Matador Resources Co (MTDR) 2025 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2025 Matador Resources Company Earnings Conference Call. My name is Marvin, and I'll be serving as the operator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay reprices, and a replay will be available on the company's website for one year as discussed in the company's in press release issued yesterday. I'll now turn the call over to Mr. Mac Schmitz, Senior Vice President, Investor Relations for Matador.

Mr. Schmitz, you may begin.

Thank you, Marvin, and good morning, everyone, and thank you for joining us for Matador's fourth quarter and full year 2025 earnings conference call. Some of the presenters this morning will reference certain non-GAAP financial measures usually -- 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 recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q. In addition to our earnings press release yesterday, I would like to remind everyone that you can find a slide presentation in connection with our fourth quarter and full year 2025 earnings release under the Investor Relations tab on our corporate website. And with that, I would now turn the call over to Joe Foran, our Founder, Chairman and CEO. Joe?

Thank you, Mac, and thanks to everybody who's listened and has taken the opportunity to anticipate in this conference call. The first thing I do really encourage you to look over the slides, particularly if you don't have time to read the whole press release that we had. There've been a lot of thought put into those slides to try to make important points that I believe are essential to the Matador story. Second, if you also do not feel you've been given an adequate opportunity to ask questions, we want to invite each of you to come visit us at our offices, where we will make sure that you're giving all the time that you want to ask your questions and get your answers. And in particular, we would invite if you do come, we will make sure that you get to have lunch with the executive team or most of the executive team that's in town, or if you'd rather -- we will arrange for you to meet or have breakfast or launch with a lot of our young leaders and get to know the people who are coming up and being pillars of support and activity and are just doing a wonderful job, great job in directing our various activities.

And of course, they're, relative -- have some years of experience, but they're the ones who are actually on the job and the first level of supervision and executive action, which none of the seniors will be in there to give you that opportunity to get some very frank responses. And that invitation goes and just work through Mac to setup such a meeting. Then what I wish to emphasize today in this conversation is the quality inventory that we procured over time, particularly in the Delaware, where I've been -- I started Matador over 40 years ago, 43 years to be exact, and that's where we started out in the Delaware. So we've got reflect -- over 40 years of experience and still think it's the best rock in the country. And we like the position that we built.

It's now over 200,000 acres. And if you're going to -- my experience, having started the company is when you're in what you feel is the best rock. It's a lot easier to build than trying together some of these outlying area. So feel free to ask whatever tough questions you want on the inventory, I think our position stands out against anybody acre for acre. Second, is I hope you'll note the strong balance sheet that we have and that this past quarter, we increased production.

Most importantly, we increased reserves by 9% as measured by the Netherlands and Sul. So we have a -- we increased production and reduced debt. And we had strong cash flow throughout even though prices went up and down throughout the last 90-day period. We believe this inventory balance sheet, the strong cash flow, all lead to growth optionality. And with San Mateo, we now have flow assurance outside the basin.

Hugh Brinson has been a change maker for us, and we're excited to work with Energy Transfer on that opportunity. And with that, we'll take the questions. Mac?

So great. Thanks. Marvin, we're ready for Q&A.

(Operator Instructions) First question comes from the line of Lauren from Bank of America.

This is Noah here. So you guys increased sort of net undrilled lateral footage by 2% this year. I guess -- what was this delineation or a result of your brick-by-brick land strategy? And where these locations -- where were these location adds? And you also had some pretty significant inventory adds in the Avalon, third Bone Spring Carbonate and Wolfcamp D. Are you seeing something that you like from those formations?

First, I'd just say. It was a lot more than one question. So which one of those do you want Tom to answer?

Really just if you could, on the inventory adds, if you're seeing anything you like on the Avalon Third Bone Spring or Wolfcamp D?

Sure, Noah. This is Tom Elsener, EVP for Reserve Engineering. Definitely appreciate your question, and it's something we're very, very proud to answer. I would say the production out of the Avalon in particular, has been very strong. I think we highlighted a particular well in our kind of Southern Ranger area to a bit Gavilon, a very strong upper Avalon well that has been a very, very high performer.

