MATADOR RESOURCES COMPANY 2026 Q2 Earnings Call

Thank you, Michelle. Good morning, everyone, and thank you for joining us for Matador's second quarter 2026 earnings conference call. Some of the presenters this morning 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 release issued yesterday. 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 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, and any subsequent quarterly report on Form 10-Q. In addition to our earnings press release issued yesterday, I would also like to remind everyone that you can find a slide presentation in connection with our second quarter 2026 earnings release under the Investor Relations tab on our corporate website. With that, I would now like to turn the call over to Mr. Joe Foran, our Chairman, Founder, and CEO.

Joe? Thank you very much, Mac.

It's a pleasure to be here with you all again, have an exchange, your questions and our answers and your comments. We appreciate. We like to hear from you. We want to be sure that all of you know that you're welcome here. Come visit, and if you do, you'll be assured of meeting, not only most of the senior staff, but also the opportunity to visit with some of our young staffers that have come in in geology and engineering, and you hear directly from them that are doing the work, how they feel about it, and their views on the future and the strength and technology that they're using being state-of-the-art. Second, I'd like to give you an overall picture.

We've had near record adjusted free cash flow for this quarter of $303 million, $200 million of which has been used to pay down the bank debt that we had on the acquisition of the federal leases. Now we're under $1 billion on that debt, making progress to get it paid down further in these upcoming quarters. I think that's an important point to remember when people wonder about how we really stand. We have 19 banks in our bank group. They all scrubbed down our numbers pretty thoroughly and had some real good exchanges. They've raised good questions. All 19 have participated and have indicated more is available if we come across opportunities like that. Thank you, banks. We appreciate your backing us and working with us in our relationship with you.

Last, two things on this report. If you're asking us how we're doing, we'd just say the true answer is that we've exceeded the high end of our production guidance. It's nice to be sitting in that spot when also mentioned, we've had a 5% increase in our oil and gas, natural gas reserves, up from 667 million barrels of oil or gas equivalent to 703 million barrels of oil or gas equivalent. Nice increase for a quarter. I want to say to all of our teams, our exploration and production teams, good work and keep it up. As I mentioned, these results, cash flow generation has enabled us to pay down $200 million in the borrowings we have for the May federal lease sale on our RBL.

We expect to now generate possibly $900 million in free cash flow for the year. We'll have this largely paid down, if not paid off, by the end of the year. Second, in this area, we remain very focused on prioritizing continued debt reduction. It's not very often that you have an opportunity to buy three properties, like Cardinal, like Paloma, and like Ridge Runner, of this quality to bring into your asset group and in the upside of Ridge Runner and, you know, on these properties to continue growing our base in New Mexico. We've steadily risen in the ranks to where we're one of the We're in the top 10, and top five in Lea County. I'm also pleased and excited to provide update. We began the year deciding we had four strategic catalysts that we were planning to execute on.

First is the closing and integrating of Cardinal. On that score, that was a very professional work with the Cardinal team. We had good relations, went smoothly, to the point where we gained increasing confidence on the capability of their people who might be interested in Matador, and we made offers to 26 of their field people, their whole staff out there, basically. All 26 accepted the offer. We thought that was a good sign of how professional the negotiations went and the opportunities they feel are ahead of them, being with a company committed to the Delaware as we are. Also want to emphasize that midstream money was used to purchase Cardinal. For midstream assets, that's our policy. Midstream money for midstream assets. On the E&P side, again, we're using Matador money for properties that'll end up in Matador.

First, we've closed and we're integrating Cardinal, and as I said, those are two separate companies, but we collaborate with each other, and we think we help each other to better performance. That was the first strategic catalyst. The second one was BLM lease sale. We paid a lot of money for it. Would've been nervous about that, but if you remember back to 2018, we were criticized some for buying and paying what we did for lease sales, and look what that did for us. That boosted us in to the best cash flow and the best properties that we had for a number of times. The Rodney Robinson wells that were drilled and the Nina Cortell were all making over a million barrels a piece. That extra free cash flow has given us a lot of opportunities. We tried to take advantage of it.

When the opportunity came up again for BLM lease sale, years later, we really prepared for it, and we're excited by the leases that we received. It extended our inventory life to over 15 years. Good properties like that with nine different zones are likely to have a lot more than just 10 to 15 years of extension. They also are enhanced by the fact we have a midstream system that should be able to increase their cash flow, picking up this gas and getting it to market. I think in the succeeding years, flow assurance is going to play a bigger and bigger role.

On page seven of the slides, we have a map showing how all these properties fit together, and on Cardinal, you laid down to give us pipeline movement all around the basin, and you couldn't have really have a better fit than the way it fits in with our other pipeline systems. In that regard, you have 100 rigs approximately out there within 10 miles of our pipelines. That's a great opportunity for our group to pick up some additional business and relationships, and our teams are out there trying to take advantage of it now and bring in new customers and take on the existing customers of Cardinal and build that up into and weave it in to our existing pipeline systems.

Finally, the future results of Cardinal and these BLM leases should we expect them turn out to be better than expected, given the quality of the acreage from not only our acquisitions, but the E&P activities of other people in the area. As I mentioned, it's 100 rigs out there working, you can expect if you are not lining up how to get your gas out of the Delaware, need to be doing so, because I think there'll be some tightness in the markets. We'll try to take care of you as best we can. At this point, you might want to take some action to be sure that's lined up, for any investment you make in new wells.

All this, we believe, sets us up for a strong finish to 2026, and even stronger performance in 2027 as we're able to plan and coordinate our various activities. As a result, we've raised our production guidance from year-over-year oil growth of 4% to 7%. All this is done with 1% less capital expenditures. One note about capital expenditures, of course, I started this company with some friends 43 years ago, with $270,000, and now we have over $12 billion in assets. On that, we borrowed money the whole way, always paid it back, and we'll need to borrow some as we finish development of these undeveloped acres and extend the coverage the midstream has in these more prolific areas. We think that outlook looks good.