Participants

Mac Schmitz; Investor Relations; Matador Resources Co

Joseph Foran; Chairman of the Board, Chief Executive Officer, Secretary; Matador Resources Co

G. Gregg Krug; Executive Vice President - Marketing and Midstream Strategy; Matador Resources Co

Van Singleton; President - Land, Acquisitions and Divestitures and Planning; Matador Resources Co

W. Thomas Elsener; Senior Vice President - Reservoir Engineering, Senior Asset Manager; Matador Resources Co

Glenn Stetson; Executive Vice President - Production; Matador Resources Co

Brian Willey; Chief Financial Officer, Executive Vice President, President - Midstream Operations; Matador Resources Co

Tim Rezvan; Analyst; KeyBanc Capital Markets

Zach Parham; Analyst; JPMorgan Chase & Co.

Gabe Daoud; Analyst; TD Cowen

Leo Mariani; Analyst; Roth Capital Partners, LLC

Kevin MacCurdy; Analyst; Pickering Energy Partners

John Freeman; Analyst; Raymond James

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to the first-quarter 2025 Matador Resources Company earnings conference call. My name is Tanya, and I'll be serving as your operator for today. (Operator Instructions) 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.

Mac Schmitz

Thank you, Latonia, and good morning, everyone, and thank you for joining us for Matador's first-quarter 2020 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 with the 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 are contained in the company's earnings release and its most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.
In addition to our earnings press release issued yesterday, I would like to remind everyone that you can find a slide presentation in connection with the first-quarter 2025 earnings release under the Investor Relations tab on our corporate website.
And finally, as a reminder, I would like to invite all of you to join us for our first ever town hall conference call on Monday, April 28 at 3:30 PM Central Time. Please send any questions that you have in advance by e-mail to investors@matadorresources.com, no later than 3:00 PM Central Time on Friday, April 25. The live conference call will be available under the Investor Relations tab on our corporate website.
And with that, I would now like to turn the call over to Mr. Joe Foran, our Founder, Chairman, and CEO. Joe?

Joseph Foran

Thank you, Mac. As we've often done in the past, I'd like to begin by insights and some of the themes that we expressed in our earnings release is that the first one is that we've been here before in challenging times, and we've come out of it each time stronger than we went in.
So we have confidence in the plans that we've submitted to you today. We feel we have the right tools in the toolbox. They give us the flexibility and the optionality to make the plans work and advance Matador's interest and value regardless of the atmosphere or how much it changes throughout the year.
Second is to call to the attention that not only we tried to make prudent decisions, but can really point to the operational excellence of our field people and our operating staff is that we've had growth in the revenues to a point that we were able to repay $190 million of our debt. We have record gas processing.
The Marlin plant is coming on line. And between the Marlin plant and Black River, we'll have processing capacity of 720 million, which is quite a bit better than the original Black River plant that was only 60 million. So -- and that provides us a large amount of flow assurance, which is critical these times to get all of it, you can to market. And finally, the point three is that we wanted to emphasize how we have an alignment of interest with our shareholders that -- that's one of the reasons that we have the Board authorized a repurchase of shares to be sure people knew of that alignment.
But second is to point out what we did in the first quarter, what we be in the management leadership team that we had over 31 transactions. Virtually, everybody on the management team bought shares, and then we had 100 other over 100 other employees buying stock, where others were not -- other companies were not as aggressive, but our guys like our leadership team recognize a good deal when they see it. So we felt it was important to offer the opportunity to have a repurchase of shares. At this price, we think it's a good buying opportunity and a good entry point that -- and so we welcome your questions.
Finally, there has been some concern about production. Is it going up or it's going down? We slowed down a little bit on our production, but it wasn't because the wells were performing well. They've done better than they expected. But what you had was you had some shut-ins due to maintenance and in light of that, the maintenance and force majeure events, in light of that, we were off by 1% or 2%, which we could have easily made that up, but it was better to move slowly but surely to be sure to provide growth for this year, reduce expenses, and to wait for the processing to come online.
So we've received the full economic benefit of our production. And we'll have growth at the end of the year. Remind everybody that if we're 1% down now by the end of the year, we'll be up 17%.

Mac Schmitz

Latonia, with that, we'd like to take a few questions. .

Question and Answer Session

Operator

(Operator Instructions) Tim Rezvan, KeyBanc Capital Markets.

