Matador Resources Co (MTDR) 2014 Q4 法說會逐字稿

Good morning ladies and gentlemen. Welcome to the fourth-quarter and full-year 2014 Matador Resources Company earnings conference call. My name is Denise and I'll be your operator for today. (Operator Instructions). As a reminder this conference is being recorded for replay purposes, and the replay will be available on the Company's website through Tuesday, March 31, 2015 as discussed in the Company's earnings press release issued yesterday.

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, its most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q.

I will now turn the call over to Mr. Joe Foran, Chairman and CEO. You may proceed, sir.

Thank you, Denise, and good morning to everyone on the line and thank you for participating in this conference call. We appreciate your time and interest in Matador very much.

I would like to introduce the members of our senior staff joining me on this call this morning and who are standing by for any questions you may have. They are Matt Hairford, President; David Lancaster, Executive Vice President, Chief Operating Officer and Chief Financial Officer; Craig Adams, Executive Vice President of Land and Legal; Ryan London, Executive Vice President and General Manager; Brad Robinson, Vice President of Reservoir Engineering and Chief Technology Officer; Van Singleton, Executive Vice President of Land; Billy Goodwin, Vice President of Drilling; Gregg Krug, Vice President of Marketing; and Sandra Fendley, Vice President and Chief Accounting Officer.

Also joining us in the call, we are very pleased and excited to have my friend George Yates, and let everybody know we're still friends even after negotiating and completing the acquisition. And we feel we're even better friends now. But he's standing by also to take any questions you may have of him.

In this call, we'd like to emphasize four points. First, 2014 was another record year for Matador. We achieved record annual oil production, natural gas production, oil equivalent, oil and gas -- natural gas revenues and adjusted EBITDA.

Second, we closed this important HEYCO combination and added 58,600 gross, 18,200 net acres in the Delaware that links our Ranger and Rustler breaks and gives us a very important foothold in that northern part of the Delaware Basin that has been so prospective for the Bone Springs and the Wolfcamp. In addition, it includes the expertise and deep experience of another 29 professionals from the HEYCO offices in Roswell, and we've been delighted to have those merger -- the integration of operations has begun.

Third, we have continued to delineate our Delaware Basin acreage and substantially increased this year the number of engineered locations, from 178 at year-end 2013 to 960 at year-end 2014. And we feel there is still substantial upside to this number as it does not include any locations on the very prospective HEYCO acreage.

Fourth, finally our staff and production in 2015 is off to another strong start. Our average daily production has been at the highest levels in the Company's history. We can begin working on the HEYCO properties now, and our two most recently completed wells and the Wolf area, the two Barnett wells, look to be excellent wells -- each with 24-hour IP test of approximately 1300 to 1400 BOEs.

Together with HEYCO and George, we will continue to look for opportunities to move the combined company forward in 2015, and continue to build one of the most focused industry players in the Permian Basin.

With that, I'd like to turn the call over to the operator for your questions.

(Operator Instructions) Ben Wyatt, Stephens.

A quick question, you guys are on the Delaware here, but you guys are really starting to see really a step change when it comes to the production mix between Permian and Eagle Ford. Just curious if you guys could give us a sense on what that split looks like today and maybe where it's heading by the end of 2015.

All right, Ben. I'm going to call upon David Lancaster who's been absolutely doing a lot of that; David and maybe a follow-up from Brad.

Yes, sure, hi Ben, it's David. As far -- I mean, you're certainly right. Our Permian production has grown quite a bit over the past year, really about tenfold. We went from about 260 BOE per day in the last quarter of 2013 to about 2600 BOE per day in the last quarter of 2014. That will only have increased now in 2015 with these two new Barnett wells that we brought on.

If my memory is correct, Ben, I think that we had modeled about still 60%, 65% of our production would probably come from the Eagle Ford overall in 2015 with about 35% to 40% coming from the Permian. But the time we get the end of the year, I think that split will be pretty close to 50-50 and maybe could slightly be even favoring the Permian at that point.

Very good; that's perfect, David, appreciate it. And then maybe just a little bit on -- you alluded to it, Joe, in your prepared remarks. But the engineered locations you guys have in the Permian, it's at 960 now. We know that does not include HEYCO.

What is that -- does that assume this 80-acre spacing you guys talked about in the Wolf? I guess what I'm getting at is could that location kind of look a lot different when you guys do update us for what HEYCO will add.

Yes, Ben, it can and it will add substantial locations. As far as the detail on it, I'm going to let Ryan speak, but George would say the same thing. We think it will be a very substantial increase in the number of engineered locations. Ryan?

