Matador Resources Company
Q4 2014 Earnings Call Transcript

Published: 3 Mar 2015

[Operator:]

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. At this time, all participants are in listen-only mode. We will facilitate a question-and-answer session at the end of the company’s remarks. 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 maybe 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.

[Joe Foran:]

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 and Chief Operating Officer and Chief Financial Officer; Craig Adams, Executive Vice President, Land and Legal; Ryan London, Executive Vice President and General Manager; Brad Robinson, Vice President, Reservoir Engineering and Chief Technology Officer; Van Singleton, Executive Vice President, 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 are still friends even after negotiating and completing the acquisition, and we feel we are even better friends now, but he is 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 close 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 prospecting for the Bone Spring and the Wolfcamp. In addition, it includes the expertise and deep experience of another 29 professionals from the HEYCO office in Roswell and we are been delighted to have those merger. The integration of operations has begun. Third, we’ve continue 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 in the Wolf area, the two Barnett wells look to be excellent wells, each with 24-hour IP test of approximately 1,300 to 1,400 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:]

[Operator Instructions] Our first question comes from Ben Wyatt with Stephens. Please proceed.

[Ben Wyatt:]

Hi. Good morning, guys.

[Joe Foran:]

Hi, Ben.

[Matt Hairford:]

Hi. Good morning, Ben.

[David Lancaster:]

Hi, Ben.

[Ben Wyatt:]

Hi. Quick question, you guys are -- on the Delaware here, but you guys are really starting to see a 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's split looks like today and maybe where it’s heading by the end of ’15?

[Joe Foran:]

All right. Ben, I am going to call up on David Lancaster, who has been actually doing a lot of that. David? And maybe a follow-up from Brad.

[David Lancaster:]

Yeah, sure. Hi Ben. It’s David. As far as -- I mean, you’re certainly right. Our Permian production has grown quite a bit over the past year, really about ten-fold. 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 and that will only have increased now in 2015 with these two new Barnett wells that we brought on. If my memory is correct, there have been, 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 by the time we get to 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.

[Ben Wyatt:]

Very good. That’s perfect, David. Appreciate it. And then maybe just a little bit on -- you alluded to, Joe, in your prepared remarks but the engineered locations you guys have in the Permian, it’s 960 now. We know that does not include HEYCO. What is that? Does that assume some of 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?

[Joe Foran:]

Yes, Ben. It could -- 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?

[Ryan London:]

Hi Ben. Yeah, we do have some 80-acre locations in the inventory. The different diagrams that we gave on Analyst Day really shows what -- how we’re breaking out all of those wells into different horizons. In the Wolfcamp, in Wolf area, we do have 80-acre locations in the XY and down in the Wolfcamp A. In the Rustler Breaks area, we do have -- we are a little bit reluctant to say that 80-acre 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 test these different horizons, I think that we’re going to find that we do find some 80-acre locations in some of these Wolfcamp benches. In the Ranger area and pretty much throughout the basin and all the different Bone Springs, we're looking at 160-acre spacing. The HEYCO properties, when we actually are able to absorb all those into our database in 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?

[Ben Wyatt:]

Yeah. That’s perfect, Ryan. I appreciate it. You guys have done a good job. I’ll hop back in.

[Joe Foran:]

All right. Thanks Ben.

[Operator:]

Our next question comes from Neal Dingmann with SunTrust. Please proceed.

[Neal Dingmann:]

Good morning guys. Nice and new wells, Joe. Joe, just a -- maybe little more color on, you guys talk about you’re going to continue remarkable performance to see how this works. I guess, could you just talk a little bit about, if you're able to do that staggered, sort of, what you guys call that W-type pattern on 80 acres, will that be that entire area down by Wolf and Loving or how will you attack that Joe?

[Joe Foran:]

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

[Ryan London:]

Hi, Neal. Yeah. The W-type pattern is kind of in its blustering state right now. As we move through the year, we hope to really refine what our alternate plans are going to be. Based on the two Barnett Wells, we do believe that any wells spaced at 80-acre spacing in X/Y is probably going to benefit from the W-pattern. So in X, we’ll be offset by 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 microseismic on the Barnett pair, they gave us a lot of information to look at and how we’re going to go forward with that. We hope to have a third Bone Spring in 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 uphold 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.

