Executive Summary / Key Takeaways

• Integrated Model Drives Record Performance: Matador Resources (MTDR) achieved record production in Q3 2025, with 209,184 BOE per day, a 22% year-over-year increase, underpinned by its integrated upstream and midstream operations and a relentless focus on operational efficiencies.
• Technological Edge and Cost Leadership: The company's advanced drilling and completion technologies, including SimulFrac, TrimulFrac, and remote frac operations, have driven significant cost reductions, lowering D&C costs to $835-$855 per lateral foot and boosting completion efficiency by 20% in 2025.
• Robust Financial Health and Shareholder Returns: Matador reported over $3 billion in retained earnings for the first time, boasts a strong balance sheet with a debt-to-EBITDA ratio under 1.0x, and increased its quarterly dividend by 20% to $0.38 per share, marking the seventh increase in four years.
• Strategic Growth and Inventory Depth: With a 10-15 year inventory of high-return drilling locations, including promising Ameredev assets, Matador projects 2-5% organic oil production growth in 2026, supported by capital-efficient operations and strategic land acquisitions.
• Midstream as a Stabilizing Force: The fee-based San Mateo Midstream segment continues to be a "quiet growth engine," providing crucial flow assurance, achieving record natural gas processing volumes of 533 MMcf/day, and contributing stable EBITDA, which helps mitigate commodity price volatility.

A Foundation of Profitable Growth

Matador Resources Company, an independent energy producer with a forty-year history, has consistently pursued a strategy of "profitable growth at a measured pace." Founded in 1983, the company has evolved from modest beginnings to a significant player in the U.S. energy landscape, primarily focused on the oil and liquids-rich Wolfcamp and Bone Spring plays in the Delaware Basin of Southeast New Mexico and West Texas. Matador also maintains operations in the Haynesville shale and Cotton Valley plays in Northwest Louisiana. The company's journey, including its public listing in 2012, has been marked by strategic acquisitions and a deep commitment to operational excellence.

The energy industry is currently experiencing dynamic shifts, driven by factors such as commodity price volatility and the increasing demand for reliable power, particularly from AI-driven data centers. This environment underscores the importance of operational efficiency and strategic positioning. Matador's integrated business model, encompassing both exploration and production (E&P) and midstream operations, provides a distinct advantage in this landscape.

Competitive Edge Through Integration and Technology

Matador's competitive standing is significantly bolstered by its integrated midstream operations and its regional expertise. While larger E&P companies like EOG Resources (EOG), Devon Energy (DVN), ConocoPhillips (COP), and Occidental Petroleum (OXY) operate in similar basins, Matador's approach to vertical integration provides a crucial edge. Its San Mateo Midstream joint venture, which generated $72.3 million in operating income for the three months ended September 30, 2025, and $210.0 million for the nine months ended September 30, 2025, offers essential natural gas processing, oil transportation, and water management services. This fee-based business model provides stable revenue streams, reducing reliance on third-party services and enhancing overall operational control and margins. This integration proved invaluable during events like Storm Uri, where Matador's facilities remained operational while many competitors faced shutdowns, demonstrating superior reliability.

Matador's technological differentiation is a cornerstone of its operational efficiency and cost leadership. The company leverages advanced drilling and completion techniques, including SimulFrac, TrimulFrac, and remote frac operations. These innovations have significantly reduced cycle times and overall costs. For instance, the successful integration of these processes increased Matador's overall completion efficiency in 2025 by 20% compared to 2024. The company has revised its 2025 drilling and completion (D&C) cost guidance down to a midpoint of $8.44 per completed lateral foot, from an initial $8.80, translating to $50 million to $60 million in capital savings based on 1.2 million net lateral feet. This cost reduction is driven by factors such as fewer drilling days on wells and the expanded use of these advanced fracturing techniques.

Further enhancing its operational moat, Matador utilizes its MAXCOM operations center for real-time monitoring of drilling activity, contributing to efficiency gains. The company's commitment to environmental stewardship also aligns with its cost-saving initiatives, particularly through the recycling of produced water for hydraulic fracturing operations. This practice reduces lease operating expenses and capital spend on the frac side, while minimizing the use of fresh water. These technological advancements and operational efficiencies position Matador as a leading innovator in the Delaware Basin, enabling it to achieve high operating margins and sustain competitive production costs.

Financial Strength and Strategic Capital Allocation

Matador's financial performance in the third quarter of 2025 and the nine months ended September 30, 2025, reflects its disciplined strategy. Total revenues for Q3 2025 reached $939.0 million, a 5% increase year-over-year, driven by higher oil and natural gas production. For the nine months ended September 30, 2025, oil and natural gas revenues grew by 13% to $2.54 billion, primarily due to a 27% increase in oil production and a 29% increase in natural gas production, despite a 14% decrease in realized oil prices. Third-party midstream services revenues also saw a 15% increase to $119.3 million for the nine-month period.