Hi, Ben. Yes, we do have some 80-acre locations in the inventory. The different diagrams that we gave on analyst day really show how we're breaking out all of those wells in the different horizons. In the Wolfcamp, in the Wolf area we do have 80-acre locations in the X, Y and down in the Wolfcamp A.

In the Rustler Breaks area, we do have -- we are a little bit reluctant to say that 80 acres is going to work so far because we only have a single well out there. But as we go through the year and delineate and set these different horizons, I think we're going to find that we do find some 80-acre locations in some of these Wolfcamp benches.

In the Ranger area pretty much throughout the basin all the different Bone Springs, we are looking at 160-acre spacing. The HEYCO properties, when we actually are able to absorb all those into our database and our full analysis, we are looking at hundreds of locations potentially that we can add there. And we'll likely start those off at 160-acre spacing. Does that help, Ben?

Yes, that's perfect, Ryan. I appreciate it, guys, good job. I'll hop back in.

All right, thanks Ben.

Neal Dingmann, SunTrust.

Nice new wells, Joe. Say, Joe, just maybe a little more color on you guys talk about -- you continue to monitor performance to see how this works; I guess can you talk a little bit about if you are able to do that staggered sort of what you guys call that W-type pattern on the 80 acres. Will that be that entire area down by Wolf and Loving? Or how will you attack that, Joe?

All right, once again, we are very excited about that, Neal, because that gives us a lot more options on how to drill. But we are not finished there. There is also a second Bone Springs zone that we intend to test this year. But as your specific question on the W, I'm going to go ahead let Ryan address that, too.

Hi, Neal. Yes, the W type pattern is kind of in its fledgling state right now. As we move through the year we hope to really refine what our ultimate plans are going to be. Based on the two Barnett wells, we do believe that any wells spaced at 80-acre spacing to X-Y is probably going to benefit from the W pattern. So, an X will be offset by a Y, which will be offset by another X.

How that is influenced by some Wolfcamp A wells and some third Bone Spring wells, that's what we hope to figure out this year. By performing the micro-seismic on the Barnett pair, it gave us a lot of information to look at in how we're going to go forward with that. We hope to have third Bone Spring, an X-Y, and a Wolfcamp A pattern refined by the end of the year and that's what we'll hope to develop the Wolf with.

The other formations uphole, we believe those may have development patterns, too, but we don't think that those are going to be influenced by that lower Wolfcamp or that upper Wolfcamp section.

You're saying just that A will be -- so I guess that's what I was getting after kind of what Joe mentioned or alluded to you, Ryan. When you go after all five different sands, then, or how -- I guess that was kind of my second or larger question around not just -- just this W pattern. But it sounds like you have A, you'll have second and third Bone Springs, plus you have these new sands. I mean is or even more than that potentially in there?

There's potential at Wolfcamp below our Wolfcamp A. We don't have any plans to test that this year. What we are looking at specifically, Neal, for this pattern is the interaction between the third Bone Springs, the Wolfcamp X, the Wolfcamp Y and the Wolfcamp A. And we think all of those will influence one another, so a development pattern is necessary if we are going to develop all of those different horizons.

The second Bone Spring we look at is a completely independent reservoir from those, so it can be developed on its own. It won't have any interaction between those other formations.

And lastly, will you test this up in the northern areas? Is it something as far north as Twin Lakes or is this something that you think is more prevalent down south, Ryan?

I think it's potential everywhere, Neal. We are just more advanced on this in the Wolf area. We think the Rustler Breaks is going to have a very similar development program. Very specifically, we have three wells we have drilled at Rustler Breaks.

Of course, we've completed the first well about a year ago in the Wolfcamp B. We drilled two more wells subsequent to that, one in the Wolfcamp X which is a stratigraphic equivalent to what we see there in the Wolf area, and then another well in the Wolfcamp B, which was a different bench than the original Rustler Breaks well. Those two wells are drilled and we are now completing them.

So looking forward for 2015 and into 2016, our goal for Rustler Breaks is to delineate and then test all of these different horizons, so 2016 we can move into development pattern.

Wow, lots of optionality. Thanks, Ryan.

No problem, thank you.

Scott Hanold, RBC Capital Markets.

And just to kind of stay on the line of just the potential growing the Permian Basin, and just could you maybe provide a little bit of color more specifically? Those two Barnett wells that you all drilled and when you step back and look at the inventory of 960 wells that you all talked about in your analyst day, do you sense that the results confirm -- better confirm that potential down specifically in the Wolf area? Or does that lend you to believe this additional upside optionality from what you've seen initially?

