Matador Resources Company - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 delivered record production at 209,184 BOE/d (+22% YoY) with oil at 119,556 Bbl/d and gas at 537.8 MMcf/d, helped by outperformance of operated wells and six non-op Haynesville wells; adjusted EPS was $1.36 and adjusted EBITDA $566.5M.
• Management raised FY2025 production guidance and lowered D&C cost per foot, but increased total CapEx given accelerated activity; dividend was raised 20% to $0.375/share quarterly and $55M of stock repurchased YTD.
• Q4 outlook: oil volumes expected to rise with larger batches, gas to dip given Waha curtailments (0.9 Bcf gas, 45,000 Bbl oil shut-ins in Oct); D/C/E CapEx guided down 21% sequentially.
• Versus Street: Q3 adjusted EPS beat, while revenue was modestly below SPGI consensus; recurring EPS beats may drive estimate revisions despite revenue normalization on SPGI basis (ex-purchased gas/hedges) [GetEstimates*].
• Catalysts: strategic gas marketing (Hugh Brinson firm transport, LNG exposure) and midstream performance (San Mateo record processing and fee-based stability) support cash flow resilience amid Permian takeaway dynamics.

What Went Well and What Went Wrong

• What Went Well

  • “Record production of 209,184 BOE/d… +22% YoY,” exceeding guidance midpoints for BOE, oil, and gas; completion efficiency improved ~20% vs 2024 average, lowering costs per foot.
  • Dividend increased 20% and $105M RBL paydown in Q3, with leverage <1.0x and ~$2B liquidity; adjusted FCF of $93M despite elevated D/C/E spend.
  • Midstream: San Mateo processed record 533 MMcf/d, quarterly net income $50M and Adjusted EBITDA $74M; fee-based model and new sour-gas compressor expand optionality.

• What Went Wrong

  • Q3 D/C/E CapEx of $429.9M was ~$95M above guidance midpoint due to accelerated activity and non-op spend; midstream CapEx $42.8M in range but total CapEx rose.
  • Q4 gas expected lower due to negative Waha pricing maintenance curtailments and Haynesville decline; 0.9 Bcf gas and 45,000 Bbl oil deferred from October.
  • Realized oil price down YoY ($64.91 vs $75.67), and LOE/G&A per BOE rose slightly vs Q2 (LOE $5.58; G&A $1.91), pressuring margins despite efficiency gains.

Transcript

Speaker 2

Good morning, ladies and gentlemen. Welcome to the third quarter 2025 Matador Resources Company earnings conference call. My name is Jonathan, and I will be serving as the operator for today. At this time, all participants are in a listen-only mode. 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.

Speaker 3

Thank you, Jonathan, and good morning, everyone, and thank you for joining us for Matador Resources Company's third quarter 2025 earnings conference call. Some of the presenters today will reference certain non-GAAP financial measures regularly used by Matador Resources Company 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 is 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 yesterday, I would like to remind everyone that you can find a slide presentation in connection with the third quarter 2025 earnings release under the Investor Relations tab on our website. I would now like to turn the call over to Mr. Joseph Wm. Foran, our Founder, Chairman, and CEO. Joe?

Speaker 4

Thank you, Matt. It's good to talk to everybody again. We think we've had a heck of a quarter and are really pleased with our process in all of our different areas and the progress. We're going to try to go around the table so you can hear directly from a lot of the people doing the actual work. I think they've just done an outstanding job to date, and we're particularly excited on this quarter because anytime you get to raise the dividend, you generally get a lot of attaboys from your shareholders, particularly the rank-and-file shareholders. We're also pleased that we were recognized by the Dallas Morning News as one of the larger companies in the Dallas-Fort Worth area. The nicest part of the deal is that when you do the calculations, we are, although 36 in size, number one in profit per employee.

We give a lot of credit to the staff and their contributions and look forward to this report. I know everybody is interested in knowing about capital spending and the thought processes behind that, but would tell you if I were faced with the same situation, we would still spend this money, just as we did this year. I think the teams really worked together on that, and the Executive Committee of the Board and the Executive Committee of the company all went through this and said not only about this quarter, but setting up next year is going to be one of the most fruitful years we have as we have lots of inventory, lots of cash flow, good liquidity, and room on our RBL. Ask away.

