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DATE
Wednesday, July 23, 2025 at 11 a.m. ET
CALL PARTICIPANTS
Founder, Chairman, and CEO — Joseph Foran
Chief Financial Officer and Head of Strategy — Bill Lambert
EVP of Administration and Finance — Robert Macalik
EVP and Chief Operating Officer — Christopher Calvert
VP, Investor Relations — Mac Schmitz
President, Midstream — Brian Willey
President and General Counsel, Head of M&A — Brian Erman
President, Midstream — Gregg Krug
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TAKEAWAYS
Production Growth: Oil and gas production increased by 31% year over year, attributed to successes in drilling programs and multi-zone development in the Delaware Basin, though the specific comparison period is not stated.
Liquidity: $1.8 billion remains available under the revolving credit facility as of Q2 2025, with all 19 banks reaffirming their support; 15-16 are also part of the midstream facility.
Midstream Processing Capacity: San Mateo midstream business increased processing capacity from 520 million to 720 million cubic feet per day during Q2 2025; the new Marlin plant is operating at about half capacity as of Q2 2025 and is fully committed for future volumes.
Midstream EBITDA Guidance: Cumulative midstream EBITDA (non-GAAP) for the first half of 2025 totaled $145.5 million, with full-year 2025 midstream EBITDA guidance unchanged at $275 million to $295 million (non-GAAP).
Lease Operating Expenses: Due to operational efficiencies and chemical program implementation.
DNC Cost Reductions: Drilling and completion (DNC) cost per foot declined by 11% year-over-year in Q2 2025, with further savings achieved through “U-turn” drilling and a shift from zipper to trimmer frac operations.
Dividend Policy: The base dividend has been raised six times over four years and is reviewed annually for appropriateness and fairness to shareholders.
Debt Metrics: Net debt-to-EBITDA ratio is below one as of Q2 2025, reflecting continued debt paydown and balance sheet strength.
Share Repurchases: The company repurchased approximately 1% of its shares for the first time in Q2 2025, under a $400 million authorization, funded with post-dividend free cash flow.
Alternative Minimum Tax (AMT): Recent legislative changes are expected to delay alternative minimum tax obligations for several years, with benefits beginning in 2025 and beyond, supporting the free cash flow outlook (non-GAAP) beginning in 2025.
Operational Flexibility: Eight rigs are expected to run by the end of the week; management states the flexibility to adjust rig count based on capital efficiency and free cash flow margins.
SUMMARY
Matador Resources Company (MTDR -1.16%) explicitly raised its full-year 2026 guidance for both oil production growth and cash flow, noting that some guidance metrics may be non-GAAP, citing strong drilling program results and expanded multi-zone productivity in the Delaware Basin. Management emphasized that San Mateo’s new Marlin midstream plant, now at half capacity but fully committed, diversifies the business into stable, fee-based revenues and supports operational flow assurance. Midstream EBITDA (non-GAAP) remains on target with prior annual guidance for 2025, as third-party volume contracts supplement in-house production, and ongoing efficiency gains reduce chemical and drilling costs. The continued growth of the base dividend and the first-ever share buyback, executed in Q2 2025, demonstrate a balanced capital return approach. Legislative changes have postponed AMT liabilities, and management expects this to benefit the company beginning in 2025.
Management reiterated that, “the value of our midstream business is not reflected in Matador's share price today.” underscoring ongoing exploration of strategic alternatives for San Mateo, including IPO or other value-unlocking transactions.
Operational improvements, notably in “U-turn” drilling and trimmer frac adoption, have led to both cycle time reductions and substantive DNC cost savings, without factoring in potential service cost deflation later in the year (as of Q2 2025).
Matador maintains operational flexibility by deferring rig count decisions until later in the year or early 2026, enabling responsive adjustment based on macro conditions and capital efficiency priorities.
The company’s brick-by-brick M&A strategy persists, focusing on incremental, accretive acquisitions around existing assets, supported by robust post-dividend free cash flow allocation and ongoing debt reduction efforts.
INDUSTRY GLOSSARY
DNC (Drilling and Completion) Cost: The combined expense associated with drilling wells and completing them for production, measured per foot of wellbore.
