Good morning, ladies and gentlemen. Welcome to the first quarter 2019 Matador Resources Company earnings conference call. My name is Dlim, and I'll be serving as the operator for today. At this time, all participants are on a listen-only mode. We will facilitate a question-and-answer session at the end of the company's remarks. As a reminder, this call is being recorded for replay purposes, and the replay will be available on the company's website through May 31st, 2019, as discussed in the company's earnings press release issued yesterday. I will now turn the call over to Mr. Mac Schmitz, Capital Markets Coordinator for Matador. Mr. Schmitz, you may proceed.
Thanks, Dlim. Good morning, everyone, and thank you for joining us for Matador's first quarter 2019 earnings conference call. Some of the presenters today will reference certain non-GAAP financial measures regularly used by Matador Resources in measuring the company's financial performance. Reconciliations of such non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP are contained 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.
Finally, in addition to our earnings press release, I would like to remind everyone that you can find a short slide presentation summarizing the highlights of our first quarter 2019 earnings release and a capital efficiency report on our website on the Events and Presentations page under the Investors tab. I would now like to turn the call over to Mr. Joe Foran, our Chairman and CEO. Joe?
Thank you, Mac, and good morning to everyone on the line, and thank you for participating in today's call. We appreciate your time and interest in Matador very much, and we especially appreciate the kind words that a number of you have had for us and compliments, and we invite each of you to come see us in Dallas and meet the staffers, especially many of our young professionals who are making increasing contributions to the good reports like today. Now, I'd like to introduce the executive committee who is joining me this morning, along with other members of the management team and senior staff who are standing by for all your questions.
They are Matt Hairford, President, David Lancaster, Executive Vice President and Chief Financial Officer, Craig Adams, Executive Vice President and Chief Operating Officer of Land, Legal, and Administration, Billy Goodwin, Executive Vice President and Chief Operating Officer of Drilling, Completions, and Production, Van Singleton, Executive Vice President of Land, Brad Robinson, Executive Vice President, Reservoir Engineering and Chief Technology Officer, and Gregg Krug, Executive Vice President, Marketing and Midstream Strategy. As outlined in our earnings release issued yesterday, 2019 is off to a record start. We had many financial and operational achievements, and I want to take a moment and again personally acknowledge the Matador staff for all their hard work and dedication, not just the ones in the office, but also our field staff who have really made efforts to improve our capital efficiencies in the field.
Just great work and a total team effort, which leads me to three things I'd like to point out before getting into questions. One is, if I hadn't emphasized it enough already, that the teams are working, and it's contributions from every phase of our business that is making this work as well as it is, and I really do appreciate their efforts as Matador has grown from 1.1 million barrels at the time we went public, of barrels of oil approved reserves, to over 100 million barrels of oil approved reserves and a comparable amount of gas reserves for a total of over two million barrels of oil or gas equivalent. Just great work, and seeing all this come to this has been very pleasing to the members of the executive staff and to see the development.
We've delivered 19 straight quarters where we've met or exceeded guidance, and our capital efficiency outlook going forward is very promising. With that, I'm happy to take your questions and turn it back to the operator.
Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press star and one. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Scott Hanold from RBC Capital Markets. Please go ahead.
Thanks. Good morning.
Good morning, Scott.
One of the things that stands out a little bit is your capital efficiency in the Permian seems to improve. I think at the same time, you're extending your lateral lengths quite a bit this year. I think into next year. Could you give us some color on some of the things you're doing to see that? There's no tension between extending laterals and losing some efficiency. It looks like they're all kind of lining up. Can you talk through progression of that and what you all are seeing and doing to continue to execute to that extent?
Yeah. Hi, Scott. Good morning. It's David. I'll take the first shot at it. Matt may want to make some comments also. I think as we've explained in the past that initially, we felt like it was a more prudent thing for us to, particularly in trying to get our resource held by production, that it was a little better for us to start out with some of the 1-mile laterals. It's not that I think we ever had an aversion to the longer laterals, it just was the more prudent thing for us to do given the particulars of our land situation. I think we've executed on that very well.
Over the past year, certainly it's been a real focus for our teams to begin to put together more longer and longer lateral opportunities for the company so that we could take advantage of some of these capital efficiencies. I think that as is reflected in what we've put out whereas just under 10% of our laterals were greater than a mile last year, we'll get up to about 30% this year, but we'll get well over 80% next year. I think we're currently projecting about 85%, which is probably even a little higher than what we talked about two months ago, because as we continue to flesh out our plans for 2020, we've even seen more opportunities to go to the longer laterals.