I think it's getting close to made over 400,000 BOE, very high oil cuts. It's something that we have a lot of running room in that part of the basin for. It's something that we've expanded our inventory in over the years. So it's something we see as it's been a big part of our campaign out in the Delaware Basin. The other zones, various adds all throughout the position is what I would say.

I'm proud that you noted the increase in footage. Our teams have been very busy doing trades, extended laterals, and we're very proud to see the 6% increase in our average lateral length in our inventory from 2024 to 2025. We've noted that we've been doing some 3.4 mile on laterals, particularly on our Ameritiv acreage that have helped us to dramatically increase our [inaudible] length. And I think that, that's something that I would tip my hat to Chris Calvert and all the operations teams for pushing our lateral lengths out to these types of distances and doing it very, very well. I think our teams have been able to improve the quality of our inventory through good geoscience support from Andrew Parker, identifying -- you mentioned the third month in carbonate was a zone that we had not originally included in our inventory several years ago, and it's one that we've drilled very successfully kind of all throughout our Delaware Basin position.

Our teams had started with that target down in our Wolf area many years ago and then further north into some of our properties over in Ranger and then over across into Rustler Breaks, and it's been one has been a great add to our position.

Our next question comes from the line of Neal Dingmann of William Blair.

I'll make sure to keep the one question. I don't want to get in trouble.

Neal, the other thing is what maybe some of the others on the deal, you know the way to our office. And you've been here a number of times asking these questions, and we've always appreciated. It's been a very useful dialogue and the guys like [inaudible] me come and ask you various questions. And so they're hoping you'll come back.

That you all have been very generous with the time, Joe. I definitely look forward to getting back there soon. Joe, my question to you, Brian. It's really just on the '26 plan, it seems you continue now to target free cash flow over production growth. You look this year, great plan out there for 3% oil growth with 11% reduced capital spend.

This is -- I compare this to prior years, where maybe you were targeting higher production growth. So my question is, you all now believe, I know you talked about value creation being sort of the key driver out there. You believe the key to the value creation is just this capital and operational efficiency, or what do you all look at as the key for this value creation?

Well, it's a good question, and it's a fair question. The way we do things, as you know, we like to collaborate with each other and several of us kind of lean one way and others lean another way on what's important. And then when we roll that all together, it comes out that I think it depends on the time, and what the nation's economy is to in political situation is which one you lean perhaps [inaudible], what interest rates are. And so there's a lot of factors that go into it, as you would guess, just like what what sector of the economy would you invest in. It varies from year-to-year and time to time.

But our first -- we began with first saying is look for the good acreage because if you have the good acreage, banks generally have a good outcome. And it's hard to turn bad acreage into profitable or highly profitable wells. So beginning with is this a well that's in the right areas and the zone that's been properly tested or is this an exploration in fact well. The other thing is, I lean more towards the long-term reserve growth because when you proved up the reserves, then it becomes optional when do you want to complete wells in those zones and and bring to the market, the -- and you want to do it in a deliberate style because as you drill these wells, the more you drill them, the better your per lateral foot or foot each rate is because you just are drilling them faster, you learned to adapt some ways of increasing your booties and reducing your costs. So last call we had, we were beaten up because we had grown our production, but we had also grown our CapEx and that CapEx was -- we took criticism for that.

This quarter, we showed what we could do the capital efficiencies that reduced CapEx spending by 11%. And we were able to recover essentially the same amount of production. But to us, most important because of the fluctuation in prices we increased our overall reserves by 9%. That's not our numbers, but that's Netherland and Sul's numbers. And so we thought that was a good outcome in total for the 90-day period that we increased production a little bit, 1%, but we reduced cost by 11% for the same amount, roughly the same amount of lateral footage and our overall reserves went up by 9%.

So we thought that's good, but you all be the judge of it and the market will be the judge of that. But we're pretty excited that we have those numbers headed in that way. Production is up, cost down. And that we proved up some new zones and that we're very excited about. And so with fewer rigs, and I'll let Chris take over from here, he feels what was most important accomplishments for the quarter.

