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Good morning, ladies and gentlemen. Welcome to the Fourth Quarter and Full Year 2024 Matador Resources Company Earnings Conference Call. My name is Lisa, and I will be serving as the operator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session at the end of the company's remarks. As a reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website for one year as discussed in the company's earnings press release issued yesterday. I will now turn the call over to Mr. Mac Schmitz, Senior Vice President, Investor Relations for Matador. Mr. Schmitz, you may proceed.

Thank you, Lisa. Good morning, everyone. Thank you for joining us for Matador's fourth quarter and full year 2024 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 comparable financial measures calculated in accordance with GAAP are contained at the end of the company's earnings press release. As a reminder, certain statements included in this morning's presentation may be forward-looking and reflect the company's current expectations or forecast of future events based on the information that is now available. Actual results and future events could differ materially from those anticipated in such statements. Additional information concerning factors that could cause actual results to differ materially is contained in the company's earnings release, and its most recent annual report on Form 10-Ks, any subsequent quarterly reports on Form 10-Q. In addition to our earnings press release that we issued yesterday, I would like to remind everyone that you can find a slide presentation in connection with the fourth quarter and full year 2024 earnings release under our Investor Relations tab on our corporate website. And with that, I would now like to turn the call over to Mr. Joseph Foran, our Founder, Chairman, and CEO. Joe?

Thank you, Mac. And thank you all for listening today. I would like to begin by thanking everybody for the thought and effort they put into their notes. But I'd also like to start out by re-emphasizing what we consider most important. When we take over a property, like the AmeriDev, it's a $2 billion deal. Obviously, it's going to have a big impact. So how do we treat that? And we really treat it like we do all of our other properties. For the past forty years, as I've done this job as CEO, I've put an emphasis on year-to-year growth. We think that's the most important number. You can look at other statistics, and I would say they're all important. But for us, the most important is year-over-year growth. At the same time, when we buy a property, the first thing we try to do is look for the efficiency gains that we can achieve. Also, a development plan that we can implement. And from there, we work to incorporate it and assess what we can do. The AmeriDev properties were special because it sets great quality rock that gives us a lot of choices. You know? Most times when people sell things, it's not their best product. But in AmeriDev's case, it was really good rock. They've done a good job operating it, and we wanted to find what else we could do. And we could have easily put a rig out there. Our first rig went out there nine days after acquiring the property. So we could have put more rigs out there and easily increased the production on a sequential basis. But we thought it was more important to set it up for the long term, by the year-to-year over year growth standard. And in that regard, for forty years in buying properties for Matador, in those forty years, we've grown a little over twenty percent a year for forty years. And that's kind of the standard we have. And we feel the AmeriDev properties will meet that standard, particularly as we organize a building plan on how exactly we want to develop it between the development wells and the step-out wells. So we thought a little time on that should be done. Now we will have one of the ways of the efficiency is our batch drilling that we've done there, and that has saved us an estimated $30 to $50 million by drilling them in the batch mode and then bringing them on. But it does have an effect on the sequential growth, which is essentially a timing problem. It's not a reserve problem. It's a timing deal. And in the fourth quarter of last year, in the first half, we only put two wells online because we had a big group coming up behind it. And so in the next forty-five days or so, we'll probably bring on thirty wells or more. And you can see what I mean. It's a timing problem. If we had closed and taken over AmeriDev two weeks earlier, we wouldn't have this discussion of whether we have a sequential problem or a miss as some of you described it. And so we ask that if you're uncertain about our timing on things, please give us a call. But the year-over-year matters because I can report that we expect to have growth of approximately thirty percent for the first quarter of this year compared to the first quarter last year. The second quarter is going to be about the same, twenty-nine or thirty percent. The third quarter, you know, again, twenty percent or more. And by the time we face the drilling program in the fourth quarter, we think that'll be comparable numbers as well. So we're very excited about this. We're not seeing any disappointments. But I want you to know that I don't want to tell you how to do your analysis. It's certainly understandable why some people want to do sequential. But in this case, I think you have to look at the year-over-year numbers. And when you look at the total reserve picture, for us, year-over-year from the fourth quarter of 2023 to the fourth quarter of 2024, you see that we've grown our production from, like, 4.6 billion BOEs to over 6 billion BOEs. And that's what I think matters. Has our shareholders increased their assets? Yeah. And that's why we felt so comfortable raising our dividend. Could we have done more? Yeah. I think that we could have easily done some more. It's probably more prudent given the volatility of commodity prices to wait until the fall when we've typically given a raise but wanted to express to you our confidence and second is to note the insider buy that has occurred. You had over thirty transactions by the senior management. That's SVPs and higher, VPs and so you have that, but even more important statistic to us in comforting to me, personally, is that over ninety-five percent of the staff are participating in the employee stock purchase plan. So everybody here, if they've been here at any time at all, has become a shareholder and an owner. And if you've ever attended our annual meetings, you'd meet many people, a good percentage of them are shareholders. They've been shareholders for forty years or more, going back to when we had the partnerships and the like. So great confidence and we thought it was most prudent not to rush in with trying to drill wells and boost production. But it has ever been important and more so to look at containing the cost and making sure what we wanted next. So saving $30 to $50 million should not be disregarded, but taken into account of whether you want to emphasize year-over-year growth or quarter-to-quarter growth and look at the timing when you're bringing on wells. So if two weeks is the difference, I would go with the year-over-year growth that I mentioned is going to be twenty to thirty percent. So with that, I'd like to open it up to questions. Mac, but give you an idea of how we evaluate it. And why we've emphasized year-over-year growth, but we still think it's important to look at sequential. And that's why we provide you those numbers itself. But our personal view is that year-over-year number is the most important. Lisa, we're ready for, to jump into the queue and ready for the first question.

