Matador Resources Company (MTDR) Q3 2021 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Welcome to the Third Quarter 2021 Matador Resources Company Earnings Conference Call. My name is Grace, and I'll 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 through November 30, 2021, as discussed in the company's earnings press release issued yesterday. I would now turn the call over to Mr. Mac Schmitz, Capital Markets Coordinator for Matador. Mr. Schmitz, you may proceed.

Thank you, Grace. Good morning, everyone. And thank you for joining us for Matador's third quarter 2021 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 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 recently quarterly report on Form 10-Q. Finally, in addition to our earnings press release issued yesterday, I would like to remind everyone that you can also find a slide presentation in connection with the third quarter 2021 earnings release under the Investor Relations tab on our website. I would now like to turn the call over to Mr. Joe Foran, our Chairman and CEO. Joe?

Thank you, Mac. I just have a very brief comment or two before you begin the question and answer. Is first, I just want to say, it's been very exciting for us this year and gratifying. Our themes were to pay down debt. Find a way to increase our dividend and set ourselves up for another good year in 2022. Coming into the fourth quarter as we have, I would believe those objectives have been attained and we're excited about the outlook going forward. And that 2022 is shaping up to be a good year. All areas of the company are doing well. The team is performing. They're working together. They're reaching some outstanding results, which is reflected in our current stock price and gives me great pleasure. Just to note, that we've -- the last month or so really since the end of August that we've been attaining one record -- all-time record high after another. And so, we appreciate the support we've received from you and from the market and from our shareholders and especially shout out to our field staff who work through the cold and iris sleeping in their trucks, doing whatever it took to keep the wells running through the night, getting up and checking it every few hours. From the capital efficiency gains that each of the groups have contributed to, so that three years ago we drilled one well that was over a mile and a half long. And this year every well we drill will be two miles or longer except for one. So a great change that is added to the performance of the company. And we appreciate all the extra effort that our staff both here and in the field have done to bring about this really high performance execution. And so with that, I'd like to turn it back to you for questions.

[Operator Instructions] Your first question comes from the line of Scott Hanold from RBC Capital. Your line is open.

Yes. Good morning y'all. Congrats on the strong quarter again. I'm kind of wondering in this commodity price environment then -- in the path that you all are going down, it looks like you're going to have a fair amount of free cash flow you going forward. And it looks like you're going to have enough free cash flow generation to pay off the revolver very early next year. So, I know it's maybe sort of a bit too early to kind of spend money that you don't have right now. But can you give us a sense of how you think about like free cash flow big picture moving forward? Like what are your priorities? And how should investors think about Matador and what you do with it?

Scott, it's a great question and it's a very worthy question. And really we talk about that every day. What should we do with this -- the expectancy of so much more free cash flow? And different people have -- how we work, we get together, we express our ideas and we work our way through them. And I would say those plans are still evolving. At the very core is, we want to be sure this is a once in 10-year opportunity that we make the most of it. And so, we're -- and the nice thing is that we're ahead. We don't have to take a bunch of chances that we can be cautious. But effective and we're looking at the range of ideas open to us. We got our basic ground game with our drilling rigs and prospects that is going to go forward. Tom and his group have got a drill schedule with a lot of A plus, it's all A plus location. So that basic ground game is going to go ahead. The midstream is growing. We've been attracting third-party companies to participate in the midstream and very pleased with how that's going. Our land group has got a number of ideas and we're weighing those against the relative certainty of some number of the wells that we have scheduled to drill. So it still is in the formative stage. We've accomplished what we wanted to do which was pay down the debt. And that we're in position. We've lowered our debt over the past year as you can see from the slide, its down to $100 million today. So we're from $475 million to $100 million. And so we have room there to have some money available for either expanding the drilling program or looking at small -- relatively small acquisitions. We favor not company to company, but the bolt-on transactions to our existing leases, because there's less risk, because we know the areas it fits in. Often that means we can expand to from one mile to two miles to now even looking at two and a half or three mile laterals. So that's interesting further expansion perhaps on our midstream. And -- but we want to -- we're not going to overlook getting that debt down and we're certainly uppermost in our mind is being good to our shareholders who have stayed with us all this time and looking at a potential dividend increase, the time into which we're not sure, but we did this dividend increase a quarter early to signal that they are uppermost in our mind and we're going to take care of them in the forthcoming year. And these discussions are going on and we'll have these plans put together was we always do in January or early February and I think you're going to like what you see that the choices are strong and we're very excited by them. David, what did I leave out here.

