Matador Resources’ midstream roll-up in December is paying off inside six months and its capacity will be filled by 2026, executives said during a call with investors on July 23.
“That has been a game-saver with the tightness in the midstream markets out there in New Mexico,” CEO Joe Foran said. “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.”
Matador combined its Pronto Midstream subsidiary with San Mateo Midstream, a joint venture with Five Point Energy in which it owns a 51% stake. The transaction, which Matador valued at $600 million, combined Pronto’s 45 miles of natural gas gathering in New Mexico’s Eddy and Lea counties with San Mateo’s 140 miles of natural gas gathering and processing assets in Eddy and in Loving County, Texas.
The combination increased Matador’s processing capacity by 38%. Commensurate with the capacity increase, the firm’s production reached new heights, too.
Matador reported a new corporate production record in the second quarter with 209,013 boe/d, a 31% increase year-over-year. On an annual basis, Matador’s production increases have remained steady for more than a decade. Its production total for each year has topped the one before it since 2012.
During the first half of 2025, Matador brought 30 new wells online. The company now intends to end the year with eight rigs in the Delaware and 106.3 net operated wells drilled to an average 10,300 ft.
Foran said the firm’s newly integrated approach has saved about $1 million in chemical costs alone. He credited G. Gregg Krug, executive vice president for marketing and midstream strategy, with the idea and ushering it through the process.
“We were faced with a choice of either building that plant, which was $200 million, or putting that into drilling, and 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,” Foran said. “And it would be a balance to our production. Plus, and perhaps most importantly, provide flow assurance to us in our operations.”
Analysts noted that midstream tends to be undervalued in producer portfolios. Scott Hanold of RBC Capital Markets asked if Matador might take the midstream business public to capitalize on its value.
There are several ways to add value via the midstream side of the business, Matador executives responded.
“There are opportunities, but we can be patient at Matador and make sure we do the right transactions,” said CFO William Lambert.
“We’re free-capital 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 mainstream business is not reflected in Matador’s stock price.”
Brick by brick
Dallas-based Matador’s report seemingly ticked all the right boxes for shareholders. Production measured by oil equivalence, barrels of crude and million cubic feet of gas all exceeded guidance. Drilling, completion and equipment spending of $345.3 million came in at $15 million less than the guided midpoint between $330 million and $390 million. And midstream spending of $56.2 million was below the $60 million to $90 million allocated for the quarter.
Matador’s stock price was up 5% to $51.06/share from the earnings call to midday July 25.
“We continue our brick-by-brick program to pay down debt, so our debt level is now at a ratio of less than one,” Foran said. The company has also reduced its lease operating expenses mostly through efficiency.
The aim all along has been to increase production without cutting into free cash flow, he said.
“Not to do one at the expense of the other, but to work them in tandem,” Foran said. “If your production is going up, your cash flow needs to be going up. And 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.”
Maintaining a strong balance sheet is the strategy Matador has employed to manage progress during turbulent times.
“More specifically, we believe we’re well positioned for the back half of the year with drilling opportunities, cash flow opportunities,” he said, adding that the company will increase its full-year guidance for 2026 both on oil production growth and cash flow.
“Obviously, this is a result of successes in the drilling program,” he said.
Matador is drilling 20 unique zones in the Delaware Basin, where Foran has spent most of his 40-year career.
“We consider that as a land of opportunity,” he said, adding that the firm’s holdings in Louisiana’s Cotton Valley Formation, located just north of the Haynesville, is also promising. Matador has 17,300 net acres completely held by production. Foran estimates that Matador has between 200 Bcf and 300 Bcf of gas to recover from the asset, once prices stabilize. Moreover, the formation has a direct path to the Gulf Coast for exporting LNG.
