MTDR
#Thank you, <UNK>, and good morning to everyone on the line.
Thank you for participating in today's call.
We appreciate your time and interest in Matador very much.
In addition to our earnings press release issued yesterday, I would like to remind everyone that you can find a short slide presentation summarizing the highlights of our first-quarter 2016 earnings release on our website on the Presentations and Webcasts page on our website under the Investors tab.
Now I would like to introduce the senior members of our operating staff joining me this morning who are standing by for any questions you may have.
They are <UNK> <UNK>, President; <UNK> <UNK>, Executive Vice President and Chief Financial Officer; Craig Adams, Executive Vice President of Land, Legal and Administration; Van Singleton, Executive Vice President of Land; <UNK> <UNK>, Senior Vice President of Reservoir Engineering and Chief Technology Officer; <UNK> <UNK>, Senior Vice President of Operations; <UNK> <UNK>, Senior Vice President and Head of Marketing and Midstream; <UNK> Spicer, Vice President and General Manager of Midstream; Trent Green, Vice President of Production; and Rob <UNK>alik, Vice President and Chief Accounting Officer.
Before I turn the call over to your questions, I want to briefly highlight a few key points from the first quarter which we felt progressed consistently with the guidance and projections we provided at Analyst Day.
First, the highlights were the increases in our proved oil and natural gas reserves, up 14% year over year to 90.2 million BOEs; and the increase to our proved oil reserves of 56% year over year to 50.7 million barrels.
Two, in the release we have detail on our new well results including completions on the Dick Jay and Dorothy White multi-well pads and our update from our exploratory well in Twin Lakes.
And then on the Dick Jay and Dorothy White, we would particularly call to your attention the outcome and the improvements to the second Bone Springs and to well results in the lower Wolfcamp in what we call the [Fat Zone].
Third is the second quarter is off to a strong start with production increasing at the start of May to approximately 27,300 BOEs per day, consisting of 13,700 barrels of oil per day and 82 million cubic feet of natural gas, up almost 14% from the average first-quarter production of 23,800 BOEs.
The last thing is just to mention again that our teams are doing a lot of little things and throughout the organization that are bringing out back piece good results, and I hope we get a chance to discuss them with you today.
And with that, I will turn it back to you, operator, for questions.
<UNK>, the way we thought about Twin Lakes is the way we do all of our exploration.
We go into it very methodically and want to thoroughly test.
When we drilled Twin Lakes, that area has produced 1.3 billion barrels of oil.
So we knew that it's a petroleum-rich environment, active petroleum system.
And we were confident that we would have a chance to look at a number of different zones.
As we drilled that pilot well and got the information, we expected to see some potential in the Strawn, but the data point was very encouraging and we wanted to test it before we moved on to the Wolfcamp.
The well has performed very well, as you can see from those details, and we still think the Wolfcamp B is still going to be our primary.
But just as we have discovered in Wolf, it's going to be potentially a multi-pay area.
And I would like to invite comment from <UNK> <UNK>, our Chief Geoscientist, because among the other things that we have, it has given us a lot of data and we will drill a Wolfcamp D test later in the year.
But this was just too good of an opportunity to pass up without testing.
The oil is in the area ---+ it comes from the Wolfcamp and we fingerprinted it and it looks promising.
And I think it's important to note this is a vertical well.
So those results that you see are from a vertical well, and it has held up very well.
<UNK>, would you talk about how your teams came to this.
<UNK>.
I would like to add to what <UNK> and <UNK> both said.
This was one of four or five different intervals, <UNK>, that we had identified based on our initial studies to have potential for more oil production.
So, we weren't that surprised by the results, because we had originally identified ---+ there have been over 200 Strawn wells drilled in this area of the county.
And we have been looking at those very diligently in an attempt to find some additional locations.
If I just might add one final comment, <UNK>, just to underscore that what <UNK> and <UNK> were saying, I do think one thing that was interesting to us was, given what <UNK> said, that there has been a lot of strong production in this area before, that we weren't sure but with this location might be a little bit depleted.
But it wasn't at all.
It came in at original reservoir pressure.
So I think that was also a little bit of a surprise to us and they suggest that there is more potential going forward here within the Strawn.
We have been advised that's a trick question, and about going to the fourth rig.
And there are no immediate plans.
It's going to be a combination of circumstances that we are going to visit as a group is that one is the sustainability of the price.
The second is, where would we put the rig to best effect.
And there are just a number of things going into question.
And we are in no hurry to do so because one of the advantages that we have is the three rigs we have are drilling these wells faster.
