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    MTDR
    Earnings call· Jun 2026(Q2 FY26)

    Matador Resources Q2 FY26 earnings call MTDR

    Aug 6, 2026 Source

    Executive summary

    Matador Q2 FY26 — Production Guidance Exceeded, Debt Reduction, and Strategic Acquisitions Integration

    Matador Resources delivered a strong Q2 FY26, surpassing production guidance and generating near-record adjusted free cash flow, which was primarily directed towards debt reduction. The company successfully integrated recent strategic acquisitions, including Cardinal and federal leases, which are expected to significantly enhance future returns and extend inventory life. Management emphasized a balanced approach to capital allocation, prioritizing deleveraging while remaining opportunistic for high-quality growth assets.

    Highlights

    5

    • Generated near record adjusted free cash flow of $303 million in Q2 FY26.

    • Exceeded the high end of production guidance for the quarter.

    • Increased oil and natural gas reserves by 5%, from 667 million BOE to 703 million BOE.

    • Raised full-year oil growth guidance from 4% to 7% with 1% less capital expenditures.

    • New properties acquired are expected to yield over 80% rates of return, driven by high-quality rock and multiple benches.

    Concerns

    2

    • Anticipated tightness in gas markets in the Delaware Basin due to high rig count, potentially impacting flow assurance.

    • Acknowledged volatility in the Middle East as a factor influencing oil prices.

    Guidance & targets

    5
    CategoryTargetConfidence
    Free cash flow
    $900 million
    high materiality
    High
    Year-over-year oil growth
    4% to 7%
    high materiality
    High
    Capital expenditures
    1% less
    high materiality
    High
    Debt reduction pace
    $100 million per month
    medium materiality
    Medium
    Federal lease activity start
    End of 2026 or early 2027
    medium materiality
    High

    Operational metrics

    9
    Debt reduction (federal leases)
    $200 millionpaid down
    Q2 FY26

    Used to pay down bank debt on the acquisition of federal leases.

    Bank debt (federal leases)
    under $1 billiondown from $1.25 billion
    Q2 FY26

    Total bank debt related to the Cardinal acquisition, reduced from initial amount.

    Oil and natural gas reserves
    703 million barrels of oil or gas equivalentup 5% from 667 million BOE
    Q2 FY26

    Increase in total proved reserves.

    Well cost
    $600 per foot rangedown significantly
    future

    Expected well cost reduction on new properties due to batch development and longer laterals.

    Federal leases royalty
    1/8 royalty
    future

    Lower royalty rate on federal leases enhances economics.

    Drilling time for 3-mile wells
    10 daysreduced from 20 days
    current

    Significant reduction in drilling time for 3-mile wells, leading to capital savings.

    In-zone drilling percentage
    98%, 99%
    current

    Achieved through MAXCOM room technology, maximizing production from capital spending.

    Rae's Creek well test
    over 2,200 barrels
    initial test

    First test well in the Rae's Creek prospect, exceeding expectations.

    Marketing gain
    significant
    Q2 FY26

    Result of efforts to mitigate weakness in Waha pricing, not necessarily expected to recur at the same level.

    Industry KPIs

    2
    MetricValueDetails
    D c efficiency rig activity10 daysdays
    FCF shareholder distributions$303 millionUSD

    Deals & partnerships

    5
    CardinalE&P and midstream assetsless than $1 billion

    Professional integration, retained 26 field personnel, provides pipeline movement around the basin.

    Federal GovernmentFederal oil and gas leases

    Strategic acquisition of high-quality leases, prepared for extensively, expected to drive future results.

    PalomaE&P properties$50 million in midstream value

    Quality company with successful property development, contributing midstream value.

    Ridge RunnerE&P properties

    Quality company with successful property development.

    Energy TransferNatural gas realizations improvement

    Deals done to improve natural gas realizations, including the Hugh Brinson pipeline.

