Matador Resources (NYSE:MTDR) reported near-record adjusted free cash flow of $303 million for the second quarter of 2026 and said it used $200 million to reduce borrowings associated with its federal lease acquisition, according to management’s earnings call.
Chairman, Founder and CEO Joe Foran said the company’s acquisition-related bank debt had fallen to less than $1 billion from $1.25 billion. Matador expects it could generate approximately $900 million in free cash flow for the full year and intends to continue prioritizing debt reduction.
The company raised its outlook for year-over-year oil production growth to a range of 4% to 7%, which Foran said is being pursued with 1% less capital spending. He reiterated Matador’s strategy of pursuing “profitable growth at a measured pace” while maintaining a focus on balance-sheet management.
Acquisitions and federal leases underpin growth outlook
Management highlighted the integration of the Cardinal acquisition, federal lease purchases, and the Paloma and Ridge Runner transactions as strategic catalysts for future development. Foran said Matador made offers to 26 Cardinal field employees and that all accepted.
Foran also said the company used midstream funds to acquire Cardinal’s midstream assets, while Matador’s E&P business funded acquisitions intended for its upstream portfolio.
The federal lease purchases extended Matador’s inventory life to more than 15 years, according to Foran. He said the acreage includes nine different producing zones and is located near the company’s existing midstream infrastructure, potentially supporting development and gas transportation economics.
Tom Elsener, executive vice president of reservoir engineering and senior asset manager, said the company expects the recently acquired properties to generate rates of return above 80%. He attributed those expectations to high-quality reservoir rock, estimated oil recoveries that are 15% to 20% higher than on other properties, multiple productive benches, longer laterals and lower projected well costs.
Elsener said Matador expects well costs on the acreage to decline into the $600-per-foot range. He also cited the federal leases’ one-eighth royalty rate and potential midstream synergies, which were not included in the cited 80% return estimate.
Development activity could begin this year
Bryan Erman, co-president, chief legal officer and head of M&A, said Matador had evaluated the federal acreage for months before the lease sale and began permit-related work immediately after acquiring it. The company could begin operations on the leases as early as late 2026 or in early 2027, he said.
Mac Schmitz, senior vice president of investor relations, added that Matador has 12 operated wells near the federal acreage that are being completed and are expected to begin production in the third quarter. The company also increased planned midstream spending to expand San Mateo and Matador infrastructure toward the federal properties, signaling potential drilling activity near the acquired acreage this year.
Foran said the company expects the acquisitions and federal lease positions to support a strong finish to 2026 and stronger performance in 2027. However, he did not provide a specific 2027 capital spending or production-growth forecast during the call.
Midstream network seen as a flow-assurance advantage
Management emphasized that the acquisitions strengthen the fit between Matador’s upstream portfolio and its midstream network. Foran said Cardinal’s pipeline system complements the company’s existing infrastructure across the Delaware Basin and noted that approximately 100 rigs are operating within 10 miles of its pipelines.
He said growing activity in the area could create tighter gas transportation markets and increase the importance of flow assurance. Matador aims to use its infrastructure both for its own production and potentially for third-party customers, according to Foran.
Erman said Matador assigned $50 million of midstream value to the Paloma transaction and nearly $100 million of midstream value to the federal lease sale. He said the acquired assets stand on their own from an E&P perspective while also adding value to the midstream business.
Michael Frenzel, executive vice president and treasurer, said a significant marketing gain in the quarter reflected the company’s marketing team’s efforts to mitigate weak Waha natural gas pricing. He said Matador does not necessarily expect that gain to recur, but anticipates improved natural gas realizations from the Hugh Brinson Pipeline and other agreements with Energy Transfer.
Management keeps acquisition option open while reducing debt
Foran described the company as being in a period of deleveraging following its recent transactions, while remaining open to future opportunities that fit Matador’s strategy. He said the company’s revolving-based lending group includes 19 banks and that the group has increased its borrowing base, providing capacity should another acquisition opportunity emerge.
He also pointed to drilling efficiency gains, saying Matador reduced drilling time for three-mile wells from roughly 20 days to about 10 days. The company said those operational improvements can lower capital requirements and improve well economics.
In closing remarks, management also highlighted the first Rae’s Creek well, which Foran said produced more than 2,200 barrels. Elsener said the initial well came online stronger than expected and that the company sees potential for the target as part of its future development program.
About Matador Resources (NYSE:MTDR)
Matador Resources Company is an independent energy firm primarily engaged in the exploration, development and production of oil, natural gas liquids (NGLs) and natural gas. The company focuses on upstream operations, utilizing horizontal drilling and hydraulic fracturing techniques to unlock hydrocarbons from key reservoirs. Its asset base includes both operated and non‐operated positions, with a particular emphasis on the Permian Basin, one of the most prolific oil-producing regions in North America.
Matador’s core operations are concentrated in the Delaware Basin segment of the Permian Basin, where it holds substantial acreage in both Reeves and Culberson counties in West Texas and Eddy and Lea counties in New Mexico.