Trimmer Frac: A completion process that reduces fracturing costs and increases completion speed relative to zipper or simulfrac operations.
“U-turn” Drilling: A drilling methodology that increases operational efficiency by reducing drilling days for horizontal wells through optimized well path design.
San Mateo: Matador’s midstream joint venture providing natural gas and oil gathering, processing, and water handling services in the Delaware Basin.
Brick-by-Brick Program: Matador’s incremental approach to M&A, focusing on small, accretive acreage acquisitions near core operations.
Flow Assurance: The reliability of midstream infrastructure in ensuring uninterrupted transportation of hydrocarbons from production points to market.
Full Conference Call Transcript
Mac Schmitz: Thank you, Gigi, and good morning, everyone. Thank you for joining us for Matador's second quarter 2025 earnings conference call. Some of the presenters today 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 to the comparable financial measures calculated in accordance with GAAP are contained at the end of the company's earnings press 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 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 issued yesterday, I would like to remind everyone that you can find a slide presentation in connection with the second quarter 2025 earnings release under the Investor Relations tab on our corporate website. And with that, I would now like to turn the call over to Mr. Joseph Foran, our Founder, Chairman, and CEO.
Joseph Foran: Thank you, Mac, and thank you all for listening in. We appreciate it, and we look forward to your questions and comments. We are pleased to report that we feel we have had a very solid quarter, very well executed, and it's pleasing to us because we have some people in new leadership positions. Everyone has really pitched in, and I think it's exciting to see some of the ideas and programs they have recommended, which will benefit everyone. In particular, I'd like to introduce Bill Lambert to you. Bill is our CFO and head of strategy. I think you'll find that he has a lot to offer, and you'll see smooth running from this point forward.
His aim and our aim as we were getting to know each other was very similar. We come from very similar backgrounds and culture. We've laughed about that some, and I think you all will enjoy getting to know him. I think many of you already know him. Our plan, our aim is to increase our production, but to also increase our free cash flow, not to do one at the expense of the other, but to work them in tandem. If your production is going up, your cash flow needs to be going up and vice versa.
If your cash flow is going up, spend it wisely on some production and drilling opportunities but be careful to keep that strong balance sheet. In times like this where you have turbulence and volatility, the strong balance sheet is, I think, you'll see is the background for a lot of our initiatives. It's helped us to achieve the progress that we have. More specifically, we believe we're well positioned for the back half of the year with drilling opportunities and cash flow opportunities. We have $1.8 billion available on our line of credit. Our banks have been very supportive of us.
All 19 banks reaffirmed their plans to stay in the group, and I think 15 or 16 of the banks are also in our midstream facility. So thank you all very much for that support and vote of confidence. Obviously, as you have seen in the report, we have increased our full-year guidance for 2026 both in oil production growth and cash flow. This is a result of successes in the drilling program, which pleases us, and we are now producing in the Delaware from 20 different zones. My whole career, forty years, has been spent primarily in the Delaware. We consider that as a land of opportunity.
But I'm also glad to report part of our time in Louisiana has resulted in us having in our deal with Chesapeake to reserve the Cotton Valley formations above the Haynesville. We believe we have 200 billion cubic feet of gas there or more, waiting all HBP just waiting for more stability in gas prices. Another opportunity that we're pleased to mention to you is our midstream opportunities. That has been a game saver with the tightness in the midstream markets out there in New Mexico. We got into it for flow assurance, and Greg Craig has guided us in this regard.
We've grown our midstream capacity from zero at the time of our original IPO to where we now have 720 million a day in capacity. We recently turned that on, so it's about half full now. But we'll soon, we believe, before the end of the year, likely be at full capacity or close to it. The team in that regard was faced with a choice of either building that plant, which was $200 million or more, or putting that into drilling. We concluded that it was best to build the plant. That would balance our asset base so that we were in a fee-based business along with the commodity-based business, which would be longer-lived assets.
It would be a balance to our production plus, and perhaps most importantly, provide flow assurance to us and our operations. We've been very glad that Greg suggested this and helped guide us along the way. In addition, in this regard, we are now recycling over half of our water production back in, which is a moneymaker for us. We're saving having to buy additional water. In the meantime, we've grown our base dividend. We've raised it six times in four years, and, as our habit is, to review the base dividend at the end of each year. We take a lot of pride in the base dividend and trying to make it be the right amount.