I'm not really sure you left out anything, Joe. So I was kind of picking through the things in my mind. I guess, Scott, the only other thing one other choice or one other thing we've talked about a little bit was maybe there might an opportune time in 2022 to look at restructuring the bonds a little bit once we have the revolver paid off we might look to do that that's something we've chatted about. Certainly haven't made any final decision on that at all, but I think that's something else that we might consider maybe buying some of that in and restructuring the bonds a little bit just to get the maturities pushed out. I think that we were real pleased to get this summer. We've gotten upgrades from S&P. We've gotten upgrades from Moody's. I think we'll work hard to continue that process. And I think that our bonds have been trading at 104 or so. So, they're yielding about 4.5% these days. So I think that we feel like that if we wanted to do something that we could significantly reduce the coupon from where we are now. So, I think there's a lot of Joe said, a lot of options for us going forward.

Yes. And I just want to indicate that the way the teams are working together and the leadership is emerging from those teams it's making, allowing David and Matt and me and other executive team more time to study these options, which we appreciate in our measurement groups and the commodity verification groups are really doing their part too. So everybody's working together. And it's real pleasing to see the new leadership emerging.

Appreciate the color there. Is my follow-up question and I'm not going to push you on 2022 guidance at this point because I know that will come probably early next year. But given the fourth quarter production cadence where you're shutting in a little bit more wells to I guess bring forward some completions. Could you give us a sense of like the progression as you get into 1Q 2022. Because it seems to me like there could be a pretty significant step up and maybe in that sequential kind of double -- mid double 15 plus percent into 1Q. Can you give us a little color on where you see that going?

I'm not trying to avoid it, but I'm going to punt it to, David.

Yes, Scott. Thanks. Look, I think you're right. So I think that we do expect to see a meaningful increase in production in the first quarter of 2022. Why is that? Well, the wells that we will have shut in at Stateline. The Voni Frac this next 11 well should all finish by the end of the year is our expectation. And once they do then we'll start drilling out plugs. And as we do, we'll begin to return and restore more of that production online. So those wells are going to all come back on. Plus I hope mid February or so certainly during the latter part of February there's going to be 11 new Voni wells that are coming online. In addition, we're currently fracking the remaining nine wells will be drilled this year at Stebbins and all those are going to be fracked here before long. And I think that we've committed to having them turn to sales before the end of the year. So they're going to begin to impact production toward the end of the year. But certainly we'll have a full quarter of production in the first quarter. We've got two more wells of Uncle Chess that are going to get done by the by the end of the year and we'll have a full first quarter and we got three wells down in Wolf right now on the Barnett that will probably come on sometime in the first quarter as well. So, I think that all that together would suggest that over the course of the quarter that our production will begin to grow meaningfully. And then as we've got nine wells that we're drilling at Rodney and those will probably start to come on in mid to late March. And so, I think that bodes well for the second quarter as well. So I think we feel like that we'll have meaningful growth and then it'll be fairly sustainable throughout the rest of the year. So we're excited about that and we'll put a fine point to where we think those numbers will actually be and be happy to share those with our next conference call and our guidance release. But overall I think we're real like excited about what's coming down the pike here.

All right. We'll appreciate that. Great. Thank you.

Thank you. And your next question comes from the line of Neal Dingmann from Truist Securities. Your line is open sir.

Good morning. First question today's on just curious on some shred information. Specifically, you all mentioned directly on the release about going directly artificial lift on five of those 13 Boros wells, as well as plans to shut in more for longer period ahead of the Voni completion. So my question there is just wanted to see, Joe, your matter, Dave one of the guys could expand a little bit on what you saw in terms of ___ or pressure changes or what caused you to move to an artificial lift. And maybe one other touched on to that whether you think about how you think about the offset sort of production on that. Just I'm trying to sort of think about those two things separately and would love to hear your color on that?