Hi, Neal, Chris Calvert, Chief Operating Officer. Great question. When we look at value creation, specifically long-term value creation, I think the fundamentals of your question really you kind of build the foundation of what we think that value creation is. It's profitability profitability focus, not necessarily production focused. When we look at that, then we try to figure out the ways to optimize the levers that build that strategy.

And so with -- on the revenue side, you look at the value of Hugh Brinton as that comes online towards the back end of this year to help improve gas realizations that we spoke to, the production impacts of that in the first quarter. You look at the CapEx spend, the 11% reduction, the $130 million in CapEx savings forecasted for 2026. I'd refer you to Slide 6 to look at our year-over-year improvements in well costs. And really, even more specifically, I would focus you to Slide 19, which I think tells a better story that shows that we're able to achieve these well cost reductions while delivering stronger well results. And so when we can go out and deliver 10% improvements from an EUR perspective and do it at a lower investment cost, I think being able to optimize those levers just continue to improve the fundamentals of that long-term value creation.

And so I think it's a great question, something we are hyper focused on the CapEx component of our 2026 plan is something that we are extremely thoughtful to that is going to be underpinned by efficiencies, vendor relationships in these volatile times, and we'll look forward to deliver that plan.

Our next question comes from the line of Tim Rezvan of KeyBanc Capital Markets.

One question. Joe and Brian, we couldn't help but notice the second priority for 2026 in your earnings release was midstream value realization. We also saw your report aggregate San Mateo and Matador Midstream EBITDA guidance for the year. So as we think about the time line, knowing this is a high priority, it seems like a drop in Matador assets into San Mateo seems to be a precursor to anything. So is that something you could do now?

Do you need to let the dust settle on the 5-point continuation vehicle first? Can you just kind of walk through the theoretical steps we could be looking at this year?

That's a good one question. Let me try to answer, I was trying to make notes as you were asking that. But no, the limitation of the one question is we're not limiting our time with you all after these one questions you've gone through, if you still got them stay on the line. We'll stay here as long as you want to ask them, and we invite you to come and see us. Now an answer to your question that you're talking about is that we look -- approach this on a very holistic approach.

And it's not me sitting in a room and telling everybody else what to do. We gather in here in this room, the same room, we thought [inaudible], and we cashed out different. People have different views. But when we get through, we all feel like we've hashed out a good plan. And we try to be nimble enough that as the economic climate changes, we'll change with it.

And so it's been that kind of a 90-day period in the past, where you had to move cautiously or I felt my 40 years experience out here is be cautious because cautiously, you have a president saying he wants $50 oil, that isn't going to work long term for the industry, needs to go more higher. You've got a world situation where you got the prospect of war in the rand, you've got Europe that we're having difficulties on both sides. I don't like some of the things we're doing. And I don't know who's right or wrong, but I hope they get resolved. There has been a good ally for us.

And then in our own country, you have this relations with Mexico, Venezuela, all those different countries that -- so you have the world view, you got to take into account. And so the -- we hedged our bet. We're 50% hedged on oil to protect the balance sheet, no matter which way we -- which direction we ultimately had, but we've taken those precautions. We we've got great vendors. Patterson is always helpful to us on timing of rigs and quality of rigs.

So it's a complex, multifaceted, and we get the various department heads in here, and we hash it out, making sure we're taking all this into account. Five Point has been very good to work with. And that simply is a situation that they have an exit period in their fund, and they've got a continuation fund working so that they can work out long term. And that's headed, that's making steady progress, and we expect it to be resolved in the near term. We don't have control over that, but Five Point's been a good partner, and they've done what they've said they would do.

And so we're watching that. You got activities, oil is important to the state in Mexico. So you're going to deal with government agencies like the Bureau of Land Management and like the state land office on these matters, and what are their plans, so incorporating that and then we really like our bank group, and they've been very supportive, and we have an RBL. That, of course, has increased over time as we've proved up more reserves, which is something we take in into account and all night in the most recent redetermination by our bank group was that they came back and increased our borrowing base and all 19 were unanimous in their support and even raise the amount that they have been offering on the midstream system. So we thought that was a when the whole way through.