We believe it's most fair to all the shareholders. We're very pleased with our results and our buyback of shares, but the base dividend is something that all enjoy. It helps make people stickier. We continue our brick-by-brick program. We paid down debt, so our debt level is now with a ratio of less than one. Finally, we've been reducing our lease operating expenses principally through efficiencies and our chemical program, which has been implemented, I think, in a very solid fashion. It's generating savings. The last thing is the way we look at things. I know there are going to be questions on what is the quarter result and how that compared to the sequential quarter.
We tend to look more at how is it over the course of the year. How does one year compare to the last year? The cycle in oil and gas, we think, is more than a quarter-to-quarter business. We do like to look at the quarter numbers, but the year-over-year numbers are more important. For example, production is up a little now, but when you look at it year over year, which you don't have as much timing differences, it's up 31%. With that, let me open the floor for questions and give Bill a chance to talk about our strategy and financial plans.
Bill Lambert: Thank you, Joe. It's a pleasure to join the team here. I think really just before we jump into the Q&A, the opportunity to join Matador and the business that we have here, I think, our integrated business is extremely well positioned to deliver on both a robust free cash flow margin as well as oil production growth. Being able to do both of those things is something that we think is unique in this world. I look forward to answering your questions, but I'm very excited to join the team. Gigi, we'll turn it back to you for Q&A.
Operator: Thank you. On your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to one question. Again, we ask that you please limit yourself to one question until all have had a chance to ask a question, after which we would welcome additional follow-up questions from you. Please standby while we compile the Q&A roster. The first question is from Tim Rezvan from KeyBanc Capital Markets. Your line is now open.
Timothy Rezvan: Good morning, folks. Thank you all for taking my question. I wanted to start on midstream. I was a little surprised to see there was no change to midstream EBITDA guidance for the year. You had a record second quarter. You lowered midstream OpEx guidance.
Brian Willey: Tim, I think we lost you. No. Tim, this is Brian Willey. I'm happy to take that question about the record quarterly EBITDA. We appreciate you recognizing what a great quarter we had at San Mateo. Really, that starts with the men and women in the field led by Thomas Green and Brian Nicholson. Some of the others as they brought the new Marlin plant online and increased this from processing capacity from 520 million cubic feet per day to 720 million cubic feet per day. San Mateo's record performance during the second quarter was driven by Matador's record production growth during the quarter.
San Mateo, during the end of the first quarter and during the second quarter, connected to approximately 30 new Matador wells. Those were areas where San Mateo provides oil, gas, and water. As Matador's production increased and had record production, that was the same thing with San Mateo. We had record EBITDA. In addition, the team has been hard at work with third-party contracts and finding ways to save costs. For example, we often talk about the coordination between the upstream and the midstream. The operations folks on the San Mateo side led by Sean O'Grady and Justin Haas worked closely with Glenn Stetson and his team and their chemical consultants.
We were actually able to save about a million dollars on chemical costs during the quarter. Really, just a fantastic job on coordination between the teams. As we look at the EBITDA for the remainder of the year, the first half of the year EBITDA was about $145.5 million in total, which is about half of the expected EBITDA range for the year of $275 to $295 million. We still expect that range as Matador is drilling to Antelope Ridge and away from some of the areas where San Mateo operates. We're excited to continue to provide flow assurance and great value for Matador shareholders.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Scott Hanold from RBC Capital Markets. Your line is now open.
Scott Hanold: Yeah. Thanks. I'm gonna stick on the midstream topic, and I know you all get asked this. It seems like almost every quarter. Just wondering what your view right now is on the progress of looking at options for that, including potential IPO. If you could set a view of how you think about that timeline and what you need to see from the midstream entity to be ready for that potential value-creating opportunity? Is it a size and scale thing? Is it just one of those things you're still assessing whether it makes the best sense for Matador at this point and its shareholders?
Bill Lambert: Scott, thank you for that. I think as we think about it, we do believe the value of our midstream business is not reflected in Matador's share price today. We continue to think about ways to highlight that appropriately for shareholders. As we think about that, there are a number of opportunities and things we think about with respect to that. I'll let Brian Willey jump in here as well.