Yep. So hey, Neal, it's David. You packed a lot into that question I got to say. So let me take a minute and try to unpack it. So first of all, let's talk about the question you asked with regard to the shut-ins that we planned this quarter, in the fourth quarter on the Vonis. As we indicated in the release, we expect to shut in a few more of the Voni wells or I shouldn't say the Voni wells, a few more of the existing producing wells, Voni and Boros as we complete these wells at Voni and we expect to set them in for a little bit longer than what we were anticipating this time three months ago. Why is that well? The biggest reason was as we were fracking the Boros wells we realized that there was a little more frac communication with some of the existing wells than what we had anticipated. So -- and I want to be clear that we're all level set on its frac communication. It's just communication while we're doing the frac. Once that's over with and we turn these wells back to sales we're not seeing any adverse effect from that communication. So we're not talking reservoir effects. We're not talking drainage effects. We're just talking frac communication. And frankly, I think you can appreciate we certainly can that we have 26 currently and 39 now producing wells at Stateline, very high value wells that we have created and constructed over the past year. And we're not going to mess them up. And so, we're going to be cautious. We're going to shut in more of them if we need to protect them. We're going to leave them shut in for a few more days. And if that means that our production is going to be slightly lower in the fourth quarter than we might have thought, that's okay. Because we feel that it's way more important to protect those wells and preserve that value and that's the way we're going to approach it. Now, you also asked a question about the comments we made about the artificial lift on the first bone spring in the Avalon and that I think is also a very easy question to answer. Seems like some folks thought that we were indicating that the reservoir pressure in these zones was abnormally low. Absolutely not. So the reservoir pressure is what we expected it to be. But I think you have to remember that we are talking about two of the -- they're really the two shallowest zones that we're completing anywhere, the Avalon and the first Bone Spring. By definition they have lower reservoir pressures than they do if you're down in the Wolfcamp B or the Wolfcamp AXY [ph]. Most of the geopressure occurs in the basin below right at the top of the Wolfcamp. So you get the really, really high pressures when you go into the Wolfcamp and below. When you're in the Bone Spring, those -- I'd say those are mildly geopressured, but they're not highly geopressured zones. And we see that all over the basin. So we tend to when we're flowing back wells in the first Bone Spring or in the Avalon, they just tend to have a little bit lower flowing pressure, because their absolute reservoir pressure is lower. That's not a big deal. In this particular case, let's take the first Bone Spring. Those well -- those couple of wells took a little bit longer to start cutting hydrocarbons than what other wells have at Stateline or in some other areas. And it didn't mean that was a problem because it wasn't. In fact, I can point you to several other cases in the first Bone Spring where it took 30% or so of the load coming back before we started to see hydrocarbons, the Ray 113 for example which is up in Rustler Breaks is a great example of that. And it's turned out to be one of our best first Bone Spring wells. So I'm not -- I don't think we're concerned at all about any of this. Right now, I want to make it clear all those wells were flowing up casing they've not one of them loaded up and died during the course of this process. And also, we just as a team several of them Neal are making 1700 Boe a day, 1500 Boe a day and still cleaning up. So we're still very encouraged by these wells and their performance. And it's just -- it probably would help them if we just went ahead and installed artificial lift. We'll be doing it before long anyway. So we decided, hey, we got the rig, we got the time, let's just go ahead and put them on gas lift and help them to continue to clean up faster and get to their full potential. And that's really what we're doing and that's all that we were really indicating in the commentary we made in the release. So, I will say that beyond those wells the second Bone Spring wells were continued to be excellent. I'm really happy with the third Bone Spring carb wells that we talked about. That's a new zone for us down there. Not one that we originally thought we'd be completing. Hats off to the Geoscience team and the Asset team for bringing that zone forward and those are excellent wells. And then wanted to demonstrate the fact that we've added some recent Wolfcamp B wells, which are the gassy wells. And at a time of high gas prices those have worked out really well too far. So all-in-all, I think we're in a good place and very happy with the results from the Boros wells. Those particular wells just hadn't cleaned up to the point that we thought it made sense to share the results with everybody at this point. That's it.

Sounds like right on plan there as we thought with you guys. Great job there. And then secondly just maybe on San Mateo specifically, we've seen some strong midstream deals again recently like we did I guess years ago at front of the highs. And wondering given the enormous value you all have at San Mateo. Kind of where you sit with that now. Any thoughts on any types of transactions or I know Matt's talked about in the past, I'd love to hear kind of where you all think? What you think about San Mateo at this point?

I'm going to say a little bit and then turn it over to Matt to finish up. But we're real pleased with the way San Mateo is going. I think the work with our partner has been very strong and we're looking at it how best to add value to that. Is it by extensions and connections to our existing system and with our third-party contacts or going into some other areas where we may be drilling that we're looking at doing some new drilling. And so, the team has looked at a lot of different ways. And you're right, San Mateo has not only added value financially, it's added operational value. Because during our storm, our plant was one of 5% -- only 5% of the plants were able to keep operating. We were one of them. And the same thing about when we did ready to connect the pipe's been there waiting that's had advantages and it's given us more options in our marketing efforts. So it's been clearly the financial value, but the operational value has been very real too. When we've told you we were going to turn on these wells, we've been able to make those deadlines where if you had some other midstream company for which you had no control over given the situation out there and the delays. It had been unlikely that we would have met those dates. So we were glad we could keep our word to you that we would turn those wells on as we said we would. But it's got a lot of opportunities in sorting through them and being sure we're selective has been the order of the day. Matt, what would you add to that?

