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 to 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 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. Additional information concerning factors that could cause actual results to differ materially is contained in the company's earnings release and its most recent annual report on Form 10-K, 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? 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 they set great quality rock that gives us a lot of choices. 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. 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 our year-over-year growth standard. In that regard, for forty years in buying properties for Matador, we’ve grown a little over twenty percent a year for forty years. And that's kind of the standard we have. 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. We thought a little time on that should be done. 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. 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 issue. 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. 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. If you’re uncertain about our timing on things, please give us a call. 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, again, will be twenty percent or more. By the time we face the drilling program in the fourth quarter, we think that’ll be comparable numbers as well. We're very excited about this. We're not seeing any disappointments. 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. 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, we've grown our production from about 4.6 billion BOEs to over 6 billion BOEs. Has our shareholders increased their assets? Yes. That’s why we felt so comfortable raising our dividend. Could we have done more? Yes, I think 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 we wanted to express to you our confidence. Additionally, over ninety-five percent of the staff are participating in the employee stock purchase plan. Everybody here, if they've been here at any time at all, has become a shareholder and an owner. If you've ever attended our annual meetings, you'd meet many people who are shareholders. They've been shareholders for forty years or more, going back to when we had the partnerships. Great confidence and it was most prudent not to rush in with trying to drill wells and boost production. It has ever been important and more so to contain the cost and make sure what we wanted next. So saving $30 to $50 million should not be disregarded, but should be taken into account when you're emphasizing year-over-year growth or quarter-to-quarter growth and look at the timing when you're bringing on wells. 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. That's why we provide you with those numbers. Our personal view is that the year-over-year number is the most important. Lisa, we're ready 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 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 maybe bring in a partner or do something to further demonstrate and maybe monetize the value of that system?

Neal, that's a really good question. It's something we talk about nearly every day, some of those questions. As long as we're active out there in that basin, we're going to be looking to extend it because the reason we got into it in the first place, going back to when we were going public, was that there were real flow assurance problems. We didn't want to go public and immediately run into flow assurance problems. 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. He’s made not only the reservoir engineers comfortable by having that flow assurance and the cash flow our CFO's happy, knowing 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. It’s hard to say because we still feel early years. We're expanding our areas of interest, just like with the AmeriDev, over to that southeast corner of Southeastern New Mexico. We're looking at other opportunities. It's just a great area. I've worked now for forty years to keep expanding, but to do it in a conservative way.

Yes, Neal, this is Gregg Krug. I was going to 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 for. Joe alluded to the AmeriDev piece, and with that acquisition, we have 180 miles of pipeline. That came with that. That's not actually part of San Mateo. We're always looking for those opportunities to enhance the footprint of where our acreage positions are. Those are the expansion-type projects we're pursuing.

Thank you. One moment for the next question. Our next question will be coming from the line of Zach Parham of JPMorgan. Your line is open.

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, Zach. This is Christopher Calvert. Thank you for the question. I think we'd refer to slide D in the slide deck to highlight the data that you're speaking to. When your full year 2025 D&C per foot is below your full year 2024 D&C per foot, we're kind of at a leading edge. From an efficiency standpoint, we've made great strides in optimizing SimulFrac, increasing the use of TrimulFrac, reducing days on well, and establishing strong partnerships with vendors to ensure we're in win-win contracts for both the drilling and the completion side. Looking into 2025, if you noticed in the release, we increased our TrimulFrac use from sixteen wells to forty. The cost savings associated with that all contribute to that leading edge D&C cost per foot going down. We're excited about being a leading edge innovator in operational efficiencies and believe that flows through to one of the highest margin operators in the Delaware Basin. We're proud of that.

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 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? 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. When you look at cash capital, how do you think that's going to ebb and flow? 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. When we take over a property as we did here, the first thing we look at is where can we deploy some capital that would, in the short term, improve the operating expenses, for example, over the long term. The savings that we're having in reducing the operating expense are going to pay off that capital in pretty short order. I don't want to take away from the way people may use sequential comparisons. We just think that year-over-year is a more important number. Illustrating it is hard to give you specifics on the capital expenditure. We don't do that during this call, but we used a lot of that CapEx early on to improve the operating expenses. Glenn, you might give a little more detail on that so that saves us more over time to do it upfront rather than being in the property for ninety days and then undertaking it.