That's not only just in some of the acreage that we added in the BLM lease sale where we always knew we were going to be able to do that, but it's also just across all the asset areas. We're routinely now drilling laterals in the mile and a half range in the Wolf asset area. We're drilling more two-mile laterals in the Rustler Breaks asset area. We're going to begin drilling a mile and a half to two-mile laterals all the time up in the Greater Stebbins area here before very long. I think you're just going to start to see it popping up all over the area.
By the time we get to next year, clearly the vast majority of our wells are going to be in this one and a half to two mile, which I think about 70% now we think will be at least two mile. I think we feel very confident in our ability to do that. The wells that we've done so far have gone very well. I think in terms of targeting, we feel very confident. As we said in previous calls, we've gotten seismic over most of our acreage these days, and we're using that now to better inform our steering. I think the farther we steer, the longer we drill these wells and the farther that we're steering, I think having the seismic is particularly important.
As you know, we have the 24/7 MAXCOM room that is really making a big difference in terms of our ability to stay right within the very narrow intervals that we've targeted and want to stay in. I think that the drilling and completion guys are just doing a marvelous job of continuing to reduce the daily rates and the costs and be able to drill these wells faster. On the completion side, I think the guys have done a terrific job in terms of being able to get these wells completed all the way out to their maximum lengths and get them cleaned up. We're actually even sort of, in some cases, making our jobs a little bigger in terms of fluid size and proppant size in some ways, proppant volumes, but not really having to sacrifice in terms of the cost efficiency.
I think we're on the right path, and I think that you'll really begin to see that kick in as the year unfolds and into next year. We're quite excited about the path that we're on here.
One other thing, Matt, before you jump in, I just also want to commend our completion group. They did their first 100% frack with recycled water, which saved $hundreds of thousands on that. That looks like another promising area to improve and be that much more capital efficient. It was innovative, and we appreciate them doing it and look forward to doing more. I think the opportunity to drill even more 2-mile laterals is more likely to increase as the year goes along. Matt?
Yes, Scott, I'll jump in here too. I think we're very excited about the capital efficiencies we've achieved and already moving towards getting even more and more capital efficient. On top of what David and Joe have said here, one of the things that we're putting into our program is combining the longer laterals with batch drilling. That hits all the different things. Just an example, our Howard Posner wells that we drilled down in Wolfcamp, they were longer laterals. The guys, as Joe said, did 100% recycle on the water. We used in-basin sand. We were zipper fracs. It's a very efficient way for us to do that. It works for us. It works for the service companies too. We think we get a better price because we're more efficient, and we want to continue to do that.
I'll steal a little of Billy's thunder here. In preparation for the 85% that David's talking about that will be longer laterals in the future, we're very happy with the rigs we have with Patterson-UTI, and we're working hand in hand in a partnership with them to even improve the efficiencies of those rigs. With the longer laterals, additional hydraulic horsepower in the form of maybe a third mud pump, as well as additional rotating capabilities with the higher torque, higher horsepower top drives that we've talked about. We're talking with Patterson-UTI about making those improvements so Billy and his guys can go even faster.
The last thing, I know we're maybe overwhelming you. Scott, on our website, we have the earnings release and capital efficiency. We have a couple of slides that show the growing capital efficiency and would really encourage people to take a look at that. A picture tells a 1,000 words, and you can see how we're driving down costs. We're increasing the number of longer laterals and taking other steps to keep things going in the right direction.
No, I appreciate it. It's all good color. It sounds like the savings you all are starting to see are sustainable and could get a little bit better. I know you were a good 10% below your budget this quarter. Can you talk through, and I know there were some puts and takes in that, but what should we expect over the next 2 to 3 quarters? Can some of those savings continue to keep you at to below your budget as we progress through the year?
Yes. Scott, we continue to think we'll improve on that. We mentioned the areas that we're working on. We don't have a specific number, not ready to raise it from what we've said before. Believe they are sustainable, and that the percentage improvement is more likely to go up than down. We'd like to wait till next quarter and give you a further report. We mentioned a lot of those areas, drilling them faster, in-basin sand, your central facilities, your recycled water. There's better equipment on the rig, the zipper fracs, the batch drilling. All those things are showing promise of improving the capital cost and achieving the capital efficiencies that I think the market is seeking.
All right. Appreciate it. Thank you.
Thank you. Our next question comes from Gabe Daoud from Cowen. Please go ahead.
Thank you. Good morning, Joe and everyone else. A nice capital efficiency update. Was just curious if you guys can maybe just switch gears a little bit, hit on San Mateo. I think 1Q EBITDA around $21 million would be a little bit lower on a run-rate basis to hit that full-year number. Just curious if you think that steps up significantly from here through the rest of the year. Just wondering, again, any kind of color there would be helpful.