Brian Willey: Yeah. Thanks, Bill. This is a really exciting time at Matador. Joe mentioned Bill joining the team earlier this year, and he's been just a fantastic addition to Matador. It's allowed me to focus more on the midstream business and really push forward evaluating some of those strategic transactions. Whether that's something on the debt side or something on the equity side, there are a lot of opportunities in front of us. But we can be patient at Matador and make sure we do the right transactions for Matador shareholders. We're free cash flow positive, so we don't necessarily need to do any type of transaction at San Mateo.
But we do recognize that the value of the midstream business is not reflected in Matador's stock price. We look forward to continuing to provide excellent service to Matador, as I mentioned earlier, as we explore the right strategic alternative to provide the most value for Matador shareholders over the long term. I would like to add, we're not just doing it for Matador and Matador shareholders, but the midstream team has done an excellent job of developing some great relationships with third parties that are repeat business. That's one thing that we've considered is how much of our third parties are repeat, and they're almost all repeat. They're so many of the really great companies of the basin.
Been there a long time. Very strong companies financially and on production. We're delighted by that progress and think it gives us a lot of options of how to optimize that value. Greg, would you add anything to that?
Gregg Krug: No, Joe. I think that's spot on. We're definitely looking at any way we can optimize our value for San Mateo and as far as that goes, of midstream. We're trying to keep every look under every stone possible. We're trying to position ourselves to have the management staff there to be able to realize that.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Zack Parham from JPM. Your line is now open.
Zach Parham: Hey, thanks for taking my question. I just wanted to ask about activity levels. Can you give us some detail on how you're thinking about rig activity in the back half of the year and going into 2026? If you continued running that eight-rig program that you're gonna be at shortly, what type of production growth does that deliver in 2026? Or is that more of a maintenance? Do you need that ninth rig to deliver some production growth next year? Maybe talk about how you're thinking about the decision to add that rig back potentially.
Bill Lambert: Thank you, Zach. I think that's obviously very topical right now. As we look at it, you're right that we will be at eight rigs here basically at the end of the week. As we think about when we might potentially add back, I think we should really step back and think about what was the decision to ultimately change back in April. What we looked at in April was a macro environment that was highly volatile, and we had the ability and flexibility in our program to optimize 2025 capital efficiency by moving some things around and reducing rig activity.
With that, we were maintaining the free cash flow margin that we think is so important and balancing that against oil production growth. As we look into 2026, and I don't want to guide in detail at this point, but I think as we think about the second half of this year and 2026, what we really think about is how do those two metrics work in tandem. If there are opportunities to add activity and drive incremental growth, we want to make sure that we can maintain those superior margins and have incremental free cash flow from doing it.
We think one of the strengths of our portfolio is we believe that we can defer making that decision until later this year or the beginning of next year and still be able to drive relative growth in 2026 versus what we believe the industry average growth rate will be. I think that is important because we do believe that Matador has traditionally been known as a growing oil company, and we believe maintaining that alongside the free cash flow generation is kind of the focus of how we think about things going forward.
Operator: Thank you. One moment for our next question. Our next question comes from the line of John Freeman from Raymond James. Your line is now open.
John Freeman: Thanks. Good morning. Just sort of following up on Zach's question. If hypothetically, we're in sort of a lower for longer sort of oil price environment. I was gonna touch on something you said earlier in the prepared remarks, Joe, about you all had a decision a couple of years ago whether to take the $200 million and put it towards just drilling more or putting it towards building that plant. I'm just curious if y'all sort of just in a hypothetical kind of lower for longer environment, if theoretically your growth profile just naturally kind of is a little lower in that environment. Does maybe more of that quote-unquote growth capital potentially get shifted into the midstream business?
Bill Lambert: So I think, John, to your point, we had the decision on investing in the midstream. I think really what it goes to is we believe our integrated business can drive best-in-class free cash flow margin. Predicting commodity price has been a challenge for everyone, frankly. Whether it is lower for longer or volatile, I think what we try to look at is how do we deliver best-in-class free cash flow margin. One of the ways that we did that was traditionally investing in that midstream to drive the flow assurance to recognize that we could sell our oil and capture that free cash flow margin.