I might turn it over to Chris, our Chief Operating Officer, just to describe some of the thought and process that we went through before deciding on this capital structure.

Speaker 0

Yeah, thank you, Joe. This is Chris Calvert, Executive Vice President and Chief Operating Officer. Thank you guys for taking the time to be on the call. I’d like to take a few minutes here to highlight the positives of what was written in the release last night surrounding the capital program and really focus on three things that I feel were probably maybe overlooked. First, I'd like to talk about the underlying economics related to the projects that came into this capital plan. Specifically, we mentioned 12 additional wells that were going to be brought into the 2025 program.

To highlight these wells specifically, these wells are in excess of a 50% rate of return, million BOE wells, half of which of these fourth quarter tills we're going to be talking about are in Antelope Ridge, which is what we've talked about, some of the highest EURs, not only in our company profile, but also in the basin. Really strong projects associated with this capital plan. Secondly, I think it was somewhat overlooked or taken for granted, the advantages and the efficiencies that have been made at the well cost level. We initially came out in 2025 and guided to a midpoint of $880 per completed lateral foot. We've since revised that number down to $835 to $855 with a midpoint of $844. As we turn on, we expect to turn on roughly 1.2 million net lateral feet this year.

That $30 to $45 savings equates to about $50 to $60 million in capital savings. Not only are we turning on extremely economic projects, we're doing it at a lower well cost level. Our initial investments are actually reduced, which in turn helps the economics of the wells. Thirdly, talking about the accelerated operations, I'd already spoken to the 12 wells that we accelerated into 2025. We will also have a positive springboard looking into 2026 with 13.6 net wells that will be turned on at the beginning of January. As we look to that, that's going to provide extremely good, excuse me, positive momentum going into 2026 to achieve a 2% to 5% organic growth rate of what we feel is somewhat of an inorganic growth rate in 2025.

I think when you consider those three things, the underlying economic returns of the projects, the reduced cost at the well level, and then the positive momentum leading into 2026, I think it leads to a very strong report and a positive outlook for 2026.

Speaker 3

Yeah, and this is Rob, CFO. I just wanted to pile on a little bit to what Chris is talking about. Even though I'm a CFO today, I've been Chief Accounting Officer for the past 10 years, and I've been sitting here at this table with this management team. We're really proud of what we've accomplished and created in a consistent manner over those past 10 years. I think one, just to bring in an accounting metric, we've gone from accumulated deficit as early as just three and a half years ago to, for the first time this quarter, over $3 billion in retained earnings. That strong balance sheet, and I'll refer you, we have the slide deck out there, refer you to slide 11. I think it highlights the strength of our balance sheet with a 0.4 leverage ratio.

Over the past year, we paid $670 million of our revolving debt and have about $2 billion in liquidity. That allows us the flexibility to take advantage of opportunities like what Chris is just talking about. I'm really excited about the well returns and the results that we've had so far this year. Like Chris said, I feel like that sets us up really nicely for 2026. At the same time, we're able to accomplish the other priorities that we have for free cash flow. We, as Joe mentioned, raised our dividend by 20% this quarter. Land spend, we continue to add on to our land position when we can find the accretive deals that we think make sense for us. We don't need to do anything, but we have a really good, strong inventory of greater than 50% returns, even at $50, as we mentioned in the release.

The last kind of piece of that is the opportunistic share buyback, the management team are buyers. The company is as well. Overall, I think we were able to hit all those priorities this quarter. Like Joe said, had an excellent quarter and really excited about how this sets us up for 2026. Jonathan, with that, we'll turn it over to Q&A.

Speaker 2

All right, thank you. If you'd like to ask a question at this time, please press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to one question. Again, we would ask that you please limit yourself to one question until all have had a chance to ask a question, after which we would welcome any additional follow-up questions. One moment for our first question. Our first question comes from the line of Neil Dickman from William Blair. Your question, please.

