Good morning, ladies and gentlemen. Welcome to the First Quarter 2019 Matador Resources Company Earnings Conference Call. My name is Delam, and I'll be serving as the operator for today. At this time, all participants are in 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 31, 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, Dylan. Good morning, everyone, and thank you for joining us for Matador's Q1 2019 earnings conference call. Some of the presenters today will reference certain non GAAP financial measures regularly used by Manitoba 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 ks. 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 Q1 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 Hereford, 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 Greg 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 their hard work and dedication, not just the ones in the office, but also our field staff who have really done, made efforts to improve our capital efficiencies in the field. Just a great work and a total team effort, which leads me to 3 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 its 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 1,100,000 barrels at the time we went public barrels of oil approved reserves over 100,000,000 barrels of oil proved reserves and a comparable amount of gas reserves for a total of over 200, I mean 2,000,000 barrels of oil or gas equivalent.
Just a great work and seeing all this come to this has been very pleasing to the members of the executive staff and see the development. We delivered 19 straight quarters where we've met or exceeded guidance and our capital efficiency is outlook going forward is very promising. With that, I'm happy to take your questions and turn it back to the operator.
Thank you, Our first question comes from Scott Hanold from RBC Capital Markets. Please go ahead. Thanks. Good morning.
Good morning, Scott.
Ian, one of the things that stands out a little bit is your capital efficiency in the Permian seems to improve. And I think at the same time, you're extending your lateral lengths quite a bit this year and I think into next year. Could you give us some color on some of
the things you're doing to
see that? I mean, that there's no tension between extending laterals and losing some efficiency. It looks like they're all kind of lining up. But can you kind of talk through progression of that and what you all are seeing and doing to continue to execute to that extent?
Yes. Hi, Scott. Good morning. It's David. I'll take the first shot at it and Matt may want to make some comments also.
But I think that 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 to us for us to do given the particulars of our land situation. And I think we've executed on that very well. But 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.
And 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 2 months ago because as we continue to kind of flush out our plans for 2020, we've even seen more opportunities to go to the longer laterals. And 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. I mean, we're routinely now drilling laterals in the mile and a half range in the Wolf asset area.
We're drilling more 2 mile laterals in the Rustler Breaks asset area. We're going to begin drilling a mile and a half to 2 mile laterals all the time up in the Greater Stebbins area here before very long. And so I think you're just going to start to see it popping up all over the area. And by the time we get to next year, clearly the vast majority of our wells are going to be in this 1.5 to 2 mile with I think about 70% now we think will be at least 2 mile. And 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 with we've as we said in previous calls, we've gotten seismic over most of our acreage these days and we're kind of using that now to better inform our steering. So 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 20 fourseven 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. And I think that 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.
And 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. And we're actually even sort of in some cases making our jobs a little bigger in terms of fluid size and profit size in some ways, profit volumes, but not really having to sacrifice in terms of the cost efficiency. So I think that we're 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. And so we're quite excited about the path that
we're on here. One other thing, Matt, before you jumped in, I just also want to commend our completion group. They did their first 100 percent frac with recycled water, which saved 100 of 1,000 of dollars 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 and look forward to doing more.
And 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. So that kind of hits all the different things.
And just an example, our Howard Posner wells that we drilled down in Wolf, they were longer laterals. The guys, as Joe said, did 100% recycle on the water. We used in basin sand. We were zipper fracs. So that's a very, very efficient way for us to do that.
It works for us. It works for the service companies too. We get we think we get a better price because we're more efficient and we want to continue to do that. And I'll steal a little Billy's thunder here in preparation for the 85% that Dave was talking about that will be longer laterals in the future. We're very, very happy with the rigs we have with Patterson and we're working hand in hand and in partnership with them to even improve the efficiencies of those rigs.
So 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 about making those improvements. So Billy and his guys can go even faster.
And the last thing, I know we're maybe overwhelming you, but Scott in our website, we have the earnings release and capital efficiency. We have a couple of slides that show the growing capital efficiency. It would really encourage people to take a look at that. A picture tells a 1,000 words and you 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. And so it sounds like the savings you all have starting to see are sustainable and could get a little bit better. And 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, but believe they are sustainable and with and that the percentage improvement is more likely to go up than down. But we'd like to wait till next quarter and give you a further report.
But 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 improving the capital of achieving the capital
Thank you.
Thank you. Our next question comes from Gabe Daoud from Cowen. Please go ahead.