If we had not had the flow assurance that San Mateo provides us, and the excellent service that they have, the reality is we wouldn't have had the oil production to have driven the free cash flow that we have today. We look to think about these things in tandem on a go-forward basis. To the extent commodity price follows the forward curve and the steep backwardation that is within it, we'll obviously adjust and manage activity levels on both the up and the midstream with that.
One of the things that we look at, though, is we believe our relative free cash flow margin to the industry alongside the depth of our inventory means that not only can we deliver the exemplary free cash flow margin today, we believe we have duration because of our portfolio to do that. The integrated nature of it helps sustain that over a longer period of time.
Gregg Krug: I'm Greg, Craig. I also wanted to emphasize the fact that San Mateo has a 99% run rate. That's huge in the midstream business. That's the assurance that we get as a producer is that we're gonna have an outlet for our gas and oil and water takeaway on a regular basis. Something that runs really efficient. That's another reason we elected to do what we did.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Noah Hugness from Bank of America. Your line is now open.
Noah Hugness: Morning, Joe and Matador team. I wanted to touch on DNC cost. Quarter, you guys had DNC per foot cost well below the low end of your guidance range. I was just wondering what drove that? How sticky are those drivers?
Bill Lambert: Thank you, Noah. I'll start, and then Chris will probably jump in. One of the benefits of our portfolio is from east to west across the basin, we have varying depths and varying cost profiles within our portfolio as to how we think about it. One of the things that took place in this quarter is we had exemplary performance in a lower-cost area of the basin more to the westward side. The reality, and Chris will jump in here, is as we look to the second half of the year, we have not incorporated significant service cost reductions. We have only thought about these things in terms of the cycle time efficiency at this point.
I'll let Chris jump in and talk a little more.
Christopher Calvert: Hi, Noah. This is Chris Calvert, EVP and COO. It's a great question. Obviously, we appreciate you recognizing the DNC cost per foot number. A few things I would like to say to that. The improvement year over year, if you look at the second quarter in 2024, we're down about 11% from that. We can refer to slide D in the presentation if you would like to look at it graphically. The majority of that improvement comes from the efficiency like Bill just spoke to. While we do potentially think there is potential for service cost, more competitive service cost coming in the back half of this year kind of post-April 2.
These improvements have been drastic due to efficiencies both on the drilling and completion side. We can start on the drilling side really kind of focusing on our U-turn program. If we look at 2025 U-turns versus even when we started in 2023, I'll refresh everybody's memory. We drilled two wells in the U-turn style in 2023. On average, it took us about twenty-five days to drill those wells. In 2025, on average, we've shaved ten days off of drilling two-mile U-turns in a two-year period. Those drilling efficiencies are not just specific to the U-turn program. We're drilling wells faster on the completion side.
In February, we guided around 40 wells would be completed using trimmer frac in the trimmer frac process. Year to date in 2025, we've already done 30 wells with Trimal Frac, and now we expect that full-year twenty-five number to be closer to 50. To refresh everyone on that, it's about a $350,000 cost savings every time you can trim off rack versus zipper operations. With that, you're also seeing efficiencies of about 20 or 30% faster even versus just simulfrac process. You have drilling efficiencies, completion efficiencies of speeding up that all kind of lead to this collective 10 to 15% improvement from January 1.
We're drilling and completing wells about 10 to 15% faster than we were six months ago. That leads to this improved D and C cost per foot number. Like Bill said, if we see that oilfield services come in and there is some sort of deflationary pressure or more competitive pricing, that has not been included in our forward-looking back 2025 estimates.
Joseph Foran: I'd like to commend Chris has done very well with is leaf in the forty years that I've run Matador going back to very inception, we've always taken the approach when these times are that we don't pit one vendor against the other vendor and just try to see which one will get down to the very lowest price. We've tried to build and we have found whatever reason, that has worked better for the creating a long-term reduction or and finding of efficiencies because you're not trying to beat them down, but you're working together, and they have ideas how to do things faster and better. We haven't.