Thank you. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, please press star one one again. Ladies and gentlemen, due to time restraints, we ask that you please limit yourself to one question. One moment while we compile the Q&A roster. Our first question for today will be coming from Neal Dingmann of Truist Securities. Your line is open.

Thanks. Morning, Joe and team. And Joe, I just want to say before my question, I thought you all did a really nice job this time on the slides, really showing the capital efficiencies and other upside that you have such as the midstream. So I guess that part takes me to my first question. And my first question, I'd like to focus on the midstream specifically. You know, you all obviously have one of the larger now Permian infrastructure systems. I think you're talking about nearly $300 million in EBITDA alone. And I'm just wondering, based on this, should we assume that now that system is largely developed given the, you know, a bit lower CapEx of $120 to $180 million this year? And then secondly, you know, are there opportunities to, I don't know, maybe bring in a partner or do something to further demonstrate and maybe monetize the value of that system?

Neal, that's really a good question. It's something we talk about nearly every day, some of those questions. And I'd simply say is that as long as we're active out there in that basin, you know, we're going to be looking to extend it because the reason we got into it in the first place is going back to when we were going public. Was that there were real flow assurance problems. And we didn't want to go public and immediately run into flow assurance problems. So that's where we started. Gregg Krug has been our leader in the company and has done a marvelous job. Our first year of operations, we had EBITDA of $30 million. This year, we have $300 million. So he's made not only the reservoir engineers comfortable by having that flow assurance and the cash flow and our CFO's happy, that they know that we're going to have the cash flow, but he's also created a very profitable business and given us some good options going forward. So it's hard to say because it's, you know, we still feel early years. And we're expanding our areas of interest just like with the AmeriDev, over to that southeast corner of Southeastern New Mexico. And but we're looking at other opportunities. It's just a great area. I've worked at now forty years to keep expanding, but to do it in a conservative way.

Yes. Neal, this is Gregg Krug. I was going to kind of chime in a little bit. As far as we're going to do, we're going to be looking at whatever enhances our flow assurance out there for both Matador and our third-party customers. I think those are the projects that we're going to be looking at. You know, and Joe alluded to the AmeriDev piece, you know, we actually along with that acquisition we have 180 miles of pipeline. That came with that. That's not actually part of San Mateo. So we're always looking for those opportunities to actually make the footprint of basically where our acreage positions are at. Those are the expansion type of projects we're looking for.