Joe, I think you said it well. The thing I would underscore is again the advantage to operating this business. And it's not only for us, but it's also for our third-party customers. So, what Joe said is exactly right. When Matador says, we've got four wells that Rustler Breaks we want to turn on or at Stateline or at Stebbins or down at Wolf wherever that may be then we've got three pipes sitting there waiting on us. We've got gas. We've got oil and we've got water. And so, we've tried to take the same approach with our third-party customers. And I think that's worked out well. We've got to multiple repeat customers that have come to us and said we like what you're doing with the water. Do you think you would be interested in bringing on the oil and or the gas. And we've done that and done that successfully. So I do think Neal, to your point if you contemplate the value of the midstream company relative to commodity prices I think we're absolutely seeing an increase. And particularly if the rig count would go back up in the areas we operate which we think are good areas there will be probably even more third-party opportunities. So I think we're in a really good position.

Absolutely guys. Love the optionality there. Thank you.

Thank you. Your next question comes from the line of John Freeman of Raymond James. Your line is open sir.

Good morning.

Good morning, John.

So you all done a terrific job just continue to drive the costs down. And I'm just looking at obviously when we started the year y'all were targeting 730 on a D&C basis per foot. You've now reduced it again down to the 680 a foot for the full year guidance. And I guess just looking at the first nine months coming in at 655 a foot, it would sort of imply that you have a pretty big step up in 4Q to 750 a foot or so to get to that full-year number, which -- I mean, I realized greater Stebbens was a little more expensive, but it seems like maybe that's pretty conservative. Just anything that I mean, may be missing and sort of that math or just sort of what's going into those assumptions to get to that full-year number?

John, I'm saying. I just was going to say the first part then turned over to Matt or Billy or to Chris for their comments. But the savings here is really in my mind mainly from two parts. One is that we've worked with -- we've experienced a time where costs came down. We have long-term relations with these vendors. And they've helped us long. And we don't try to beat them down. What we try to do is ask them to help show us ways that we can improve the efficiencies and they've been good about that. And second, is that's sustainable that doesn't go away when you improve the process. And both Billy's group and the drilling and Chris's group and the completions have done a very good job of reducing days on the well drilling and days on the well fracking. We're fracking them faster. And when you reduce the days you save, it's about a 100,000 a day on the rigs and some similar on the fracking and just cutting the time makes for a lot of savings. It's also very sustainable. So we've worked out from different angles and I want to commend all of them for doing a great job both here, the engineers in the office and geologists, but also the people in the field. Matt, sorry, I hope I didn't take too much of your thunder.

No. It's all good, Joe. It's all good news. And I would say John for us, I mean, you kind of hit on something there that the wells we drill down the Stateline we got very, very efficient. The costs there just kept getting better. The guys were doing them faster, cracked them faster. So they did kind of move it down that direction. But I would say for 2021, I think we're pretty well set on our costs. We've got a lot of things locked in for the end of the year. Going into 2022, we anticipate and we're looking very closely at this. We don't have a number yet. But I wouldn't -- it wouldn't surprise me if we saw something in the 10% to 12% increase, see the prices are up. So that affects us some. We do have -- the steel business, the oil field contribute tubular goods, it's not a big portion of business. So we've been working very closely with our pipe. B&L pipes are used to be champions, it's now B&L. And so, we've been working with them to make sure that we have pipe for next year and we're very confident that we do. But I think to kind of to Joe's point, we're offsetting a lot of these costs with these efficiencies. And so if you just kind of -- just a couple of examples on the drilling side. I think the last quarter we were talking about a new lateral record for one bottomhole assembly, one bit, one motor, one MWD being just a little over 12,000 feet. And so, during this quarter the guys have significantly beat that to where we're at 13,155 feet. So that eliminates trips, saves days and on that particular well that was the third little spring well we drilled down at Stateline. We knocked about three days off the average which saves us about $175,000. So, just on the drilling side we're drilling these wells faster. One of the ones that Stebbins you mentioned that area we drilled one four days faster than the fastest well we had ever drilled up there, which saves us probably a quarter of a million dollars. So on the drilling side those guys continue to hit it out of the park. On the frac side and Joe mentioned this too, it's completing these wells faster is very important. So, if you look back in 2020 we averaged about 1250 feet of completed lateral per day. And so fast forward to our latest final crack operations, we pretty much doubled, about almost 2500 feet per day. We actually had one day that was 3600. So that's a pretty good day. And why that's important? Joe mentioned the cost savings. So we paid by the frac stage and so the service provider and we're very happy with Universal. We're very happy with Halliburton who we're using. They look and see how much we're going to complete in a day and they adjust their pricing on that. So we save money there. We save money on the rental items. But maybe as important as we reduce the number of days that we have offset wells shut in. We reduce the number of days between stud to turn in line. And then even on the safety and ESG front if we're drilling these or completing these wells twice as fast you've got limited exposure for having the crews out there for half the days and on the environmental side if that equipment is out there running whether it's running at full speed or whether it's idling you are admitting. So we're able to reduce emissions there. So I think if you just roll all that up into what we're expecting for next year I think we're very optimistic that we'll have a great year and we'll be able to offset what not be 10% or 12% increase in service cost with some efficiencies.