By working together, for example, our driller, either they or their predecessors have drilled virtually every well that I've drilled in this forty-year career. They're finding ways to improve, and we are. It's been a great collaboration. The same thing on the pipe business. We're using the same guy for years and years. Virtually, all of our completion or fracking has been done either by Schlumberger or Halliburton. In there, after each job, we do a postmortem on whatever area and say, how can we improve? How can we give you better notice? How can we create the efficiencies? Chris and his team and Cliff Humphreys have done just a great job of building those relationships.
The communication between them has led to a lot of these efficiencies and the crews. Chris and our drilling engineers have done a good job of training the crews to look for those little ways to make things more efficient and bring down the cost. Chris, I'm sorry for jumping in on you like that, but I just couldn't resist to brag on y'all a little bit. On how you've done it without beating people down, but getting them to suggest ways. Too and for y'all to find ways.
Christopher Calvert: Thank you, Joe. I appreciate you pointing that out. One thing I would also want to point to is I think back to even Zach's question about activity levels as we look into the back half of the year. We understand the headwinds of volatile commodity times, but we also see opportunities. One of those opportunities is high grading operational equipment, whether that's rigs, frac fleets. Like Joe had mentioned, our primary pressure pumping providers, which is Halliburton next year, we've managed to high grade a lot of equipment service personnel to where we are able to implement and integrate those simul and triaml frac opportunities.
Like Joe said, it is all about relationships and something that Joe has cultivated over forty years that we continue to push forward today.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Philip Jungworth from BMO. Your line is now open.
Phillips Johnston: Thanks. Good morning. Recognizing that an IPO is just one of the options you could look at to unlock midstream value, but as you think about San Mateo from a public investor standpoint, how important do you think it is that you have a competitive organic growth profile for Matador or is visibility around third-party volumes enough? If it is important, do you think of that as more of an absolute type, low, mid, high single digits type number? Or is it more relative to overall Permian Basin levels?
Bill Lambert: Thanks, Phil. I think to start that off, I think Matador thinks of itself as a relative grower in the basin. Obviously, that growth rate is balanced with the free cash flow margin as we've discussed previously. Our portfolio and the depth of our inventory life allow us to grow and sustain that growth with the type of returns we want to have over a long period of time. Within that, the partnership that we have with San Mateo integrated nature of that business is key to Matador delivering on that. It is key for San Mateo from a growth profile. I'll let Brian talk more about how we think about Matador growth versus third-party growth.
First and foremost, the nature of how this business has come into play has really been around driving a superior result for Matador's free cash flow.
Brian Willey: Thank you, Bill. When we look at growth at San Mateo, we see opportunities both at Matador and with third parties, as Joe mentioned earlier. We have a lot of repeat customers on the third-party side in addition to new that we continue to look at and pursue. Especially up in that Northern Lee County area, where the Marlin plant just came on, we think there are some really good opportunities there. As Joe mentioned earlier, the Marlin plant's about half full right now. It's about fully committed on the reserve capacity side, and it'll take years to fully fill up, but it is fully committed.
All those opportunities for growth present themselves on both Matador's side and being able to continue to follow Matador and the drill bit. With third parties, we have just a great team and a BD team that's doing a fantastic job. We see growth on both sides.
Joseph Foran: I'd like to emphasize that we got into this with the whole idea that yes, Matador might be the major customer, but to succeed and meet the test of quality, we needed to be sure to attract third-party business. We really tried very hard to be sure they, that the run time of 99%, they enjoy that benefit. All the other benefits. The same as Matador. I think that's why it's led to repeat business is they did feel they were fairly treated and communicated and liked the operations. So far, that's been without problems, and we appreciate their involvement. We appreciate the guys in the field who have really done the extra job to reach that 99%.
When you had high storm Uri go through, they didn't shut it all in and say, we'll get back next week when it warms up. They slept in their trucks. Kept the plants going. In addition, we've improved the system by adding that connector line between the Black River system and the Marlin system. We've had gas going in each direction on that connector line as the offloads are needed. Proud of that record and proud of the support that we've had. I think that's given us additional opportunities of what we should do for the midstream business and which drives the value of the midstream business. There are some good options that we have ahead of us.