Thank you. One moment for the next question. Our next question will be coming from the line of

Thanks for taking my question. Just wanted to ask on your D&C cost guide. You took it down to $880 per foot. That's down 3% year over year. Your 2024 D&C costs came in quite a bit below the initial guide. Could you just give us a little color on where your leading edge D&C costs are today and maybe talk about your ability to continue to drive those D&C costs lower going forward?

Yeah. Hey,

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

Thanks. You know, hey, Joe, you gave a sort of good overview of why you see some of the ebbs and flows in production and the focus on sort of year to year. Could you address the capital side too? And I think, you know, when you look at the fourth quarter, it came in a little bit higher, and I think the first quarter set up a little bit higher. And so when you look at cash capital, like, how do you think that's going to ebb and flow? And what are some of the puts and takes, you know, within the range of the roughly $1.4 to $1.7 billion that you all have for 2025?

Well, good question. And breaking that down, you know, I would say this is when we take over a property as we did here, the first thing we look at, where can we deploy some capital that would, in the short term, improve the operating expenses, for example, over the long term. So the savings that we're having in reducing the operating expense are going to pay off that capital in pretty short order. And that's, you know, as I said, I don't want to take away from the way people may use sequential comparisons. We just think that the year-over-year is a more important number. And illustrating it's hard to give you the, you know, on the capital expenditure and, you know, we don't do that until this call, but we used a lot of that CapEx early CapEx to improve the operating expenses. And Glenn, you might give a little more detail on that so that saves us more over time to do it upfront rather than to be in the property for ninety days and then undertake it.

That's right. Scott, this is Glenn Stetson. I would just say, yeah, echo what Joe said is we got it on the AmeriDev properties. And immediately got to work and accelerated the completions of those eleven wells, the Firethorn and Pimento wells. And along with that, we did some facility upgrades to accommodate that new production and also to bring the facilities up to Matador standards. And in doing so, we were able to reduce our OpEx, as Joe pointed out, to the tune of $2 million a month. And so those savings are significant. And realize them even quicker than we had anticipated. And one anecdote that plays into both the CapEx side and the operating side is that on those eleven wells, we recycled over 1.2 million barrels of produced water for the fracturing operations on those eleven wells. So I think, you know, synergies across the board that resulted in a really nice quarter.

Well, and also, and I want to shout out to Reese and his group for the very professional way they operate those properties when they had them up for sale. And then afterwards, as we closed the deal, as they were very professional, very cooperative, and, you know, would say they didn't, they may change the high level of equipment and operations and they didn't have a short-term approach. So shout out to Reese, and we look forward to having the chance to work with him again.

Thank you. One moment for the next question. And our next question is coming from the line of Timothy Rezvan of KeyBanc. Your line is open.

Hey. Good morning, folks. Thanks for taking my question. I wanted to ask what drove the decision to kind of put a bigger spotlight on the Cotton Valley assets. Are you seeing kind of inbound inquiries on that? Because it doesn't seem to really be a need. It just sort of sell that now, you know, with leverage at one times and coming down pretty steadily. So, you know, should we think about that as you hanging a shingle, like, a for sale sign on that Cotton Valley asset? Just any color would be helpful.

Yeah. Well, thank you. The Cotton Valley assets, we've had them a long time. When we did the deal with Chesapeake years ago, we solely sold them the Haynesville formation down there, and we reserved all the uphole rights with these properties are. We had been drilling Cotton Valley wells to that point. And so we're very experienced in that. But, you know, when we went out to New Mexico, there is this HPP by that deeper production, so there is no urgency. And shortly after that sale, gas prices declined. And it was better to be in oil primarily than the gas. And so it's all HBP, so there wasn't a hurry. And you were developing at that time, people were drilling the vertical wells. But now there has been horizontal drilling in that Cotton Valley that has yielded wells that are in the quarter of five billion cubic feet of gas, which if you have stable prices, you can make money, but that's the second key. Is the ups and downs of gas prices has discouraged that. Why you've had much better commodity prices with the oil out there in New Mexico. So it's one of economics. But now that you have, yes, seems to be rallying. You have these data centers. You have the liquids that can be taken out. It's starting to be more attractive, but we're not in any way trying to sell them. That's not the reason. It just shows you we have another card to play at the appropriate time. And we have also a very high net revenue interest because when we did the deal with Chesapeake, we reserved all the overrides that had been earned or acquired. So it's a, we see it as a prime property, but let me turn it over to Ned or Tom how y'all feel about it? Who plan our drilling program?

