Matador Resources Co (MTDR) 2023 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Second Quarter 2023 Matador Resources Company Earnings Conference Call. My name is Olivia, and I'll be serving as the operator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes and a replay will be available on the company's website for 1 year as discussed in the company's earnings press release issued yesterday.

I will now turn the call over to Mr. Mac Schmitz, Vice President, Investor Relations for Matador. Mr. Schmitz, you may proceed.

Thank you, Olivia. Good morning, everyone, and thank you for joining us for Matador's Second Quarter 2023 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 into 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 recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q.

In addition to our earnings press release issued yesterday, I would like to remind everyone that you can find a slide presentation in connection with the second quarter 2023 earnings release under the Investor Relations tab on our corporate website. And with that, I would now like to turn the call over to Mr. Joe Foran, our Founder, Chairman and CEO. Joe?

Thank you, Mac, and welcome to the call to all out there and tell you how much we appreciate you all taking the time to call in and listen and we'll provide you with the opportunity to ask questions. I simply like to begin with the simple fact that Matador is in very good health, and we feel we have a very good plan that is underway and producing favorable results.

In particular, I'd like to emphasize that it's pretty simple math. We are expecting 40% growth through 2023. And how do we get to that? We began the year at 101,000 barrels of oil or gas equivalent, and will end the year at over 140,000 barrels of oil or gas equivalent per day.

In addition, we have added significantly 98 million barrels of oil or gas equivalent, just since the end of last year. So for the first 6 months of this, where we are now, it's 98 million barrels, which is a far better indicator of our performance and our outlook than a 1% or 2% difference in production expectancy in the third quarter.

Now the reason just to clarify further and put things into context, I want to talk about the production and what you're probably not aware of, that production difference is really related primarily to 3 different incidents. First, as we are upgrading the Advance facilities to make them more efficient, we've had to shut in those facilities, which is approximately 1,500 barrels of oil or gas equivalent. Second, we've had to shut in our Stateline production due to offset fracs from the other operators joining us, which accounts for 1,150 barrels of oil or gas equivalent.

And third, the [Nina] cartel was forced to be shut in because of the midstream company, had a force [majeure]. There was a fire. And so we all got shut in, we had no control over that, and that was 850 barrels. So total, that's 3,500 barrels a day. But again, in my view, it's far more significant that we're adding 98 million barrels of oil or gas equivalent, then then having 3,500 barrels that were shut in that made about 1% difference in the production rates.

Now going into the third quarter, the outlook is very strong, and you can continue to see us add to production. And then you look into next year, we're growing more confident every day that we meet the mark that we set up there of 150,000 barrels of oil or gas equivalent. And so when you look at real value, it's those kind of rates and those kind of outlook and those kind of growth that we believe makes the most difference. And we hope you all take that into account in making your investment decisions.

The other thing is to -- I think you've heard me say this before, but our strategic plan for the year was to increase production. And second is to reduce debt; and third, to reduce the cost of drilling and operations, and we're doing that. That's playing in the numbers that we presented to you, we're achieving that.

Production is up -- the debt is down by $140 million, a significant amount during the short term that we've added Advance. And finally, that we've gotten the operating expenses down. And the drilling costs appeared to have peaked and will do better in the third quarter, confident than we did in the second quarter. So we think the outlook is very strong. Those are reasons for thinking that Brian, have I left something now?

No, Joe, I think you did a good summary there. I will say that it's exciting to be able to do a $1.6 billion acquisition this year and still have our leverage ratio at 1x or less, and we expect that going forward that we will continue to have a leverage ratio at 1x or less, and we're excited about 2024 with 46 net wells in progress, and the exit rate, as Joe said, we're growing more confident about that 150,000 BOE per day, the target we set, and we're excited to be able to hit that next year. And it could be better.

All right. And the other thing that I think that should help give you comfort that we're truly doing better than expected, not only the reserve adds, but the fact that we're going to -- we expect in the second half of the year to do as much with 7 rigs as we did with 8, which reflects that our drilling and completion [crows] are reducing days on well and becoming more efficient and that our production rates are not just staying up, but they're actually growing.