We're very glad we elected to build the plant to take that $200 million, build the plant, which left us with enough money to pay down debt. Not just putting in additional drilling. That just adds to the inventory and while we feel we're well-positioned, be to keep building the midstream and the regular oil and gas operations, and to them, in tandem. To do that together and didn't do one to the exclusion of the other would make we think that gives us more balance and more stability and gives a big upside to the stock.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Kevin McCurdy from Pickering Energy Partners. Your line is now open.
Kevin McCurdy: Hey. Good morning, Matador team. Appreciate the details on the cash tax reductions this year and the change to guidance. Any thoughts on when Matador might now become, say, subject to the AMT and how cash taxes will trend on a yearly basis until then? This seems like maybe an underappreciated improvement to your free cash flow outlook. Thank you.
Robert Macalik: Thanks, Kevin. Yes. This is Rob Macalik. I'm the EVP administration and finance. As we did note in our release, we're very pleased with the tax act and are very optimistic about the cash tax savings that will bring us. We do believe that this pushes out our obligations under the alternative minimum tax for several years based upon our current rates, but we're still analyzing that part. I do think that is going to be a benefit for us starting in 2025 and beyond.
Joseph Foran: Also to show our seriousness in these areas is that Rob is moving over to do more strategy and chief financial work for the midstream. Mid Golodny is taking over the chief accounting officer and he's come in and done an excellent job. He and Rob have really worked together, which is important. Ben, thank you for joining us and doing the good work.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Oliver Huang from Tudor, Pickering, Holt and Company. Your line is now open.
Oliver Huang: Good morning, all, and thanks for taking my question. Just wanted to circle back on activity understand the timing of the drop down to eight rigs as part of the full-year plan here shortly. The year's upstream spend trajectory would seem to imply another leg down in Q4. I was hoping that you all might be able to walk through the cadence of frac activity anticipated for the rest of the year and any flow-through effects we should be aware of when thinking about the start of 2026.
Bill Lambert: Yeah. I think, Oliver, to your point, we do see with the current level of activity that to be generally the case, and I think it's a function of a lot of good work by the team to pull activity because of the efficiencies that we've mentioned before. Into the third quarter. You're seeing a little bit of higher third-quarter capital with wells that are being turned on in, frankly, the last couple of weeks of the third quarter. They're really not contributing to third-quarter production as much as they are in the fourth. It's very similar to what we saw in the first and second quarters of this year.
With that, I think that is an important thing for our investors and for you all as analysts to understand about the go-forward nature of the Matador business. Because the Delaware has such prolific rock, and multi-zone development is an important piece of how to develop that rock, there will be some larger batch sizes, and those larger batch sizes will naturally have some lumpiness to production as they come on because when they come on, they're really, really prolific. Even with the efficiencies that we are capturing across drilling and completions, there's longer cycle time to having some of the bigger programs than there has been when it was kind of individual or paired developments.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Leo Mariani from Roth. Your line is now open.
Leo Mariani: Hi. I was hoping you guys could talk a little bit about the uses of free cash flow here. Obviously, you guys referred to the brick-by-brick program here in terms of M&A. I was hoping you could comment a bit on what you're seeing in the M&A environment. Then obviously here in the second quarter, you guys bought back a decent number of shares, I guess, the first time in the company's history, roughly 1%. Can you maybe talk to both of those and how you sort of balance that initiative? Is the buyback going to be fairly price sensitive here?
Bill Lambert: Sure. Thank you, Leo. I think first off, just to kind of level set how we think about it. We think about free cash flow post the dividend because we view the dividend as sacrosanct. With that, after you pay the dividend, the remaining free cash flow in any quarter, we think about as how are we going to drive the best value for shareholders over the long term. With that, we kind of see a couple of different buckets. There's really three that we think about, the first of which is the brick-by-brick land acquisition, to kind of reinvest and replenish our inventory life. Which we think is very important and runs continuously.
It's a strength of the Matador team. The second is, as you noted, the share repurchase program that we have a $400 million authorization on, and we're active in the second quarter in our first quarter of having it. The final is balance sheet management and paying down debt. A lot of people have asked us about is there going to be a formula or is there a specific way to think about how we do that in the future. As we look at it, we think about the value that can happen and, frankly, the way that the brick-by-brick works we want to make sure that when we have those opportunities, we can capitalize on them.