That's great. I appreciate all the color on that topic. It looks like as the leverage continues to fall pretty rapidly it appears that you are getting more comfortable with kind of a lower hedge position than I guess I would typically have as we approach an upcoming year. Just any other color on that?

John, just a little bit. As I mentioned how we are -- we get together and people everybody talks about their views and there's a little discussion. I don't call it a debate, but a clinical analysis of what we ought to be doing. And it is as much or more from the bullish view that our marketing group has in prices going forward as it is the lower leverage. I mean the lower leverage helps in that you know you got plenty of room on your commercial line of credit, but we still fundamentally come back and look at all the circumstances. And right now you've got a lot of backwardation. Craig, would you say any -- add anything to that?

No. Joe, I think you hit it right on the head as far as backwardation is definitely the drawback, the main drawback about doing anything. It just doesn't -- I don't think it makes a lot of sense to do that right now. And we're definitely looking at things on a daily basis to make sure or whatever that tipping point. We'll be ready to pounce on it. But at this point in time I don't see a real reason to go out and do anything right now with the current situation what we're seeing as far as the long-term curve the way it looks.

Thanks guys. I appreciate it.

Thank you, John.

Thank you. And your next question comes from the line of Zach Parham from JPMorgan. Your line is open.

Thanks guys for taking my question. One thing you mentioned earlier on the call was just having the balance sheet capacity to expand the drilling program. Can you talk a little bit about the decision to add the fifth rig and just maybe where you go from here. Why was now the right timing? And how do you think about adding additional activity in the future?

Zach, I'll be real quick on the -- my reasoning is this is this past year we've been drilling a couple of years almost all the wells have been a 100%. We owned a 100%. Now as we move into some different areas we're getting more non-operating interest. So if you have to drill the same amount of wells where you have 50%, you're going to have to double your rig. So that fifth rig is just really going to be used primarily in the areas where you've got you have 50% interest in your have other non-op people in there. So your net capital spending is the same as when you had four rigs, it's just proportionality. David?

Yes. I think you said it well, Joe. Zach, I think we tried to make it clear in our press release last week and again this week the primary impetus for picking up that rig was first and foremost to drill a saltwater disposal well up in the Stebbins area, which we had budgeted and sort of laid out from the beginning of the year. I think you can appreciate that we've drilled a lot of new wells up there this year and we felt like we needed some additional saltwater disposal capacity. This well was on the -- was kind of on the docket and beginning in August was sort of a good time to get that done, so that we could have the well completed sort of simultaneous to when the new wells will start coming on up there at Stebbins. So that if we expect we'll need a little bit of additional capacity and this will sync up really well with that. As we mentioned we took the rig for a term of six months. Frankly, I think all our rigs are on about six months terms. So we have lots of optionality. But we needed then to find a home for it for the next few months and the best place to put it we thought was Rodney. It enabled us to drill a few more wells there. That's always nice to be able to do this time of year. Because as we mentioned in the release a week ago, we are a bit constrained operationally each year by the mating habits of the lesser prairie chicken in new Mexico and that usually is a period between early March and mid-June where at least daylight operations I believe are all that are permitted in that period of time. So we usually like to be just in and out so that we're not fooling with any of that during that period of time. This enabled us to be able to do that to get these wells drilled. We'll get them fracked. They'll be -- we'll be turning them to sales before there's new prairie chicken to being made in the world. And so I think that's a that's all a very positive thing. And as Joe said, I think then whether we hang on to the rig or not, we'll be -- really, I think generally when people ask us that question, do we think we're going to spend a lot of more money next year on drilling and we don't. But we may need them and we may need that extra rig just sort of maintain the same level of capital spend. And so, I think that's part of the decision-making process that's going on right now as to what will be the final mix of wells that we'll drill next year and how we'll put all that together which we look forward to sharing at our next call.