Sure, Tim. This is Tom Elsener, our EVP for Reservoir Engineering. You know, we feel very confident in the Cotton Valley. And, you know, as Joe mentioned, we had drilled a well, you know, over about fifteen years ago, and actually give Joe six BCF gas EUR on that one-mile well. I know today, you know, our operations teams would go in there and be capable of drilling a, you know, two-mile well or two and a half or even further perhaps. And I know they would mix and only increase the profit concentrations and the frac fluids and the stage intensities and prove the targeting and, you know, all different things we've learned over the last, you know, fifteen years, I think, would go into significantly higher gas EURs than that. I think we're very proud of it. There's a lot of vertical production in that area, but there's other horizontal wells also. And I agree with Joe. It's another card to play if we wanted to, at some point. You know, several hundred feet of pay over there in the Cotton Valley and all the gas infrastructure from the Haynesville was already in place. And so I think it's something that, you know, we like to have in our toolbox.

Thank you. And our last call for today will be coming from Kevin McCurdy of Pickering Energy. Your line is open.

Hey. Good morning, Joe. I wanted to ask your thoughts on uses of cash here. You forecast around a billion dollars free cash flow in 2025. And you have a lot of unlock value in midstream as your deck shows. Your leverage is pretty low. Are there other considerations for use of cash here above the dividend?