Hi Scott, it's Ryan again. I would be reluctant to say it confirms anything. We are very -- we are very encouraged by the outcome so far, but the wells just started flowing this past weekend. So we think that it's encouraging. We won't really know anything for several months of production data.

If you remember in the Eagle Ford, we were very reluctant to come out and say that 80 acres worked and then 40 acres worked. I think that's just kind of our nature to be a little bit conservative. But I think we are all very encouraged by the outcomes right now.

If I could reword the question a little bit, if you do see those wells hold in for an extended period of time, does that give you some sense of at least upside in those specific formations at that spacing within the Wolf area?

Absolutely, that's what we'll be looking at. We'll be looking at the cumulative production over time of these wells compared with the more or less infinite spaced wells. We'll look at the pressure decline over time.

There are several different tools will be using to evaluate these. And right now, everything looks like they were completely independent of one another. When we fracked the wells, we did see interaction, but that's no different from what we see in the Eagle Ford even on 80-acre spacing -- hydraulic interference but not necessarily production interference.

But like I said, we won't know anything for several months of production data.

Okay, I appreciate that.

Scott, this is Brad. I think you brought up an important point, and Ryan mentioned it on what we see at these wells as we gather more data and more long-term information, a good example is the Johnson well which we originally had taken about 700,000 BOE curve. And the longer that well produced the more we realize it's probably going to be joining the Dorothy White in the million-barrel club.

So I think it's important not to take too much. The Barnett wells at 1,300 BOE per day are some of the highest IPs we've seen out there. But we wanted to get -- watch them long-term to see where they're going to fall on our type curves. But we are really very encouraged by the initial results of those wells.

Okay, I appreciate that. And just as a follow-up question, in an 8-K filing yesterday related to the close of the HEYCO acquisition, there was some conversation within that 8-K regarding looking at JV opportunities, and obviously Mr. Yates being put on the board being a little bit delayed. Can you give us a little bit of color around that?

Yes. I want to touch one point back on the Wolf. It's the same thing. We are very encouraged by the data. Scott, you know how we are. We don't want to claim victory until victory should be claimed. We want this data.

But the data points right now continue to be encouraging. And from our early projections clearly Brad has and Netherland Sewell have been comfortable about raising the recovery estimates. And we are having -- the outperformance has clearly been pleasing to us and the development of these other zones. But yet we needed a little more time to give you a really clear and defined picture of that. But right now I think that certainly the trajectory is very encouraging.

Now to the point that you're asking about the JVs is that originally JVs for going to be closed and be included as part of this transaction. That's still the intent. It's just we ran out of time when we were closing the HEYCO transaction to get the paperwork, the documentation, all the requisite approvals on the JV.

It amounts to about 1500 acres. It's in these same areas that we already have interest. But George has a fiduciary duty to those JVs, and he needs to work it through with his family members that everything is right as it should be. So we just concluded, rather than trying to force it, rush it through, getting it closed at the same time we did the other part, that having a little bit of time and giving everybody time to dot the i's and cross the t's was the right thing to do.

George, would --?

Joe, that's -- your explanation of it is exactly correct. But Scott, what I'd also say is that we expect to close the JVs by midmonth. So we are not looking at a long delay, but as Joe said, we just ran out of time. There was a lot to do (laughter) running right down to the 12th hour on getting our merger closed by Friday night. And everybody was exhausted, and adding the JVs onto that same timeline just did not make sense.

Okay, I appreciate that, guys, thanks.

Irene Haas, Wunderlich Securities.

Good morning and congratulations on closing the HEYCO deal for both parties. And I guess the two rigs running, one we pretty much know that is going to be cookie stamping wells in the Wolf prospect. I'm interested in the other rig. Can you give us a little color as to the sequencing question, where you would drill first and all that, now that the HEYCO is closed, sort of where you will start and where you will end up for 2015?

Hi, Irene. It's Ryan again. The one rig up in New Mexico is going to be -- going back and forth between Rustler Breaks, Ranger and the new HEYCO properties. The original plan was for the rig to be delineating in Rustler Breaks, and that's what we intend to do this year. We'll delineate the acreage and we'll test different horizons.

And we have some wells in some of the second Bone Springs in our Ranger area that we are going to want to get on the schedule and have done for this year. And of course, the HEYCO properties, we want to get these on the schedule as soon as possible. Now that the deal is closed, we are looking all the different leases.

There are several that already have permits in the federal acreage and we certainly want to get those on the schedule. That will probably be summer before we actually get any of these wells integrated into the schedule, just because of all the progress we've made on our own properties up to this point.