Yeah. Hey, Gabe, it's David. I think actually the EBITDA that we had for San Mateo this first quarter was pretty well right in line with what our expectations were. Not surprisingly we've got it modeled on a ramp. I think as we had said in previous calls, that at the midpoint of our guidance, we had about $90 million estimated for this year for San Mateo. I think we still are very comfortable with what our projections have been for San Mateo, and we felt like the first quarter was right in line. I think as both Matador's production and third-party volumes pick up during the course of the year that you'll continue to see that improve through the year.
I guess the bottom line was San Mateo really came in right on top of what we were expecting. I think we thought it was a good quarter.
Awesome. Thanks, David. That's helpful. Just to follow up on the asset sale front, can you maybe just give us an update there on remaining initiatives, potentially with like the Eagle Ford, San Mateo 1, and/or Haynesville? Just any updates there?
Sure. I think that we're pleased with the progress that we've made so far and really quite optimistic that we'll continue to make progress as the year goes on. I think we've said that our intention has been primarily where the Eagle Ford and Haynesville assets are concerned, that we felt like that we would probably have a little more success in selling off the assets kind of pieces at a time because we don't know that there's anyone out there that's interested in the assets across the plate, though there may be. We certainly know that there are a number of people that are interested in particular assets that we have. Often those may be the offsetting operators in those areas. I think that we're encouraged by the number of inquiries that we still are continuing to get about certain of our Eagle Ford properties.
I know that Van and Jonathan Filbert and their teams are in constant communications with folks that have expressed interest. As I think Joe said in his quote in the earnings release, we're continuing to look to make satisfactory transactions and optimistic that we can. Certainly we're not going to give it away. If we can come up with acceptable business deals, we'll continue to do that, and I'm optimistic that we will.
Gabe, another area that still remains fertile to make a win-win deal is these trades with other operators that we're doing. We have interest in their units that we trade for interest they have in our units. That improves both sides of the transaction, and that's been an active area for us, and that we feel real good about. Our mineral transactions have also been good. I think we have currently about 1,500 BOE off of our minerals, 1,000 barrels of oil. Of that, two-thirds of that is oil that has been growing. We've leased some minerals that have brought in several million dollars. Very encouraged. The bits and the pieces, they add up, it's active. Anytime you do a deal, the next time you deal with that party, it seems easier.
A number of those are in the works, and we hope to increase that as the year goes along. Matt?
Joe, I just want to underscore what you started with your comment there and how it relates to capital efficiency. These trades a lot of times are set up for us to be able to drill the longer laterals. Van and John, and the team have done a really nice job in converting one-mile lateral potentials to mile and a half and two miles just by making these trades that you're talking about.
No, definitely. Thanks, Matt and Joe. That's all really helpful. Thanks a lot, guys.
Thanks, Gabe.
Thank you. Ladies and gentlemen, due to time constraints, we ask that you please limit yourself to one question and one follow-up. Our next question comes from Neal Dingmann from SunTrust. Please go ahead.
Good. Give me that warning, Joe. I'll try to keep mine brief.
Neal, you're welcome to talk as long as you want. We'll stay here all day for you. We know you all have a choice, just like the airlines say. We appreciate you being tuned in to us.
My question is really what you talked about earlier about the efficiencies, and you guys really are just notably running ahead. Based on that, what's your thoughts if you continue to run so far ahead in these efficiencies? Would you cut activity and keep the spending down? How do you think of it? It's obviously a nice sort of quandary to have. You guys seem to be running ahead more than most out there. I'm just wondering if that continues to be the case, how you think about activity and CapEx, et cetera, for going into the end of the year.
Neal, that's a great question. That's one we're focusing a lot on discussing what's best, is that we approach the what's best question from what creates the most value for our shareholders, for share values. The first thing is to look at the opportunity and the opportunity set and say, what will that do for us? Second, we're also thinking about the money and being more selective in what we do and trying to thread the needle of increasing value without overspending. Probably the assets we like acquiring the best are those acreage that are in our current tracks where we're about ready to drill, where we can bolster our working interest or work a trade of some sort. Those opportunities take priority, because if you don't buy that acreage that comes up available in your units, you won't ever get it.
You won't ever see it. You've got to either do it or not. We're more selective in pursuing trends, and we just don't buy acreage just to pursue trends. It's got to be related to a prospect of some sort. Just balancing that we've told the market, you included, that we're determined to narrow the gap over time and to do it in a pragmatic, value-creating way. We think we achieved that this quarter. The same practices that helped us achieve it this quarter, we intended to continue to follow and do what we say. It's just like selling parts of the Haynesville and the Eagle Ford. We said we'd do that, and we have. We said we'd drop the rig in the Eagle Ford, and we have. We said that we'd be more selective in what we do, and we have.