Speaker 3

Morning, guys. Nice to see another nice quarter and solid outlook. Joe, my question is really for you or Chris and the team, just on the op efficiency, something you were just getting at with the capital spend. I'm just wondering, as you all continue to see the improvement, how do you all decide between continuing potentially with the same capital spend and likely increasing production growth, or maybe continuing with the same production and decreasing capital spend? Is it one or the other, or how do you all make that decision from a higher level? Thank you.

Speaker 4

Neil, thanks for the question. It's a good question, and I wish I could give you an easy, always answer, but it's always a balance between those two areas and taking into account a number of other factors. It's just not a one variable question or a one variable answer that is price oil up or price oil down because we've often made more money in the bad times than, you know, in more robust times by taking on some projects when others were out the sideline. A great example of that, if I don't, is going back in time to when we bought the Rodney Robinson lease and the Bonnie and those leases, they paid out at $20 a barrel during the COVID period. That's one of the best deals we ever did. It was a time of worst oil pricing, and they've really kept giving during that time.

Come forward, the same thing can be applied to times where the drilling rigs were stacking up. We've kept the same rigs for 10, 15 years or more and have found that that's sometimes where you have good rig hands, good pricing on your rigs, good pricing on your completion is a time to build that foundation. We talk about it in committee, CISTA, and it's pretty lively about what we want to do and who wants to do something slightly different. We weigh, when you start out with just $270,000, as I did, to get to where we are today, you can be sure you've had lots of discussions and thoughts about how much to spend and where to spend.

We've kind of worked out a system among ourselves where we really try to stress test it and think about all the factors because there's other factors that weigh in on keeping a rig and keeping it going. What's going to happen next year? What is the quality of the prospects? I'm pleased to say our geologists have really knocked it out of the park on some of their ideas on drilling here and there, as you all have seen. We've had a steady rise in our engineering reports and in reserve studies that we do twice a year for the banks. There's been steady growth there.

The capital spending isn't something that we weigh by itself, but in connection with everything else and the other capital requests from midstream and marketing, for example, is another area that they've come up with ideas and have pointed out, let's spend some money here on the midstream. Of course, with the flow assurance, the added flow assurance that you get out of the basin has been a lifesaver for us at times when the rest of the basin was more or less shut down. It's a multifactor deal and it's lively discussions. I think I got to give a lot of credit to all the guys on the team that are helping make these decisions. I think they've been very wise. As Rob pointed out, look what it's done for our retained earnings.

Over the last three and a half years, we've moved from a deficit to over $3 billion in retained earnings. It's a pleasure to come back in light of those good decisions and say we're raising the dividend again, which in fact is now the fourth time in seven years, getting it up there to 3.5% or more. We plan to keep going in that direction as long as Chris and his team and Tom and his team and the midstream guys are all making these, I think, very good capital decisions. I think you can expect more of the same in the same manner, but we look at it more broadly than just looking at capital decisions based solely on oil price.

Speaker 0

Yeah, Neil, this is Chris Calvert again. I think Joe hit it on the head. Just to provide a little more color, I think when we look at specific project returns, you obviously, like Joe said, have two factors, really multiple factors, but one that has really, what we feel, dislocated in the back half of this year, and that is the cost components to those returns. That cost dislocation can come from efficiencies, which we have proven to be extremely good at, to where, whether it's simul-frac, trim-frac, U-turns, the efficiency-driven cost dislocation has been the large player in 2025. Now, as we look into the back half of this year, we are able to take advantage of some more competitive service cost pricing. When you have the confluence of efficiency and service cost reduction, you can really tip the scale on project economics.

I would also say that as we look forward, the tenet of what we have always operated on is optionality. When we look at this, it is October right now. When we provide a more clear picture of 2026 in February, we have the ability to flex up, flex down, to revise this soft guide for 2026 if market conditions have changed. I think that is something that is extremely important to where, if we see this cost dislocation somewhat converge back, we have the ability to make that change moving forward.

Speaker 2

Thank you. Our next question comes from the line of Derek Whitfield from Texas Capital. Your question, please.

Speaker 3

Good morning, Joe and team, and thanks for taking my question.

Speaker 0

Morning.