[Neal Dingmann:]

So -- 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. Would you go after all five different sands and/or -- I guess, that was kind of my second or larger question around, not just this W-pattern but it sounds like you’ll have A, you’ll have second, third Bone Springs plus you have these new sands. And is it is even more than that potential there?

[Ryan London:]

This potential Wolfcamp below are Wolfcamp A. We don’t have any plans to test that this year. We're looking at specifically, Neal, for this pattern is the interaction between the third Bone Spring, 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're 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 or other formations.

[Neal Dingmann:]

And lastly, would you test this up in northern areas? I mean, something is far northern, Twin Lakes or is this just something that you think is more prevalent down southern?

[Ryan London:]

I think it’s potential everywhere, Neal. We’re 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've drilled at Rustler Breaks. Of course, we’ve completed the first well about a year ago in the Wolfcamp B. We’ve drilled two more wells subsequent to that, one in the Wolfcamp X which is a stratigraphic equivalent to what we see down in the Wolf area. And then another well in the Wolfcamp B, which was the 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 these different horizons. So 2016, we can move into a development pattern.

[Neal Dingmann:]

Well, that’s rationality. Thanks Ryan.

[Ryan London:]

No problem. Thanks Neal.

[Operator:]

Our next question comes from Scott Hanold with RBC Capital Markets. Please proceed.

[Scott Hanold:]

Thanks. Good morning guys.

[Joe Foran:]

Hey Scott.

[Scott Hanold:]

And just kind of staying on the line of just, potential of growing the Permian Basin and just could you, just maybe provide a little bit of color more specifically, those two Barnett wells that you’ll drilled. And when you step back and look at the inventory of 960 wells that you’ll talked about on your Analyst Day, does -- do you sense that the results confirm -- better confirm they are potential down specifically in the Wolf area or does that that lend you to -- there is additional upside optional that from what you’re seeing initially?

[Ryan London:]

Hi Scott. Ryan again. I would be reluctant to say it confirms anything we’re very calm. We’re 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 is to be a little but conservative. But I think we’re all very encouraged by the outcomes right now.

[Scott Hanold:]

Yes. 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 that -- those specific formations at that spacing within the Wolf area?

[Ryan London:]

Absolutely, that’s what we will be looking at. We will be looking at the cumulative production over time of these wells compared with the more, less infinite spaced wells. We’ll look at the pressure decline over time. There is several different tools we will be using to evaluate these. And right now everything looks like there are completely independent of one another. When we frac 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.

[Scott Hanold:]

Okay. I appreciate it.

[Brad Robinson:]

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

[Scott Hanold:]

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 the 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?

[Joe Foran:]

Yes. I want to touch one point back on the Wolf is the same thing. We're very encouraged by the data. Scott, you know how we are, we don't want to claim victory till 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 they are going to solve and talk more about raising the recovery estimates and we are having -- the outperformance is clearly been pleasing to us and the development of these other zones so. But yet we need 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, the JVs are going to be close to being 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 1,500 acres. It's in the 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 rev and trying to force less through, getting it close to 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?

[George Yates:]

Joe, that's your explanation of it’s exactly correct. But Scott, what I would -- what I'd also say is that we expect to close the JVs by mid-month. 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, running right down to the 12 hours 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.

[Scott Hanold:]

Okay. I appreciate that, guys. Thanks.

[Operator:]

Our next question comes from Irene Haas with Wunderlich Securities. Please proceed.

[Irene Haas:]

Yeah. Hey. 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 little color as to sequencing, where you would drill first and all that, now that the HEYCO deal is closed, sort of where you will start and where you will end up for 2015?

[Ryan London:]

Hi, Irene. It’s Ryan, again. The one rig up in the 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 will 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 this on the schedule as soon as possible. Now that the deal is closed, we're looking at all the different leases. There is several that already have permits in the federal acreage and we would certainly want to get those on the schedule. It will probably be summer before we actually get any of these wells integrated into discussions 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 are right in the middle of this, the stable Third Bone Spring FAIRWAY. And our highest ranking geologist, Dan Block is standing next to me. Dan, you want to say anything about what we want to do for the year?

[Dan Block:]

I’m very excited to close this deal and really sync our teeth into the HEYCO acreage. We have our ideas of where there are some sweet spots, locations to build 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, a target rate.