Thank you and good morning, Joe and everyone else. Nice capital efficiency update. I was just curious if you guys can maybe just switch gears a little bit hit on San Mateo. I think 1Q EBITDA around $21,000,000 would be a little bit lower on a run rate basis to kind of 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.
Yes. Hey, Gabe, it's David.
Well, I
think actually the EBITDA that we have for San Mateo this Q1 was pretty well right in line with what our expectations were. Not surprisingly, we've kind of got it modeled on a ramp. And I think as we had said in previous calls that sort of at the midpoint of our guidance, we have about 90,000,000 dollars estimated for this year for San Mateo. So I think we still are very comfortable with kind of what our projections have been for San Mateo and we felt like the Q1 was right in line. And I think as both Matador's production and 3rd party volumes pick up during the course of the year that you'll continue to see that you'll continue to see that improve through the year.
So I guess the bottom line was San Mateo really came in right on top of what we were expecting. So I think we thought it was a good quarter.
Awesome. Thanks, David. That's helpful. And then just a 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 place, though there may be. But we certainly know that there are a number of people that are interested in particular assets that we have and often those may be the offsetting operators in those areas. And so I think that we've we're encouraged by the number of inquiries that we still are continuing to get about sort of our Eagle Ford properties.
I know that Van and John Filbert and their teams are in constant communications with folks that have expressed interest. And so as we 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. But certainly we're not going to give it away. But if we can come up with acceptable business deals, we'll continue to do that. And I'm optimistic that we will.
Yes. Gabe, another area and it still remains fertile to make a win win deal as these trades with other operators that we're doing. I mean they give they have interest in their units that we trade for interest they have in our units and 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.
We're I think we have currently about 1500 BOE off of our minerals, 1,000 barrels of oil of that 2 thirds of that is oil that has been growing. And we've leased some minerals that have brought in several 1,000,000 of dollars. So very encouraged, the bits and the pieces they add up. And so it's active and we'll hope to continue to anytime you do a deal, the next time you deal with that party, it seems easier. So 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 longer laterals. And so Van and John and the team have done a really nice job in converting 1 mile lateral potentials to 1.5 mile and 2 mile just by making these trades that you're talking about.
Definitely. Thanks, Matt and Joe. That's all really helpful. Thanks a lot, guys.
Thanks,
Our next question comes from Neal Dingmann from SunTrust. Please go ahead.
Good. So 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. We know you all have a choice, you'd like the airlines say. And we appreciate you being tuned in to
My question is really what
you talked about earlier about the efficiencies and you guys really are just notably running ahead and based on that, what's your thoughts if you continue to run ahead so far ahead in these efficiencies? Would you cut activity and keep the spending down or 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 etcetera for going into the end of the year?
Neal, that's a great question and that's one where we're focusing a lot on discussing what's best is that we approach to what's best question from what creates the most value for our shareholders per share values. So the first thing is to look at the opportunity and the opportunity set and say what will that do for us. And but 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. And so probably the assets we'd 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, it comes up available in your units, you won't ever get it.
You will never see it. So you've got to either do it or not. We're more selective in just 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. And then 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.
And we think we achieved that this quarter and the same practices that helped us achieve it this quarter. We continue to follow and do what we say. It's just like selling parts of Haynesville and 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.
And we said that we'd be more selective with what we do and we have. And that perhaps most importantly that we saw ways to improve our capital efficiency and we have. And we think they did that in the right step. 1st get the acreage validated and held by production. So you have more time and leverage to convert those 1 mile into 2 miles and we have.
So we're I think doing the right things and it's lively discussions around here about exactly how to do that. But we're I think getting it done and threading that needle this Q1 and we believe it's sustainable and we'll continue to do it through the year. But I don't want to paint myself in the corner and say we're not going to take advantage of a special situation either to acquire acreage and units or areas where we can convert 1 mile to a 2 mile. You got to sometimes spend a little money to do that, but you're going to have a value increase. And finally, I just but we're monitoring everything very closely.
And 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. And then my second question, Joe, that was a great answer. And just on my follow-up, I love that Slide 5 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 a test.
There's not many electric cars in the garage.
I do want to commend the board and the staff and the executive staff as you've noticed nobody sold shares. We've been buyers. Nobody sold a share among any of our directors or staff and we think it's a great opportunity when you move in 6 years from 1,000,000 barrels of oil to over 100,000,000 barrels. I think that's a lot of value and that our rate of change is I think one of the best in the business. And 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 great achievement I think over the last few years and we acknowledge, we hear the market, want to be sure that you're addressing and moving towards free cash flow and we are. And it's by next year, I think it'll be increasingly clear how we're doing it. But 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.
