Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The integration of the recent acquisition is ahead of schedule and performing better than expected.
• Matador Resources Co (NYSE:MTDR) has successfully executed two bond offerings and a stock offering, strengthening its financial position.
• The company has drilled promising wells that are expected to set up a strong performance for 2025.
• Matador Resources Co (NYSE:MTDR) has achieved significant cost reductions in drilling and completion costs per lateral foot, showcasing operational efficiency.
• The company has a robust inventory of 2000 locations with an expected average return rate of over 50%.

Negative Points

• Operating expenses for newly acquired assets are higher than Matador's legacy production, impacting overall cost efficiency.
• The company is facing challenges in optimizing production chemical spend and personnel costs in the newly acquired assets.
• There is uncertainty regarding the future cash tax rate for 2025, which will depend on the company's planning and available deductions.
• Matador Resources Co (NYSE:MTDR) has not yet fully realized the potential value of its midstream assets, which remains a source of frustration.
• The company anticipates a slight increase in capital expenditures for 2025 due to maintaining nine rigs for the full year.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with MTDR.

Q: Neal Dingmann from Truist Securities asked about the company's open market share purchases and whether stock repurchases would become a larger part of shareholder returns. A: Joseph Foran, Chairman and CEO, explained that while they consider buybacks, they currently favor fixed dividends as a more effective way to return value to long-term shareholders. He noted that buybacks might benefit short-term shareholders more and emphasized the importance of maintaining a strong dividend policy.

Q: Scott Hanold from RBC Capital Markets inquired about capital allocation for 2025, especially in light of the new Emer assets. A: Joseph Foran and Brian Willey, CFO, discussed the company's strategy for measured growth, highlighting their inventory of 2,000 locations with high returns. They plan to run nine rigs throughout the year, which will result in slightly higher capital expenditures compared to 2024.

Q: Zach Parham from JPMorgan asked about the company's tax refund and expectations for cash taxes in 2025. A: Robert Macalik, EVP and Chief Accounting Officer, stated that the actual cash tax rate for 2025 will depend on their plan and available deductions. They are confident in their 2024 estimates and will provide more details in February.

Q: John Freeman from Raymond James questioned the potential for further efficiency gains in drilling and completion costs. A: Christopher P. Calvert, EVP and COO, highlighted the use of Trimol Frac and remote frac operations as key drivers of cost reduction. He emphasized ongoing improvements in drilling times and operational efficiencies.

Q: Kevin MacCurdy from Pickering Energy Partners asked about the production increase from the Emer assets and future activity plans. A: Glenn Stetson, EVP of Production, and Edmund Frost, EVP of Geosciences, explained that recent well results have exceeded expectations, and they are optimistic about continued strong performance from these assets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.