So, they are more productive.
But we will continue to look at it, and it's about adding value for the shareholders is that we are in no rush to just grow for the sake of growth.
It's all ---+ like <UNK> <UNK> likes to say, it's profitable growth at a measured pace.
So we hope that prices continue to improve and the vendors continued to work with us.
But there's nothing immediate on the horizon until we all feel more comfortable with the prices and the economics of drilling.
<UNK>.
I just was going to say, <UNK>, one of the things that I think is really important is what we have been able to do with the three-rig program.
What has allowed us to do in these lower commodity prices is really get ahead not only on our efficiencies and drilling the wells fast but also efficiencies and optimization, if you will, on completing these wells.
We are able to do this in a time that service pricing is lower, and we are able to really figure out these efficiencies going forward.
So we are set up.
As <UNK> said, it's going to be profitable growth and a measure is.
We do feel really good about where we are at in that timeline and in that system of drilling better wells for less money.
I might add just one other thought, which is that even though we are not willing to do that today I can assure you that our teams are actively planning for when that day comes.
And each of them have many locations that they are excited to get the chance to drill when and if that opportunity comes back to us again.
So they are very active in terms of their planning for when we feel like it's time to go forward.
I think, as we indicated at Analyst Day, our focus at Rustler Breaks this year was principally going to be in the Wolfcamp A, X, Y, the upper part, and also in the Wolfcamp B.
And so we do have ---+ we're going to be drilling essentially all Wolfcamp wells there in 2016, and they will be divided between the A and the B.
I will say, though, that there is a little variety within the B.
There are currently three different landing targets, two of which we have actually released results on and a third of which we have now drilled through but don't have enough information to release the results from, as yet, just getting ready to frac that.
So I think that, as we go forward, we will continue to further refine and define the best intervals within the B, in particular.
But for the most part you are going to see us drilling the As and Bs at Rustler Breaks this year.
Neil, the first Matador grew primarily by acquisition and exploitation.
This Matador has grown almost exclusively from the drill bit and organic growth, other than the merger with Pako, where George and I thought we would be better combining.
So we've done it both ways, doing it the way this Matador has done it with the drill [bed] and organically is more profitable generally because acquisitions are expensive, it's a very competitive process and it's difficult to make them work.
We are always looking around for that kind of opportunity.
We would love to make another HEYCO-like deal.
But they are hard to do.
We will continue to add acreage in our various areas, bolting on additional joining tracks and trying to acquire additional interests in our units.
Our geological teams, I think, do a very good job of picking out good buy areas.
Our exploration has worked out well for us as we move from Cotton Valley to Haynesville to Eagle Ford to the Delaware and then up there at Twin Lakes.
So, they have got some very interesting ideas that we are considering.
So, we consider it an opportunity-rich environment.
And it's the kind of rating opportunities out there ---+ good, better, best.
And for the most part, opportunities that we've seen have come from buying undeveloped acreage and incorporating them into our plan.
But we would welcome another HEYCO-like merger.
We would welcome other opportunities.
But we are not planning making that critical to our growth or development.
We want to be sure that we have those opportunities in hand that assure us of our continued growth.
And in that regard I think you know we still stand by, we've got 3,500 locations out there, and 1,400 net.
And at drilling 50 or 60 wells a year, that's 20 years.
So we have got a lot in hand.
But we're like that rancher.
All we want is what we have and what adjoins us.
I just want to build on what <UNK> is saying there, to your question about the opportunity set and how you expand that.
The recent success we've had that we just mentioned on the second Bone Springs down at Dorothy White and the lower Wolfcamp and even the other interval that we've targeted at Rustler Breaks and the Wolfcamp B ---+ that's three different opportunities right there for us to expand on the assets we already own.
<UNK>, thanks.
We would like to compliment our drilling and completions group and our production group and all of our team.
They have all contributed to this cost improvement.
And we are really, really proud of them; and our area teams for our different prospects, we are really proud of them.
And there are a lot of little things that our production group, for example, sometimes doesn't receive all the recognition.
But cutting some salt water disposal costs in half is one example, and changing out the comps.
It doesn't get the headlines that some of these discoveries in these big wells do, but all those little things are important, too.
And <UNK> <UNK>, our Head of Operations, is just a fantastic leader.
And he and his group ---+ they take great pride in finding ways to drill these wells faster and better and complete them faster and better, which are very sustainable savings.
And <UNK> <UNK>, our President, has always had a policy of working with the vendors, he and <UNK> have, of trying not to beat them down but ways to add value.