[David Lancaster:]

Yeah, Irene. This is David. I would also mention that [Technical Difficulty] replay number of non-operational opportunities for anticipated well on that acreage too that we are continuing to respond to and participate in. So there is going to be quite a bit of activity even before we actually get out there and drill our first operated well on that acreage.

[Joe Foran:]

And David, we are -- as Dave pointed out, we are really pleased with these non-operated wells. They are being proposed and we participated. And the other thing I want to mention, David Nicklin who is our Head of Explorations is not with us today and I want to give a shout out to him. He’s mother been in [Technical Difficulty] and he is taking care of her. But we are thinking of him and her and hoping that he will get back soon and that she will get better.

[Matt Hairford:]

Irena, I will just add one thing. I mentioned that the New Mexico rig has the 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 on 160-acre spacing there that way. As we move forward, we will feel confident 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.

[Irene Haas:]

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

[Ryan London:]

Yeah. I mean, 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’re executing upon. And I think, year and a half or about a year and a half to two years with as much acreages we have in the north -- in the New Mexico areas, what its 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 is so many we have to test.

[Joe Foran:]

Yeah. Irene, I’d like to add Matt Hairford and I, I think, both feel the same way is that what we try to do is grow at a major pace. And we don't want to drill this too fast because then you miss out on what you learn from the data, that’s what we did in the Eagle Ford, if you remember, we were fairly liberate. And want to get the data, because again on these zones it may be able to be frac better by doing the W pattern or some like that. We want to be sure we’re not doing things that we would either later regret or not doing things we wish we would have done, because we learned about them long after we drill them. So, with that tension between going that at 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.

[Matt Hairford:]

Yeah, Joe. Irene, this is Matt. I just want to trying to underscore, Joe saying there. I mean, it is very important for us historically and always to get things right. So we want to get things right. And particularly, in this current environment, it gives us a lot of opportunities to really find tune things. 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 do 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.

[Irene Haas:]

That’s great. Thank you very much.

[Joe Foran:]

Good question, Irene.

[Operator:]

Our next question comes from David Amoss with Iberia Capital Markets. Please proceed.

[David Amoss:]

Hey. Good morning, guys.

[Joe Foran:]

Good morning, David.

[Matt Hairford:]

Good morning, David.

[David Amoss:]

I just wanted to ask again on Rustler Breaks, 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 if this is successful result? Can you just talk about the sequence from there? It looks like in your analyst presentation, you kind of spaced about 1,320-feet apart from the lateral collateral basis? So how do you test there or what’s the sequence of testing tighter spacing and testing that X/Y concept that you're having success with the Wolf right now?

[Ryan London:]

Hi, David. It’s Ryan again. We’ll start with the one well. We will -- it’s been drilled. We are completed. 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 have delineated than we will go under spacing. It will be very reminiscent of what we’ve done 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 down spacing 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’re not going to get in hurry in any one horizon in any one area.

[David Amoss:]

Fair enough. And then just on the cost side, any update since the Analyst Day. I mean, 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?

[Matt Hairford:]

Yeah. David, this is Matt. And the adjustments -- the cost adjustments we’re seeing are continuing to improve. We were talking 15% to 20%, now we’re talking more 30% to 35%. And 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 50% adjustment. So they are -- you kind of characterize it right there. They’re moving around a bit right now.

[David Amoss:]

Matt, any dramatic difference in geography to that 30% to 35% you’re saying as kind of a leading edge? Is that more aggressive in certain areas versus others or is that kind of across the Board?

[Matt Hairford:]

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

[David Amoss:]

That’s really helpful. Thanks, guys. Really appreciate it.

[Joe Foran:]

Thanks, David. Good questions.

[Operator:]

Our next question comes from Blake Donovan with Stifel. Please proceed.

[Blake Donovan:]

Good morning. Thanks for taking my questions.

[Joe Foran:]

Hi, Blake.

[Matt Hairford:]

Hi, Blake.

[Blake Donovan:]

At the Analyst Day you mentioned that when you practice second Norton Schaub well, you saw communication increase production from the first Norton Schaub drilled in the X/Y sand. Do you still see any communication? Would you mind giving us an update on that please?

[Ryan London:]

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 proper interference testing yet, but the original Norton Schaub well has stayed higher since the frac. It has not -- it does not appear to be plus production. It looks like its 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.