The company reported net income attributable to Matador shareholders of $176.4 million, or $1.42 per diluted common share, for Q3 2025. Adjusted EBITDA for the quarter was $566.5 million, contributing to adjusted free cash flow of $93 million. Over the first nine months of 2025, Matador generated $1.95 billion in net cash provided by operating activities, an increase of $278.6 million from the prior year.

This robust cash flow generation has enabled significant debt reduction, with $311 million repaid under its revolving credit facility during the first nine months of 2025, bringing total borrowings to $285 million as of September 30, 2025.

Matador maintains a strong balance sheet with a debt-to-EBITDA leverage ratio under 1.0x and approximately $2 billion in available liquidity.

Matador's commitment to shareholder returns is evident in its dividend policy. On October 15, 2025, the Board of Directors approved a 20% increase in the quarterly cash dividend to $0.38 per share, or $1.50 annually, marking the seventh increase in four years. This increased dividend represents an annualized yield of approximately 3.5%. Additionally, the company authorized a $400 million share repurchase program in April 2025, repurchasing 1.23 million shares for $50.7 million during the first nine months of 2025. Management emphasizes that these actions are supported by strong liquidity, free cash flow generation, and a positive outlook.

Outlook and Growth Trajectory

Matador's forward-looking strategy is characterized by disciplined capital allocation and a focus on high-return projects. The company increased its estimated drilling, completing, and equipping (DCE) capital expenditures for 2025 to a range of $1.47 billion to $1.55 billion. Estimated midstream capital expenditures for 2025 were adjusted to a range of $155 million to $175 million, including costs for the Marlan Processing Plant Expansion, which came online in Q2 2025.

For 2026, Matador anticipates an organic increase in production to approximately 210,000 BOE per day, with expected oil production growth of 2% to 5% from 2025. This growth is expected to be achieved with an 8% to 12% lower total capital expenditure compared to 2025, for approximately the same amount of lateral footage, signaling further capital efficiency improvements. The company expects lateral lengths to increase by approximately 10% in 2026, which should support equal or improved volume per foot.

The Ameredev acquisition, completed in September 2024, has been integrated ahead of schedule and is performing better than expected, contributing significantly to production and providing high-quality drilling inventory, particularly in the Antelope Ridge area. Matador maintains a robust inventory of 10-15 years of drilling locations with expected rates of return exceeding 50%. The company also holds substantial gas reserves in the Delaware Basin (over 1.4 Tcf) and a "significant gas bank" in the Cotton Valley with 200-300 Bcf of gas opportunities, offering future flexibility if gas prices stabilize.

Risks and Considerations

Despite a strong operational and financial position, Matador faces inherent risks within the energy sector. Commodity price volatility remains a significant concern, directly impacting revenues, profitability, and cash flows. While Matador employs derivative financial instruments to mitigate price risk and its fee-based midstream business provides some stability, sustained low prices could affect economic production levels and compliance with financial covenants.

Operational challenges, such as pipeline-related interruptions and inflation in service costs (e.g., diesel, steel, labor), could impact profitability and delay operations. The company has demonstrated resilience by curtailing wells during periods of negative Waha gas pricing to mitigate losses. Regulatory changes, including potential future bans on new exploration licenses, also pose long-term risks, as Matador's business model relies on exploration and acquisitions. However, the company's flexibility to adjust capital expenditures and its deep inventory of drilling locations provide a buffer against these challenges.

Conclusion

Matador Resources Company stands as a compelling investment case, distinguished by its integrated operational model, technological prowess, and disciplined financial management. The company's "profitable growth at a measured pace" strategy has consistently delivered strong results, culminating in record production and significant retained earnings. Its proprietary drilling and completion technologies, such as SimulFrac and TrimulFrac, coupled with a focus on cost efficiency, provide a tangible competitive advantage in the highly competitive Delaware Basin. This technological leadership translates directly into lower well costs and higher returns, underpinning its robust inventory of high-quality drilling locations.

Looking ahead, Matador's outlook for continued organic growth in production, coupled with declining capital expenditures in 2026, underscores its commitment to capital efficiency and shareholder value. The integrated midstream segment, with its reliable, fee-based revenue streams, acts as a crucial stabilizer against commodity price fluctuations, a differentiator from many pure-play E&P peers. While commodity price volatility and regulatory shifts present ongoing challenges, Matador's strong balance sheet, strategic flexibility, and proven ability to execute in diverse market conditions position it favorably for sustained long-term value creation.