Other suppliers, B&L Pitco, has been very supportive through time, and we'd like to confirm what direction pipe prices are because when you're drilling these longer laterals, you want to be sure you have the best quality pipe at the best prices. So give credit to all of them at Halliburton on our frac designs and execution. So I would say you're not going to make a decision in an afternoon but you're going to gather get everybody's proposals in there, massage them together and go from there. And so it's something that these long relationships that we have with these vendors really pays off because you just -- you really make that time together and planning this that much more efficient. And we think that planning has played a big role in the reduction in our CapEx as well as the efficiency gains and like the timing and the timing that we have in drilling these wells, we're just drilling them faster than we have in the past because everybody knows what they're supposed to do, and they -- people come up with ways to expedite the operation and the drilling plans.

Chris, did I leave something out there?

No. I think Joe hit on a lot. And I think to the question, Tim, the relationships we have on the E&P upstream side that Joe has mentioned, I've been long-standing and part of the success story of the operational excellence of Matador. And I think to the story with Five Point and the continuation vehicle, I think what we're excited about is the structuring a deal that allows them to be part of the future growth of the entity. Now as the drop-down conversation moves forward, I think that's something that from the E&P side, we have referenced these 3.4 mile laterals.

We've referenced the productivity of the Ameredev acreage that is now in our asset base. And so I think that is an exciting story from both the E&P side and the wholly owned Matador -- excuse me, Metador midstream side, the gathering side. And so I think that the cadence of any sort of drop down, I think that's something that we will continue to work on. But we're excited about the continuation vehicle simply because it's another sign of support from Five Point, and they've been supportive of everything from plant expansions to interconnects between Marlin and Black River. This is just another sign that they want to be a part of the growth story that is San Mateo.

Chris, I think that's excellent. But I just want to add on to that, that we've gotten a number of questions recently about our artificial intelligence participation. And what we found most effective is to work together with our vendors, and where we can use artificial intelligence between us, most often, they have the program. They're ahead of us, maybe more often, and -- but work together, so it's a win-win situation. And -- so we're taking baby steps, but we are taking it in the deliberate fashion with our partners, some of whom have more experience in this area, and we feel like it's other win-win where we all are gaining from the collaboration.

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

Can you talk about how you're thinking about using the buyback going forward? It was relatively limited over the last couple of quarters. I know you didn't plan to be formulaic with the boast, but just any chance on how you plan to allocate free cash flow to buybacks in the future?

Hi, Zach, this is Rob Macalik, CFO. Definitely on the shareholder return, we're proud of the cash we've returned in the form of both the dividend and the share buyback. We've raised the dividend 6 times in the last 4 years and are really proud of the 3% yield that we have on that dividend today. We just instituted the share buyback in 2025, and we think it's a really nice extra tool that we have at our discretion. As you can see through the management and employee share purchases, including the guys in the field, we as a management team feel like the stock is undervalued.

And so we've been trying to be prudent with our capital, but we do think that the share buyback is a nice tool that we have, that we can continue to use opportunistically and feel like between the dividend and the share buyback are really good shareholder return tools to use. And so I think you'll consider -- continue to see us use that in a very conservative way, but use it when there's a dislocation between our stock price and what the rest of the market is doing.

Our next question comes from the line of Derek Whitfield of Texas Capital.

Wanted to focus on surfactants with my question. Could you perhaps elaborate on the enhanced performance you're seeing in your well results, the degree at which you could expand the program in 2026, and how much of this is baked into your guidance?

Great question. This is Chris Calvert again. So I'll start with the back part we have not made any sort of uplift into our 2026 production guidance plan. So I'll put that out right now. As far as quantifying the successful results, we were excited about the pilot test we did in 2025.

We have long used surfactants throughout completions. This is something that, as the technology advances, as we continue to delineate from a subsurface perspective in the parts of the basin that we feel could be more benefited from advanced surfactants. That was kind of the basis of our pilot test in 2025. So we're excited about the early results. As we look into 2026.