That's right. Scott, this is Glenn Stetson. I would echo what Joe said. 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. Along with that, we did some facility upgrades to accommodate that new production and bring the facilities up to Matador standards. In doing so, we were able to reduce our OpEx, as Joe pointed out, to the tune of $2 million a month. Those savings are significant and realized even quicker than we had anticipated. On those eleven wells, we recycled over 1.2 million barrels of produced water for the fracturing operations. I think there are synergies across the board that resulted in a really nice quarter.

I want to shout out to Reese and his group for the very professional way they operated those properties when they had them up for sale. Afterwards, as we closed the deal, they were very professional and cooperative. They may have had the high level of equipment and operations and didn’t take 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. 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 be a need to just sell that now with leverage at one time and coming down pretty steadily. 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.

Thank you. We've had the Cotton Valley assets for a long time. When we did the deal with Chesapeake years ago, we solely sold them the Haynesville formation down there, reserving all the uphole rights with these properties. We've been drilling Cotton Valley wells to that point. So we're very experienced in that. But you know, when we went out to New Mexico, there were HBP by that deeper production. There was no urgency. Shortly after that sale, gas prices declined. It was better to be in oil than gas. It was all HBP, so there wasn’t a hurry. When developing at that time, people were drilling vertical wells. Now, however, there has been horizontal drilling in that Cotton Valley that has yielded wells 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. The ups and downs of gas prices have discouraged that. We've had much better commodity prices with the oil out there in New Mexico. There’s economics at play. Now that you have the data centers, 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 we have another card to play at the appropriate time. We have 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. We see it as a prime property.

Sure, Tim. This is Tom Elsener. We feel very confident in the Cotton Valley. As Joe mentioned, we had drilled a well about fifteen years ago; it actually had a six BCF gas EUR on that one-mile well. Today, our operations teams would be capable of drilling a two-mile well or longer. We know they would incorporate higher profit concentrations, frac fluids, stage intensities, and improve targeting, applying all the different techniques we've learned over the last fifteen years, would increase the gas EURs significantly. We're very proud of it. There's a lot of vertical production in the area, but there are other horizontal wells also. I agree with Joe. It’s another card to play if we wanted to at some point. We have several hundred feet of pay over there in the Cotton Valley and all the gas infrastructure from the Haynesville was already in place.

Thank you. 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 the uses of cash here. You forecast around a billion dollars in free cash flow in 2025. 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. There's a lot of ways to answer that. There are many opportunities. When we get around the table like we are now, discussing ideas—it's really exciting. When we talk about profitable growth at a measured pace, we don’t want to expand too fast or too slow. It’s a Goldilocks-type arrangement as we look at the ideas. We have ten to fifteen years of inventory. After the $2 billion deal, our balance sheet is the strongest financial position we've been in. We have over a $3 billion line of credit; we’ve only committed to $2.5 billion. There's plenty of dry powder there. We don’t want to be greedy—that’s why we emphasize proper growth at a measured pace. It depends on all considerations. We have opportunities in New Mexico that are growing with the drill bit and we're keeping pace with nine rigs running. The efficiency gains lead to higher returns. It’s about managing a multitude of opportunities. We’re excited but cautious, ensuring what we’re doing is best for the shareholders. We're eager to grow sustainably while being careful with capital outlays.

No, Joe. This is Brian. I think all very well said. We're excited about 2025 and the prospect of approaching a billion dollars in cash flow as a great accomplishment. Joe mentioned growth, and that’s true from both a production and a free cash flow perspective. We're excited to do that and be in a position to 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 enthusiastic about the opportunities that are in front of us for 2025. Really, really excited about what we have in front of us.

Right. Rob is our chief of many hats and has done an excellent job finding research projects and managing the tax position to contribute in ways that don’t show up in these calls. I'm proud of the audit; once again, we had no questions. We look forward to 2025, and as Brian said, all the opportunities are emerging, and we'll continue to seek ways to improve our cash tax position. But we always follow the rules. Anyway, those are my closing remarks. If you have any questions, please give a call to Mac. We’ll get some set up and have a visit. The land guys deserve a lot of credit. Those land men and women are out there trying to make deals all the time. I’m really proud of how they've built relationships to create win-win scenarios. Back to you, Lisa.

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