in making that kind of a move because we've had 40 years now of double-digit profitable growth. And we're proud of that record and give credit to our Board. We're keeping a strong Board, but we also have a strong balance sheet and a strong staff that takes a lot of pride in trying to get better all the time, attend the conferences, work together as a team. And [ thinks ] -- we can see our pipeline of deals and opportunities getting better and are very excited by the way the year is going to continue for us. We reduced debt in the acts that we took to get ready to be in this position where we could go in a number of ways to create value is part of it. We reduced debt by $190 million to where it's approximately about $400 million at this time. And we'll have upwards of somewhere between 1.5 and 2x that debt in free cash flow this year. It's a little early to say because we don't know exactly what prices are, which way commodity prices are going. For this reason, we did hedge production this year to protect us over the next 6 to 9 months so that if there's some dramatic in the price changes, that we're protected. And yet at the same time, we're free by doing costless collars to get out there. And if it should go the other direction, we're ready for that opportunity with our 10 to 15 years of inventory. And the test standard for that is will the wells return to 50% or better rate of return after drilling. As you heard, the hard thing to know is how successful our brick-by-brick program will be this year. Last year, we did 200 transactions. We hope to approach that total this year or exceed it. And Van and his land team are confident -- are headed in that direction -- looking for efficiency gains. So at the end of the year, let's see how we do on brick-by-brick, but let's also look at the efficiency gains and the return that we may have on our assets. And one thing in our assets to keep in mind is that we sold our certain noncore assets for $440 million, which was reduced debt as well as give us more powder to fulfill these objectives that we've mentioned to you. As I said, I'm very excited by this. This has been a great plan as it came together to realize that we have a plan where we're going to grow reserves 17%, but we've reduced debt. We're buying back stock in at a very attractive price that we also recommend for each of you to consider. And we've improved the staff and its efficiency and its productivity in our various areas. We feel we're in the most exciting area in the oil and gas business at this time in the Delaware, where our chief geologist is bound zone after zone. And Andrew, would you like to say a word about your geological work?

Yes. Thanks, Joe. This is Andrew Parker, SVP of Geoscience. I'm just proud to be able to speak to the depth of our inventory that we've covered a little bit here. But this 10 to 15 years of inventory is based on over 20 proven targets across the basin that we keep finding more of them as we go and stacking them up in various asset areas and getting more and more confident in how we evaluate them in these brick-by-brick deals. And we just have a lot more wood to chop in this basin. Thanks, Joe.

Thanks, Andrew, and thanks for your hard work in identifying those various target zones. Now I'd like to ask Tom to comment. Questions come up a number of times, been reported back. We refer to a gas bank that we have in Northwest Louisiana. Tom, do you want to explain what we mean by gas bank?

Sure. Thank you, Joe. So for those of you on the call, we refer to our gas bank as our Haynesville and Cotton Valley formation over in East Texas and North Louisiana. The company still retains all the rights in the shallower Cotton Valley formation, which is a proven formation that we've drilled over 15 years ago with this old 1-mile lateral. Today, I know that Chris Calvert and the team could go in there and drill a 2-, maybe even 3-mile-long lateral and deliver a 15 Bcf gas well or approximately. Our company believes that we have somewhere between 200 to 300 Bcf of gas potential in the Cotton Valley formation that we can access whenever we think that prices have stabilized, and we can make a nice return on those investments.

Thank you, Tom. It's interesting when gas prices stabilize, that will become under more and more consideration. It also has NGL possibilities to go with our -- again, our midstream operations. And Gregg Krug, our Head of Marketing and Midstream, has ideas; and Tom, Chris, everything else gives him an interesting card to play, so to speak. I appreciate very much everybody listening in and wish to close by just repeating our invitation. Please come to the annual meeting. You'll get to meet our people. You'll get to see the latest equipment that we are using to achieve these results. And you'll hear all of us talk, and you'll be able to ask questions and continue to get to know us. I don't know how well, going forward, this town hall meeting will work, but we thought we'd give it a try and try to make ourselves more available plus what we're actually doing and give you a chance to hear from our key staff members, particularly in operations. I wish to thank everybody for participating today, and congrats to getting this year off to a good start, increasing our reserves and reassuring people that while we may make some adjustment, this company is still going to grow this year in double-digit terms and keeping an eye on profitability and innovation. And in that regard, one more time, you've probably heard us talk about our U-Turn wells going out, and we have now drilled some more. Josh, how many U-Turn wells have we drilled so far or planned?

Joe, this is Josh Passauer, EVP of Drilling. We drilled 14, and we have several more in progress, Joe.

All successes?

Yes, sir.

No problems?

No, sir.

All right. That's what I want him to keep saying or he'll be up here at night. But thank you again. Debt down, opportunities up. And we'll have another one of these if this thing proves useful to each of you all. And we really appreciate our individual shareholders just like we do our institutional shareholders. So thanks, and we are open to you for any visits.

Towanda, we'll turn it back to you. Thank you.

Thank you. Ladies and gentlemen, thank you for your participation today. This concludes today's program. You may now disconnect.