Tim Rezvan

I'd like to start on the midstream. Obviously, there has been a lot of volatility in the broader market that may be impacting the decision on that. You did use the phrase IPO in your fourth-quarter earnings deck. We didn't see that in this deck. So -- can you talk maybe about what you're thinking about with the path forward on the midstream side, given you've been pretty candid that you're looking to kind of realize value from that segment.

G. Gregg Krug

Yeah. This is Gregg Krug, EVP of Marketing and Midstream Strategy. Yeah, we're looking at all these options as far as possibility of IPOs in various other things. We're looking at opportunities to grow our business.
And if we think about kind of where we started. We started at 60 million a day at the Black River plant. And as Joe mentioned, we're -- once we get this plant up and going, which is going to be this quarter, should be -- we should be up at 720 million a day of capacity.
So we like our growth that we're seeing now, and we see opportunities to go further. We've got a lot of inquiries on third-party gas that we're chasing and -- we think there's lots of opportunities there. So as far as your question on IPO, yes, that is always a possibility, and we're investigating all those opportunities.

Operator

Zach Parham, JPMorgan.

Zach Parham

Just given the changes in the operational plans, I wanted to talk about how you're thinking about longer term. I mean, historically, Matador has been a growth company. with this guidance update, your second half implied volumes are roughly in line with 4Q oil in more of a maintenance level. And in the current environment, how are you thinking about the longer-term outlook for the company in the current commodity price environment, would you continue at maintenance levels? Or would you anticipate growing again at some point?

Joseph Foran

Well, thank you, Zach. It's a good question. And the answer is, yes. We're very open to and want to have reason to grow again. It's not that we're downsizing now because, as I mentioned, we're going to have 17% growth in oil production by year end. And this is primarily a timing matter.
And is this a temporary thing on oil prices? Or is this a new world you live in, and we're going to do what's profitable. We've never been a growth for growth's sake -- it's always been our motto here has been profitable growth at a measured pace. And if you mean what you say about a measured pace, that means when prices get a little lower, you're a little more -- you take a few more moments to think about what you're doing and don't rush into things and to manage your contracts with your vendors, so you have optionality and flexibility to either add or to take down and you build relationships with them, that give you that kind of flexibility and optionality.
So we're very much intend to grow, and we're shareholders, too. Nobody here wants to own stock. unless there is going to be increases in value over time. And I think we're very well positioned for it because you may say, well, your production was a little bit off this quarter. Yes, but we paid down $190 million in debt.
So that leaves us with a lot of optionality there is we want to speed up CapEx expenses as the year goes along, we want to make an acquisition.
But either way, we've got the tools in the toolbox, including the share repurchase to make Matador more value quarter-by-quarter. What we don't want to do is to do it blindly or to rush in, in a time of turbulence. We're going to do it slow and steady, but that profitable growth at a measured pace is governing our approach, but we have lots 10 to 15 years of inventory.
So there's no shortage of inventory and everywhere we drill these wells, they're going to have a high net rate of return, and it's just optimizing, those locations and our field staff and our midstream business to consistently generate growth and profitability. And if you look at our last -- since we went public, you see over and over again, we have generated profits per quarter, and we had a profit this quarter. So I don't know how many straight quarters that makes for it, but it's been very consistent, that we haven't had a losing quarter.
And that's because of the professional approach of our office staff, our field staff and that they have great properties to work with. The two big acquisitions we've made in the last couple of years, both of which were about $2 billion. They've been integrated very smoothly, and the performance has been better than expected. And so we're pretty excited, and that's why you saw as much buying from insiders as you did, and you can expect it again this quarter.
For me, I've never sold a share. And I've had kids in college for that matter, not trying to be flippant, but we all have things like that, but this has been where the value is generated rising from -- we started with 270,000, and we feel we have over $11 billion in assets now.
So this group collectively has made good decisions all along -- and we've encountered these times, numerous times, and we've always come out ahead. If you may -- you can -- exactly you've been around long enough to remember those, but each time we've come out, whether it's been COVID or the BLM leases that people were worried about that we paid too much for, but we're paying out at $20 a barrel oil in six months.
And just consistently, and that's the nature of this business. is trying to be ready for whatever the circumstances are being thrown at you. And I feel this group has really done a good job, and we're all very confident in the plans and the way execution in the second quarter by turning on 40 wells, people were concerned about timing on those wells. We turned on 40 wells. So this second quarter should be a record quarter.