Patterson has done a good job with the rigs and the bigger pumps that have made a huge difference.
And we have been working with Halliburton recently.
Their crews are efficient.
Schlumberger has done a real good job (technical difficulty) company.
All these people, we feel like they are working with us.
And that's just making a difference.
I just want to underscore what <UNK> is saying there.
What we really look for in our vendors, and we have been very pleased with our vendors during this downturn, is how we create value together.
We do expect a good price, we expect a great price.
But when we go to our vendors what we really ask them is, how can you help us create value.
How can you help us do things.
And one example that I will ask <UNK> to talk a little bit about is just, on the drilling side, how we are able to improve the great efficiencies in drilling these curves.
You're going from vertical in a well to 80 or 90 degrees, and they have been able to do this at over 90 feet per hour.
So they drilled the curve recently in a little bit ---+ in around 10 hours.
It's pretty amazing.
Just like <UNK> is saying, the improvements in technology and our guys working with the vendors are finding different bit/motor combinations and making little well pads and deciding exactly how to drill each part of the well, and that has led to the faster curves down to 10 days now ---+ I mean 10 hours, I'm sorry.
(laughter) And we expect more to come.
The guys are working hard together.
They get together and sit down and go through each segment of the well and find ways to get faster and faster right now with our contractor over the next month and a half will be sitting down with everyone that works on the rig, all the tool pushers, crews, superintendents, sitting down and going start to finish on every well, and identifying any place there we can continue to get better.
So we are not happy with where we are.
We are happy with drilling wells fast and setting records and meeting all our goals for the year, early in the year.
But we're not going to stop there.
We're just going to keep getting better and better.
And with the faster curves, one of the things that I think you saw was down in the Wolf area.
We recently worked together, figured out a way to eliminate one of the casing strings.
Just that alone saved $600,000 in a reduction in costs in that well.
That opens up a lot more drilling and development for us in that area.
That's a big deal.
We've gotten better with our frac crews.
And where we were getting 3-4 stages the day, now we are getting 5-6 stages a day.
That efficiency ---+ that's super for us.
We are trying new technologies now while the costs are down and efficiencies are down.
And some of the things we are doing there ---+ we have done the diverters and surfactants to improve well performance, also cut costs.
We are using the [burst port subs] and [dissolvable ball] technology.
That eliminates coiled tubing work, eliminates drillout costs and it hits the wells back faster.
They are online.
Since we don't have to go in and drill out the plugs, if we got four wells on the pad, while we are moving over and fracking the next one we can go ahead and start flowing the other one back.
That gets production back two weeks quicker.
So, there's a lot of good things going on.
We are always big into the bigger frac jobs.
We've had opportunities to try new things there, bigger designs, moved up over time, from 20 to 50 barrels a foot and 1,300 to 3,000 pounds per foot.
So all of these things are big.
We are getting to see the improvements now and really happy with our success and really happy with all the teams and guys in completion drilling, production and everything they've done for us.
It's amazing.
Did that answer your question.
All those things are true.
This is the area that George Yates and I met.
This is how we came to work together is in the Strawn ---+ there was a Strawn play in the early 1980s, 1984-1985, up through the rest of the 1980s.
And these were great wells.
This is, at that time, about the only place in the country you could find drilling rigs.
And so these were great wells then.
They deserve another look now with all the modern technology.
We drill down to get to the Wolfcamp and do the course.
We have the course in the Wolfcamp and the Strawn.
And it was just that this was ready to test.
You have a vertical well, an inexpensive vertical well.
We wanted to measure that opportunity because we knew ultimately, after this one, since it was above the Wolfcamp it was logical to test that first and then move on to the Wolfcamp.
And it has performed well, so now you have two proven zones of interest because when you drove the Wolfcamp it's charged the Strawn, just like other parts of the Wolfcamp, there are several different members.
And we like the outlook on this.
I think it sets up, obviously, other locations.
But as we approach this, you know how deliberate we are about exploration.
We tried to be very methodical process and this data.
And it's a great data point, but we think we've got others behind it.
<UNK>.
Yes, I think it's a really great result in Strawn.
But it doesn't change our expectations, our focus on the Wolfcamp in this area.
Just the notion you're able to drill down into the Strawn and make a nice well is great.
To be able to identify that the oil in the Strawn does come from the Wolfcamp in this area is also encouraging to us.
And we are evaluating the data from the core.
We want to make sure we picked the right landing targets and get off to a good start in the Wolfcamp D there as well.