So I appreciate our shareholders who appreciate that and new ones because they can see that 36 years, Neil, I've never had a layoff. So in 36 years, we've been financially disciplined to the point we never had to call good people in and let them go. So 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 started with 270,000 dollars to $2,500,000,000 market cap, I think is hopefully speaks for itself. But 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.
So we spent 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 great stat Doug. Joe fantastic quarter. Thanks guys.
Thanks Neil.
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. So I just have one for you. You mentioned the well results in Antelope Ridge in the Charles Link pad, very strong 24 hour IPs on 5,000 foot laterals.
You mentioned these were drilled and completed simultaneously. It's a horizon and an area that people understand pretty well. So I was wondering if you could talk about kind of what the purpose was at this pad or any learnings or how we can think about you all applying this as you move to kind of pad drilling going forward, especially the Stateline area?
Yes, Tim, this is Matt. And I think it kind of just dovetails into what we've been talking about here this morning. It's to be able to do these 4 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 foot. We kept the proppant about the same. So it's really a nice test for us to try a number of different things that all relate to efficiency.
Okay. And 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 fracs. They were all done with 1 rig Tim.
Okay. Okay. I'll leave it there. Thank you.
Thanks, Dan.
Thank you. Our next question comes from Noel Parks from Coker and Palmer. Please go ahead.
Good morning. Good morning, Noel. Hi, Noel.
Well, you've talked a lot about the trade offs and you're strategically, as you mentioned, you're threading the needle to keep growth or spending. And when we're looking at the progress you're making on lateral length, Is it fair to say that given the size of your inventory right now that the focus is more on over the next year on productivity within the wells on that inventory as opposed different ways either through adding formations or expanding the footprint of extending the inventory just in terms of total locations?
Hi, Noah, it's David. I think that I think it'll always be a little bit of both. But our exploration staff, geoscience staff does I think an excellent job in terms of identifying targets and often new targets that we want to test. I think in just to cite as an example, I think we've drilled quite a number of First Bone Spring wells over the past year and had drilled those in various places around the basin and have been pleased with those results. And I think that 2 years ago, that's probably not a target that we were thinking or talking much about.
So 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. And certainly, we're going to be very focused on development and longer laterals and more batch drilling as we've been saying. And so I don't I think you'll still continue to see a little bit of that exploration mix in what we're doing.
But 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? Operator, 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.
One of the 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 sort of where do you anticipate that being by year end?
Yes, John, this is Matt. We are moving more and more towards the basin sand. In fact, in Q1, just about 100% of those wells were in basin sand. So as we've talked in the past, it's the way we do things, we're very methodical about how we make changes. And so we're 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 2 that we're still looking at and we will continue to look at these things going into the future. We like I said, 10b very methodical, but we're happy with the results we're seeing so far.
Yes. Matt, in particular on your methodical study, why you've done it zone by zone is make sure there's no degradation in any of those. And 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. The 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 that Joe's talking about and we don't see it. Great.
And then just my follow-up question, I just want to make sure that I'm thinking about the 2nd quarter natural gas production guidance the right way. So the 7% to 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 like how much is built into that guidance?
Yes, John. Hi, it's David. I don't know that I know just right off top 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 that are 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 Resto 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 $10,000,000 to $12,000,000 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. And then we did have a couple of just really nice wells that were non op in the Elm Grove part of our Haynesville asset Chesapeake operates and they drilled a couple of really nice wells that really exceeded our expectations in terms of their early gas flow rates. So those things will trend off.
As I recall, we don't have much in the way of any Wolfcamp B completions kind of on the schedule here in the Q2. So that happens to us from time to time. We kind of have these little spikes in gas production. We had one last year in the Q2 for predominantly the same reasons. And I think we'll see it again this year.
We already expect in the late part of Q3 and into Q4 because there's 2 additional non op wells that are scheduled to be drilled by Chesapeake in an area we call our LA wildlife area where we actually will have about a 40%, 45% working interest in those wells. And we expect those will also be very good natural gas wells. So I think you'll see that it spikes back up again in the 3rd Q4. And with regard to the temporary shut ins, 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 1 or 2 that are still temporarily shut in.