That perhaps most importantly, that we saw ways to improve our capital efficiency, and we have. We think they did that in the right step. First, get the acreage validated and held by production so you have more time and leverage to convert those one mile into two miles, and we have. We're, I think, doing the right things, and it's lively discussions around here about exactly how to do that. We're, I think getting it done and threading that needle this first quarter, and we believe it's sustainable. We'll continue to do it through the year, but I don't want to paint myself in a corner and say we're not going to take advantage of a special situation, either to acquire acreage in units or areas where we can convert one mile to a two mile.
You got to sometimes spend a little money to do that, but you're going to have a value increase. Finally, we're monitoring everything very closely. Finally, on these issues of this is that we're very pleased that we think our shareholders have gotten a lot of value for what outspend that we've had in terms of not just production growth, but profitable growth, and that you see that we doubled earnings last year, and we had an earnings beat in this quarter. Did that answer your question? I hope it did.
It did. My second question, Joe, that was a great answer, and just on my follow-up, I love that slide five you all showing your great ownership. My thoughts, look, if your stock continues to be this cheap, Joe, are you going to encourage all your guys there to keep selling all their Tesla and Facebook stock and buy some more Matador?
I hope our staff has good sense enough not to buy Tesla.
There's not many electric cars in the garage, Neal.
I do want to commend the board and the staff and the executive staff. As you've noticed, nobody's sold shares. We've been buyers. Nobody's sold a share among any of our directors or staff, we think it's a great opportunity when you move in six years from one million barrels of oil to over 100 million barrels. I think that's a lot of value, that our rate of change is, I think, one of the best in the business. We've grown our acreage position to 135,000 acres in what we believe, and evidently other companies believe, is the best basin in the country. That's a great achievement, I think, over the last few years. We acknowledge, we hear the market, want to be sure that you're addressing and moving towards free cash flow, and we are.
By next year, I think it'll be increasingly clear how we're doing it. We've made a lot of progress already. It's just at this point in our life cycle, we have a great opportunity set, and our guys are turning up some other great opportunities. I don't want to tell them ignore them because this is how you add value. I appreciate our shareholders who've appreciated that, and new ones because they can see that 36 years, Neal, I've never had a layoff. In 36 years, we've been financially disciplined to the point we never had to call good people in and let them go. Financial discipline, coming up not through private equity, but through friends and neighbors, I can assure you that we care a lot about financial discipline.
We practice it, 36-year record, and starting with $270,000 to $2.5 billion market cap, I think hopefully speaks for itself. We care about it, and we feel we're on a good road and path to achieve it, in a way that doesn't damage the value of the individual Matador share. We spend a lot of focus on it. I think the plan is good. I think that if you look over the last few quarters, the movement has been steady and methodical to achieving this free cash flow standard.
That's a great stat, Joe. Fantastic quarter. Thanks, guys.
Thanks, Neal.
Thank you. Our next question comes from Tim Rezvan of Oppenheimer. Please go ahead.
Good morning, folks. Thank you for taking my question. Gabe hit on some lines, I just have one for you. You mentioned the well results in Antelope Ridge in the Charles Ling pad. Very strong 24-hour IPs on 5,000-foot laterals. You mentioned these were drilled and completed simultaneously. It's a horizon in an area that people understand pretty well. I was wondering if you could talk about what the purpose was of this pad or any learnings, or how we can think about you all applying this as you move to pad drilling going forward, especially on the state line area.
Yeah, Tim, this is Matt. I think it just dovetails into what we've been talking about here this morning. To be able to do these four wells all at the same time is a very efficient way to do it. I think the well results are very nice. They're very good wells. We expected them to be, and they are. One of the other things that we just touched on a little bit is we've actually increased the amount of fluid that we've pumped on these wells. We've gone upwards of 60 barrels per fluid. We kept the proppant about the same. It was really a nice test for us to try a number of different things that all relate to efficiency.
Okay, just to follow up, when you say drilled and completed simultaneously, did you have multiple rigs on that pad, and is that just you applying zipper fracs?
Just zipper frac. They were all done with one well, with one rig, Tim.
Okay. I'll leave it there. Thank you.
Thanks, Dan.
Thank you. Our next question comes from Noel Parks from Coker & Palmer. Please go ahead.
Good morning.
Morning, Noel.
Well, you've talked a lot about the trade-offs and strategically, as you mentioned, threading the needle to achieve growth or spending. When we're looking at the policy making on lateral length, is it fair to say that, given the size of your inventory right now, that the focus is more on, let's say, over the next year on productivity within the wells on that inventory as opposed to different ways, either through adding formations or expanding the footprint of expanding the inventory just in terms of total locations?
Hi, Noel. It's David. I think it'll always be a little bit of both. Our exploration staff, geoscience staff, does an excellent job in terms of identifying targets and often new targets that we want to test. Just to cite as an example, I think we've drilled quite a number of First Bone Spring wells over the past year, and have drilled those in various places around the basin, and have been pleased with those results. I think that two years ago, that's probably not a target that we were thinking or talking much about. I think that we'll continue to look for I know that Ned and the staff are frequently identifying new zones, new targets that they would like to go after. I think we just try to balance that with the kind of development efforts that we have in place.