Van Singleton

This is Van Singleton, I just wanted to add 1 thing to what Joe was saying that in the first quarter, we not only replaced the reserves that were produced, but we added to them. And so I think you see that over our history is that not only do we have 10- to 15-year runway of really good locations right now. But every year, we continue to replace those and grow the reserves.
And so I think what you see right now is -- as we've said before, there's never really one smoking gun decision that makes all of this happen. It's hundreds of small decisions. And we all work together as a team across the company, to figure out what's the best thing to do at the right time. And by preserving our optionality and balance sheet, we're going to be able to set ourselves up for more profitable growth in the near future.

Operator

Gabe Daoud, TD Cowen.

Gabe Daoud

Thanks, tons for the time. I was hoping, Joe, maybe we could circle back to your comments around stock representing a good entry point. Is it fair to assume then you're maybe getting after it on the buyback relatively soon? Just how do you prioritize the buyback against potential inorganic opportunities this year as you've also noted, volatility presents typically good opportunities for active bolt-ons like you guys did with AECO maybe about 10 years ago.

Joseph Foran

Gabe, I may need you to repeat part of your question, but let me try to answer as best I can, is that first thing is what's nice about where we are today is in our release, we mentioned five or six things that we did when we saw the fall enough turbulence and chaos and what does this mean and what what direction are prices going up or down and what the world situation is that we started taking steps from our experience, what do we need to be in to give us maximum flexibility and optionality on how our plan goes.
So what you saw is we paid down debt, you know that we took these other steps to pay down debt. We had oil hedges implemented oil hedges to protect us on price. We sold noncore assets. And in the Eagle Ford, sold all of our -- the rest of our position there. And so part of our Pronto plant to our joint venture partner on San Mateo.
And we worked with our 19 banks, and they authorized bigger RBL for us, Reserve-Based Loan. And so now we're in a position to go either way. And it's not that we're forced to go either to the route of acquisitions or drilling or share buybacks. But I think we'll have to see which of those creates the most value for us. But it's nice to have all three options to go with.

Van Singleton

This is Van again. Van Singleton, I think also to add to that, Joe, is just the dividend, six times in four years, we've increased it. And I think we want to preserve our optionality to continue to increase that at the appropriate times going forward.

Joseph Foran

Yeah, we want to be known as that company that pays a regular dividend and tries to increase it year to year. So that's the other thing. So the alignment, a lot of this comes from that alignment that other companies haven't been as quick to buy their shares back or to buy them for themselves. And we have -- if you look at companies, I think ours is -- our ownership between officers and directors is 6.5%, 6%, some are going towards 7%.

Operator

Leo Mariani, ROTH Capital.

Leo Mariani

I wanted to just ask a little about the kind of activity reductions here. If I'm looking at your slides, right, it looks like you guys ended cutting some of the activity on the new Ameredev asset and also at Antelope Ridge, but actually increased activity a little bit in West Texas. So I was just kind of curious about that from a turn in line perspective, if there was something maybe was kind of driving you to put a little bit more CapEx in West Texas in favor of some of these other areas?
And then just on your your production, obviously, like a record second quarter, but I just want to get a sense, should that be kind of peak production for the year? And does production roll off a little bit with the activity cuts in the second half?

W. Thomas Elsener

Leo, this is Tom Elsener, EVP of Reservoir Engineering. I'll probably take the first part of that, and then I'll pass the second part over the Glenn Stetson. But just in the normal course of funneling the operations from a 9-rig program down to an 8-rig program, there's just some shifting of the timing of the wells around all that.
I know Chris and the team are optimizing the completion schedule. And I think it's just shifting some wells around between different buckets, maybe carrying over some wells in different quarters. We're proud of all of our assets. Certainly, West Texas has been a big part of us for a very long time. But we're real happy with the returns of all the wells and things are going better than expected.

Glenn Stetson

Yes. Leo, this is Glenn. I just wanted to pile on to what Tom was saying on the our Meredith properties is that we highlighted in the release, the 11 wells that we turned online that had an average IP of 1,450 BOE per day. All combined was around 15,000 altogether.
So we're really happy with those results and I think confirms the prospectivity of the eastern side of that acreage position. And so -- and then on your second question there. I would just say that Q3 will be lower than Q2, as you said. And then Q4 is projected to be slightly higher than Q3, but could change depending on the timing of these capital efficient batches that we're doing.

Operator

Kevin MacCurdy, Pickering Energy Partners..

Kevin MacCurdy

And I, for one, appreciate the leadership you're showing here by reducing activity amidst the macro uncertainty.

Joseph Foran

We appreciate that a lot. And I would like to say is that the fourth quarter may not go down, but we have the optionality to to ramp up production in that area or to keep it as is. We didn't want to promise something that we weren't certain of delivering. We can deliver. Feel very certain about that, but I don't want to do that unless the oil price is optional or is optimal and that -- so there's plenty of time left to bring that around if the incentive of higher commodity prices are there.