[Blake Donovan:]

Okay.

[Matt Hairford:]

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

[Blake Donovan:]

All right. Thanks. And then looking toward full development mode in the Wolf area? How do your acre spacing assumptions in the X/Y sand cooperate with those in the Wolfcamp A? Do you guys considering 80-acre in Wolfcamp A and you see any potential for stacked and staggered there or at this time is it more just a linear drill plan?

[Matt Hairford:]

Well, 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 more of a shale component through than the X/Y and so we’re very excited that 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 Y stacked in the same location as the Wolfcamp A and 80-acre spacing for the A and 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 worth a thousand words so.

[Joe Foran:]

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

[Blake Donovan:]

Great. That sounds good. I will leave with that. Thanks guys and congrats.

[Joe Foran:]

All right. Thanks, Blake.

[Matt Hairford:]

Thanks, Blake.

[Operator:]

Our next question comes from Brian Corales with Howard Weil. Please proceed.

[Brian Corales:]

Good morning, guys.

[Joe Foran:]

Hey, Brian.

[Matt Hairford:]

Hi, Brian.

[Brian Corales:]

On the Midstream side, I know you spend 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?

[Joe Foran:]

Well, Brian, it -- I’ll try to give you an update, but it’s been hitting financials for some time. We -- this has been emerging. We first started in the Haynesville. They didn’t like. A couple of months ago we decide to have at Midstream. We started building the Midstream first, when we were active in the Cotton Valley, in the Haynesville and we built some Midstream assets there. We continue 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 developed some expertise. Gregg Krug had joined us and had some good ideas. And then Matt Spicer came and joined us. And between the two of them, I think they have done a very excellent job of building on the foundation that we had in the Haynesville in the South Texas to really make impact here in, first in the Wolf area. But it’s going to go into the other areas where processing make 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 the JT units. And we’re going to build on that to a cryogenic unit. And just do it as we have done many times. As Matt, like he says, we wanted it done right. So we’ve move deliberately and on step-by-step basis. Gregg, what did I leave out there?

[Gregg Krug:]

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

[Joe Foran:]

And Brian, if you may remember from the Analyst Day, we had the ramp up in our Midstream. And it’s pretty well balanced between processing salt water 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 salt water disposal, but if I didn't that shown a lot of promise on the Wolf. And that we’re optimistic that we can secure some third-party contracts as well. So that we can save ourselves some money but also help others in -- make a service, it's a win-win situation. Matt, do you want to add anything to that, Matt Spicer.

[Matt Spicer:]

Just to say -- yeah, this is Matt Spicer. It makes sense when you go in a development mode to get these facilities. And like Joe had mentioned, we have these facilities everywhere but now that we’re kind of in development mode in the Wolf, it makes sense to expand into the Baker facility.

[Joe Foran:]

Brian, one last statement is that as you know when we took Matador, probably 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 they have met with us. It help the guide us on this much in the same way that we've had E&P people on the full board. And these man with the expertise are from companies you had recognized, public companies, have been helping guide this and provide that strategic pressure test whatever, that we’re on the -- we're taking the right steps. So their presence to special advisers may step up as the Midstream grows. Matt Hairford?

[Matt Hairford:]

Yeah. 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 this salt water disposed well up and running. We’re disposing about 10,000 barrels a day out there. Joe mentioned we got the JT units. So we’re processing oil and gas at the -- on the Wolf acreage presently and looking to improve that process by building its cryo plan. So there's a room for expansion in both those efforts. With the salt water disposal, we can drill additional wells. It will dispose from the existing surface facility. So we can add to that. And the cryo plan is modular, so once we get filled up, we can -- if we choose to add another train to that and build it up as well.

[Brian Corales:]

Guys, that was very helpful. Thank you. And one another questions, I think you are 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?

[David Lancaster:]

Yeah. 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, little bit higher than that on a few days. And it is 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 there in the central area, some of the [indiscernible] wells, while we frac this eight wells which had broken. So, our March production is down -- is going to be down a little bit from that. But we were in the 75 million to 80 million range in early February.

[Brian Corales:]

Okay. Thanks guys.

[Joe Foran:]

Thanks Brian.

[Operator:]

[Operator Instructions] Our next question comes from Richard Tullis with Capital One Securities. Please proceed.