But 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 it's pretty well keep the wells on and producing. But we just we were just trying to do our best to estimate how that might impact our 2nd quarter production. John, a couple
of other factors just I agree with whatever thing that David was saying. But a couple of factors that help 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. And second is in our processing, we get an uplift on NGLs And then when you process about 20% of the processed gas ends up in as NGLs and with that uplift, we have takeaway from our plant by BP who's done a good job. They take them to Mount Bellevue and they're responsible for the transportation and the fractionalization. So those two factors have mitigated and have helped us, but it's a day to day, but we're not flaring primarily because of the processing effect and the other mitigations that we've got going.
We also belong, we'll participate in the Gulf Coast Express. So 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 is talking about for not only transportation, but the fractionation as well. So it's a very nice thing for us to have.
That's very helpful. I appreciate guys. Nice quarter.
Thanks, John.
Thank you. Our next question comes from Sameer Tajwani from Tudor, Pickering, Holt. Please go ahead.
Hey guys, good morning.
Good morning Sameer.
So first off on the lateral length side of things, is it possible for you to quantify the existing opportunity set of 1.5 to 2 mile laterals? And is it fair to assume that extending laterals is now a key goal for the land team as you shift to larger development projects?
Yes, this is David Sameer. Good morning. Yes, 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 1.5 to 2 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, but it's certainly decreasing at a rapid pace. And 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 kind of look out into our 2020 schedule, I think has made us confident that we can get to 85% there. So we've even been able to kind of progress that just in the last several months. But I'm very confident that the teams are approaching every opportunity that they can make these wells longer laterals.
Okay. And on the first part of the question, the existing kind of opportunity side of the 1.5 to 2 mile laterals?
Well, I'm not entirely sure what you mean by that. Can you be a little more specific or what you're trying to ask me there?
Well, I guess I'm trying to understand how sustainable over 8,000 foot average lateral is kind of going forward. How many wells in your inventory do you think you have at that lateral length as your acreage position stands today?
Well, I think that so just to be specific, when I think we've been clear in the past that of the 2,600 or so net wells that we have in our 2,500, I guess it is in our inventory 4,500 gross or something to that effect. That was all based on 1 mile lateral kind of estimates. And so, but I think for all of those locations, it is our plan to try to convert as many of those into 2 mile laterals. Sometimes that may be combining a couple of those locations into a 2 mile lateral. Sometimes it may be extending one of those existing ones into being a 2 mile lateral.
But 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 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. And so I guess I feel like that this will be sustainable for us going forward. That it's not just a it's just not going to be a 1 year or 18 months kind of 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 is saying there. A lot of these wells that are now mile and a half or 2 mile laterals once weren't. And so the team has done a fantastic job of moving those in the direction where they now are 1.5 or 2 mile laterals.
And typically the way this works is, let's say you've got you're combining 2 sections there in New Mexico. The hardest one to get to a mile and a half or 2 mile was the first one. So once you get that down, the subsequent wells you come back and drill, regardless of which formation they're in are usually already addressed by joint operating agreement or a trade that Van
and his team have made. So it's easy to move them forward faster. Sameer, there's one other thing while you're on this deal of sustainability. The other part or what runs in parallel to the sustainability of convert these into 1.5 or 2 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 to 80 that's gotten some that has resulted in some people having under protection.
The original Wall Street article committed us. We were one of the few companies that whose actual production exceeded projections. And part one of the main reasons for that was the fact that we had always been conservative in our spacing and spacing them out. So sustainability is not only having the ability to have a number of 1.5, 2 mile laterals, but also the ability to convert by trades or acreage acquisitions, 1 mile laterals and then buying the adjoining property in some fashion, so that you can convert a forced pool into 2 miles and we've been working at that well. And 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 2 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. So I like our chances is what I'm trying to say is that we're making steady progress on that and continue to lack our chances going forward.
And 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 1 mile laterals actually may have much better return to if we can get to the longer laterals. So 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. But 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. So 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?
Yes, it's David again. I think pretty close now. So I think that we've been close to getting we're pretty close to getting all the various trades and things that we've been working on put together. And certainly we're back to drilling at 7s and I think that we've got at least another Wolfcamp well planned here for the very near future. And so I think it's I know there's a lot of curiosity about it.
I don't think it'll be long before we're able to talk a little bit more about that, Sameer.
Okay. So next quarter's call is a good guess?
Well, I don't ever want to say I don't want to tie myself down. I probably cried wolf too much already. So I'll just say as soon as they let me tell you, I will. How's that for a deal?