So that's my case. I'm not trying to be defensive but try to give you more information that's hard to put in the news release. But since the question came up amongst some of you want to supply this additional information. And so just to repeat, the full year production growth from '22 to '23 is 21%, 24% for all and the 2023 exit rate represents a 40% production growth. So I think that trumps quarter 3 projections. And we do look at things on a -- more on a full year basis than a quarter-to-quarter. I'd say much like a football [coast] didn't pay that much attention to the first quarter score but wants to know what that fourth quarter score is.

Olivia, we'll jump into questions. Thank you.

(Operator Instructions) And our first question coming from the line of Scott Hanold of RBC Capital Markets.

I'm just kind of curious, now that you've got the advanced assets in your hands for a good period of time, and there's probably still more to learn, but specifically with those first -- the first tranche of 21 wells that you all are going to bring on, I know you all are planning to do a little bit stage because you can't just obviously put a bunch of flush wells online at once. But could you give us some context in terms of how big the batches are when they come on? Is it like 3 to 4 wells a week and then you need another week before you kind of bring the next batch on. Is that generally the process cadence of what you expect through August and early September?

Scott, this is Glenn Stetson, EVP of production. That's exactly right. So it's a 21-well batch. And the way that it works in practice is will really -- there are multiple pads where there are 4, 5 and 6 wells per pad, we'll commission the facility. It's one facility for all 21 wells. And the way that it will work in practice is that we'll basically turn on a well every couple, 3 days. And so starting in the middle of August, it will really run through the end of September before all 21 wells are really kind of contributing at their in a meaningful way.

So One thing that I did want to mention too was what Joe commented on was when we took over these advanced properties, they really had a different setup where they had effectively 1 facility per pad. And so one of the efforts that we're conducting right now is to consolidate a number of those facilities at the Hat Mesa properties in New Mexico. We're going -- we're consolidating from 14 facilities to 5. And then in West Texas from 5 to 1. So by going by operating 6 facilities instead of 19, there are a lot of efficiencies that we gained by doing that. And so while we have a temporary shut-in or deferred production, what you get at the end of that is fewer people, so lower supervision costs and lower OpEx just from simply the reduction in the number of facilities that we're operating. So lots of synergies on that front. And then as you say, in Q3, we're really going to spend most of the second half of the quarter, bringing on all those new wells.

I appreciate that color. And then pivoting to maybe the commentary on 2024. It seems like you've got very strong and improving guidance on sort of that circa 150 target. Just -- can you give a little context, you obviously dropped the rig that you had. So it sounds like operations are going well. Can you achieve that 150-ish goal with those 7 rigs or would you bring on an ACE -- and any kind of view on cost savings as well. And so looking at 2024, what kind of budget just at a high level are you thinking about?

Scott, this is Chris Calvert, EVP and Co-Chief Operating Officer. I'll address the operational components to your question, I guess, first, -- looking at the decisions surrounding going from 8 rigs to 7, we looked at it really in 3 and 4 things. A, it allows us to accomplish our goals set forth in 2023 when it comes to the number of [TILs] that we will turn in line. Second, it obviously provides us flexibility that gives us more optionality to reduce our debt.

Third, we feel like it's prudent to be a little bit more patient in this declining service cost environment before adding that rig and if we are able to accomplish those goals that I just mentioned, it's more prudent for us to be a little bit more patient with this rig. And all 3 of those really set up for what we think is going to be a great 2024. Now budget-wise, 2024, we really don't give much color until our February discussion. But we are excited about the runway that we do have. Like I said, we are able to accomplish a lot of the goals that we set forward. And a lot of that comes from the efficiencies that we do receive on the drilling, completion and production side, reducing days on the drilling side, whether that's eliminating casing strings, getting longer run times out of our bottom hole assemblies, completion, greater utilization of simul frac room frac.

We set forward a full year target of maybe 50% of our wells would be simul-frac in the second quarter, that number was actually 55%. And we're looking to exceed 60% for the second half of this year. So I think there are a lot of efficiencies that play into being able to till the same amount of wells that we projected with a 7-rig case. And so I think for us, it was an easy decision. Now the timing of the eighth rig will obviously depend on a lot of certain things, market conditions, commodity price, the realized savings that we have seen via these efficiencies and via really kind of what we see as a peaked service cost environment. And so we give ourselves the option to be flexible with the addition of that 8th rig.