And that's really what our teams ---+ <UNK> is really, one of the focuses he's on is rating the different landing targets good, better, best.
And this will be an important point on that.
They will look at that, and the engineering teams.
And I think that's something that we really learned over the past four or five years as these teams ---+ the more they work together and the more they seem to like it and the better they do and there's intermixing as guys move from leadership of one team to another.
And I think that's cross-pollination, in agriculture terms.
But it works here.
Tom Elsner is an example.
Tom has worked all of our different areas at one time or another.
And so have the other guys.
And they will just all pitch in.
And really, the whole [executive team] ---+ I couldn't be more proud of them and what they are accomplishing.
And we just think the outlook is really encouraging and we are adjusting to these lower prices, the whole industry is.
And if things get better, that's going to be wind at our backs.
But we like the outlook for the remainder of the year.
Wait, wait.
<UNK> has ---+ he's raised his hand, wants to ---+
You asked about horizontal potential here.
And we are definitely looking at that, given in the Strawn.
Of course, we were thinking horizontal all along in the Wolfcamp, in this area.
Given these results, these are more conventional reservoirs.
Not only is it a vertical well but we did not have to pump the hydraulic fracture treatment.
This is all natural flow that we are seeing out of this reservoir.
And so, we are evaluating our data right now to look at going horizontally in this interval.
And so, the core lab is finishing up the analysis.
We're going to get a final report here in the next few weeks and we're going to be looking at all of that to decide not only what we are going to do with the Strawn in the future but where we're going to be landing our Wolfcamp test later this year.
<UNK>, that question sounds like someone who once worked as a geophysicist for Exxon.
<UNK>, do you want to ---+.
And Arrowhead is working.
As you know, most of Arrowhead is HBP, so we have been delivered about going in there.
But our activity is going to be picking up.
We have gotten approval to drill three extended-reach tests in there from the forced pooling and we have got approval on that.
So those ---+ they are the Mallon wells that will be coming up.
We had a good test, operated by Yates, in there as part of our legacy acreage from Yates.
There has been good tests by Concho, some not operated.
But we're certainly going to be more active there soon.
<UNK>.
Just to your question there about costs, I think <UNK> mentioned that there are going to be longer laterals.
Each lateral is scheduled to be about a 7,500-foot lateral in the third Bone Springs, and they are near to our Cimmaron well that was also drilled in the third Bone Springs, which has been a good well for us.
We are anxious here to be able to drill the three longer laterals; our acreage sets up for the ability to do it.
And the cost of the wells will probably be about $7 million each, I would say.
But a lot of that is due, of course, to the fact that they are longer laterals.
It's a good question and something that we look at and evaluate on a continual basis.
If you go all the way back to our Eagle Ford design, you can see we went through we characterize as seven different evolutions.
And in reality, it's probably 27 or 47, whatever it is, just different little knobs that we turn all along the way.
So we are right square in the middle of that same process in the Delaware Basin.
So, when you hit on a few of the key things.
We've gone anywhere from 20 barrels a foot all the way up to 50 barrels per foot on fluid volumes and all the way from 1,200 or 1,300 pounds per foot to 3,000 pounds per foot on the proppant volume.
And so we're continuing to evaluate those.
The initial wells we did, let's say at Dorothy White, were 2,000 pounds per foot in the Wolfcamp.
So we've got a couple years that we are looking at some of those.
The 3,000 pounds per foot jobs are newer.
We've got months as opposed to years.
But we are continuing to evaluate those.
And the nice thing about it, and we said it earlier in the call.
But we're able to do this in s low-cost environment.
So we are able to take some bigger steps as we go along the way.
So all that's in the evolution process.
Some of the other things that <UNK> was talking about, the diverters that we have been using, that's the initial things you saw in the release, the initial tests on that is very favorable, showing a 38% increase in production in the first 180 days of the well.
Still, that's pretty early.
But that's favorable.
We've tried two different approaches on surfactants.
We've tried an increase in one surfactant compared with the use of a different form of nanosurfactant.
That test is still too early for us to call.
We changed first cluster spacing on some of the wells; we've tightened them in an effort to ---+ as we did in the Eagle Ford, when we are fracking offset wells, to try to frac more of the rock, get more stimulated rock value near wellbore, using it in conjunction with the diverters, which I think is an interesting concept that we have done on some more Dorothy White wells.
So it's continuing to evolve.
The notion that bigger is better, I think, is typically true.
But there is a point of diminishing returns.