Certainly we're going to be very focused on development and longer laterals and more batch drilling, as we've been saying. I think you'll still continue to see a little bit of that exploration mix in what we're doing. We clearly have a strong focus on development and longer laterals, more multi-well batches, and that will only become more apparent as we go through this year into next. Did that get your answer, or did we lose you?
Yeah.
I guess I'll turn it back to you.
Thank you, sir. Our next question comes from John Freeman from Raymond James. Please go ahead.
Good morning.
Hi, John.
You noted that one of the main drivers of the lower well costs in the quarter was in part due to the increased use of the in-basin sand. I know that in 4Q, about 50% of your Delaware completions were utilizing the regional sand. Where did that stand in 1Q, and where do you anticipate that being by year-end?
Yeah, John, this is Matt. We are moving more and more towards the in-basin sand. In fact, in Q1, just about 100% of those wells were in-basin sand. As we've talked in the past, the way we do things, we're very methodical about how we make changes, and so we've gone through all the processes that we've talked about in the past, and getting very comfortable with in-basin sand in most of the formations. There may be a formation or two that we're still looking at, and we will continue to look at these things going into the future. Like I said, tend to be very methodical, but we're happy with the results we're seeing so far.
Yeah. Matt, in particular on your methodical study, why you've done it zone by zone is to make sure there's no degradation in any of those. We're getting increasingly comfortable that there isn't any degradation, and there's a price advantage, but we're still monitoring.
Right. We'll continue to monitor, John. These things, the IPs, it really won't make any difference. A 30-day, 60-day, probably not, but we'll continue to watch these things for years to make sure that we don't have the degradation, which I was talking about, and we don't see it.
Great. Just my follow-up question, I just want to make sure that I'm thinking about the second quarter natural gas production guidance the right way. The 7%-9% decrease, which you'll say partly is just due to the normal sort of declines from the larger than expected gas production you got in Q1, and then some is due to possible shut-ins given sort of the gas price dynamic at the moment. Is there any way to sort of quantify how much of that is due to the possible shut-ins? How much is built into that guidance?
Yeah. John, hi, it's David. I don't know that I know just off the top of my head how much that is. I think that it may be sort of a half and half kind of thing. I think part of it was that we had a number of fairly big wells, or wells that came in at higher than expected gas production in the quarter that we called out, like the David Edelstein well, which was our first 2-mile lateral at Rustler Breaks, and in the Wolfcamp B, which is traditionally a higher gas producing zone. If I recall correctly, I think that in its earliest days, it was making 10 to 12 million a day, so it was clearly a contributor to that. The Howard Posner wells that we called out in the report at Wolf contributed to that.
We did have a couple of just really nice wells that were non-op in the Elm Grove part of our Haynesville asset that Chesapeake operates, and they drilled a couple of really nice wells that really exceeded our expectations in terms of their early gas flow rates. Those things will trend off. As I recall, we don't have much in the way of any Wolfcamp B completions on the schedule here in the second quarter. That happens to us from time to time. We have these little spikes in gas production. We had one last year in the second quarter for predominantly the same reasons. I think we'll see it again this year.
We already expect in the late part of the third quarter and into the fourth quarter, because there are two additional non-op wells that are scheduled to be drilled by Chesapeake in an area we call our L.A. Wildlife area, where we actually will have about a 40%-45% working interest in those wells. We expect those will also be very good natural gas wells. I think you'll see that it spikes back up again in the third and fourth quarter. With regard to the temporary shut-ins, we did have a few days in April where we did shut in some of our higher GOR wells on a temporary basis. I believe that I'm correct in saying that all the wells are now back and flowing, and there might be one or two that are still temporarily shut in.
I think that we're just sort of monitoring that situation. I think if we don't see gas prices doing anything different than they are right now, that we would plan to pretty well keep the wells on and producing. We were just trying to do our best to estimate how that might impact our second quarter production.
John, a couple of other factors, just I agree with everything that David was saying, a couple of factors that helped mitigate the gas situation was one, is about 20% of our gas came from the Haynesville and the Eagle Ford, which were unaffected by WAHA. Second is in our processing, we get an uplift on NGLs, and then when you process, about 20% of the processed gas ends up as NGLs. With that uplift, we have takeaway from our plant by BP, who's done a good job. They take them to Mont Belvieu, and they're responsible for the transportation and the fractionation. Those two factors have mitigated and have helped us, it's a day-to-day. We're not flaring primarily because of the processing effect and the other mitigations that we've got going. We also will participate in the Gulf Coast Express.