But these wells that are going to be this summer are some of the best wells. They're right in the middle of the fabled third Bone Springs fairway. And our highest-ranking geologist, Dan Block, is standing right next to me. Dan, do you want to say anything about what we want to do for the year?

Yes, we were very excited to close this deal and really sink our teeth into the HEYCO acreage. We have our ideas of where there are some sweet spots, locations to drill in the third Bone Spring, as Ryan mentioned. And we want to advance those through the federal permitting process as quickly as we can, so we are incorporating them into our drill schedule as soon as we can. But sort of early summer's our target rate.

(technical difficulty) Irene, this is David. I would also mention that (technical difficulty) acreage that we do have a workover program (technical difficulty) out there and started on that very quickly out of Roswell. And then in addition, again, a number of the non-operated opportunities to participate in wells on the acreage, too, that we are continuing to respond to and participate in. So there's going to be quite a bit of activity even before we actually get out there and drill our first operated well in that acreage.

And David, as David pointed out, we are real pleased with these non-operated wells that have been proposed and we participate (technical difficulty).

And other thing I want to mention, David Nicklin, who is our head of exploration, is not with us today and I want to give a shout out to him. His mother has been ill and he's taking care of her. But we are thinking of him and her, and hoping that he'll get back soon and that she will get better.

Irene, I would like to add one thing. I mentioned that the New Mexico rig has a delineation/testing program in the Rustler Breaks. But it also has the same -- we have the same goal in our Ranger area. We are actually drilling an offset to our Ranger 33 well right now in a lower sand, in the sea sand, and we are testing that sand and 160-acre spacing there.

That way as we move forward, we'll feel comfortable that 160 is the appropriate spacing for Bone Spring, and that we have these different horizons we can go after, even within some of the Bone Spring formations.

That's great. So, one follow-up question. So should we expect sort of this split between the three new areas sort of a third, a third, a third? And how would you describe your position at the end of 2015 in terms of your New Mexico sandboxes? Would you be sort of ready for development, much like where you are now with Wolf prospect?

Irene, I think that's going to take some time. It took us about a year in the Wolf area before we really started to believe in our development plan there, which we are executing upon. And I think a year and a half, or about a year and a half to two years with as much acreage as we have in the New Mexico area is what is going to take to really understand some of these horizons.

We expect by the end of the year we'll have delineated some Rustler Breaks, but it may take more wells before we really understand some of the horizons, considering there's so many we have to test.

Yes, Irene, I'd like to add, Matt Hairford and I think both feel the same way, is that what we try to do is grow at a measured pace. And we don't want to drill these too fast, because and you miss out on what you learned from the data. That's what we did in the Eagle Ford, if you remember.

We work fairly deliberate and want to get the data, because again, on these zones that may be able to be fracked better by doing the W pattern or something like that, we want to be sure we're not doing things that we'd either later regret, or not doing things we wish we would've done because we learned about them long after we drilled them. So it's that tension between going at it with deliberate speed, but also not so fast that you miss out on some of the technology or operating practices that lead to better recoveries.

Irene, this is Matt. I just wanted to underscore what Joe is saying there. It is very important for us historically and always to get things right. We want to get things right. And particularly in this current environment, it gives us a lot of opportunity to really fine-tune things.

You know, we've got -- the reduction in rig count has allowed us to improve the people that are working on the rigs for us. They come with new ideas. And so, not only we get the advantage of drilling and completing these wells and looking at the historical production, but we also get to improve our efficiencies at the same time, which is very important to us because once we come out of this downturn and things are going to speed up again, and we want to be positioned just right to get these things drilled and completed in the most optimized fashion.

That's great, thank you very much.

Good question, Irene.

David Amoss, Iberia Capital Markets.

I just wanted to ask again on Rustler Breaks, and I know you guys have talked about it a bunch already today. So you've got the Y test going right now. If you get that result and it's a successful result, can you just talk about the sequence from there?

It looks like in your analyst presentation you downspaced about 1,320 feet apart from a lateral to lateral basis. How do you test or what sequence of testing tighter spacing and testing that X-Y concept that you're having success with at Wolf right now?

Hi David, it's Ryan again. We'll start with the one well. It's been drilled. We'll complete it. It's actually being completed as we speak. We'll evaluate that well to make sure it's up to our standards, and then we will delineate on that reservoir throughout the property.

And at that point, once we feel we've delineated, then we'll go into spacing. It will be very reminiscent of what we did at Wolf. And like we did at Wolf, our very first well Dorothy White was about a year and a half ago, and since then we've delineated the acreage and now we're doing the downspacing testing.