Speaker 3

Perhaps leaning in on some of the efficiency gains you've highlighted this quarter, where are you seeing the greatest opportunity for continued gains? More broadly, how much of your recent projected gains have been factored into your soft guide for 2026?

Speaker 0

Yeah, Derek, this is Chris Calvert again. From an efficiency standpoint, I still think there is always going to be ground to be gained. We have talked a lot about completion operations, simul-frac, trim-frac. In 2025, we utilize those two processes on about 80% to 85% of our wells. Trim-frac, there's still ground to be made to where we can get that number. Right now, it's about 40% for 2025. Look to boost that in 2026. There are going to be logistical operations where we can look to utilize money. Partnerships with San Mateo play a key part in this when it comes to treated, produced water, and using recycled water for fracturing operations is going to be a large part of efficiency gains from a logistics perspective moving forward.

On the drilling side, extending laterals, we're excited that as we move into the fourth quarter, we're going to have some of our longest laterals to date, 3.4 mile laterals, at the AmeriDev asset. We are extremely excited to bring some of that value forward. From an efficiency standpoint, it's really across the board with completions, drilling, production, facilities, measurement that we look to push forward. Now, how does that play into 2026? Everybody on the call is very aware that this $50 commodity price world that we live in is relatively recent. It's probably within the last 7 to 14 days. When we've looked at how we guide from a capital perspective, if oil continues to be in this $50 region, I think there's potential to improve upon a D&C cost per foot range that we guided $835 to $855 for the back half of this year.

I think any sort of service cost reductions from a $50 oil commodity world, I think there's potentially grounds to improve upon. From an efficiency standpoint, we started the year at $880. We're going to finish $835, $845, give or take. A large part of that is efficiencies. As we look into 2026, we look to improve upon that number. Hopefully, like we've said in the release, we'll turn in line a similar net lateral footage, but do it on a cheaper capital budget from a D&C side or a more efficient capital budget from a D&C side.

Speaker 2

Thank you. Our next question comes from the line of Leo Mariani from Roth. Your question, please.

Hey, guys. Don't want to continue to harp on the same sort of point here, but you know, clearly, you folks do have flexibility in your plans, which you certainly spoke to, that you certainly could adjust some things, you know, come kind of formal guide, you know, in February. I just wanted to maybe get a better sense in terms of the variables that you guys are looking at. A number of folks out there are expecting kind of an oversupplied oil market in 2026. Just want to get a sense of how much the oil macro kind of plays into your thought. I know you've certainly got some returns here, but if oil goes another leg lower here, is there kind of a price level where you maybe decide not to grow so much? Would that be in the $50 to $55 range?

Just trying to get a better sense of how you're thinking about oil macro and how that factors in your decisions here on spending.

Speaker 0

Yeah. Hey, Leo, that is a great question. I think as we look, and it will go back to Joe's answer, I think it was on Neil's first question. I think that's a story that we unfold and we tell when we live in that world. As we get closer to February, if commodity continues to slide, I think that's how we have to approach it. Like Joe said, it's done at a committee level here with all teams participating with board contribution. It's really an internal discussion. I think as we look at that, the optionality that we maintain, whether it's at the rig level, even more flexibly at the completion level, we are able to reduce activity in that world if costs don't continue to go down in that reduced commodity price. I think that's how we would kind of look at it.

It is not a single variable. I don't know if Joe would like to chime in.

Speaker 4

Chris, those are all good points. Remember that we don't look just at the oil price. One factor that has influenced us and made us more active is the fact we've reduced days on well. If you drill these wells faster, you save about $100,000 a day. That makes a big difference in looking at your rate of return. Each day you save, you improve what makes sense to drill at what particular rate of return. The second thing that I'd say is that the drilling companies, we use Patterson more often than anybody else. Patterson is making improvements all the time on their equipment and their people, creating the efficiency. Price, some drops in price can be replaced by efficiency gains. These wells are going to produce for 30 years.