Yes. Well, I had to take the shot. So appreciate it.
Fair enough.
Thank you. 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 wanted to make sure is the 2019 guidance still good with oil growing at 18% and gas growing at 18%?
Yes, Irene. While we didn't make any updates to our guidance for this quarter. So I think you can assume that that's a yes. So we just didn't we didn't feel like it felt 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, but and Q1 was a little bit better than what we thought, but it still looks pretty good to us.
Okay, that's great. And second question, the Stateline 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. And we are 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 and same with the same with the tract in Western Antelope Ridge, which we're hoping to be able to start drilling on this fall.
So I think everything is appears to be on track Irene and if that's the case hopefully we'll be drilling there by the 1st of the year.
And if I may follow-up on that and presumably you would have all your infrastructure set up close to time that you guys start completing?
Well, I think certainly that's what our plan is. And we what as we have said, we would expect to run 2 rigs there, 1 on the eastern side and 1 on the western side. On the eastern side, we're planning 2 mile laterals. On the western side, we're planning 2.5 mile laterals. And it will take us, of course, we're going to drill those at least to begin with 4 wells on each pad, perhaps even 5.
And so it will take us several months to get all that done. So I don't think you would expect to see 1st production from those pads until sometime probably in Q3 of 2020. But so between now and then certainly we'll be out there getting the roads and the pipes and the facilities and all in place. And of course, we'll be extending the large truck 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 and that is on track to be finished by the summer of 2020.
So I think all those things are moving together on plan and hopefully by the time we're doing the 2nd or Q3 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. I appreciate it. And 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 has already drilled some solid Second Bone Spring wells, but have you been able to pick up anything from that operator, Matt, that you might be able to use in your own operations, including planned drilling down in the State Line area?
Yes, 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. And we'll look at the good stuff.
We look at stuff that's maybe not so good and try to learn from all of that. But Richard, this stuff continues to evolve. One of the things that we 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. So there's just a number of things that we have a lot of insight into to 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 3 d seismic.
We've had a lot of success identifying targets, steering with 3 d seismic and really making a lot of progress in those. Ned?
Yes. And I'll follow in on that. The 3 d is great at helping us accelerate that learning curve. I mean, we're able to see what the offset operators are targeting and really being able to kind of relate that to the rock on our own acreage. And I think that's been very beneficial for kind of accelerating our results in places like Antelope Ridge.
I mean, the recent Ling wells were targeted and steered on the seismic and then 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. So it's really been firing on all cylinders here. So we are definitely looking at offset operators and trying to relate that back to our own acreage.
Thank you. And that's helpful. And then just lastly for Joe, maybe just a big picture question to close out the call. As Matador moves closer to Delaware Basin pure play, just wanted to get your view on the competitive landscape in the Delaware going forward with a very large company 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 and giving us. Is that 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. 2nd, 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.
So 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 we're I think we're 6 or 7 in size and production and rigs is that those companies we have a long history of 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 going to 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 is as much as they'd like to be are going to move because that's where the business is. So yes, they're going to 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 going to spread their business among different vendors and those vendors are going to look to pick up business from other companies like ours. So I see it is a good thing. Just like in cities, you're better off to have a lot of construction projects going on than no construction projects.
So that brings in the workers and really facilitates, I think a lot of progress and a lot of innovation. So I see that is 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 will 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. So 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 track homes.
We're being somewhat the custom builder, but we're doing it faster and quicker and for less money. But we're still we're both doing batch drilling. We're both recycling water. So 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.
So I think it's a positive. I haven't seen any, negative impacts. Have you Matt?
No. And I agree with what you're saying, Joe. I think if anything, it helps in that endeavor with the service companies. And you're right. Nobody really wants to put all their eggs in one basket, but they do want to work with a qualified partner.
And I think we fit that bill. I think that the relationships we've established with our partners over the years, Patterson being 1, Halliburton and others 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 and I think that will continue. So I see it more as a positive.
Billy is our Head of Operations out there. Billy?
No, I agree. It's we're all working together and meet with each other and pay attention to what each other's doing. And 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've got a lot of guys that go meet with the scientists that design new bids 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 for me. Have a great day.
Thanks, Richard.
Thank you. Ladies and gentlemen, this concludes the Q and 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 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 nearing any spending gap. Yet at the same time, we're moving forward with profitable growth and profitable production that and building up the inventory of the longer laterals and other capital efficient projects. So 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. And so 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.
So 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.