That's a great question, Kevin. And, you know, there's a lot of ways to answer that. There's a lot of opportunities. And when we get around the table like we are now and guys talking about, well, I kind of feel this, and I think we'd do that. It's really exciting. Because there are a lot of opportunities here, and we want, we talk about profitable growth and measured pace. So we don't want to try to expand too fast or too slow. It's a Goldilocks type of arrangement, and we look at the ideas that we have. We have ten to fifteen years of inventory. We have a balance sheet. That even after doing the $2 billion deal, it's the strongest financial position we've been in. We have over a $3 billion line of credit with our banks of which we've only committed to, yeah, two and a half period. And so there's plenty of dry powder there. We don't want to try to, and that's why we say instead of trying to grow x percent a year, that's why we say proper growth at a measured pace. So it depends on all the considerations. And but we're, you know, we've got all these opportunities in New Mexico. They're growing with the drill bit, and we're keeping pace with nine rigs running on the drill bit. Set. Earning a fifty percent right of return. We have these opportunities on the midstream which is a fee-based business instead of a commodity-based business. It gives a little more stability to our future earnings outlook. We have Louisiana. And, you know, that we just don't want to get greedy and don't want to go too fast, but I want to go too slow. And so we're, we'd be in the efficiency gains that we're getting are leading to higher returns, you know, just drilling one vertical, these horseshoe wells are an example of the efficiency that we're doing. Lateral length has grown to where we're over, we're now doing over ten thousand feet per well on the completions. The EURs are better. This rock that we acquired from both Advance and AmeriDev is leading to ten percent better recoveries. So, I mean, it's a multitude of opportunities, in trying to manage it to, it's kind of like a football coach. He's got a really good running back, and he's got a really good passing quarterback. So does he call more plays for the running back or the passer or, you know, double reverse to the wide receiver? I don't know. But we all discuss it. And, again, the fact that we are all shareholders and particularly among management, that were steadily buying should give you an idea that we're resolving that internally, in a way that's best for the company and best for the shareholders that we're all stakeholders and really excited by the opportunities, but we also know that you can suddenly have things like, you know, COVID or, you know, depression. You know, gas prices have been zero at Waha where we've had to pay money to take our gas. So you want to be careful on that. There's a lot of manners to take into consideration. But we think we have the staff has matured together. We've all grown up together. Our discussions are lively. What we want to do with this extra money, but we all agree and it's a corny expression. Admit, proper growth in a measured pace but it seems to fit us that if we can keep up for forty years, I've been in business. I started out with $270,000, and now we have $11 billion in assets. And that's just growing twenty percent a year for forty years. And we're more of a tortoise than a hare, maybe. But we went public back in 2012, yeah, twelve dollars a share? And today, we're approaching sixty dollars. So it's growth over a very turbulent time. And we're looking forward to when it's a little less turbulent, but we're also ready because we've made, we want to be ready with lots of dry powder because we've made more progress in difficult times when others are sidelined by the opportunities that come up. So this is a room full of people that, you know, are owners. And it's measured on what is going to improve the stock price. And really grateful to those shareholders who have been in here since 1983 when we got started. So and they keep coming up with good ideas. And I look across here at Ned. Ned and his group of geologists, I mean, they come in with some good looking ideas, and Tom's team of, he has, he leads the teams in these various areas. They're always thinking of things, and the land group, you know, John and them, this brick by brick approach, has generated a lot of opportunities and helped get us into areas that we didn't have. And so I have to tell you, we got a lot of work to do. But it's also work that we think will be rewarding to the other shareholders and to us. And I like our chances. I guess. Is what I want to say. And everybody's looking for capital efficiencies. You know, I don't want to be silly but Mac generally brings donuts for our prep session prior to this call, and I can tell he's trying to be more capital efficient because there's not as many as there was in the early days. So we're trying to get him. But the dividend and let me just take a moment on the dividend. Is that we like this steadily increasing dividend over time. And you can see we started out with ten cents and now we're at a dollar twenty-five. We would have a stronger dividend growth if things were a little less turbulent, and we do not see ourselves buying back stock. We think that favors the short termers and not the people who've been in a while. But we like it. We want to be known as a company that year after year increases its dividend, and now it has moved from ten cents to a dollar and a quarter. And we have many, probably more individual shareholders than most companies do. And the individuals, why do, and they come to our annual meeting and express that view. And we invite all of you to attend our annual meeting and, you know, and hear what they have to say. And we'd like y'all coming to visit. We want you to know everybody on the call if y'all come see us. We'll have lunch or breakfast, and you'll get to meet the staff will take all the questions that you've got. So with that, Brian, Erman or Brian Willey as Subaru leaders, if y'all know anything else we should say, please jump in now.

No, Joe. This is Brian. I think all very, very well said. I'll just, we're excited about 2025 and to be approaching a billion dollars in cash flow as a great accomplishment. Joe mentioned at the beginning about growth focus on growth, and that's true from a production standpoint, and that's true for the free cash flow perspective. And so we're excited to be able to do that and be in a position where we can return value to our shareholders.

No. I think you guys said it well. I think you're really excited about the results for 2024 and even more excited about the opportunities that are in front of us for 2025. I'm really, really, really excited about what we have in front of us.

Right. And Rob is our chief of can officer and kind of the guy who wears many other hats. Around here. Has done a real good job of finding research projects and managing the tax position to make contributions that don't show up in these kind of calls. But Rob has kept us on pace and the audit. I'm proud of the audit. Tell them how once again we had no questions.

That's right. Yeah. No. I think, for the last ten years, we've been audited by KPMG. Really proud of the of the of my team and and what we've been able to do to really provide a very high quality financial close and and feel definitely feel audited by the KPMG team and and are really, you know, excited about looking forward to 2025 and and as Brian said, all the opportunities there and continue to look for for ways to to chip away at the cash tax position any way we can.

But follow the rules. Always. Always. Alright. But anyway, that's those are my closing remarks, but again, if you have questions that have been answered, give a call to Mac. We'll get some set up and have a visit. But the land guys deserve a lot of credit. Those guys all the land men and women are out there trying to make deals all the time. And really proud of the way they built in relationships and trying to make trades that please both sides. Back to you, Lisa.