So like Matt mentioned a minute ago, very deliberate, very conservative with things. We have a lot of things to learn throughout the basin, so we are not going to get in a hurry in any one horizon and in any one area.

Fair enough. And then just on the cost side, any updates since the analyst day? It seems like the cost negotiations across the space right now are kind of moving around on a day-to-day basis. Any update since early February?

David, this is Matt. The adjustments, the cost adjustments we are seeing are continuing to improve. We were talking 15% to 20%, now we are talking more 30% to 35%.

And you know, that's not all the way across the board, but it's pretty widespread. Some of the business units that aren't specifically related to oil and gas, you may see 5% to 10% there. Some of the others you may see as high as a [50%] adjustment. You kind of characterized it right there. They are moving around a bit right now.

Matt, any dramatic difference in geography to that 30% to 35% you're seeing that's kind of a leading edge? Is that more aggressive in certain areas versus others or is that kind of across the board?

David, I think if you go back to last fall I think you would find some differentiation there. But I think now it's probably pretty much about the same across all basins.

That's really helpful. Thanks guys, really appreciate it.

Thanks, David, good questions.

Blake Donovan, Stifel.

At the analyst day you mentioned that when you fracked the second Norton Schaub well that you saw communication and increased production from the first Norton Schaub, drilled the X-Y sand. Do you still see any communication? Would you mind giving us an update on that, please?

Hi, this is Ryan again. We're not seeing -- we don't have any evidence to show that the wells are communicating. We haven't done any property interference testing yet. But the original Norton Schaub well has stayed higher since the frac. It has not -- it does not appear to be flushed production. It looks like it's hanging in there.

And the pressure came up, the production came up, or the gas came up. Just about everything across the board is up after that frac.

This is Matt, Blake. I might just add that this is very common in horizontal drilling. We've seen it in the Haynesville. We've seen it across the Eagle Ford at this -- hydraulic communication that Ryan is talking about is prevalent in all of these basins.

All right, thanks. And looking towards full development mode in the Wolf area, how do your acres spacing assumptions in X-Y sand cooperate with those in Wolfcamp A? Are you guys considering 80-acre in Wolfcamp A and do you see any potential for stack and stagger there? Or at this time is it more just a linear drill plan?

We do see a variety of different potential patterns in the Wolf area and we do think that the 80-acre spacing at Wolfcamp A is going to be likely. That has a more of a shale component than the X-Y, and so we are very excited that the 80-acre appears to be working in X-Y. If it works there, we feel pretty confident that it would work in a shale type formation.

As your second comment about the staggered approach, that is what we think we would have. We'll probably have an X or a Y stacked in the same location as the Wolfcamp A, and 80-acre spacing for the A and the X-Y. It's very similar to what we have shown in the diagram on our analyst day presentation. It's hard to explain in words, but the diagram is worth 1,000 words.

Blake, come see us and we'll show it to you again.

Great, that sounds good. I'll leave it at that. Thanks guys and congrats.

All right thanks, Blake.

Brian Corales, Howard Weil.

On the midstream side, I know you all spent some time at the analyst day. Can you maybe just give us an update on where that stands and when we can start seeing, I guess -- when it hits the financials, I guess?

Brian, I'll try to give you an update, but it's been hitting the financials for some time. This has been emerging. We first started it in the Haynesville and then like a couple of months ago we decided to have a midstream. We started building the midstream first when we were active in the Cotton Valley and the Haynesville. And we built up some midstream assets there.

We continued to add them on a case-by-case basis in South Texas. Then when we got this acreage together in Wolf and began to see the opportunities there, we had developed some expertise. Gregg Krug had joined us and has some good ideas, and then Matt Spicer came and joined us. And between the two of them, I think they've done very excellent job of building on the foundation that we had in the Haynesville in South Texas to really make a impact here, first in the Wolf area, but it's going to go into other areas where processing makes sense.

And we are now processing with the JT unit. We have enough sufficient volume of gas from our Wolf area that merits the use of a JT unit and we are going to build on that to a cryogenic unit, and just do it as we've done many things. As Matt, like he says, we wanted it done right so we moved deliberately and on a step-by-step basis. Gregg, what did I leave out there?

Joe, I think you touched on everything. The only thing I guess I would add is that we are looking at -- for a cryo plant, we are looking at a startup in the August range, thereabouts. So we should have the cryo started by that time and fully processing our Wolf acreage out there.

