Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Matador Resources Co (MTDR, Financial) reported significant growth in production, increasing from 3,300 barrels per day in 2012 to over 95,000 barrels per day currently.
- The company has proved reserves of approximately $500 million, with potential to increase to over $600 million pending the Ameredev acquisition.
- Matador Resources Co (MTDR) achieved a reduction in drilling and completion (D&C) costs per foot to $960, down 5% from prior guidance and over 10% year-over-year.
- The company successfully implemented new efficiencies such as simul-frac and trimul-frac, leading to significant cost savings and reduced days on well.
- Matador Resources Co (MTDR) has a strong midstream infrastructure, including the Marlan plant and San Mateo system, ensuring effective processing and flow assurance for oil, gas, and water.
Negative Points
- The company faces uncertainties and contingencies related to the closing of the Ameredev acquisition, which is subject to regulatory approvals.
- Despite the efficiencies and cost reductions, the company acknowledges the need for continuous improvement and faces challenges in maintaining these efficiencies.
- Matador Resources Co (MTDR) has significant exposure to market fluctuations and operational risks, particularly in the competitive oilfield services (OFS) market.
- The company’s growth strategy involves substantial capital expenditure, which could impact financial flexibility and necessitate careful management of resources.
- There is a reliance on teamwork and coordination across various departments, which, while currently effective, poses a risk if any part of the team underperforms or faces disruptions.
Q & A Highlights
Q: What's driving the big step-up in expectations on 4Q volumes? Is it well outperformance or better base declines?
A: Brian Willey, CFO, explained that the increase is due to great teamwork and optimized drill schedules. The Dagger Lake South well, which was brought online sooner than expected, exemplifies these efficiencies. The integration of Ameredev assets, subject to regulatory approvals, is also anticipated to contribute to the increase.
Q: Can you give us some color on the path forward for the Advance properties and the cube development strategy?
A: Tom Elsener, EVP of Reservoir Engineering, noted that the results from the Dagger Lake South and Margarita properties have exceeded expectations. They plan to drill another dozen wells on the Advance properties in the second half of the year. The cube development strategy, which involves drilling wells simultaneously, has been successful and will be applied to other acreage positions.
Q: You took down your D&C-per-foot guidance to $960 per foot at the midpoint. Can you talk about the drivers of that decline?
A: Chris Calvert, COO, attributed the decline to sustainable efficiencies and improved processes, such as simul-frac and trimul-frac techniques. While the OFS market has become more competitive, the majority of the cost reduction is driven by these efficiencies.
Q: How much more build-out do you think you need in the midstream area now that you've added Piñon?
A: Joe Foran, CEO, stated that they are open to further build-outs that make sense and enhance the existing system. Gregg Krug, EVP of Marketing and Midstream Strategy, emphasized the importance of staying ahead of the drill bit and maintaining adequate flow assurance.
Q: Can you give us an update on the current production of the Ameredev assets and your approach post-close?
A: Brian Willey, CFO, confirmed that Ameredev is running one rig and has 13 drilled but uncompleted laterals. The estimated production for Q3 is approximately 25,000 BOE per day. Tom Elsener, EVP of Reservoir Engineering, added that they plan to integrate these assets and start drilling Wolfbone and Bone Spring targets.
Q: How do you reconcile the updated guidance with the ninth rig, given the cycle time improvements?
A: Brian Willey, CFO, noted that the ninth rig will add about four wells, with minimal production impact for the year as these wells will be turned online late in December. Chris Calvert, COO, highlighted that efficiencies from techniques like trimul-frac are driving reduced cycle times.
Q: Would you expect the Ameredev stand-alone volumes to be directionally flat or grow in Q4?
A: Tom Elsener, EVP of Reservoir Engineering, stated that it would be more appropriate to comment on this after the deal closes, as the timing of the second group of drilled but uncompleted laterals is still uncertain.
Q: Do you think a nine-rig program is sufficient to hold volumes flat or grow in 2025?
A: Joe Foran, CEO, emphasized the importance of reducing days on well to make the existing rig fleet more efficient. The next two quarters will help determine the exact needs for 2025. The company aims to maintain flexibility and options to adapt to changing circumstances.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