And our next question coming from the line of Neal Dingmann of Truist Securities.

Nice quarter. Joe I'll just start out looking at that Slide 6, obviously, fantastic growth. I know it's too early for '24, but I'm just wondering, Joe, like if you look at maybe just philosophically, how do you guys think about sort of growth, if I would look into '24. I mean I'm looking specifically at maybe like that second quarter guidance post advance through like, what, fourth quarter, obviously, it's a nice trajectory. And I'm just wondering with what Chris said around the 8 rigs, should we think about kind of growth still continuing in '24 or maybe just how we think about growth versus any sort of alternative shareholder return or what have you.

Thanks, Neil. That's a real good question that we're -- we talk about nearly every day is what is the strategic plan for -- we know we'll have 7 rigs, then what else optimizes the plan. We know we'll -- the way Tom and his group in coming up with quality and ad quality prospects to drill. We know we'll come -- we'll get an eighth rig sooner than later in the year, a high likelihood higher ability to add that 8th rig. The other factor is, as you know, we're doing brick-by-brick acquisitions all the time. Last year, we did, I think, the year before, 250 and then last year, 206, some like that.

So we're doing those all the time. And so we're going to have a formula where it's going to be primarily through the drill bit, but we hope to make selective acquisitions that and add to the interest we have in certain properties as well as joining acreage so we can go from 1 mile to 2 miles or 2 miles to 3 miles. And so that needs to be factored in. And then as Chris said, commodity price. We -- and again, as he said, wait a little bit because we feel maybe vendor prices have peaked and maybe there will be a more favorable cost environment if we wait a little bit into 2024.

But the group is ready to get going at any time that we think the conditions are favored. And that's kind of do we -- how soon to go debate rigs look at how many acquisitions we've either made or likely to make. And then the third factor is make sure it's profitable growth at that proverbial measured pace. And then the last thing is, we are really focused on quality and inter acquisitions and drilling. We're not trying to just get bigger. We want to get better so that our operating expenses get better. And the law of averages kicks in where we raise our average reserve per well. And all that plays a factor.

We want we want an emphasis on quality rather than just getting bigger. And -- it seems to be working out. We think the teams have done a really good job getting us into this better rock with both the advanced and the Ascent acquisitions to go along with our leasing activities that John has done and he's -- Van and John on the land side have really broadened Sweden areas that we're in.

So if they keep having that success, you'll be heavier on getting the drilling rig as well as the acquisitions. So we want to be opportunistic, but I hope it gives you some idea of the calculus that we're going through every day. And by the third quarter report, we'll have a more definite plan for you, Neil. And if you'll come and see us, you know we always love seeing you and other analysts and answering your questions.

You got to know that makes a lot of sense. You guys have been highly successful, both organically and externally. So I look forward to more than that. And then my second question is just on Slide 9. Joe, you obviously have in the title slide is titled very properly the synergistic midstream assets you all have. And I'm just wondering, maybe my question around those assets is are you able to continue -- are you able to start adding a notable amount of third party? Or maybe just talk about sort of plans for those now that you've folded in advance to the San Mateo and the Pronto Midstream. Would love to hear what the guys are thinking sort of short term because, again, I think you've outlined the CapEx was lower. I know it shifted because of activity on that. I'm thinking though more of how should we think about EBITDA coming from that and maybe just either third-party or proprietary activity from that.

Well, that's a great question. And I'd begin by saying the 2 assets that we have that are most overlooked, one of them is San Mateo, the midstream, when we meet with people, they look at production, but they don't necessarily look too much at the midstream, and that's an increasingly valuable asset. The second thing I would like to give a shout out to Greg and Anton and others in the group, Josh and Sean, we are getting much our pleasure and what we had hoped to achieve is a lot of repeat business from our customers who've been calling us and saying they would like to get -- put more gas in our system and -- which is what we hope to achieve and they like our service. So I give them credit.

And I think they've done a really good job of making it all more profitable. So that's -- and the second overlooked asset is in Northwest Louisiana when we made the Chesapeake deal, you remember we reserved all the Cotton Valley rights uphole. And so that's starting -- that area is starting Cotton Valley starting to get more drilling activity, making good wells. So we have, according to our Netherlands and [Sol] reserve estimate a few years ago, 200 to 300 Bcf of reserves there that we start any time gas prices stabilize in an area, they probably don't want to do that drilling when it's up and down.