Thanks guys. That's great color. Just one follow-up. Could you talk a little bit about the future development plans at Stateline? Pretty soon you'll have two packages on at both Boros, San Antonio where you've had some really strong results. How many additional packages in the future are you expecting to develop that Stateline? And maybe if you could talk a little bit about the additional zones you plan to come back and develop?

I think Zach that once we get this next batch of 11 wells on at Voni that'll be 50 producing wells at the Stateline. And I think originally we had permitted 96. It's most what I recommend or what I remember plus or minus a 100. So that would suggest that we're kind of probably halfway through there. I think the zones that we would be talking about in the future there would probably be some more Wolfcamp Bs that we would be going back and adding, because we had thought there was two maybe three benches of Wolfcamp Bs there. I could see us maybe doing some additional third bone. We've done this third bone carb, but there's a third bone sand that looks pretty good there too. That might be something we would do down the road. Might there's probably a couple of different benches, targets in this first Bone Spring. And so, that's something that we might look at. And then of course, there are other targets in the Avalon. And we even had a Brushy Canyon target that we've looked at. So those are the kinds of things that I think would be primarily on the docket going forward. My guess is that once we get these next group of voni wells on, we're sort of going to take a little bit of a pause at the Stateline and do some other things that we want to do for a while and then we'll probably we'll come back in a while and continue our efforts at the Stateline. But I think when we sort of roll out our plans for 2022 that we'll have a little bit less emphasis on the Stateline in 2022 and be able to move at least one of those rigs away or a couple of them away for a while and do some more things we want to do it Rustler Breaks over in other areas of Antelope Ridge. There's a big new chunk of federal acreage that we got at the same time we got the Stateline and the Rodney Robinson over an Eastern Antelope Ridge that I know the geoscientists are just dying to get some wells down on that I think could be another significant development area for Matador going forward. So without going into too much detail that's sort of how I see things evolving in the near future.

Thanks. That's helpful color. That's all for me.

Thanks Zach.

Thank you. Your next question comes from the line of Michael Scialla from Stifel. Your line is open.

Hey, good morning guys. I had a question on your thoughts on natural gas. It looked like your third quarter production, your gas production was quite a bit stronger than forecasted. Was that coincidental or anything you did deliberate there to increase gas during the quarter? I know you had a couple of Wolfcamp B wells. And maybe just along those lines how you thinking about returns on some of your gassier assets versus the oilier ones with prices where they are now. Does that Haynesville compete and does the Wolfcamp B compete with the earlier parts of your inventory?

Yes. Mike, we had made some adjustment as gas prices went up and they looked stronger to increase our proportion of gas a little bit. And also just to establish for you and others that we had a lot of gas -- really good gas opportunities. It just was that oil prices, the oil commodity was getting better prices. But to demonstrate that we had those options going forward, we want to drill a couple of gas wells. David, more specifics on that?

Yes, sure Joe. I think what I would add, Mike is that first of all, the third quarter I would say was a little anomalous from the standpoint. A couple of things that we pointed out in the release. There were some mineral interest that we had -- that we received production on from some properties we had in the Haynesville for the first time in the third quarter. And we really weren't sure about the timing of the operations of the folks drilling those wells and when that first production might be received. And so, we hadn't included that in our original forecast. And so that was nice. It's always nice to sort of have free gas. And so that was -- that added to a bump there in the quarter. We also ended up acquiring a little bit of additional working interest in a well or two in the Delaware that tended to be a little bit more gassy wells that kind of added to that, because we sort of had a little bit of catch up on the production there too. I think as Joe pointed out, we did add a couple of the Wolfcamp B wells there at Stateline on the Boros [ph] side. And frankly we're going to drill four more on the Voni side. That's four of the 11 that we have planned for this next time. As far as the returns go, I think we've always been happy with the the returns from the Wolfcamp B wells. It's just that right now we're happier. So I mean, it's just one of those deals where if you're going to do it this seems like a really good time to take advantage of that. So -- and I think we've always said, we've got some really good gas wells to drill, not only to make nice quantities of gas, it's also rich gas. So there's a lot of NGLs associated with that. And then they also make oil [ph] along with them. So what's not to like about that right now. So, that's one reason that we probably have decided to bump a few of those up in the program a little earlier than maybe we might have otherwise.

That makes sense. Next question is along the lines of the last question you just answered on Stateline. You said, you're going to be about halfway done once you get to sort of 50 wells here online. Curious, could you kind of run through sort of a similar thought process on Rodney Robinson. Where are you there in terms of kind of the remaining inventory? And then you also mentioned that Eastern acreage be curious to learn a little bit more about that as well. What's the potential inventory like there?