To look at it just on the price of oil, what the price of oil is today is narrow-minded, because again, I point you back to the Rodney Robinson wells and the other wells we drilled in the COVID period. You had low oil prices then, but they were paying out within a year, on the strength of its production, the low well cost. These other factors have to be not weighed once and then you wait six months to drill the well. They're made close in time to when you spud. You can always postpone it. You can just say we're not going to do it now. If you have a long relationship with the service companies, they'll work with you. They don't want to lose the business. Everybody works together on these things to do it at a more or less optimal time.

The capital decision really isn't the one that drives it so much. For a company like us that has the capital resources, we do $2 billion on our line of credit, paid down debt to a small amount. It really is a larger question on that is what efficiency gains taken into account, what efficiency gains, what these other costs are, and cost of profit. I really commend Chris and his team for reducing that where your profit cost is less now than it was, considerably less in my mind, where you can save $60 million has to be taken into account on the decision. Do you go ahead with this capital spending now thinking that, anticipating that with the efficiencies and the like here, you're going to still come out ahead? They're going to use their best equipment and best hands.

They all know that reducing cost is a major objective. Ours is working for the long term. We're not spending just to be spending, but we're spending fully intending to make money. You can see that by the number of shares and participation by our employees in buying stock in the open period. I feel real comfortable that everybody's taking things into account and pointing out the positive of drilling these wells, or doing other capital events at the same time and coordinating it. It's a balance between what the choices you have to drill or to acquire properties or use them to keep building out your midstream, which has worked out to be a real good deal. We have a lot of opportunities, a lot of choices, and there's a lot of thought and effort put into it.

Speaker 3

Yeah, Joe, this is Bryan Willey, the Executive Vice President of Midstream. I think you're exactly right. You mentioned the midstream business. Just a couple of items on that. That business is performing extremely well. We had a new processing record last quarter. 533 million cubic feet per day of natural gas was processed. We continue to have that success as we get into the fourth quarter. It's been a great start to the fourth quarter. Not only is the business performing well, we've talked a lot about the different options with that part, with that business, because we don't believe that the value of the midstream is fully reflected in Matador's share price. We continue to explore the options. We can be patient there. We don't necessarily have to have that money at Matador.

We can be patient and make sure it's the right opportunity and the right transaction for Matador shareholders to provide the most value. Maybe the last point I'd make is just Matador also has some wholly owned assets that they retain and they continue to operate. Those are assets that we acquired in the Advance Acquisition and the AmeriDev Acquisition. It's about 250 miles of pipeline altogether. Great assets. Those assets are about $30 to $40 million this year in EBITDA is what we expect. We also, next year, expect it to be between $40 and $50 million in EBITDA for those assets. Those are great assets that we could drop down eventually down to San Mateo with the right situation. It's a great business at San Mateo and in the midstream business because it's a fee-based business.

It's something that, despite the ups and downs of commodity prices, we continue to get the fees from our customers, including Matador, but also including third parties. It's been a great year for third party. We've had a new customer on the oil side, and we continue to expand the relationships with our existing customers and repeat customers as we move forward. The midstream business continues to perform very well. That relationship and partnership with Matador, the team there, and team here at San Mateo, this really is a benefit that I think is hard to replicate and very unique for Matador and its shareholders.

Speaker 0

Yeah, this is Greg Krug, AVP of Marketing and Midstream Strategy. I just wanted to pile on a little bit as far as the midstream business is concerned. As Bryan Willey mentioned, as far as it is a fee-based business and not commodity. These lower commodity prices do not have an effect on the fees that we get on San Mateo. Also, I wanted to point out that, you know, as far as flow assurances, we harp on that every time we have an opportunity to do so, just because it is so important to Matador and to our third-party customers. We feel like we're a step above some of the other third-party midstream companies just for the simple reason, I mean, we're tied to those with some of our midstream or our wells at Matador, those other companies, and they're just not as reliable as we are.

We feel more comfortable with going to the San Mateo and Matador-owned systems. I think that's a huge factor for us as well.

Speaker 3

Yeah, this is Brian Willey. One other thing to add. Slide 12 actually shows an outline of our assets. You can see the 650 miles of pipeline, the 720 million cubic feet per day of processing. I think just generally, if you just look at the slides generally, if somebody took a minute to look at the slides, you'd be able to see what a great job Matador is doing altogether and what a fantastic job that we're doing. I think if you haven't taken time to look at the slides, I think it's a great opportunity to be able to look at those and get a great summary of the progress that we are making in Matador. If slide 12 has those Matador wholly owned assets, you can see those in blue on the map.