[Richard Tullis:]

Thank you. Good morning, everyone. 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? Is there opportunity to pick up more acreage in the Wolf area where you are having a lot of success? And how do you look at say, even the Midland Basin side of the Permian?

[Joe Foran:]

Well, Richard, there's always opportunities to acquire, has been my experience. You just want to do on the right terms, at the right time in the right areas. So, we look at that on a -- we are constantly looking at such opportunities to make sure they are right fit into right time. Times when prices are low, there is 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 lot of opportunities, you just don't want to be somebody else's opportunities. So, we really try to work on that and do deals that make sense for everyone. And during the times like this, there are more opportunities for the farm-outs, the carries. Prices, I think are becoming more reasonable, not that they evolve. They are not cut in half like oil prices necessarily, some are, some aren’t. It just widely varies but you just have to be more careful in times like this. So acquisitions are still on the horizon. Van is outlooking for on an everyday basis. But right now, our first order of business is absorbing the HEYCO assets, putting those assets to use and making sure that’s right before we just take on other acreage. And we got to make the HEYCO acreage more productive and get that going really before. I think we will be as aggressive about acquiring anything else. Van, is that correct?

[Van Singleton:]

I think that’s right, Joe. I just wanted to emphasize that we are seeing opportunities across the basin. But we’re maintaining a very focused approach to try to add to the core areas that we’ve developed so far.

[Richard Tullis:]

Go ahead. Sorry about that.

[Van Singleton:]

Yeah. Just, there are still opportunities more to come on that later.

[Richard Tullis:]

Okay. That’s helpful. Thank you. And then, just lastly, a quick question on, this latest Barnett well targeting X sand compared to the earlier well, there are no well in Loving? So this one higher IP 24-hour rate, a much higher oil component in the initial rate. How did you drill this one differently? Where did you see that was different in this Barnett well?

[Ryan London:]

Yeah. We have -- 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 on line this weekend. So there is still kind of cleaning up. They actually may improve a little bit. The gas oil ratio and the water, the water component make 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 is 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.

[Richard Tullis:]

Okay. Well, thanks so much. I appreciate it.

[Ryan London:]

Yeah.

[Joe Foran:]

Thanks, Richard.

[Operator:]

Our next question comes from Jeff Grampp with Northland Capital Markets. Please proceed.

[Jeff Grampp:]

Good morning, guys. Thanks for taking my questions.

[Joe Foran:]

Hi, Jeff.

[Matt Hairford:]

Hi, Jeff.

[Jeff Grampp:]

I want to talk about the Barnett well a little bit more. It looks like you guys put a little bit different completion recipe between the two in terms of fluid and profit and frac stages. So maybe just wanted to get your guys thought on maybe what you are trying to do there. Is that different between the X and the Y or just kind of your thoughts on the different completion there?

[Ryan London:]

Hi, Jeff. It’s Ryan again. The -- really the only, the design for the completions were the sand going into the wells. If you remember, we did perform microseismic on these wells and as we were fracking the Y well, we did modify the design slightly to see if the fracs were going to communicate across the boundaries of the stages. We did -- so changed up the heal half the lateral little bit as we moved on and it appears as though the wells are turning out very similar. Once again, it’s going to take several months of production to see if there is any real meaningful change in the production from the wells based on the frac change halfway through the frac.

[Matt Hairford:]

Jeff, this is Matt, again, and I just kind of want to add to what Ryan saying there, it’s a yet another opportunity for us to valuate our completion design. We have 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 A. And this is kind of a little bit of a change where we’ve linked to that stage a bit and change that just a bit on part of the frac. So should give us some good results?

[Ryan London:]

Yeah, Jeff. It was interesting as we were performing the microseismic, we would all had left up after each day. We had an engineer on locations and he would check in with quite a few of us. And we would huddle up and we would look at things. And about halfway through, actually probably about two thirds of the way through the frac, we're noticing that there were 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 then in some months of production data before we can actually make any permanent changes to the frac design.

[Jeff Grampp:]

Got it. Yeah. That’s great color. And then just kind of looking at unit LOE going forward, I know you guys had brought on a lot of Haynesville production lately. So just kind of wondering, what kind of trend you guys are thinking LOE takes in ‘15. Should we expect maybe a big move down in 1Q or maybe a slower ramp throughout the year going down relevant -- relating to the guidance that you guys have?