Once again, no sort of uplift is baked into the production. However, I think it's a little early to speak to the enhancements or uplift other than the fact that we have noticed that it is formation specific, certain formations respond a little better, but I think that could delineate and differentiated as we move into 2026 as we test in different parts of the basin. So stay tuned. We're excited about the '26 plan. Once again, the capital is projected into the budget, but not production.

Our next question comes from the line of John Abbott of Wolfe Research.

My question is really on the Woodford. What is the strategy there? Is your position primarily held by production you're drilling your first well in the first half of this year. You have additional pipeline capacity by the end of this year. Is there further derisking in 2027? How are you thinking about that play?

Yes, John, this is Chris. I can take it again and probably pass it to Tom. We're excited about the Woodford. Obviously, our geoscience team has long looked at deeper parts of the basin. We're excited about we've delineated and have producing wells out of 23 discrete horizons in the basin.

The Woodford would be additive to that. And so we have a geoscience team who's long looked at deeper parts of the basin. And I think if you've looked at public data about some of these well results in and around the ZIP Codes in which are being reported. You'll see that there is a nice overlap to what we think is the fairway of this basin that is existing to current Matador acreage on the map. And so we look at this as as additive, and I can kick it to Tom.

John, I appreciate your question on the Woodford. This is our -- this will be our first one in the Woodford. And so I would say our primary objective is to learn as much as we can about the Woodford and all the other zones immediately adjacent to it. We'll be drilling a pilot hole and running logs. And I know Andrew Parker can speak more to some of those things.

But we do have a had a nice position over there on the eastern side of the basin where others have had some success further over into Texas in the Woodford. Clearly, we're very excited about it. And so it's something that is -- would be purely incremental to our current inventory. We have not yet awarded any inventory whatsoever to the Woodford. So it'd be a great win for Ameredev.

But I'll pass it over to Andrew Parker to speak more.

Yes. Thanks, John. Just to add on to Chris and Tom here. We've had our eye on this. We're really excited about the results in Texas, and we really like our rock in New Mexico.

We think we have a lot of running room here. Again, it's very early, but we're excited to share more about the test later in the year. But the Woodford -- it's an important part of the petroleum system in the Delaware Basin, which -- this just adds to our confidence of being in the best basin here and our confidence in our inventory across the basin as well. So we're really excited about it.

Our next question comes from the line of Scott Hanold of RBC Capital Markets.

Can you -- Matador basically built itself on the brick fabric M&A as well as organic growth. And moving forward, it looks like, I think for the industry, the growth rate is obviously coming down as well as Matador. But as you -- what do you see in terms of the way to add values for Matador going forward? And do you see a lot of M&A opportunities left to continue to consolidate?

Hi, Scott, this is Van Singleton, co-President. Thanks for your question. I think you can see from last year that our brick-by-break approach was effective as it has been for some time and 175,000 acres without doing a major transaction that was 690-or-so individual transactions. I think you can count to see us be vigilant to protect the balance sheet, but always look for good opportunities in the future. We try to keep a pipeline of deals coming in, but they need to be the right deals in the right neighborhoods.

So many of these are end units we have or adjacent to units that we have to form these longer laterals, and we're excited to see there's still opportunities out there, and we'll continue to make trades that are good for both sides. Again, just like doing the deals with EnCap, they've been good partners to work with. And we look forward to other deals like that coming up. And if some bigger deals do come up, we'll give them full evaluation and due consideration. But we need to stick to our strategy of protecting the balance sheet and putting ourselves in a position for future growth. Brian, do you want to add to that?

Yes. Hi, Scott, this is Bryan Erman, Co-President, Chief Legal Officer and Head of M&A. Just to pile on to what Van said. I think we have shown that we can grow in different ways. We did the Ameredev and advanced deals in previous years.

And then as Van said, we did 17,500 net acres and essentially replaced our inventory that we drilled last year through smaller deals. And so I think that's a differentiator for us that we can grow through the bigger deals, and we do think there will be some out there in the future to look at, but we -- in the years that those aren't there, we can grow through the brick-by-brick approach, and we really do feel like that's a differentiator for Metador.