Even all the different slides, they just really summarize the great progress that we're making.

Speaker 4

Right. I hope that answers your question. Another thing to look at is that, look on slide number four, and you can see the progress we've made over these 12 years since we went public in this Matador, and, you know, where we sit and why having that midstream to service our area. The other midstream companies have been very cooperative. We've all tried to cooperate with each other on offloads. Having the midstream gives you, puts you in that club where everybody helps each other if some is down for maintenance, and I want to thank everybody for the way they do that and get gas out of the market. Greg, do you want to add to that?

Speaker 0

Yes, I do want to say, had a shout out to our third, some of our third-party offloads that we have, one of which is, I want to congratulate MPLX for their acquisition of Northwind. We're going to have a long relationship with MPLX, and we're looking forward to working with them further on our north, the Northwind asset and the fact that's going to be a solution for us for our sour gas and CO2. I might add, as far as Enterprise is concerned as well, you know, with their acquisition opinion.

Speaker 4

Yeah, that's important.

Speaker 0

We've got quite a bit of gas dedicated to them as well, and we look forward to that. We're also doing quite a bit of business with Target, and we're looking forward to doing additional business with them. We've got a great relationship with all those folks.

Speaker 4

Hope that answered your question. If you need more, we again invite everybody on the call to come see us. We'll devote more time to you and to see our operation because there's aspects of our operation such as our Maxcom room, which is monitoring all of our drilling activity, that has added to the efficiency gains that led us to lower prices, which has opened up the door to more capital decisions and adds to the long-term nature of what we're trying to establish in New Mexico.

Speaker 2

Thank you. Our next question comes from the line of Neil Hunknes from B of A. Your question, please.

Morning, everyone. For my question here, I was hoping to kind of ask on the water handling. We've seen a lot of activity in the water handling sector this year. Obviously, San Mateo has a large water handling business. As you guys continue to leverage trim-frac and simul-frac operations, it seems to be playing an increasingly important role there. Could you maybe talk about just general growth aspects for that company or a growth outlook and how you're thinking about that business today?

Yeah, hey, Neil, I'll start from the Matador side of things. Brian can also talk about it from the San Mateo side. Next year, there is going to be, you know, we're looking at roughly $40 to $50 million investment in Matador's wholly owned midstream business. A lot of that has to do with the build-out of our water gathering system, both in the AmeriDev area and in our Hat Mesa kind of ranger area. That investment speaks to the integrated nature of the upstream business with the midstream business and to being able to provide an increased percentage of produced water for these intense hydraulic fracturing operations. Chris Calvert talked about some of the efficiency gains that we've seen in that realm. I think it is a great example of us working together to increase the amount of produced water.

It lowers use for hydraulic fracturing operations, which reduces our lease operating expenses, and it reduces the capital spend on the fract side. There is an investment there to increase our water handling capabilities.

Thank you. Our next question comes from the line of John Abbott from Wolf Research. Your question, please.

Speaker 3

Thank you very much for taking our question. Our question is going to be on natural gas pricing. I mean, we did see some negative Waha negative during the first part of October. As you sort of look out in the Permian, there's going to be additional takeaway capacity. Do you think that gets filled? I just really sort of like, how do you think about gas pricing in 4Q? How do you think of gas pricing longer term? Do these pipes get filled? How do you think as you sort of report on a two-stream basis? How do you think about the gas price and your realizations?

Hey, Joe, I'll start. If Greg and Anton want to pile in here, that's great. In Q4, as we highlighted in the release, we did elect to curtail some wells for a few weeks during this long-haul pipeline maintenance period. In doing so, we avoided paying those kind of deep negative Waha pricing. I do think it speaks to Matador Resources Company and our ability to be nimble and make sure that we have that lever as an option to pull in this sort of environment. We saved a lot of money in doing so and really just deferred that production to where Waha prices are positive as they are today.