And, Brian, you may remember from the analyst day we had the ramp-up in our midstream. And it's pretty well-balanced between processing, saltwater disposal, central delivery points and so there's a balance there. It's not based on one thing, but a number of projects.

I think I mentioned saltwater disposal, but if I didn't, that is showing a lot of promise out in the Wolf in that we are optimistic that we can secure some third-party contracts as well, so that we can save ourselves some money, but also help others and make a service that's a win-win situation. Matt, do you want to add anything to that, Matt Spicer?

Just to say, Joe -- this is Matt Spicer. It makes sense when you go into development mode to get these facilities. And like Joe had mentioned, we have these facilities everywhere. But now that we are kind of in development mode in the Wolf, it makes sense to expand into the bigger facilities.

Brian, one last statement is that as you know when we took Matador public, we have a lot of legs to these shareholders, many of whom are from the oil and gas business. And we have some that came from midstream who have been helpful to us and have met with us, and helped guide us on this much in the same way that we have had E&P people on the full board. And these men with expertise from companies you'd recognize, public companies, have been helping guide this and provide that strategic -- I don't know, pressure test or whatever that we are on the -- we're taking the right steps. So their presence as special advisors may step up as the midstream grows. Matt Hairford?

Brian, this is Matt. I just want to underscore what Joe said right here at the start. This isn't a new business for us. And even processing third-party gas is not a new business for us. We've been doing that in North Louisiana previous to these activities and it's really exciting for us.

We've got the saltwater disposal well up and running. We are disposing about 10,000 barrels a day out there. Joe mentioned we got the JT unit. So we're processing all of our gas at the on the Wolf acreage presently and looking to improve that process by building this cryo plant.

So there's room for expansion in both of those efforts with. The saltwater disposal, we can drill additional wells that we'll dispose from the existing surface facility, so we can add to that. And the cryo plant is modular, so once we get filled up we can, if we choose to, add another train to that and build it out as well.

Guys, that was very helpful, thank you. And one other question; I think you were putting or Chesapeake was putting a bunch of wells on at Elk Grove early in the year. Can you maybe just give us an update on where your gas production is or what it was last month, or something of the like?

Brian, it's David. When Chesapeake put the three wells on right at the first of the year, our gas production overall climbed up to about 75 million a day; a little bit higher than that on a few days. And it's probably running between 70 million and 75 million a day currently.

We do have -- as we mentioned in analyst day, we have shut in some of our Eagle Ford wells. They are in the central area. Some of the [Danish Kvelik] wells while we frack these eight wells at Bishop Brogen. So our March production is down. It's going to be down a little bit from that. But we were in the 75 million to 80 million range in early February.

Thanks, guys.

(Operator Instructions) Richard Tullis, Capital One Securities.

Joe, it's obvious that you are growing your drilling inventory organically and with the recent acquisitions. On the acquisition front, what do you see out there as opportunity to pick up more acreage in the Wolf area, where you're having a lot of success? And how do you look at, say, even the Midland Basin side of the Permian?

Richard, there's always opportunities to acquire, has been my experience. You just want to do them on the right terms at the right time in the right area. So we look at that -- we are constantly looking at such opportunities to make sure that they are the right fit at the right time.

Times when prices are low, there's generally more opportunities and more opportunities for creative opportunities. I think George said it very well at the last earnings release, where he said there are a lot of opportunities. You just don't want to be somebody else's opportunity (laughter).

So we really try to work on that and do deals that make sense for everyone. And during times like this, there are more opportunities for the farm-outs, the carries; prices I think are becoming more reasonable. Not that they've all -- they're not cut in half like oil prices, necessarily. Some are and some aren't. It just widely varies. But you just have to be more careful at times like this.

So, acquisitions are still on the horizon. Van is out looking for them on an everyday basis and -- but right now our first order of business is absorbing the HEYCO assets, putting those assets to use and making sure that that's right before we just take on other acreage. And we've got to make the HEYCO acreage more productive and get that going really before I think will be as aggressive about acquiring anything else.

Van, is that correct?

I think that's right, Joe and I just wanted to emphasize that we are seeing opportunities across the basin. But we are maintaining a very focused approach to try to add to the core areas that we've developed so far. (multiple speakers) Anyhow, just -- there are still opportunities; more to come on that later.

Okay, that's helpful, thank you. And then just lastly a quick question on this latest Barnett well targets in the X sand compared to the earlier well, the Arno well in Loving, so this one, a higher IP, 24-hour rate and a much higher oil component in that initial rate. How did you drill this one differently? What did you see that was different in this Barnett well?