So I think at this point we are leaning more towards the larger jobs and I think that's probably where it's going to land out.
But we'll wait and see.
I think that, yes, the answer is just we would like to see just a little more well performance before we look at doing that.
I suspect that we probably will end up scheduling a few more Bone Spring wells.
This latest one that we drilled in Wolf, the Big J 124, I think, really exceeded our expectations.
We expected to see a good well, but we did change the frac design on it.
We went to a little bit larger job and it really seemed to make an impact.
So we will, I'm sure, do another well or two and see if we can replicate that kind of result.
I really am very encouraged by that because I think that you are getting ---+ with this well, you've got a little bit of Wolfcamp kind of performance out of the well that costs a couple million dollars less to put together.
The pressure isn't quite as high, of course, so the [ERs] may be a little bit less.
But clearly, this was a very, I think, significant well for us.
And given the fact that, as <UNK> said a minute ago, we can cut out an intermediate string of casing here, save ourselves $650,000 that way, and that the guys continue to make improvements with the frac design, I think we're going to get these wells under $4 million.
And if we can deliver those kind of results for under $4 million, these will be highly economic wells for us to drill.
So we're probably going to ---+ we are going to probably take a chance and take a shot at drilling a couple more of them just to see if we can replicate this.
And I think we are all optimistic that we well.
What I would say is begin by saying this is we have we have Midstream assets in North Louisiana and the Eagle Ford and we have other gathering and saltwater disposal and an oil gathering still on that in the [Mentone] Wolf area.
And in addition we had this last one at Rustler Breaks.
So there are four distinct areas.
All of them have received attention.
The two areas that have received the most inquiry or people, expression of interest, have been Rustler Breaks and the remaining Midstream assets at Mentone.
And we are continuing to evaluate ---+ when we receive an expression of interest, we give it what we feel is an appropriate consideration.
That we are not running a process, but ---+ and one of the resources that we're continuing to receive these considerable expressions of interest.
We are looking for a long-term partner on it that ---+ and we expect to be the anchor tenant.
Most of the inquiries have been from PE, but you are getting expressions of interest from other companies as well.
They are not lining up outside to come in, but it's consistent and it's regular.
And we are evaluating those opportunities because, with the success both in seeing how they are affected by the successes both in Wolf and in Rustler Breaks, well, how will it fit into the overall strategy.
That was one reason we elected to raise money, as we did, so we would not feel pressure.
We'd have a little more time to evaluate and decide strategically how it all fits in.
Very impressed with the work that our Midstream team has done in finding new markets, saving money here and there.
The technology is working.
Inlink has done a very good job operating that plant.
So the design work at our Midstream deal worked out very well.
That plant is now, with our gas that's running through that, is at capacity.
So I think that has been a win-win deal.
But it's also proving that the design work that our team has done is on target, too.
And the only hesitancy at Rustler Breaks is design this to fit the increased output that we have there.
With the better results we want to be sure that we have designed it for the right fit in the Right way.
<UNK>, what did I leave out there.
I think you pretty much hit it, <UNK>.
Yes, we have had quite a bit of inquiry as far as for our assets, especially in the Delaware Basin.
We get phone calls probably on a weekly basis, anyway.
But there has been quite a bit of traffic coming in.
Does that answer your question then.
So we haven't decided.
The fortunate thing is we don't have to rush into this.
We, again, have nothing borrowed on our commercial line of credit and we have money in the bank, over $100 million.
So we are trying to do it in the same methodical fashion that we try to do most everything.
And we will ---+ again, it's all aimed at building value for the shareholders.
I don't think I said that very eloquently, the whole thing.
But it's really encouraging and it's becoming an important part of our business.
And I think our Midstream team has really knocked it out of the park since it came together a couple of years ago.
<UNK>, that's an excellent question.
And I can't give you a very precise answer because our ideas and valuation are evolving.
Two years ago, as we were getting started, it would have been easier to say oh, yes, we will put this together and do something.
That is clearly ---+ when we meet, we discuss it.
There's just a lot of circumstances to consider.
And it's a high-class problem.
I will just say that, because the Midstream is really doing good.
The E&P are doing good, and fortunately we haven't had to pick, well, we have money enough for one but not for the other.
Or (technical difficulty) ---+ you know, that they get the leftovers.
It just hasn't worked out, and fortunately the market has been open and we have been able to do both.
And that seems to have generated, I think, a lot of value for our shareholders.
The Inlink deal was a real boost.
(technical difficulty) [Sofring] was a real boost.