By October, the vast majority of our gas will be either on pipeline or be in the Haynesville and the Eagle Ford and on the Gulf Coast Express, where we have firm transportation.
That's a nice tie-in with the midstream business to have the processing plant and to have the residue capacity and the NGL capacity that Joe's talking about for not only transportation, but the fractionation as well. It's a very nice thing for us to have.
That's very helpful. I appreciate it, guys. Nice quarter.
Thanks, John.
Thank you. Our next question comes from Sameer Tejwani from Tudor, Pickering, Holt. Please go ahead.
Hey, guys. Good morning.
Good morning, Sameer.
Hey, Sameer.
First off, on the lateral length side of things, is it possible for you to quantify the existing opportunity set of one and a half to two-mile laterals? Is it fair to assume that extending laterals is now a key goal for the land team as you shift to larger development projects?
Yeah, this is David, Sameer. Good morning. I think that to take the last part of the question, it absolutely is a goal of the asset teams and the land department to try to make every well that we can a one-and-a-half to two-mile lateral going forward. I would dare say that there are many proposals that we're sending out to prospective partners anything anymore that are for single-mile laterals. I'm sure there's still a few. Obviously, we've estimated that we still might have as many as 10% or 15% of them next year, it's certainly decreasing at a rapid pace. I think that when we had the call in February, I think we had talked about we were estimating about 70% of our laterals in 2020 could be greater than a mile.
Just in this past quarter, the efforts of the teams and the land department, as we look out into our 2020 schedule, I think has made us confident that we can get to 85% there. We've even been able to progress that just in the last several months. I'm very confident that the teams are approaching every opportunity that they can to make these wells longer laterals.
Okay. On the first part of the question, the existing opportunity set of the one-and-a-half to two-mile laterals?
Well, I'm not entirely sure what you mean by that. Can you be a little more specific on what you're trying to ask me there?
I guess I'm trying to understand how sustainable as over 8,000 foot average lateral is going forward, how many wells in your inventory do you think you have at that lateral length as your acre position stands today?
I think that, just to be specific, I think we've been clear in the past that of the 2,600 or so net wells that we have, or 2,500, I guess it is, in our inventory, 4,500 gross or something to that effect, that was all based on one mile lateral kind of estimates. I think for all of those locations, it's our plan to try to convert as many of those into two-mile laterals. Sometimes that may be combining a couple of those locations into a two-mile lateral. Sometimes it may be extending one of those existing ones into being a two-mile lateral.
I think that, as we've mentioned before, as we've gotten more and more of our acreage held by production in a single zone, that's given us then the luxury of time to go back and look at putting together different units that would make for longer laterals in other zones that we intend to come back and drill over the years. I guess I feel like that this will be sustainable for us going forward, that it's just not going to be a one year or 18-month flash in the pan. I think that it will be something that we'll be able to sustain on and perhaps even improve on as we go forward.
Yes, Sameer. This is Matt. Just to tag on to what David's saying there. A lot of these wells that are now mile and a half or two-mile laterals once weren't. The team has done a fantastic job of moving those in the direction where they now are, one and a half or two-mile laterals. Typically the way this works is if, let's say, you're combining two sections there in New Mexico, the hardest one to get to a mile and a half or two mile is the first one. Once you get that down in subsequent wells, you come back and drill, irregardless of which formation they're in, are usually already addressed by a joint operating agreement or a trade that Matt and his team have made. It's easy to move them forward faster.
Samir, there's one other thing while you're on this, still is sustainability. The other part or what runs in parallel to the sustainability of converting these into one and a half or two-mile laterals is the fact that when we were naming our potential locations, that we were spacing them on 160 acres. We didn't do that closer 80 that has resulted in some people having an under-protection. The original Wall Street article committed us. We were one of the few companies whose actual production exceeded projections. One of the main reasons for that was the fact that we had always been conservative in our spacing and spacing them out.
Sustainability is not only having the ability to have a number of one and a half, two-mile laterals, but also the ability to convert by trades or acreage acquisitions, one-mile laterals, then buying the adjoining property in some fashion, so that you can convert a forced pooling into two miles. We've been working at that well. Then, again, a MAXCOM program where you stay in zone better and pick up the lease line acreage on the curve so you don't have two curves, you have one curve and pick up the lease line, all lends itself to the sustainability and the additional reserves by staying in zone more. I like our chances, is what I'm trying to say, is that we're making steady progress on that and continue to like our chances going forward.
I'll just make one last just quick comment, Samir, and that is that it may be that we find that the number of locations actually could increase because the fact that some horizons in some areas that are maybe a little skinny at one-mile laterals actually may have much better returns if we can get to the longer laterals. That'll be something that we will visit there as well.