Hi again, this is Ryan. We really didn't drill this well any differently. And I think some of the early numbers you are going to see are maybe a little different just because this is basically the first -- the very early production of this well. This is just an IP, it's not long-term production. And both of these wells just came online this weekend. So they are still kind of cleaning up.

They actually may improve a little bit. The gas/oil ratio and the water component may change a little bit over time. And all of the prior wells were in the X sand. If you remember this is one of these wells in the X sand and one of these wells is in the Y sand. But really nothing was done any differently on the frac or on the drilling of these wells other than just the landing target.

Okay, well, thanks a bunch. I appreciate it.

Thanks, Richard.

Jeff Grampp, Northland Capital Markets.

I wanted to talk about the Barnett wells a little bit more. It looked like you guys put a little bit different completion recipe between the two, in terms of fluid and proppant and frac stages. So maybe just wanted to get your guys thoughts on maybe what you were trying to do there. Is that a difference between the X and the Y, or just kind of your thoughts on the different completion there?

Hi Jeff, it's Ryan again. Really the only -- the design for the completions were the same going into the wells. If you remember, we did perform micro-seismic on these wells. And as we were fracking the Y well, we did modify the designs slightly just to see if the fracs were going to communicate across the boundaries of the stages.

So we did -- we changed up the heel half of the lateral a little bit as we moved on, and it appears as though the wells are turning out to very similar. Once again, it's going to take several months of production to see if there's any real meaningful change in the production from the wells based on the frac change halfway through the frac.

Jeff, this is Matt again, and I just kind of want to add to what Ryan is saying there. It's yet another opportunity for us to evaluate our completion design. We've talked to you and others about when we came out to this area, we went big on our fracs. We brought much larger fracs than what other operators had done in the area.

And this is kind of a little bit of a change where we've lengthened out stage a bit and changed it up just a bit on part of the frac. So it should give us some good results.

Jeff, it was interesting, as we were performing the micro-seismic, we would all huddle up after each day. We had an engineer on location and he would check in with quite a few of us. We would huddle up and we would look at things.

At about halfway through, actually probably about two-thirds of the way through the frac, we were noticing that there was some overlap between some of the stages. So we decided to expand them out and see if there was any impact. And like I said before, it's going to take a while for us to really digest the data and some months of production data before we can actually make any permanent changes to the frac design.

Got it, yes, that's great color. And then just kind of looking at unit LOE going forward, I knew you guys have brought on a lot of Haynesville production lately, so just kind of wondering what kind of trend you guys are thinking LOE takes in 2015. Should we expect maybe a big move down in 1Q or maybe a slower ramp throughout the year going down, relevant or relating to the guidance that you guys have?

Hi Jeff, it's David. You know we -- I think as we discussed at analyst day, we've certainly set a goal for ourselves to reduce the LOE, you know, over the course of the year. And we've modeled, I believe, 7.25% for the year. And I actually have that modeled. We have it modeled as kind of ramping down through the year.

I think that we'll see some improvement in the first quarter with more of the gas being on. So -- but I'm also looking forward to seeing those numbers.

The other thing that I think would be impactful to that is just the service cost reductions that we are seeing. And I think we'll see some impact of that on both the -- not on the CapEx side, where it will be the most significant, but also on the LOE side. So, we are tracking that pretty closely. But I guess specifically to your question, we've kind of got it modeling -- moving down through the course of the year.

(multiple speakers) Matt and I both spoke up at the same time. One of the things that I would like to emphasize is that when you cut the LOE cost, you have pretty nice uplift and effect in your commodity price of $3 to $5. Also is -- I think it's important to note that our all-in unit of production cost the 2014 was $43.

And David and the senior staff and all of the staff, they've really been looking for ways to knock that down some from there, with these adjustments to service costs and the like. And we think we are making some progress. So I want to commend that staff.

And at analyst day you remember we spent some time showing that if we could reduce or just these costs more favorably to us, each of that resulted in a nice uplift to price. And there's a slide in that analyst day presentation that reflects that. Matt Hairford.

Yes, Jeff, this is Matt. I just wanted to kind of build on what David was saying a little bit on how we're going to achieve these cost reductions. And it is service pricing other things.

But another thing to think about is comparable to what we did in the Eagle Ford, where we drilled our delineation wells and then came back and drilled development wells. You achieve a lot of efficiencies there. And a good example is the Wolf acreage.

We've got a central tank battery there that we'll produce these wells into. So the more BOs that you add to this equation, and you spend less money getting them out of the ground, that does improve the LOE as well.

Great, thanks for that color, guys. Great results.

Thanks, Jeff.