And the way Rustler Breaks is coming on, we are going to be really happy.
We built the plant and didn't sell it off the first chance that we got.
Same thing down there in Mentone having right now where we are having this gas come on to the point where it's filling that plant at capacity, we are glad we have a gas gathering system to divert some of the gas to enterprise so that we're not having to flare.
And I really commend our production group because, as of today as we were preparing this, I asked how much we are flaring.
And the answer was nada.
And you couldn't have done that if we didn't have either control, operational control, or influence on this Midstream and if there has not been close coordination between Midstream and production.
So we see not just financial advantages, some operational advantages.
At the same time, some of the expressions of interest have been interesting enough that it's hard not to give them some serious consideration.
So it's like ---+ <UNK>.
I was just going to add to that, <UNK>, I think one of the things, <UNK>, that we take comfort in is how we approach these midstream assets, where we build and what we build.
And <UNK> said it earlier; we build them.
They are need-based.
So we are not going out and having to find people to come on to our systems to make these things work.
They're going to work.
So the option for us to monetize part of it is a good option.
The option for us to keep it is also a great option, you know.
So we don't have any have-tos in here.
It's a good problem for us to be looking at.
Well, I think that we have pretty well always talked about the X and the Y as being these little individual 20-foot or so thick sands, the X being a little bit shallower than the Y, that we have been completing wells in.
So at times we drill wells in the X zone, and at times we drill wells in the Y zone.
And we have been developing those in a bit of the W pattern across our acreage there.
So it's really not ---+ it wasn't really intended to signal anything other than some of those wells penetrated the X targets and some of them penetrated the Y target.
But it's, I think, pretty consistent with the messaging that we've had about the upper Wolfcamp all along.
What we typically do there is we will go ahead and we will set up our perf cluster spacing.
Let's say it's 50 feet.
But what we will do when we are using the diverters is actually put more per clusters, per stage.
And the idea is we will pump a portion of the stage, say half of it for discussion purposes, and then we will drop these diverting agents.
And the notion is that some of the perf clusters are taking most of the fluid at any time during the frac jobs.
So the diverters go down and plug up the perf clusters that are taking the most fluid, and when that happens you will see another fracture initiation point on your pressure curve while you are fracking these wells.
So what we believe is we will frac part of the perf clusters during the passive stage and then we will look those up temporarily; they are dissolvable material.
And then the second half of the frac stage will go into different perf clusters.
The one that you talked about on our <UNK> Burton Wells, we figured that we saved around $75,000 on the completions by going with the diverting agents.
And it's related to the fewer frac stages.
So you are paying less hydraulic horsepower.
The volumes, the fluid and profit volumes are the same either way.
It's just how much horsepower you used to get it in place.
Yes.
First is, those are great assets and we think that in the Eagle Ford that gives us another oil bank.
We've got 250 locations to drill down there.
The economics, just the direct economics of drilling down to the Eagle Ford and completing there are very comparable to put we are experiencing out there in the Delaware.
The difference is it's just basically one zone.
You drill down to the Eagle Ford, you turn right, you make your horizontal.
But out there in the Delaware, you've got a number of different pay that, once completed, you pick up more PUDs, you pick up more probable and possible reserves.
That's why right now it has a higher allocation base.
But we gained a lot of skill.
<UNK>'s team did a great job in reducing the days on well from close to 20 days to the last ones were six to seven.
They really learned how to drill them and complete them.
And again, if someone were to come in and make us a really strong offer, we would make a deal.
Now, we are not going to sell it on the basis, I don't think, of $35 oil.
You've got to project in what we think is the comparable value.
But we've showed, over the years, in selling first Matador, in selling Inlink, and selling Haynesville, part of Haynesville, Chesapeake.
If someone comes in and makes an offer, we are a public company, we are value-oriented, we will make a deal.
Haynesville also has a lot of promise.
We've got a lot of locations over there that ---+ those are great wells.
Some of those are 10-12 BCF wells.
They have upheld very well.
We've got a lot of locations and we can put a rig there to work if we wanted to when gas prices are better.
We are advantaged currently over there because we have ---+ in our deal with Chesapeake we kept those rights.
So we have close to 90% net revenue interest.
We've got favorable gas prices our marketing group has achieved.
We have wells to operate and then we also reserved all of our Cotton Valley.
So it's a wonderful gas asset.
We get calls from time to time.
But again, I don't think selling at $2 is a good deal unless we really needed the money.
And at this time, we don't.