Okay. Those are all really good points. Appreciate the detailed color. For my second question, you guys continue to be active in testing the Wolfcamp zones at Ranger and Arrowhead over the past few quarters, the XY specifically. I don't think we've got an update on these wells. I think previously you've talked about some land work that's been outstanding. Just trying to get a sense of how close you are to completing that land work before we can get some more color on the results.
Yeah. It is David again. I think pretty close now. I think that we are pretty close to getting all the various trades and things that we have been working on put together. Certainly we are back to drilling at Stebbins, and I think that we have got at least another Wolfcamp well planned here for the very near future. I know there is a lot of curiosity about it. I don't think it will be long before we are able to talk a little bit more about that, Samir.
Okay. Next quarter's call is a good guess?
Well, I don't want to tie myself down. I probably cried wolf too much already. I will just say, as soon as they let me tell you, I will. How is that for a deal?
Yeah. Well, I had to take the shot, so appreciate it.
Fair enough.
Thank you. I show our next question comes from Irene Haas from Imperial Capital. Please go ahead.
Hello. Question to follow up on the earlier oil production cadence. Just want to make sure, is the 2019 guidance still good with oil growing at 18% and gas growing at 18%?
Yes, Irene. Well, we didn't make any updates to our guidance for this quarter. I think you can assume that that's a yes. We just didn't feel like it. It felt it was too early in the year for us to make any changes. We've only been out with that for a couple of months, I guess. The first quarter was a little bit better than what we thought, but it still looks pretty good to us.
Okay, that's great. Second question. The State Line Area, when would you guys start drilling in that really nice chunk of land?
Well, our plan, as we had talked about when we put our guidance release out, was to begin activity there right around the first of 2020. We're on task and on plan right now to be able to do that. We have submitted for approval now some of the first permits to the BLM. We've had all our on-site visits with the BLM. We feel like that they're on board with what the teams have laid out in terms of how we'd like to go forward with the development of those properties, same with the tract in Western Antelope Ridge, which we're hoping to be able to start drilling on this fall. I think everything appears to be on track, Irene, and if that's the case, hopefully, we'll be drilling there by the first of the year.
If I may follow up on that, and presumably you would have all your sort of infrastructure set up close to the time that you guys start completing?
Well, I think certainly that's what our plan is. As we have said, we would expect to run two rigs there, one on the eastern side and one on the western side. On the eastern side, we're planning two mile laterals. On the western side, we're planning two and a half mile laterals. It will take us, of course, we're going to drill those at least to begin with four wells on each pad, perhaps even five. It will take us several months to get all that done. I don't think you would expect to see first production from those pads until sometime probably in the third quarter of 2020. Between now and then, certainly we'll be out there getting the roads and the pipes and the facilities and all in place.
Of course, we'll be extending the large trunk line down from the Black River processing plant in the Rustler Breaks area down to that state line acreage, so that as soon as we turn those wells on, that the gas will be flowing back to the new plant that Matt Spicer and his team are starting to build. That is on track to be finished by the summer of 2020. I think all those things are moving together on plan. Hopefully, by the time we're doing the second or third quarter conference call in 2020, we'll be talking all about that.
Great. Thank you.
Yes, ma'am.
Thank you. Our last question comes from Richard Tullis from Capital One Securities. Please go ahead.
Thanks, Joe, for getting me in last there. Appreciate it. I guess a question to start off with Matt. We've heard from Offset Operator recently reported some really strong Second Bone Spring wells in that southern Lea-Eddy border county area. I know that Matador's already drilled some solid Second Bone Spring wells, but have you been able to pick up anything from that offset operator, Matt, that you might be able to use in your own operations, including planned drilling down in the state line area?
Sure, Richard. Thanks for the question. It's just one of the things that we focus on. We've got a non-op team that looks at all the non-op proposals, all the well results, what people are doing, how they're doing them. We look at the good stuff, we look at stuff that's maybe not so good and try to learn from all of that. Richard, this stuff continues to evolve. One of the things that Ned and his team do, along with the MAXCOM guys, is look at where these wells are steered, what zones they're producing out of, what the results are, how the completions are put together, what type of artificial lift.
There's just a number of things that we have a lot of insight into non-op partners, as well as just looking at public stuff like you're talking about and understanding how people are thinking about things and the approach they're making. One of the other things that Ned and his team are very actively doing is continuing to work on the 3D seismic. We've had a lot of success identifying targets, steering with 3D seismic, and really making a lot of progress in those. Ned?
I'll follow in on that. The 3D is great at helping us accelerate that learning curve. We're able to see what the offset operators are targeting and really being able to relate that to the rock on our own acreage. I think that's been very beneficial for accelerating our results in places like Antelope Ridge. The recent Ling wells
Were targeted and steered on the seismic, you're handing off a wellbore that's exactly the right rock to the completions guys, and they're doing a great job with that. It's really been firing on all cylinders here. We are definitely looking at offset operators and trying to relate that back to our own acreage.