Similarly, we can't predict the macroeconomic volatility, but when it happens, we want to use the share repurchase program to capture that. Within all of this, we always want to be mindful of leverage and driving total debt down over time as well. I think that's really how we think about it. I'll let Erman jump in on more of the A&D specific.
Brian Willey: Thanks, Bill. Yep. This is Brian Erman, co-president, Legal Officer, and Head of M&A. I think it's just to reemphasize what Bill said. We really do view the brick-by-brick approach as a strength of the company. That's something we've always done. It's something we've always had a lot of success at. I think as the market currently is a little more focused on that versus the bigger deals. We view that as a competitive advantage for Matador. As far as the quarter, it was just another typical execution on the brick-by-brick approach. All over the basin, focused mostly in and around our existing units. But really all over the area.
Again, just something that we view as a real advantage to Matador.
Operator: Thank you. Ladies and gentlemen, Jason, are you ready for closing remarks?
Joseph Foran: Thank you very much. I thank you for all your questions. I thought all the questions today were very appropriate and good inquiries. I hope we've answered them. If not, call us back and we'll discuss them with you. I invite you to do that to be sure you've gotten your questions answered. The second thing, I'd just like to note, I hope that you can see is that Matador has now grown to a part where we have approximately $10 to $12 billion in assets. Depending on oil and gas prices and the other opportunities. But we have a team here, a true team, of everybody pitching in, and we collaborate. Work on this together.
It's been a steady process over forty years. I started in 1983 with $270,000, and we've enjoyed over those forty years, approximately a 20% year after year growth in value. So 20 percent $2,270,000 to $10 to $12 billion in assets. Obviously, you all know me. It wasn't because of my brilliance at all, but I've somehow been able to, year after year, attract the talent to spur that growth. We're really very excited the way everybody has been pitching in and helping ideas and getting a little better every day.
We're in a more complex environment today than we have probably at any time in our past where Washington is bouncing the ball around and you're not sure where it's gonna land, we're trying to maintain maximum flexibility. But continue that growth, not only in quality of production amount of production, but in the quality of the production. Creating the flow assurance that we can get our product out of the basin. Continue to try to upgrade our people and bring on young people. We have a big internship program, 30 people this year. The people in the field, we think they're remarkable.
How they take the initiative and keep the plants and the wells going, and I'm very grateful for them and the banks. Everything seems to be coming together that we can continue to offer consistent growth over that time. Industry-leading cost, and the knowledge that we've been the first movers on a lot of new formations. Out there in the Delaware over the years. We think things look very promising to us. We're excited. The real issue is there's a lot of things up in the air as we know in Washington. In the environment. In the markets.
We're trying to keep this balanced approach guided by the fact we don't want to increase production if we're not increasing cash flow, and we don't want to be just increasing cash flow and not replacing and adding to our reserves. Very pleased with the growth and continued growth in reserves. Continued growth in profitability. Ideas. Andrew Parker, and his group VPs are doing a great job of coming up with more ideas all the time. Refining their studies. On this call, I know you've asked questions. I hope we've answered them. But at the same time, supplied you with the notion that internally, we're very optimistic, and you probably saw that in the last open period.
Where our leadership, we had more insider buying than any other company. Significantly, to me anyway, of having run this company for forty years, we have a shareholders we have an employee share purchase plan, and we have over 95% participation. Tremendous support from the people on staff to take advantage of it and can see the growth. We like our chances. The organizations come together. The finances are there. Plenty of dry powder. Some great technical work. Having worked all over the basin. We have as Tom was primed to give you a rundown that all these different areas. We had good ideas and good plans. Once again someone mentioned this.
Truly want to invite all of y'all at one time or another to come visit with us. Get to know us a little bit better, have lunch or breakfast with us, meet our young people, and we'll be, we'll do our best to answer all of your questions. Just try to get to know each other better. I think you'll see that this is what's great about the oil and gas. It's a win-win. Business, and we're here to win it. For our shareholders, but we're also here to win it for you and others and gain your trust and confidence. With that, I'm gonna sign off, but really, offer the sincere invitation to come and see us.
Take us up on that and let continue to, y'all do your job, and we'll try to do ours.
Operator: Ladies and gentlemen, thank you for your participation today. This concludes today's program.