So it's going to have to take a strong offer from somebody for us to want to do something because that gives us some valuable options in that we could drill there if we needed to and earn good rates of return.
But in the meantime, the gas and oil is not going anywhere.
It gives us valuable oil and gas options that, as prices strengthen, they are just going to go up in value.
We also like the diversification of risks.
That helps us with our ---+ from the ratings services.
It's an incidental thing.
But again, we are open to it.
But we also see value in retaining it and giving us those valuable options.
<UNK>, would you had anything to that as CFO.
No, I don't think so, <UNK>.
I think you handled that very well and were very complete with it.
In terms of capital allocation I think you know, <UNK>, that we have very little of our capital for 2016 allocated.
And we have got about, I think, about $6 million going to the Eagle Ford and about $5 million going to the Haynesville.
So it's only 2% or 3% of our budget for this year.
And honestly, we operate some, other companies operate some.
Chesapeake operates some.
I would say the other companies and Chesapeake have all done a good job, and we feel good with the small allocation but the big option.
It's all HBP.
So as prices improved we were probably get more looks.
I think that is, again, still a bit early days for us.
But I think we are beginning to certainly make progress there.
But in the Wolf area I think we've got enough drilling behind us that we are pretty much in development mode.
We've got our facilities and infrastructure pretty well built out there, so that certainly will begin to pay dividends as we go forward.
But even at that, from time to time we still want to be able to branch out and test another zone like the second Bone Spring or drill another well down into the lower.
I think before too long you will see us wanting to jump up and test the Avalon in this area.
So, there's still exploration opportunities in each of these areas.
I think in Rustler Breaks we're still a little earlier there.
Clearly, we are building out the infrastructure.
But there's still a little bit of that to go.
And in all these areas, as we get more into development mode I think you will see us benefit from economies of scale on the production side that go with that.
So we will be able to take advantage of the operations there to help to further reduce our cost.
As our production goes up I think that on a unit basis that you will see our costs go down.
So I think all those things will help.
But again, as we continue to drill better wells for less capital investment, that also will help to improve the returns.
So I think things are headed in the right direction.
To add to that, <UNK>, you make a really good point that when you think about doing these different things ---+ second Bone Spring, Wolfcamp X and Y, lower Wolfcamp, Wolfcamp B ---+ they are all a little bit different.
So, as you go through and do these things, you learn something from each one of those that may translate to something else.
So, every time we drill down to a Wolfcamp B, we drill through the Avalon, we drill through the second Bone Spring, we drill through all these different intervals.
And so we are getting better at doing that in anticipation of when to do this it will be something else.
For instance, the Avalon ---+ we will know how to get there quicker.
One thing I might just add in closing on that question, <UNK>, is that I do think that the finding costs of a lot of these wells are really quite good.
I think that a lot of the Wolfcamp ---+ we're probably beginning to look at plus or minus $10, sometimes sub $10 finding costs.
So, I think that also is very attractive and something that also helps with the returns.
<UNK>, I would add a couple of things that I've learned from my 35 years' experience.
One is look at the other side of the coin.
Following up what <UNK> says, you are getting your [finding] costs down there in the range of $10.
Where some say, well, you shouldn't be spending the money now, go down to two rigs, one rig ---+ if you believe that prices will strengthen over time, that the laws of supply and demand work and they will increase in the coming year and years to come, then establishing finding costs down there in the sub $10, as those prices rise, analysts will be commenting on what great margins we have.
Well, the great margins won't be just because prices return in 2018 because what we do in 2018 ---+ part of those great margins will be observed because, at a time like this, we cautiously but methodically kept up the pace and delivered $10 finding costs.
That will help these (technical difficulty) assets that provide better to average margins for someone who is coming in to a new entrant.
And then the other thing that we are establishing again on the record reserves that we are establishing ---+ yes, that isn't necessarily cash flow all today.
But those are assets that will provide assumptions and increase value in years to come.
That's the way we see it.
I think prices are much more likely to go up than down.
It feels like the worst is behind us.
But if there's another spate, we think we are aware of that.
We were very pleased with the offering and the indications of interest that we had.
And we are really excited about the progress.
But what ---+ and what I found over the years is that one is better off to look at it not from a single point of view, what is your precise rate of return today, but also look at the value you are establishing, the options you are establishing, the organization, the innovations you are establishing, the new technology you are learning.
All these things will factor in when you think of yourself as a going concern.
Also your outlook on prices, all these ---+ you know, it's just more [complex] (technical difficulty) sometimes, and that's why you have to be cautious, you don't go too fast or you will miss out on some things and make it risky.