Thank you. That's helpful. Just lastly for Joe, maybe just a big picture question to close out the call. As Matador moves closer to a Delaware Basin pure play, just wanted to get your view on the competitive landscape in the Delaware going forward with the very large companies significantly ramping up activity and playing a larger role. Joe, do you see any risk for the small and medium-sized companies to be able to consistently execute operationally going forward?
Thank you, Richard. That's really a thoughtful question, and I appreciate you asking it. First thing is I think the move of Chevron and Exxon into the basin and other bigger companies ramping up is first a very bullish sign on oil prices. Second, I think it reaffirms what we've always thought, that the Delaware Basin is the best basin in the country. They wouldn't be moving in there at that kind of level if they didn't think it was really good country. I think that enhances our 135,000 acres out there and just makes it that much more valuable.
The other thing that we've discussed a lot internally and with our vendors is they've been through ups and downs out there, and I think we're six or seven in size in production and rigs, is that those companies, we have a long history with Patterson, where they or their predecessors have drilled nearly every well that I've drilled. They've done a great job for us, and I don't see them likely to come in here and say, this 36-year relationship, they're gonna dedicate everything to Exxon or Chevron. They want some diversity in their clientele, too. The other thing that I think it also means that other vendors that are not yet in the basin or in it as much as they'd like to be, are gonna move because that's where the business is.
Yes, they're gonna want some of Exxon and Chevron's business, but Exxon and Chevron don't want to put all their eggs in one basket. They're gonna spread their business among different vendors, and those vendors are gonna look to pick up business from other companies like ours. I see it as a good thing. Just like in cities, you're better off to have a lot of construction projects going on than no construction projects. That brings in the workers and really facilitates, I think, a lot of progress and a lot of innovation.
I see that as really pretty positive, and if you're in the top 10, you're, I think, in a pretty good spot to take advantage of that there's actually more competition for services, and it'll help you in the long run to have more good frac crews and more good drillers and more good labor out there and field services. It doesn't worry me. Our guys compete a lot, but it's a different kind of competition between us and, say, Exxon and Chevron. Our guys are drilling these wells faster. We're innovating after every well and after every completion job, and where their practice is more to try to turn it into manufacturing and we're more like a custom home. They're building a bunch of tract homes. We're being somewhat the custom builder, but we're doing it faster and quicker and for less money.
We're both doing batch drilling. We're both recycling water. I don't think they're doing anything that we're not doing. We just have the advantage of that we're able to innovate and change after every well, and our rate of change is higher than theirs. I think it's a positive. I haven't seen any negative impacts. Have you, Matt?
No, I agree with what you're saying, Joe. I think if anything, it helps in that endeavor with the service companies. You're right. Nobody really wants to put all their eggs in one basket, but they do want to work with a qualified partner. I think we fit that bill. I think that the relationships we've established with our partners over the years, Patterson being one, Halliburton another, who's got our frac work right now. I think they enjoy working with us. I think they enjoy the innovation that we bring to the table. I think that will continue. I see it more as a positive.
Billy is our head of operations out there. Billy, what
No, I agree. We're all working together and meet with each other and pay attention to what each other's doing. For us, we stay out in the lead and develop the new technology. We're not waiting for anyone else to tell us what to do or find the best way to do it. We got a lot of guys that go meet with the scientists that design new bits and new motors and our geology group getting out there and getting all the seismic in there. I mean, everybody's working together and we're doing really good things and having the majors come in and hopefully help bring more people in to help us. That's all good.
Good stuff. I appreciate everyone's thoughts on the topic, and that's all from me. Have a great day.
Thanks, Richard.
Thank you. Ladies and gentlemen, this concludes the Q&A portion of this morning's conference call. I'd like to turn the call over to management for any closing remarks.
Thank you very much. I want to thank everybody for their, again, their time and attention and their questions. We really want to sincerely invite you to come see us. We'll give you the time that hopefully will make it worth it. We'll help for you to meet and see the depth of our staff and have more time to answer your specific questions. We really welcome those visits and appreciate your interest, and I want to emphasize that we're on a good path right now towards narrowing any spending gap. Yet at the same time, we're moving forward with profitable growth and profitable production, and building up the inventory of the longer laterals and other capital-efficient projects. It's been a good plan so far. We want to continue to enhance it and look forward to sharing with you our details of our progress, either here or at conferences.
Please feel free to call David anytime or come see us and we'll get together and make sure you get a complete review of what we're doing. Thanks again. Good to talk to you. Look forward to our next visit.
Thank you, ladies and gentlemen, for attending today's conference. This concludes the program. You may all disconnect. Good day.