[David Lancaster:]

Hi Jeff. It’s David. We are -- I think as we discussed at Analyst Day, we’ve certainly set a goal for ourselves to reduce the LOE over the course of the year. And we modeled, I believe, 7.25 for the year. And I actually have that modeled -- we have it modeled just 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 am also looking forward to seeing those numbers. The other thing I think will be impactful to that is just the service cost reductions that we’re seeing. And I think we’ll see some impact to that on both the -- not on CapEx side, where it will be the most significant but also on the LOE side. So we’re tracking that pretty closely. But I guess, specifically to your question, we’ve kind of guided modeling, moving down through the course of the year.

[Jeff Grampp:]

Yeah.

[David Lancaster:]

Matt and I both spoke up at the same time. One other thing that I would -- I would like to emphasize is that when you cut the LOE cost, you have a pretty nice uplift in the fact in your commodity price, $3 to $5. Also as I think it's important to note that our all-in unit of production cost for 2014 was $43 and guided in the senior staff and all of the staff -- all of the staff, it really been looking for ways to not back down, some from there with these adjustments to service cost and the like. And we think we're 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 adjust 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?

[Matt Hairford:]

Yeah. Jeff, this is Matt. I just wanted to kind of build on what David was saying little bit on how we are going to achieve these cost reductions and infinitive service pricing and other things. But another think to think about is comparable to what we did in Eagle Ford where we drilled our delineation wells and it came back and drilled development wells, we achieved a lot of efficiencies there. And a good example is the Wolf acreage. We’ve got a central tank battery there that will produce these wells into. So the more BOS that that you add to this equation and you spend less money getting them out of the ground, that does improve the LOE as well.

[Jeff Grampp:]

Great. Thanks for the color, guys. Great results.

[Matt Hairford:]

Thanks, Jeff.

[Operator:]

We now have a follow-up question from Ben Wyatt with Stephens. Please proceed.

[Ben Wyatt:]

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

[Joe Foran:]

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 met with them, they have been really encouraging. And I’d like to give a shout out to these banks led by RBC, Bank of Montreal and SunTrust and Comerica, Scotia. They've all -- it's been a great bank group and they’ve really worked with this and they’ve really helped us along and so we want that to continue. The production we have had, they are pleased to see. SunTrust is also a member that has been helpful. They have been pleased to see that the volume. Our outside consultants have been all confirmed and the outperformance has been very helpful. And further reductions in LOE and alike will help mitigate any lower price. So, I would say so far so good, Ben.

[Ben Wyatt:]

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

[Joe Foran:]

Hey, thanks Ben.

[Operator:]

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

[Joe Foran:]

All right. Thanks very much, Denise. And thank you all very much for listening. There is two other points I would like to end the call with. One is again, I’d like to emphasis 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 geologist 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, they’ve got to keep improving their fracs to get better recoveries. And then you have your production group which we really hadn’t met -- mentioned. They’ve done a great job on their gas lift and have really paid attention. And for example, you didn’t hear us complaint about the weather. They have 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 nickel and dimes and that adds up overtime too. And our accounting people have been good about collecting the money. And so we really appreciate all these little things that they’ve done. And that’s why we feel Matador is more about is emphasizing the execution and you can hear the efforts we make to mitigate expenses and increase efficiencies. The last thing is that although we feel, we 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 where we’re operating. But we still feel our best years are ahead of us as we continue to get our act together and with the jointer of HEYCO, who was one of the 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 analyst 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 little more complex. Well, not little more, they are more complex but it gives you more opportunities for these design fracs and the use of the techniques like microseismic, study of the core. A lot of what our guys like to do to -- 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.

[George Yates:]

Well, I guess my final word would go back to the opportunity that I see in the Northern Delaware basin. We had some conversations -- call about those opportunities, about engineered locations. I’m really excited, 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’re not talking about those 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 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.

[Joe Foran:]

The thing I would 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 his right and his election to take additional stock about $12 million -- $4 million in additional stock instead in lieu of cash, which we take as an affirmation of the deal. And 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 like it and George seems to feel similarly. So we’re off to good start. We’re not through. We have the two JVs to close, probably about the middle of the month.

[George Yates:]

Yeah. All right.

[Joe Foran:]

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.

[Operator:]

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