    Capital programs

    1
    Midstream build-out to federal propertiesunderway
    Period spend: increased

    Benefit: support spudding wells this year in that vicinity

    Increased midstream spend to build out San Mateo and Matador systems to support activity on newly acquired federal leases.

    Risks & headwinds

    2
    Tightness in gas markets / flow assurance in Delaware Basinsucceeding years

    100 rigs operating within 10 miles of our pipelines

    Mitigation: Matador's midstream system and proactive planning to take care of its own gas and help others.

    Commodity price volatility

    prices were to collapse to $30 a barrel instead of $70

    Mitigation: Adjusting program accordingly, properties make money even at $70/barrel.

    What to watch in Q3 FY26

    4

    Debt reduction pace

    Next 12-15 months
    Current$200 million paid down in Q2, total debt under $1 billion
    Target$100 million per month

    Why it matters

    Management's first priority is deleveraging, which impacts future acquisition capacity and financial flexibility.

    But our target would be something at present prices, somewhat in that range of $100 a month. So it's paid off within a year to 15 months.

    Q&A highlights

    5

    What drives the over 80% rates of return on new properties compared to existing 50%+, and will this lead to more activity?

    Tom Elsener explained that the high returns are due to very high-quality rock (15-20% higher oil EURs), 9+ benches allowing for batch development and longer laterals (reducing well costs to $600/foot), high net revenue interest (1/8 royalty on federal leases), and midstream synergies.

    “We're very excited for these new properties and the 80% rate of return is really underpinned first and foremost, just by the very high-quality rock.”

    asked by Neal Dingmann · answered by W. Elsener

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Catalysts & Acquisitions

    Matador successfully closed and integrated the Cardinal acquisition, retaining all 26 field personnel, which management viewed as a sign of professional negotiation and shared commitment. The company also secured federal leases, extending its inventory life to over 15 years with 9 different zones. These acquisitions are expected to drive better-than-expected future results due to the quality of the acreage and surrounding E&P activity, with 100 rigs operating within 10 miles of their pipelines.

    02

    Debt Reduction & Capital Allocation

    The company utilized $200 million of its near-record adjusted free cash flow to pay down bank debt associated with the federal lease acquisitions, reducing the total to under $1 billion. Management projects approximately $900 million in free cash flow for FY26, aiming to largely pay down or off the debt by year-end. The capital allocation strategy prioritizes debt reduction while maintaining flexibility for opportunistic, high-quality acquisitions that fit the company's asset base.

    03

    Operational Outperformance

    Matador exceeded the high end of its production guidance for the quarter and reported a 5% increase in oil and natural gas reserves, reaching 703 million BOE. The company raised its full-year oil growth guidance to 4-7% while simultaneously reducing capital expenditures by 1%. New properties are anticipated to deliver over 80% rates of return, underpinned by high-quality rock, 15-20% higher oil EURs, and the ability to achieve well costs down to $600 per foot.

    04

    Midstream Synergy and Flow Assurance

    The recent acquisitions, particularly Cardinal and the federal leases, significantly enhance Matador's midstream business. The Cardinal system provides extensive pipeline movement across the basin, and the federal leases are strategically located near existing infrastructure. This integration creates opportunities to serve 100 rigs operating nearby, ensuring critical flow assurance for both Matador's production and potential third-party producers in an increasingly tight market.

    05

    Drilling Efficiency and Technology

    Operational improvements have led to significant reductions in drilling times for 3-mile wells, decreasing from approximately 20 days to 10 days, resulting in substantial capital savings and improved economics. The company's MAXCOM room technology plays a crucial role in maintaining drill bits in zone 98-99% of the time, maximizing production from capital spending and enhancing overall efficiency.

    06

    Rae's Creek Discovery

    Matador highlighted the successful initial test of its first Rae's Creek well, which produced over 2,200 barrels and exceeded expectations. This discovery in a new prospect area, encompassing 50,000 acres, showcases the team's geoscience and operational capabilities. The company is excited about the potential of this zone to add a new, high-impact target to its future development mix.

    AI-generated summary of the company’s earnings call. Not investment advice.