Yes. So I'm going to start and then I may get to Tom Elsener here to help me out a little bit. So I believe I'm correct that we have 10 wells currently producing at Rodney, nine that are drilling. So that would give us 19. I think that probably works us 50%, 60% plus or minus through the inventory that we had there. Although, as always I think the Geoscience group and the Asset teams continue to identify new targets. So I wouldn't be surprised if we ultimately end up with more than 40 targets there. That's what we had originally sort of -- I think would originally permitted like 29 or something like that. And so we would be 19 through that. But I already know that they've got more than that on the drawing board. And so, I think that we'll see more than that at Rodney before we're done. With regard to the -- well, maybe I'll just pause and Tom you want to add anything to that?

Yes. No, David said it very well. The teams continue to find new opportunities at Rodney Robinson where we're interested in this like Stateline with third Bone carbonate we see potential there at Rodney Robinson, which is one of the wells -- one of the targets that we're still working on submitting additional federal permits. As David mentioned, the initial 29 federal permits at Rodney Robinson that was kind of just to get us get us started so that we could diversify our inventory of permits and acquire more permits in Stateline. So the teams today are in the process of adding and submitting more permits at Rodney Robinson for additional zones in the third bone carbonate into the a lower even to the second Bone Spring carbonate. So we have a lot of potential -- in some of the zones we haven't really talked about a whole lot. And in addition to those we still think there's a lot of potential in the Wolfcamp B, in the Brushy Canyon and as the nine wells that we're going to be drilling on Rodney Robinson we expect to see just awesome payouts. Those initial 10 wells have all paid out of Rodney Robinson and anytime you're getting these payouts in a year or six months or even less that we're getting stellar returns. Glenn's team has done an excellent job taking all the fluid off of Rodney Robinson and all the oil, all the gas, all the water is on pipe there. So we continue to be very excited about the Rodney Robinson track.

And Mike I think with regard to part two of the question, I'm just going to set it up and then I may kick it to Ned Frost who heads our Geoscience group and let him add a little color. But we bought originally about 8400 acres in that federal lease sale back in October of 2018. Really it's already been three years kind of hard to believe that. But it was kind of a little -- just a little before this time three years ago. And we've focused mostly on Rodney and Stateline, which were I suppose about half of it -- well not even half of it. But we do have about -- I think it's a little over 4,000 acres that that we bought that's pretty contiguous over there in the more easterly part of Antelope Ridge. And I think what's been exciting to us, number one, we always like the acreage and the opportunity. Thought it might be a little more exploration focused at the time, but felt like we were getting it for a good price. But I think with time what we've seen is we've been working at Stateline and Rodney Robinson that the rest of the world has just gotten closer and closer and made good wells on every -- just almost every side of that acreage. So it really makes us excited. We've got permits in the Hopper right now and looking forward to doings a few tests there this year. And Ned, you may want to kind of add to the kind of targets that you see there. But I think we feel like that could be a real positive area for us going forward.

Sure. Yes. Thanks David. I think Eastern Antelope Ridge primarily at this point we'll be looking at Wolf Bone there. So that would be Wolfcamp A upper and third Bone Spring sand. We have 3D seismic data that shows that the target heads back there pretty well. We're confident that we'll have that in good quality there. So, like David has said, we're excited to get some wells down on that. Like everything as we drill the first deeper wells we're going to see the shallower targets as we drill through them. So I'm quite certain we'll find more to do over there. At this point Matador has drilled 24 unique targets in the Delaware basin. When I say targets, I mean Rock intervals that are regionally mappable and discrete and that's coming out of 13 separate formations. So I think we always like to push that number higher and I'm sure we can find a few more over there. So as always the Geoscience team's very excited about what we see and anxious to get some wells on the ground.

And Mike, I will say even though he hadn't asked for it, I'm kind of secretly budgeting the core, because I'm sure there will be a core requested on one of those wells coming down the road. So the guys do a great job with that and they make great use of the rock and I'm sure we'll want to invest in a little additional science as we start into that area, because it certainly served us well in all the other areas that we've worked.

And Mike, I'd say that's an overriding theme when we get together and talk about what are we -- where are we going to drill. What are we going to drill. And even when the M&A questions come up about this lease being available or do we want to acquire the adjoining lease is the quality of the rock. And that's what really drives us through all these decisions and which tracks to drill is the quality of the rock. So Ned and his group have done a great job on that. The other groups have contributed to. We're trying to make some of the engineers a little more geology oriented and the geologists a little more engineering and land oriented. So, we believe in that interdisciplinary exchange.