Scott, this is Joe. And let's put a little bit of this in perspective. I started, as you know, with $270,000 in 1983. And today, we've got over $10 billion in assets. So throughout that 40-year period, the same question has been asked and asked again, do you think you can grow anymore?

Has there been so much consolidation that there are not opportunities out there. We've always been able to find opportunities, and I don't really see it much different, and that we think is -- we aim for being better, not just bigger. And in a lot of these situations by going after these areas like Woodford and they fit us very well. I'm not sure it fits a major. They need to be down there where they've got hundreds of thousands of acres and these are smaller, but they've still fit us, and we consolidated that way.

And Van and others have an active trading circle where we give up here in their area, and they give back. So those arrangements are working. And as far as the profitability goes, I think we've proven over 40 years that we've managed our money well to reinvest in the right areas. And even at old Matador, we were investing in the right areas there in developing trades. So we've been active in each of these extensions, and we've had merger opportunities, many merger opportunities.

But so far, we found -- this worked best to be as we are. We're a little unique in a lot of areas. And one thing is the collaboration with each other in the company as well as with our outside relationships, and a good example of this is working with plans as we have. And we've done some -- they might us [inaudible] some very good ways to add to production and make sure we're in the right areas and right equipment, what's on pipe, and what's still on trucking. And there's another example is that -- so [inaudible] about who's the next merger or anything.

We try to work on the efficiencies and thinks it worked out pretty well that in 43 years, we moved from one rig and part of the time and having 300,000 new assets, which at the time, caused a lot of money, but not so much today when we're drilling 3,000 feet or more and gain efficiencies there. So the business has changed, but the basics about building relationship, being in the absolute best area you can afford and working trades to consolidate things and looking for the new technology, all that that's same the same thing in sports is that it's not how big your school is, but it's often about how good your people are. I mean you look at University of Indiana hadn't had a winning season or championship since 1800s, the late 1800s, but then they win the National Championship because they got better people. And it's not that we can drive people into coming, but we do have a dedicated group of professionals who try to get better every day. And you've been to our offices often, and Scott wouldn't you agree, it's a very motivated group here that works well together and has kind of a unique culture to it.

But I ask that question of you if you respond.

And our next question comes from the line of Paul Diamond of Citi.

Just wanted to touch on D&C in '26 for a moment. You guys guided towards a midpoint of $7.95, talked a bit about cycle times, better land as development. Just wanted to get if you could parse that a little bit on how those improvements are kind of broken out amongst those groups or any other levers?

Yes. This is Chris Calvert. You kind of tailed off on the back end of the question, but I'll repeat it a little bit and then whatever I missed. So you said a little bit more commentary surrounding increased lateral lengths, reduced cycle times that led to the reduction in our D&T cost per foot to $7.95. And so I think, Paul, the first thing I would point to is, when we look at this improvement in D&C cost per foot, it is largely efficiency driven.

As we look to -- we've talked a lot about these -- this well batch that sits on our Metador acreage, it's 3.4 mile laterals. We expect to turn in line in the first part of this year. That is contributory to the 10% increase in lateral lengths. And so I think when we speak to the ability to do more with less. And I think that is a standard story that is somewhat spread across the industry being able to drill the same lateral footage or accomplish the same with fewer rig counts.

Stories like increased lateral length helped contribute to that. And so when we look at improvements in completion efficiencies, we were kind of the -- one of the first to do [Simo and Trimofrac] in the Delaware Basin. It has stayed a large part of our completion story. We've seen completion efficiency improvements of 20% year-over-year as far as completed lateral footage per day, all of which contributes to lowering your D&C cost per foot. And so when we think about cycle time improvements, that it really underpins the ability to turn in line the same net lateral footage in 2026 versus 2025.

Do it with $130 million D&C capital savings year-over-year. And then also still be able to deliver moderate production growth in the form of 2% or 3% oil -- organic oil volumes. And so I think the underpinning story to the $7.95 number is largely efficiency driven, focused on, like I said, longer laterals and reduce cycle times.

And our last question comes from the line of Philip Jungwirth of BMO.