But when they stabilize, that's another alternative for us to go. So on the midstream, we plan to connect Pronto and Sam Mateo soon. I want to thank our partner on the San Mateo, Five Point. They've been a really good partner. We've enjoyed working with them. And of course, we're -- we would like to keep expanding that relationship. We haven't gone so far to start meeting with people about possibly another gas plant, which we think will be needed to meet the overall production from that part of the basin, and we'd like to be one of the first to get a gas plant and either up there in that Northern Lea County or add to our Black River plant.

So I mean there's a lot of opportunities, but we want to be careful as Brian indicated, to keep our leverage ratio down there to 1 or below. And things are going well, but we don't want to get greedy. We want to be more of the tortoise than the hair, slow but sure Thanks, Neil. -- come see us.

And our next question coming from the line of Kevin MacCurdy of Pickering Energy Partners.

Joe, you detailed in your press release, your progress on debt repayment, which I know the investors are pleased with, especially long-term holders. I wonder if you can talk to how you're thinking about the long-term capital allocation strategy and how you're thinking about balancing growth, debt repayment and shareholder return over the long run given the current prices?

Kevin, that's a very good question, and I wish I'd give you a specific answer. But the step -- it's a step-by-step process, and the first step was to integrate Advance and confirmed its values and its potential and how that might affect the rest of the equation. The second thing is just meeting with our Board, we've got a great Board, a lot of expertise and on there and their active shareholders. And what you know, we like dividends. I'm one of the largest shareholders, as you know. And a I like dividends. We all do.

We want to do it in a responsible fashion, and we like to work towards that achievement and being recognized as a company who steadily increases its dividend year after year, but to do it in a way that's financially responsible. So we've raised it from a nickel a quarter to pens in the last couple of years to $0.20. And we'll -- as I mentioned at the annual meeting, we're going to look at this at our third quarter board meeting and see if prices are stable and how the economy and the outlook goes, taking all those factors again, we'd like to be able to raise it, and it's probably more likely than not that we would if they stay this way, but don't want to guarantee or promise anything until the Board can meet as a whole and look at our third quarter numbers and how the year will play out, and then we'll know how 2024 is shaping up.

So there's going to be a balance there. And then on the capital allocation, as I said, we tend to be more opportunistic in trying to set a fixed budget. We have a fixed budget things change and you don't want to be stuck to the budget, but to be able to take advantage of opportunities. The advance is an example of that. I got to call it Thanksgiving. And I wasn't expecting it and said, "Hey, are you interested and we started working on it from then, which would have changed the plan. So we want to be nimble and opportunistic.

And -- but we also want to reward our shareholders who have been good to us and steadily raising the dividend, but also keeping the financial assets strong. And we have our borrowing base with a base is just a small fraction of our total assets. And so we have more room on that if we should want it. Our bonds have been upgraded, the original bonds. So we think we have good standing.

And when we had the last issue, we were over subscribed 6x. So we think our standing in the market is good. So we have the options, and our team has really been coming up with good ideas. So I just like our chances. And so does everybody else. And I'd like to point out that we adopted an employee shareholder purchase plan and that we had somewhere between 90% and 95% participation. Is that right, Brian?

Right. We start to know.

So over 9%. So the whole staff is excited about this and excited about the outlook and the rewards. So I hope that's helpful to you. I tend not to be somebody that does a fixed budget and a budgeting process. We'd rather be opportunistic and nimble and move the capital where it can be most helpful to Matador. Brian or Tom, do you have any comment on that?

This is Brian Willey, the Chief Financial Officer. And Joe said it very well. I'd say it's -- we're a unique and I think a great position where we can grow production while we also increase shareholder value and reduce the debt that we can do all 3 at the same time. And as we look into the rest of this year and then into 2024, we talked about the increased production in 2024, and that will lead to, of course, increased cash flows, we can then accelerate the debt repayment and continue to make these returns to shareholders and look for opportunities, whether it be on the E&P side or the midstream side, as Joe said, and look for opportunities as we go forward and what would be the best fit for Matador in the long term.