Kevin MacCurdy

My question is on the criteria for the buyback. Just conceptually, how would you think about the number of shares you're going to be buying back will you be looking at certain valuation metrics? And will it be governed by kind of a percentage of cash flow on a quarterly or an annual basis? .

Brian Willey

Yes. Kevin, this is Brian Willey, Exec Vice President and Chief Financial Officer. I appreciate the question. It's not a single metric or a single variable that we're looking at. I think it's a mix.
And so as Joe mentioned earlier, -- we really have a lot of great options in front of us, whether that's using our cash for debt repayment for the share repurchases, making opportunistic land acquisitions that Joe mentioned that we've often made in these times, and they've been challenging times. -- expansion in the midstream business, -- we could also add back the rig, as Joe mentioned earlier, and/or increase the dividend.
So there's a lot of opportunities for us to use our cash flow. And so really, what we'll do is we'll evaluate those. And and look at what is best for Matador in the long term and its shareholders. As Joe mentioned earlier, we're all very large shareholders. And so as we look at it, we want to provide the most value for us and our shareholders over the long term.

Operator

John Freeman, Raymond James.

John Freeman

I saw that you stepped up the hedging activity quite a bit both on oil and gas. But the other thing that sort of jumped out was you all are willing to lock in meaningfully wider gas gifts in 2026. So just interested in what you all are seeing on the marketing side that drove that decision.

G. Gregg Krug

This is Gregg Krug. Again, -- we're constantly looking at those hedges. And we just saw that the -- we felt like there was an opportunity to layer on some. We just built like 26 heads some vulnerability there with because of the capacity issues that we're seeing. And we wanted this to some additional protection.
So that was the driver behind that. is we felt like that we needed to have that extra protection insurance policy, so to speak.

Operator

Thank you, ladies and gentlemen. This ends the Q&A portion of this morning's conference call. I'd like to turn the call back to management for closing remarks.

Joseph Foran

Thank you very much. And to those that ask questions is that if you have further inquiries, don't hesitate to call us, we'll be happy to visit with you. And once again, we want to invite all of you to come see us sometime and meet our people in person as well as see some what we think are the most latest tools in the toolbox, including the Maxcom room that goes 24/7 or our measurement room that does the same thing that has generated a lot of value. and also to emphasize to you because I don't want anybody to feel, oh, we're throwing in the towel towards the end of the year are worried by it.
No, we think matters will straighten out over these next couple of quarters, and it will be clear what needs to be done in the fourth quarter to make optimal our year for our shareholders.
And Brian Willey made a lot of mention of the tools, including increasing the dividend as a way of returning value to the shareholders. And we can -- there's no shortage of rigs or vendors out there that we can get the work done in a first-class way. So I'm very optimistic about the year that it's going to get better from here.
We've said second quarter is going to be a record quarter. Third quarter will be strong, but there we will be making those concrete plans for the fourth quarter and for 2026. And -- as I said, we've done this for 40 years, rising from $270,000 to the present bill. So this is a group that's had to react to very rapid change in the business when we came in. You had Kelly drive type of rigs and now you've got top drive and you're drilling 3-mile laterals. That was unforeseen, but that's working out well for us.
So there's a lot of knobs to play with. And particularly when the outside factors of world prices, world governments, you got to be ready to shift as the atmosphere changes. And I think this is the group that is doing it now, and we have alternatives and -- but we see a lot of options in the past.
That's what led to certain breakthroughs. You all mentioned the Yates transaction, but also the BLM when we bought those properties and all was -- you had [COVID] Those made a difference. And you go back to getting people that we start out --
The big help was with Mesa and in our slide deck, we show some of those big events in the past have come back to help us, and they generally occurred in times where commodity prices were down. But right now, I feel the field is really open, and we've got more tools than we've ever had to use and to add value.
So I think it's a great time to get in, and you'll see buying from us, but you also now see the company ready to put money on the line and buy back shares. If people can't see the value opportunities we've been creating, we'll buy their stock back. And we'll start with this amount, $400 million, and we'll go -- we're not going to do it all at once, but gradually and in a controlled fashion and be happy to buy back to whoever wants to sell at a price that we think is a bargain for our shareholders. And that's my last comments, I promise, unless you want to call in or come see us.

Operator

Ladies and gentlemen, thank you for your participation today. This concludes today's program. Have a wonderful day.