But if you go too slow, you're going to miss out on some wonderful opportunities that are only available today.
We think this year is off to a really strong start.
We are where we wanted to be and where we projected we would be at the analyst.
And the outlook for this next quarter is, look, we are going to have an increase in production.
We've already experienced an increase in reserves.
And the organization is stronger.
We are better in every area ---+ Midstream production, drilling, completions.
And the teams are coming up with lots of ideas, good technical work.
I don't want to ---+ and the macro environment, I think, is improving.
Relationships with vendors is, I think, excellent.
So, there's some real intangible progress going on, along with just the simple rate of return, the cash flow coming back.
And I think you will continue to see that progress as it goes along.
And we try to be long-range thinkers and worry about the long-range price.
And when we first went public, people worried about us because we were 90% gas, weren't oily enough.
And we went down in the Eagle Ford and established ourselves there, and then we were pushed back because we were not putting all of our money back into the Eagle Ford.
But we were establishing the Permian position.
We think those were the right decisions.
And even out here in the Permian, we ---+ a couple years ago, you may remember that on these conference calls, people were giving us no value for the Rustler Breaks.
That is turned out to be a good move.
Midstream ---+ until recently, we were getting no value on the Midstream.
So I think Matador has a lot of assets that are not always appreciated because I think we think of ourselves as being fairly low-key and waiting till they actually prove themselves.
That's an example.
And now Twin Lakes, for which we are receiving no credit, is an exploratory success with room to grow.
And so I give a lot of credit to our Board and our management staff to have reached those decisions.
And I hope that answers your question, <UNK>, that I think you have to hope that you ---+ or you all evaluate however you want.
But in fairness I think you have to look broader and look at the intangibles and look at the decisions that we made, like going to the Delaware before it was cool.
We didn't get much value, but it turned out to be right.
Going to the Eagle Ford and being on the 9,000-foot contour didn't receive a lot of credit until it happened.
And Midstream has been the same way.
Thank you all I'll do a good job, the analysts.
It's just we have the advantage of more information that we try to get out to you.
And in that regard, I hope you and others that have commented ---+ we've had some comments that our press releases are too long.
We've tried to condense it.
So if there's a comment card, also let us know.
If you want us to condense it more or you like the detail, and we will try to comply because we are really trying to get it out to you in the form that is best suited to you all.
I'm serious about the comments.
Let us know if we are getting the right information to you.
It's a great question.
And we are pursuing along parallel lines a number of opportunities.
We are pursuing increasing our interest in the sections from the non-op, if they want to sell.
We want that to be a volunteer basis, don't want them to feel they have to.
But if they are interested, we would welcome that discussion.
And the same thing with adjoining acreage to any of ours.
And we are looking at some new areas.
<UNK> and his team are full of ideas on other areas that we might go.
But it's fitting all those things into a puzzle.
We are pursuing all those lines.
And we can't ---+ we have got to let the sellers decide that ---+ you wait to see where the thing breaks.
You call a number of plays.
It's like you pitching, you know, you serve up fastball, curves, sliders.
You just hope they bite on each of them.
Well, no, any time, <UNK>.
Come see us.
All of you, come see us.
Thank you, operator.
I think that we appreciate your questions and interest and want to extend an invite to all of you to come see us.
This is something we are really inviting institutional investors, in particular.
Come see us and have lunch with either our executive committee or our young professionals and get to know us because we've found that we like to know our shareholders.
And we want you all to know us and see that we are planning not just for today but two years from now, three years, five years, whatever.
We will continue to try to uncover and convert these various opportunities we discussed today into value for our shareholders.
And just by way of a personal note of Matador trivia, you've heard the Dick Jay being prominently mentioned in this conference and in this news release.
Dick Jay is my friend from my boyhood in Amarillo.
We had a paper route together beginning in fourth grade and have been business partners involved, ever since, which is now over 50 years.
So when we needed a good well, we called his name out of the bullpen and we put it on the bulk oil pad.
And we have advised Dick that we are glad he came through.
And they are some of our best wells.
So when you need a little boost in the oil business, just go back and get your fourth-grade paper route throw and name a well after him.
I don't recommend family members, but I do recommend (laughter) I do recommend friends like Dick to name wells after.
And a number of our other wells are being named for some of our long-term shareholders in New Mexico.
So I hope that adds the least bit of color that we are really serious about when you to come see us get to know us and us get the chance to know you.
And thank you again for your interest.
The teams are back to working this afternoon, and we will see what we can do.