And that's really how we manage the business. And so just like Advance, I think that deal was fantastic because it had a number of synergy had the midstream synergy with Pronto, which we're working on, and we expect to bring on next year. It had a lot of recycling where we've used over 11 million barrels in recycling already from the advanced properties. And we've used the dual fuel in the simul-frac and been able to improve on the capital side. And then as mentioned earlier by Glen, on the LOE side as well. So acquisitions like that are fantastic to be able to make, and so we'll continue to look for those types of special deals.

Tom?

Joe, Brian, I think it's very well said. I mean, the key word is kind of that nimbleness and being opportunistic. And in that purchase, there's so many different parts of our business. I think -- all of our production teams looking for ways to combine these -- combine these tank batteries as a very innovative example of how can you take something in its current form and make it even better. I think that all of the long laterals, the trades, everything we're doing to make these improvements. I certainly think that the horseshoe project that is a really kind of a key example of something that didn't come from the executive team that came from the staff. It came from our drilling team and working very closely with our MAXCOM group to run all the different torque and drag models. And that's just one example of things that we do every day here at Matador to be creative and nimble. And so yes, I think that's part of our DNA.

And this is Glen again. I might mention that if you rewind a year ago, I mean, even the Pronto acquisition was another opportunity that came up that we were able to -- we were kind of uniquely able to close on in a very short period of time. And I think it made us the ideal candidate for those assets. And this year was -- or excuse me, this last quarter was a very productive one for Pronto where they hooked up directly to 15 of Matador's operated wells, and we increased the throughput to that plant, and we think that it's going to be full by the end of the year, which is why we're looking at expanding. So I think that, again, it's just that approach that Tom and Joe really and Brian have talked about here of being able to execute on the opportunities as they come up. So be flexible.

And I like your chances too. As a follow-up regarding Pronto, any further color you can provide on your options and the time line of building a new plant.

Yes, we -- sorry, this is Glen again. I would just say we highlighted in the release that this is something -- as I just mentioned, we think the plant -- the current plant is going to be full by the end of the year. And so really, I mean, there are plants to expand that system with a 200 million cubic feet a day plant. And right now, I mean, it's still in the planning phases, and that's where we're at right now. So we're going to, I think, refrain to add more than that today, but that's -- that's the path we're on right now.

And as always, I appreciate your answers.

Yes. This is Greg, Craig, with EVP of Marketing and Midstream Strategy. I echo what Glenn had said. I mean, we're looking forward to getting a new plant out there. We think that it lends itself really well to our expanding our drill with our drilling program and also with the availability of third-party gas. We think there's a really need out there for that. And it's definitely shown up quite a bit here lately, especially with with our competitors out there that we think that there's opportunities there to grow our third-party businesses. So.

Our next question coming from the line of Zach Parham of JPMorgan.

I guess first just on CapEx. You took the CapEx budget down and reduced your guided D&C cost per foot to $1,100 per foot. Where were you on D&C cost per foot in 2Q? And how do you expect that to trend in the back half of the year? Just trying to get a sense of the magnitude of the cost deflation you're seeing?

Yes. Zach, this is Chris Calvert again, EVP and Co-COO. To answer your questions first, in January, we did a full year guide of 1,124 feet for dollar spent per completed lateral feet. We have just guided that down to 1,100. And so if you think back to the first quarter, our number was about $1,014 per lateral foot. And so we all knew, and I think everybody kind of on your side of the coin knew as well that the second quarter.

Similar to our absolute CapEx spend, the second quarter was going to be a little bit of a high watermark for us. And so the second quarter came in around $1,156 per foot. And so obviously, those are wells that are being turned online at kind of the peak of this cost -- service cost environment like Joe had said. What we're looking forward to is taking these capital efficiencies that we always speak to. And in quarters past, the story has been those capital efficiencies are going to be used to basically mitigate cost inflation. And now the story for the second half of the year. Those are going to be working in tandem with the sort of more competitive service cost environment.