Really appreciate the color guys. Thank you very much.

Thank you. And your last question comes from the line of Gabe Daoud from Cowen. Your line is open sir.

Thanks. Hey, good morning everyone. Guys, I was maybe hoping we could just go back to the comment on potential like small bolt-ons. Could you just quantify that? Is that like $20 million, $50 million bucks in terms of smallish or is it hundreds of millions kind of similar to the heco deal from 2015?

Gabe, we'll look at whether it's small or large, that really isn't a factor in the screening process. The real factor of screen just what I said on the earlier question is what is the quality of the rock. And if it's 40 acres in quality rock, it'll have our attention. And it could be a big track that doesn't have that rock potential, we won't pay much attention to it. So and that's why we tend to do the bolt-on, because we're already familiar with the quality of the rock. So that's the big draw. And in the amount of the acreage, we try with acquisitions to make sure the quality and the fit is there. And then the different groups that we have land, geology, engineering, midstream, everybody feels good about it fitting in and adding value. It seems right, but in the old-fashioned that's really the way we're thinking about these things.

Thanks Joe. That that makes sense. And then just a quick follow-up on the comments earlier just on fighting inflation with efficiencies on the capital side. Did you guys mention just what LOE could look like as we move forward here you had a nice number in 2Q. So just curious how that will trend just given inflationary backdrop?

Yes. I think Gabe. It's Dave, hey. I think we did sort of provide in our slide deck a bit of an update as to, I don't think we changed our numbers as to what we thought the range of those were going to be for the rest of the year. I think -- look, I'd like to give a big shout out to our production team, because I think they've done a terrific job of cost controls over the last couple of years of really being innovative both in the office and in the field in terms of driving LOE down. They've gotten water on pipe, 98% of our water's on pipe. 83% of our oil's on pipe. They've been doing all kinds of electrification projects, which is not only saves us money, but it gets rid of the compressors out of the field that improves emissions, I mean, all kinds of positive things. Even in the Eagle Ford, we don't talk about that a lot, but we've got a team that's worked to put all our wells on rod pumps, which they needed and that's taken a lot of compressors out of the field. It's reduced LOE, it's reduced emission. So they've done a -- they've just done a bang-up job I think in our opinion. And I really feel like that LOE is likely to trend down, especially as we add significant additional production next year, I don't know that the cost will go up as much. Now, I'll qualify that a little bit by what service cost inflation might be. But I do think that as we would look at it today we would expect those numbers to continue to come down a little bit. I think Glenn Stetson is here. He heads our production group. Glenn, do you want to add anything to that?

Yes. Thank you, David. You said it well. So it's hard really expand upon it. We continued to -- in 2020, we really did focus on process and efficiencies. And David mentioned, most of those centralizing compression, getting water and oil on pipe, converting wells from on-site generation electrical generation to grid power. And those were some of the big knobs that we turned. So when you look forward we think that we can maintain this level of unit cost and continue to chip away at it, maybe at a lower rate than we did in 2020, but continue to see efficiencies as we move forward.

The other thing while we're on this subject coordination with the production group, with the completion group, Chris and Cliff have done a great job. We all coordinated, so as the fracture cleaned up. You're waiting there with the pipe. And again we just have fewer days out in the field before we get the production going. So makes a big difference. And the LOE all been very innovative, helps with the ESG. The way you all reduced emissions and Shelley will you say, how much emissions have been reduced in the past year by the production group?

Sure. This is Shelley Alpern [ph]. I work on the ESG for Matador. And we're proud that from 2019 to 2020 we saw a year-over-year decrease of around 20% in our total greenhouse gas emissions intensity.

That's awesome. That's great stuff. Thanks Shellie and thanks everyone.

Thank you, Gabe.

Thanks Gabe.

Thank you ladies and gentlemen. This ends the Q&A portion of this morning's conference call. I'd like to turn the call over to management for any closing remarks.

Thank you all for your time and attention. As always, we really appreciate your interest and support and the candor of your questions. And in these sessions I always want to encourage you all to ask whatever you want to ask and we're happy to report and pleased with the progress. And I think until we're very excited and we have more and more of our young leaders emerging that I think bodes well for the future. So I want once again want to invite all of y'all as the nation starts to open up to come see us, have lunch or breakfast or dinner with us. And we'll talk more but eager for you to keep looking into the operations. And I think that you'll be pleased with the continuing results. And we're getting ready for a great 2022 and finish the year strong. Thanks.

Thank you presenters. Ladies and gentlemen, thank you for your joining. That concludes today's conference call.