Ben Wyatt, Stephens.

Thanks for letting me get back in. You just answered my LOE question, but one more here. Joe, maybe just give us an update. You guys used to get quarterly borrowing base re-determinations, a nice bump in the revolver. Just curious if you could give us an update on how the commercial banks are thinking, and just maybe your outlook for what the revolver looks like as we move throughout the year.

Well, Ben, that's being reviewed right now and we are working with the banks right now. But it looks really encouraging at this point. We are not expecting any reduction in our revolver at this point. They have the final word, of course.

But right now, we're -- as we've met with them they've been real encouraging and I'd like to give a shout out to these banks led by RBC and Bank of Montreal and SunTrust, Comerica, Scotia they all -- it's been a great bank group, and they really worked with us and they really helped us along. And so we want that to continue. You know, the production we've had, they're pleased to see.

SunTrust is also a member of that and has been helpful. They've been pleased to see that the volume by our outside consultants have been all confirmed and the outperformance has been very helpful. And the further reductions in LOE and the like will help mitigate any lower price. So I would say so far so good, Ben.

Very good, I appreciate it guys. Keep up the good work, thanks.

Hey, thanks, Ben.

We have no additional questions. I will now turn the call back over to management for any closing remarks. Please proceed.

All right, thanks very much, Denise, and thank you all very much for listening. There's two other points I'd like to end the call with.

One is, again, I'd like to emphasize that Matador takes the approach that it isn't just grand strategy you need, but this is a business about execution. And to execute well, that means a whole lot of things have to happen that you all have just got to pinpoint the right areas to make selective lease acquisitions. The land people have to go out and make good deals on them.

Then the drillers have got to do their part, and completions got to keep improving their fracs to get better recoveries. Then you have your production group, which we really hadn't met -- mentioned. They've done great job on their gas lift and have really paid attention.

And for example, you didn't hear us complain about the weather. They made extra efforts to overcome the weather. And I'd like to recognize them for that.

And then our marketing guys have fought for the extra nickels and dimes, and that adds up over time too. And our accounting people have been good about collecting the money. And so we really appreciate all of these little things that they've done. And that's what we feel Matador is more about is emphasizing the execution, and you can hear the efforts we've made to mitigate expenses and increase efficiencies.

The last thing is that although we feel we've made a lot of progress since the IPO, many of you have covered us since then, this Company has not only grown in size but hopefully in its knowledge in these key areas that -- where we are we are operating. But we still feel like our best years are ahead of us.

As we continue to get our act together and with the joinder of HEYCO, who was one of our pioneers in the Bone Springs, and working with George and their group, their tremendous experience, things are just going to get better. And we're very excited. We look forward to the next call.

I want to extend an offer to each of you analysts that have been nice, come in and see us. You were there at analyst day. Come back where we can spend some time on any of your follow-up matters. But this is going to be a good year for us.

And it's a little more the reservoirs. Good news/bad news is they are a little more complex -- or not a little more, they are more complex. But it gives you more opportunities for these design fracs and the uses of the techniques like microseismic, study of the core, a lot of what our guys like to do -- the meat and the substance to make things better, the massive fracs. And I'd like to, before I end it, give George a final word, as they say.

Well, I guess my final word would go back to the opportunity that I see in the Northern Delaware Basin. We've had some conversations this call about those opportunities, about engineered locations. And I am really excited and looking forward to seeing some of the work that we've done at HEYCO being realized through this combination. And I'm very optimistic the only reason we are not talking about those in detail today is because this integration process just takes time.

We certainly had numbers and numbers of engineered locations, hundreds of them, but of course we have -- we can't announce what we had on HEYCO's -- our expectations in HEYCO until we have an integrated approach, conforming to Matador's engineering requirements. But I think there's a lot of good news to come.

The thing I'd like to express, my appreciation on behalf of the operating committee and the Board of Matador, as we got into this, as we got to close, George was -- as we were deciding the terms, in the end George exercised right and his election to take additional stock about 12 million -- $4 million in additional stock in lieu of cash, which we take as an affirmation of the deal. And we want to -- we appreciate that vote of confidence. We look forward to working with your groups.

And the more we learned about the properties and the people, the better we liked it. And George seems to feel similarly. So we are off to a good start. We're not through. We have the two JVs to close probably about the middle of the month.

Yes, right.

And with that, I'll sign off. Appreciate your tuning in and please let us know whatever follow-up questions that you may have or come to visit us. Hope to see all of you soon. Thanks. Bye.

Ladies and gentlemen, thank you for your participation today. This concludes the program. Great day, everyone.