And so like I say, the increased utilization of simul-frac of dual fuel, those things will now be working in series, so to speak, with this kind of a more competitive service cost environment. So looking forward to about $1,100 per completed lateral foot, we do expect to realize some pretty immediate cost savings, both on the completion side really immediately into the third quarter and then on the drilling side as well going into the latter half of the year and then into 2024. And so we are guiding that number down. And that number comes from a combination of those capital efficiencies that we've spoken to and then also the more competitive service cost environment.

So it is somewhat of a mix of both. But once again, our strategy here is control we can control and utilize simul-frac, dual fuel technologies, drilling wells faster, completing wells faster. And that has really, as it's always been kind of underpinned to these cost savings that we speak to.

One other thing, Zach, is that while we want to get the cost down, we want to do it not by going to cheaper products, but we want to keep up the quality. We like the vendors that we have, they're quality vendors with quality products. So you can be -- as you know, the old same penny-wise pound foolish, if you're just going to something that's cheaper and Chris and them, I think, have done a very good job of balancing cost against quality to make sure that our wells is well equipped with the best products possible.

That's great color. Just one quick follow-up. Joe, you talked about 3 issues that would impact your 3Q production in your prepared remarks. Will those issues persist into 4Q? Just trying to reconcile that 1,500 barrels of oil a day reduction in the 4Q volume guidance?

Zach, this is Glenn. Again, EVP of Production. Yes, some of the shut-ins at Stateline associated with offset fracs will continue into Q4. And we've included those numbers when we're -- when we contemplated the exit rate at the 143,000 BOE. So it will still impact Q4, but we've included those impacts.

Yes. This is Brian Willey. Glenn is exactly, right? It doesn't include the impacts. But going into Q4, the Stateline shut-ins are essentially about 2,000 BOE per day is the impact. And so we would have a higher exit rate if those shut-ins didn't happen. So I think it's -- we're really proud of the exit rate we have and as we get those wells back on, just as Joe said earlier, these are temporary shut-ins. The oil and gas is still there. So it's just a temporary shut-in and we put it back online and then are able to take advantage of those production from those wells. So we're excited about getting them back on the end of the fourth quarter and into next year.

The Nina Cortell should be back on no problem. The facilities will you be finished with them.

In Q3, yes, sir.

Yes. Glenn is not in his head, yes. If not, he'll be up here at Christmas.

Our next question coming from the line of Subhasish Chandra of Benchmark Company.

Joe, a question on '24. So you're comfortable with the guide $150. Any thoughts on the oil cut? If that's a number you can -- we can take kind of the 4Q number and run with or as maybe the Advance properties mature and gas plants come on, we might see a heavier gas mix?

Well, I think expect and see subject to whatever Glenn adds to my remarks is that we expect to go out the year at about 60%, and that will increase in 2024 to somewhere between 62% and 64%, Glenn, is that.

Yes, Joe, you nailed it. That's exactly right. We'll exit the year about 60%, 40% split, 60% oil and 40% gas on a BOE basis. And one thing that could affect that, as we continue to develop the Advance properties, we will get oilier. But just like in Q2 of this year, this quarter that we just reported on, there was some non-op activity in the Haynesville where we had some pretty hefty overrides and that's not really something that we can control the timing on. And that might move our gas volumes on a BOE basis up or down 1% or 2%. So kind of subject to activity in the Haynesville, that can change, but the 60-40 split is a good benchmark, I think.

Got it. Yes. No, I wouldn't turn away for gas. The -- as far as -- I think I appreciate your comments that you don't want to say more on the gas processing expansion. But just hypothetically, a plant of that scale, how much do they run?

Say that again, please?

Yes. How much was... How much of the plants run 200 to-date plant.

Well, it depends on the size. How much sake costs. A lot of it depends on the size of the plant and whether it's for regular gas or for (inaudible) gas. And again, some of it depends on the competitive environment. So it's very difficult to hesitate to say some. And our reaction to some of that, depending on what that cost is, may influence whether we take on a partner or not. And because again, we want to protect the balance sheet. We want to reduce debt. And while we'd like a plant, we don't -- we're not trying to get a monopoly on new plants out there in that area. We work with somebody else that would somehow make the proposition better. So Zach, at this time, it would be really hard to put an exact number because design can come out in a number of different ways. So until we have a firm design, it will be difficult. So when we do, we'd be happy to share it. And again, I say the same thing come see us, and it will be -- we can tell you where we are at that moment.

