Matador Resources Company (MTDR) Earnings

Management highlights

- Financial Performance & Deleveraging Progress * Achieved near-record adjusted free cash flow of $303 million in Q2 2026, with $200 million used to pay down acquisition debt for federal leases, reducing outstanding debt to under $1 billion * The company's 19-bank bank group fully supported the acquisition, with additional capacity available for future opportunities; management expects to fully pay down remaining acquisition debt by the end of 2026 - Strategic Catalyst Execution * Completed acquisition and integration of the Cardinal property: all 26 offered field employees from Cardinal accepted positions with Matador, integrating smoothly into operations. The company maintains separate E&P and midstream entities, with midstream capital allocated to midstream assets per longstanding policy * Secured high-quality acreage in the May 2026 BLM federal lease sale, extending Matador's drilling inventory life to over 15 years. The new acreage has 9 producing zones, fits geographically with Matador's existing assets and midstream infrastructure, and follows the company's successful 2018 federal lease purchase that delivered strong long-term cash flow * Acquired three high-quality properties (Cardinal, Paloma, Range Rider) that strengthen the company's core position in the Delaware Basin, where Matador now ranks among the top producers in Lee County - Operational Highlights * The Race Creek exploratory well, on Matador's 50,000-acre position, came in with initial production of over 2,200 barrels of oil equivalent per day, exceeding management expectations * Operational efficiencies have cut drilling time for 3-mile laterals from ~20 days to ~10 days, reducing per-well capital costs and improving project economics * Improved midstream infrastructure access delivered a significant marketing gain in Q2 2026 from mitigating Waha natural gas pricing weakness, with further improvements expected as new pipeline capacity comes online * The integrated midstream business provides flow assurance for Matador's production, and supports third-party producer demand in the Delaware Basin where production growth is expected to create pipeline tightness

Guidance

- Production guidance for full-year 2026 was raised: year-over-year oil growth guidance increased from 4% to 7%, achieved with 1% lower planned capital expenditures than prior guidance * Management expects strong full-year 2026 pre-dividend cash flow of approximately $900 million, which will allow full or near-full paydown of remaining acquisition debt by year-end * The company's baseline strategic target for 2027 is mid-single-digit oil growth, consistent with its longstanding policy of measured profitable growth * First drilling activity on the newly acquired BLM federal leases is targeted for late 2026 to early 2027, with large pad development expected to be a core part of early 2027 activity * Strong improvement in natural gas realizations is expected in coming quarters as the Hugh Brinson pipeline comes online early, alongside existing transportation agreements with Energy Transfer

Segment performance

Matador Resource Company does not break out separate financial performance by product segment in this earnings call transcript. The company reports an overall near-record adjusted free cash flow of $303 million for Q2 2026, and a 5% increase in total oil and natural gas reserves from 667 million barrels of oil equivalent to 700 million barrels of oil equivalent. No segment-specific revenue or absolute financial figures are provided.

Risks & headwinds

- Without secured flow assurance (pipeline access) for new production in the Delaware Basin, where ~100 active rigs are driving near-term production growth, producers may face constraints moving gas to market * The strong marketing gain recorded in Q2 2026 is not expected to recur in future quarters * High-debt positions increase stakeholder scrutiny and risk, requiring consistent deleveraging to maintain financial flexibility and banking support

Analyst Q&A

• Q: What drives the expected >80% rate of return on Matador's new assets, compared to 50%+ returns on existing assets, and will the company increase activity in these new areas? /

  A: The high returns are underpinned by core Delaware Basin rock quality, with expected 15% to 20% higher estimated ultimate recovery (EUR) per well versus existing assets, plus nine producible zones that enable batch development and longer laterals. Lower well costs, falling to $600 per foot, and high net revenue interest from the 12.5% royalty on federal leases further boost returns. Additional midstream synergy value, from proximity to existing infrastructure, is not included in the 80% return projection.

• Q: Is mid-single-digit oil growth the correct 2027 target, and will capital expenditures need to step up from 2026 levels to hit this target? /

  A: Matador's longstanding strategy of measured, profitable growth remains in place, and mid-single-digit 2027 growth aligns with this policy. The company's top priority is continuing to pay down acquisition debt, targeting ~$100 million per month in debt reduction at current prices to pay off remaining debt within 12 to 15 months. New assets are profitable even at $70 per barrel oil, supporting disciplined growth alongside deleveraging.

• Q: What is the timeline and development plan for the new federal BLM acreage? /

  A: Matador had targeted this acreage for many months, so permitting work began immediately after the lease sale, with significant progress already made. The company targets spudding first wells by the end of 2026 or early 2027, with large pad development expected to be a core part of early activity. Midstream capital spending has already been increased to expand infrastructure to serve the new acreage, and 12 operated nearby wells are currently being completed for Q3 2026 startup.

• Q: How do recent large acquisitions change Matador's strategy for its midstream business? /

  A: The acquisitions reinforce the strategic value of Matador's integrated midstream business by securing flow assurance for the company's expanding Delaware Basin production, and creating new midstream value: the Paloma acquisition added $50 million in midstream value, while the federal lease sale added close to $100 million in midstream value. With ~100 active rigs within 10 miles of the new pipeline, growing regional production is expected to create flow assurance tightness, so the expanded midstream network serves both Matador's needs and third-party demand in a win-win structure.

• Q: Is Matador currently in digest/de-lever mode after recent large acquisitions, or will it continue pursuing new opportunities? /

  A: Deleveraging is the top near-term priority, consistent with Matador's 43-year pattern of acquiring high-quality assets, improving operations, and paying down debt to prepare for future opportunities. The company will keep evaluating attractive opportunities that fit its existing portfolio, such as the recent acquisitions which were an exceptionally good strategic fit. The bank group has already raised the company's revolving credit limit, providing $2 billion in available capacity for qualified opportunities, while operational efficiencies continue to lower capital spending per well, improving project returns.