On your question about these long-haul pipes that have already been decided to be funded for building, you've got Hue Brinson that's coming on later this year and Blackcomb and GCX expansion, all of which will add roughly 4 BCF towards the latter part of this year. We do think that the longer-term view of, and really, I mean, just 2026, that the capacity issues, if you call them, in the basin for Waha will be relieved by those pipelines.

Speaker 4

Yeah, the other thing, Glenn, is weather still plays a role in the gas pipeline business. You hit October each year or end of September, you're faced with this risk. You want to be sure you have the balance sheet that you can work through those periods. The second thing is that solutions are coming, that the midstream industry is very responsive to this and finding ways out. I'm pleased to report today, Anton, you have a better handle with gas or the selling price is $1.50 now.

Speaker 3

Yeah. This is Anton Langland, Executive Vice President of Marketing. Joe is correct. Cash has gotten a little bit stronger out there at Wahaha. We anticipated some of this, and we went out and put in hedges for 2026 where we have a big hedge position to protect downside risk on Wahaha. As we know, all these pipelines are coming online in 2026. We'll have GCX expansion mid-2026 for half a BCF. Blackcomb will come on for 2.5 BCF. Hugh Brinson will come on at 1.5 BCF. That's all going to happen in 2026, which should alleviate some of this pressure, downward pressure on Wahaha prices going forward when you start looking at the end of 2026.

The 2027 should be a great time for Wahaha production in our gas and give us a lot more opportunities to produce more of our gas fuel wells that we have in inventory that we haven't drilled yet because of these lower gas prices. In 2027, 2028, we'll have a lot of opportunities to drill a lot of gasier benches out there.

Speaker 2

Thank you. Our next question comes from the line of Zach Parham from JP Morgan. Your question, please.

Hey, guys. Thanks for taking my question. I wanted to ask on well productivity. Just looking at the publicly available state data, your well productivity on a per lateral foot basis is down a little bit year over year in 2025, though relatively in line with where you were in 2022 and 2023 as 2024 was a really strong year. I know there will always be some variability in productivity data just given the geographical mix of wells and various lateral lengths. Could you talk a little bit about your expectations for well productivity going forward and how you see that trending into 2026?

Speaker 3

Hey, Zach. This is Tom Elsener, our EVP for Reservoir Engineering. Going into 2026, we have a very strong program. We expect the same or better BO per foot in 2026 as we have seen in 2025. Coupled with all the commentary about these longer laterals, we expect to see lateral length increase approximately 10% going into 2026. That should be really positive for the total EURs, really positive for the capital efficiencies, lowering well costs. These are very strong projects, as we've talked about with rate of returns over 50%. These are $1.1 million, $1.2 million BOE wells. These are very strong wells that are very durable at a wide variety of lower oil and gas prices. I think that the team should be commended for all the hard work and cooperation they've put together. I think it's quite the opportunity to bring these wells forward.

As Chris mentioned, things have gone better than expected operationally. The teams coordinating with midstream to have all the permits, the pipelines, all the drilling and execution, all the completions, all the wells turned online on time and under budget, I think has really been something that we're proud of, and we expect to see that going forward. I think it'll continue on beyond 2026. I think that a lot of these really high-quality Wolfcamp and Bone Spring wells have been pushed further north. As you know, one example of that has been our Avalon well that we've highlighted in the release at Gavilon. That's a well that has produced over 280,000 barrels of oil in the first 12 months of life, and it's already paid out. It will continue to pay out many more times into the future.

I think our inventory is very strong, and we're very, very excited for the wells we're putting up on the board for this year.

Speaker 2

Thank you. Our final question for today comes from the line of Kevin MacCurdy from Pickering Energy Partners. Your question, please.

Speaker 3

Hey, good morning. Thanks for taking my question. Just continuing to touch on the midstream angle, what is the impact of the increased activity on the San Mateo volumes and EBITDA outlook? Thanks. Yeah, this is Bryan Willey, Executive Vice President of Midstream. You know, that partnership we have with Matador is critical to us. It's about 70% to 80% of our revenues come from Matador. As Matador grows, oftentimes that leads to growth in San Mateo as well, just depending on where the growth is. I think we'll have more to talk specifically about that, of course, next year when we lay out our plan. That's a great partnership that we have with Matador. It's something that, as you look at the capital expenditures for next year, Glenn mentioned earlier the Matador-owned capital expenditures. I think we had mentioned in the release the 8% to 12% capital expenditure increase.