And our last question comes from the line of Leo Leo Mariani of ROTH MKM.

You guys obviously talked about Advance production kind of being a little bit better than expected. I was hoping maybe you could kind of quantify that. I think you guys were around 25, 450 barrels a day in the first quarter. Where did that number kind of come out in second quarter? And maybe just talk about the trajectory of Advance as we get into 3Q and 4Q a little bit would be helpful?

Leo, this is Tom Elsener. We've certainly been very happy with the Advance production so far. It's done remarkably well compared to our forecast. And so I think we're just right in there within a few percent of what we had targeted. It's a little bit a few percent better. So overall, we're very happy with it. I know the team has taken over those properties and has done a great job improving the production. There's some ESP replacements and some other things. So we -- things are moving along very well.

Okay. I also wanted to just ask a little bit about sort of debt pay down. It sounds like you guys maybe have paid down debt a little bit faster in the last handful of months than maybe expected. Can you kind of talk a little bit about sort of when you can think you can get to getting that revolver sort of paid off? I mean it sounds like it's a pretty important goal for you folks. I know obviously, it will be dependent on commodity prices. But if we look at strip, I mean, do you think that's something that can be pretty much fully paid off kind of by middle of next year? Just looking for a rough estimate on when we can expect that debt to get paid off.

Yes. Thanks, Leo. This is Brian. And you're right, it is an important goal for us and something that we are certainly focused on. And it does depend on oil prices and the realized oil prices that we get and the other opportunities that we have, of course, including building a new plant and any other E&P opportunities we have going forward. But I think right now, depending on whether or not we get a partner on the plant, if we get a partner, I think that we'd be close to paying that off by the end of next year at current strip, and that continues to be one of our goals as we go forward.

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

Thank you. All those are good questions. We appreciate the discussion. It sounds like you all have done your homework. And I hope that was helpful to you in your own planning. As you all can see from us, we've had in my Chairman's remarks, we've had, I think, a remarkable run, 36 quarters where we've met or exceeded industry guidance.

And again, if we had to do it all over again, we'd do it pretty much like we did. We didn't want to -- we had events that work gave us a headwind on production, but we're down by 1% or 2%, but the big number is look at the reserves we added in the first 6 months of the year, and the reserves will add in the last 6 months. And production is on a very strong path to grow. And the costs are coming down, the debt is coming down.

And we think our opportunities are increasing. We like our position in the Delaware, and we're one of the larger operating companies with one of the larger acreage position. So that's -- the acreage is going to be something that's going to keep on giving. [Nad], our Head of Geoscience just over and over again, as examples of weather where the Delaware has extended itself by adding new producing horizons. It's done in this 6 months.

So we're we're excited as I hope you can tell and eager to visit with you. And we always feel somewhat limited. They were not able -- time doesn't allow us to go into all the detail that goes into our decisions. But if you could be here and listen to us as we go in, you'd see that these plans are thought out, great Board, great executive team, great staff. And so far, touch wood, we feel we've gotten to the right answers. And when it's an opportunity to present itself, we've made the right decision whether to do it or not.

We hope that record at 36 consecutive quarter, that's 9 years, gets to some trust and confidence that we're on a good path when we outline this and look not to 1 quarter's production, look at the full year and not just let the full year, look at are we adding reserves, proved reserves, proved developed reserves at a favorable pace and a favorable cost.

So that's kind of a summary of what we're trying to do, good people, but technology, trying to take -- as you heard from Chris, trying to take full advantage of the innovations and the new technology, and we're recycling on the environmental side. We didn't get any environmental questions, once you know we're making, we think, some great strides in the environmental responsibility, including recycling water and having more and more of our production, water and gas on pipe, and that we're continuing improvements there and real pleased with that.

And the innovation of the Horseshoe is going to add to the number of locations and we're drilling longer and longer laterals that have better economic benefits. So we think in all the areas that the team is making good moves. And we think this is going to be one of the best years we've ever had. And 2024 is going to be even better. So with that, I'll sign off, but know that Max phone number handy and Brian's and they will always be available to you.

Ladies and gentlemen, thank you for your participation today. This concludes today's program. You may now disconnect