[Management View]
Matador Resources reported a strong Q2 2025 with a 31% YoY increase in oil and gas production, driven by successful drilling programs and multi-zone development in the Delaware Basin. The company emphasized the strategic importance of its San Mateo midstream business, which has increased processing capacity and is fully committed for future volumes. Management highlighted the continued growth of the base dividend and the initiation of share repurchases as part of a balanced capital return approach.

[Outlook]
Matador raised its full-year 2026 guidance for oil production growth and cash flow, citing strong drilling results and expanded productivity. The company plans to maintain operational flexibility with the ability to adjust rig count based on capital efficiency and free cash flow margins. Legislative changes delaying AMT obligations are expected to benefit free cash flow starting in 2025.

[Financial Performance]
- Oil and gas production increased by 31% YoY.
- Midstream EBITDA for H1 2025 totaled $145.5 million, with full-year guidance unchanged at $275-$295 million.
- Drilling and completion costs per foot declined by 11% YoY in Q2 2025.
- Net debt-to-EBITDA ratio below one as of Q2 2025.

[Q&A Highlights]
Question 1: Why was there no change to midstream EBITDA guidance despite a record second quarter?
Answer: San Mateo's record performance was driven by Matador's production growth and cost-saving measures. The first half EBITDA was $145.5 million, and the full-year guidance remains $275-$295 million due to expected drilling activities in different areas.

Question 2: What is the progress on exploring strategic options for the midstream business, including a potential IPO?
Answer: Management believes the midstream business value is not reflected in Matador's share price and is exploring strategic alternatives. The company is free cash flow positive and can be patient in evaluating the right transactions.

Question 3: How is Matador thinking about rig activity in the back half of the year and into 2026?
Answer: Matador will be running eight rigs by the end of the week and will defer decisions on adding rigs based on capital efficiency and free cash flow margins. The company aims to balance production growth with maintaining superior margins.

Question 4: In a lower for longer oil price environment, would growth capital shift more towards the midstream business?
Answer: The integrated business model aims to deliver best-in-class free cash flow margin. Investment in midstream ensures flow assurance and supports oil production, which is crucial for maintaining free cash flow.

Question 5: What drove the lower DNC costs in Q2 2025, and how sustainable are these improvements?
Answer: The reduction in DNC costs was driven by operational efficiencies, including the U-turn drilling program and trimmer frac process. These improvements are expected to continue, with potential additional savings from service cost reductions.

Question 6: How important is a competitive organic growth profile for San Mateo from a public investor standpoint?
Answer: Matador aims to sustain growth with high returns, supported by the integrated nature of the business. Growth opportunities exist both from Matador's drilling activities and third-party contracts.

Question 7: When might Matador become subject to the AMT, and how will cash taxes trend until then?
Answer: Legislative changes are expected to delay AMT obligations for several years, benefiting free cash flow starting in 2025.

Question 8: What is the expected cadence of frac activity for the rest of the year and its impact on 2026?
Answer: Higher third-quarter capital is expected due to wells being turned on late in the quarter, with production contributions more significant in Q4. Larger batch sizes in multi-zone development will lead to some production lumpiness.

Question 9: How does Matador balance free cash flow uses between M&A, share repurchases, and debt reduction?
Answer: Free cash flow post-dividend is allocated to brick-by-brick land acquisitions, share repurchases, and debt reduction, based on opportunities and macroeconomic conditions.

[Sentiment Analysis]
Analysts were generally positive, focusing on the company's strategic midstream expansion and operational efficiencies. Management maintained a confident and optimistic tone, emphasizing flexibility and balanced growth.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 | YoY Change |
|-------------------------------|---------------|---------------|------------|
| Oil & Gas Production Growth | 31% | N/A | +31% |
| Midstream EBITDA (H1) | $145.5 million| N/A | N/A |
| DNC Cost Reduction | -11% | N/A | -11% |
| Net Debt-to-EBITDA Ratio | <1 | N/A | N/A |

[Risks and Concerns]
- Volatility in oil and gas prices could impact production and cash flow.
- Potential delays in midstream capacity utilization.
- Legislative changes affecting tax obligations and financial outlook.

[Final Takeaway]
Matador Resources demonstrated strong operational performance in Q2 2025, with significant production growth and strategic midstream expansion. The company remains focused on balancing production growth with free cash flow generation, supported by operational efficiencies and a flexible approach to capital allocation. Management's emphasis on strategic alternatives for the midstream business and the delay in AMT obligations are expected to enhance shareholder value in the coming years.