Was hoping you could talk about the better wells for less money slide. And just what I was really interested in is, first, the forecasting of EURs and the bottom-up build here and then just second, the footnote around excluding wells drilled by Metador or Advance and whether this has been a drag on historical EURs and if Matador designed wells are demonstrating improvement across this acreage.

Philip, it's Tom Elsener, EVP for Reservoir Engineering. I'll take the first part of that one. What we're really proud of is the continued improvement in our well productivity over these years and really highlighted by our own operations and showing that how we've been able to improve our [ViO] per foot of lateral year-over-year. It's something we're really proud of. It's not something that just comes very easily.

It comes from a combination of improved targeting, improved spacing, improved completions, many of the different operational improvements that Chris has been lining out, but also from our geoscience teams finding better places to buy acreage, better places to land the wells. Combined with the approximately 25% improvement in cost per foot over these years, there are some very big improvements to the rates of returns to the quality of the inventory. And we're certainly very proud of the Emeritus acreage and the advanced acreage. And those have been great acquisitions for us. As has been mentioned on the deal front.

We've been very successful with big deals in the smaller brick-by-brick transaction. So Matador has improved its portfolio over the years through the wide range of different techniques.

If I tag on to your note, Cal, it's just that, as an example of this, of these efficiencies, it isn't just it makes the well better, but it's generated additional cash flow that we've been able to pay down our debt. And last year, for example, we paid it down by $200 million. So we were getting our leverage ratio down there to about 1, which gives you more options having that kind of balance sheet strength. And so we tie those together in our discussions that I mentioned when we collaborate what does this mean.

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.

Well, I'd just like to say if anybody else on the call doesn't feel that they got your questions answered, please give a call in to Mac, and we'll arrange a separate conference call. But we want to make ourselves available to you because we think there's a lot of good progress is being made, and we're very excited about some of these new areas that we're developing. It's just hard to always fit it in a 90-day period. But as this year goes along, I think you're going to see why we are as optimistic about the year as we have been, and hope that oil prices will stabilize and that some of the disruptions will be settled over time. And the economy will remain strong.

But I give much credit to this team has continued to grow and work that much better together and reiterate our invitation become seeing and meet the people in person that that have a direct effect on the value of the company and then meet some of the younger people because I think they have done a very impressive job. With that, I want to be sure and give a shout out to Glenn Stetson, Glenn, and then called on the say much, but he's watched over both the production and the midstream and kept both of them running even in bad weather and other times. And so Glenn, if you want to say anything, please do so now. And if you want me to ask you a question first to give you a structure to do that. But you're watching over those two very important areas have got work together, the production and the midstream.

Yes. Thank you, Joe. This is Glenn Gtetson, EVP of Production, I think Tom and Chris both gave examples of of things that we're doing on the efficiency side. I would like to provide an example of where both Matador, San Mateo, and on the completion side, the production side and the midstream companies that work together to achieve some of those efficiencies and one of them is on the produced water side using hydraulic -- using produced water for hydraulic fracturing operations. In 2025, 72% of the water that we used was was produced water, and that has the benefit of both reducing our CapEx per foot, but also reducing our lease operating expenses, and we couldn't achieve those results without the help of San Mateo and Matador's midstream -- wholly owned midstream properties or assets.

And so I just wanted that just another area of where we are working together to help on all fronts.

And trying to help the flow assurance, the importance of flow assurance into perspective, is if you're going to -- as I often heard, some of you've heard me say, if you're going to be a cotton farmer in Dawson County, Texas, you better own -- also try to own part of the cotton chain because you got to genuine cotton before it hits the market. And it's the same thing. After we produce the gas, it's got to be collective midstream entity and then take in the market. So we started in on that view when we went public, when first Matador public back in 2012 that it was important over the long run that have an interest in the midstream to be sure you have flow assurance. And that's delivered a lot of benefit to us through time.

Now we're not cotton farmers, but I believe it's an apt analogy.

Marvin, with that, that concludes our closing remarks. Thank you.

Ladies and gentlemen, thank you for participating today. This concludes today's program.