Approximately $90 million to $100 million of that is midstream, whether that's San Mateo and our share of the 51% or whether that's Matador owned. We have some really great projects on tap for next year to continue to grow the company and continue to expand the business as we support Matador.

Speaker 2

Thank you. Ladies and gentlemen, this ends the Q&A portion of this morning's call. I'd like to hand the call back to management for any closing remarks.

Speaker 4

Thank you very much. Thank everybody for spending the time in here with us. Again, I repeat, if you want more information or have more questions, you'll find us successful. Rob will be happy to take your questions and get answers for you. We try to pride. I didn't come up through private equity, but came up through friends and relatives. With friends and relatives, they have a higher standard for communication and being accessible. We want to maintain that. You know, a lot of people, as I said, I think one of the issues just confronted directly is, quote, capital spending. Are we outspending our cash flow? I think the answer is clearly not. If you don't believe the accounting that we've grown from a deficit to over $3 billion, having made good decisions, then look at it this way. I've never sold a share of stock in Matador.

We have a whole group of executives that haven't either. As far as the employees go, we have an employee share purchase plan with over 95% participation. The people that know the company best, we're buyers, basically, not sellers. We can see the future coming up. We don't look upon it. We look more upon the quality of the rock and the quality of the operations as opposed to what the oil price per barrel is because you can have a very high oil price and the capital decisions that don't have good operations, or something else can affect it, that they're spending too much on their bank debt and are in a bad position. Over 40 years, remember, we started with just that $270,000. Over 40 years, we've grown to this point. It's from having a good decision-making process.

Not that we've never made a bad decision, but not many of them. Made a whole lot more in times of oil price being shaken for one reason or another. I've pointed out some of those instances. If you keep going and be that much more selective in your decisions, you can build an organization and there are more good people to become available. It's worked to our advantage. Not that I welcome $50 oil for a sustained period, but it's not fatal either if you've maintained your balance sheet all through time and your bank relationships. You just have to be a little more careful. The midstream has helped because it's fee-based and it gives us further balance. As we say around here, we like our chances.

I think if you come to visit and meet the staff, you'll say these are people I could trust with my, I won't say it's your life savings, but you could trust your investment, because we've come a long way. You got a 40-year history to look at. We're pretty optimistic. We see the opportunities growing for us rather than being reduced. I think this period going into the fourth quarter, frankly, we've never looked so good with more options than we had before and more targets of opportunity for 2026. We're excited. I do think that as helpful as these questions are on these kind of calls, it's even better to come see us, have breakfast or lunch with us, or even dinner and meet the people behind these capital decisions and see that, hey, they're reasonable people. They're professional.

They wouldn't be spending the money on this well or that well if they didn't have a high degree of trust and confidence in it. I think that's what you get for investing in Matador Resources Company. We do have a sheet that says why Matador. It's at the back of your, of the earnings release. I really encourage everybody to look through those exhibits. I think they tell the story in 5 to 10 minutes of why Matador. An original investor in First Matador was in at $0.85. We, you know, sold for $18.95. An original shareholder in this Matador is in for $3.56. It's come a long way. We like our chances. Better today than ever. I think we thank the board for working with us. We think they're distinguished. It's a good process. We rank up there.

Van can tell you more where we rank in New Mexico, but it's a top 5, top 10 type of company. Start out with you have on page four how little we started with back in the early 1990s to where we are today. Please give it serious consideration. If you want more information, we're here. If you want a personal, in-person discussion, if that would give you greater comfort, just give Mac a call and he'll schedule it. We'll enjoy meeting you. We would like to wish we could meet every one of our shareholders, so they would have that personal relationship. Thank you very much for your attention today. Come see us. We like our chances. We feel very comfortable that next year is going to be a good year for us one way or the other. Thank you.

Speaker 2

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.