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Good morning, ladies and gentlemen and welcome to the Second Quarter 2021 Matador Resources Company Earnings Conference Call. My name is Tina, and I'll be serving as the operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website through August 31, 2021, as discussed in the company's earnings press release issued yesterday.
I would now turn the call over to Mr. Mac Schmitz, Capital Markets Coordinator for Matador. Mr. Schmitz, you may proceed.
Thank you, Tina, and good morning, everyone. And thank you for joining us for Matador's second quarter 2021 earnings conference call. Some of the presenters today will reference certain non-GAAP financial measures regularly used by Matador Resources in measuring the company's financial performance. Reconciliations of such non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP are contained at the end of the company's earnings press release.
As a reminder, certain statements included in this morning's presentation may be forward-looking and reflect the company's current expectations or forecasts of future events based on the information that is now available. Actual results and future events could differ materially from those anticipated in such statements. Additional information concerning factors that could cause actual results to differ materially is contained in the company's earnings release and its most recently quarterly report on Form 10-Q. Finally, in addition to our earnings press release issued yesterday, I would like to remind everyone that you can also find a slide presentation in connection with the second quarter 2021 earnings release under the Investor Relations tab on our website.
I would now like to turn the call over to Mr. Joe Foran, our Chairman and CEO. Joe?
Thank you, Mac. It's a pleasure to be here today to have this kind of report to pass on to you, normally I'd say two or three things in particular to highlight. But there's a lot here, I would think Matador had an inflection point, it's been an exceptional quarter, and everything came together for us great effort by our staff, both here in the office and in the field. And I think the results are sustainable because many involved improvements in the process, and wells that will produce for years to come at record low cost. So I invite you all to read the prepared remarks, they're a little long to read to you, but hope that you'll take the time to look those over, we included some slides that are on our website. And I'm going to go quickly through those because that how much what I'm trying to say, but also to share with you some of these accomplishments. And so if you look at slide A, you'll see that we had record EBITDA and free cash flow and everything was above expectations. The productions was higher, the costs were lower. And each group contributed to these results.
Also exciting for me is that we repaid another $100 million on our debt, so our debts cut in half. And we've gone at the last year at the heart we were nearly had a leverage ratio with 3 that's now down to 1.8. And I like staying in the ones. So the balance sheet is now having straightened as we predicted, as we were able to bring the BLM properties online. The quarterly production was better than expected that these BLM wells many of which are going to produce a 1 million to 2 million barrels a piece. We have more zones than we really had originally anticipated. And also most important and whether sustainable, we have moved our capital efficiency really forward so that now in 2018 we grew one well, it was over two miles, that was two miles or more. And this year, every well we drill will be two miles or more except one. So we've moved our efficiency from about 2% to 98%. And the other thing, that we have a max calm room that follows our wells in real time as they're drilling horizontally, and they've increased our time and zone from 70% to 100%.
So you can see what kind of difference that makes in both reserves and production that can increase your productive footage by nearly a third. And this effort to improve capital efficiency follows all aspects of our business, we will try to be good operators who both watch revenue and expense and capital projects and then per unit cost. So everybody is in an effort to provide the shareholders make the most use of the shareholders capital has been invested with us, we're already exceeding second quarter 2021 guidance. And that's enabled us to have some operational flexibility to bring some projects forward, and really start preparing for 2022.
The next slide I have is on slide B, which shows the increasing contributions of our midstream asset. And not only does it have these important financial contributions, but it has operational enhancements. To know that we will be have our pop out there with wells ready to come online. So from the environmental viewpoint, you're not trucking, you don't have the emissions problem, the pops are ready, and they take away and then the operational enhancement, is that because San Mateo, the parts are waiting and ready to turn on the Rodney Robinson wells, and the bores wells, and they were producing too much volumes for it to be trucked. Plus, your third party may or may not be there. But our production group made it clear that they'd be there with the Pops. And they were no matter what. The third thing is what I've already touched on is the borrowings outstanding. And you can see that immediately prior to the BLM deal, we had a leverage ratio of 1.8. And then as we did that project, the debt, we borrowed the money, low interest rates, to do that - to do the projects on the BLM acreage, and it reached high in the third quarter of 2020 a year ago, at $520 million. And we've reduced that now to $240 million in outstanding borings for the back to the 1.8 ratio, so good planning by the financial group, good cost control of the operating group.
And now those wells are delivering record production rights. And we'll exceed the original estimates that we had on what the cumulative production would be. The next thing is we try to establish with you is credibility that when we set a priority, we achieve it and give you markers. So you say whether we pass those milestones or not, and 2021 priorities deliver free cash flow, pay down debt, initiate dividend, continued capital efficiency improvements. The focus on the federal properties, grow San Mateo, have all been achieved and earned the San Mateo performance incentives, as well as the employer proactive hedging strategy. So we did all those priorities. And all the milestones in June say we've done the first three the next bores wells, we'll get them turned to sales, and we still have the greater standards very to finish, but it's underway.
So in the left corner, you see the capital efficiency what I was talking about cutting the cost in almost half and the San Mateo EBITDA grow. And then the capital efficiency what also mentioned that we've improved capital efficiency is as measured by the length of your lateral feet drill in your various wells from 1% in 2018 to 98% today. So going forward, we tried to give you, provide you with some guidance and that we are - the outperformance of the first half the year has allowed us to accelerate the Voni completions, it sets us up better for 2022. So we get a full year of production from these wells. So we're very excited as good as we're doing here. We'll do even better next year. And we'd like our chances.
So with that, I'd like to turn it back and open the floor for questions. But one way, if I have not recognized one of the groups, I'd sure like to make sure I do the universal shout out because it was really exciting the way that every group from the field to the office or within the office, each department did its part in achieving these results. So, Tina, over to you for the first question.
[Operator Instructions]
First question is from Scott Hanold with RBC.
If Joe, you had indicated that the operational change really sets up for a good 2022. Can you all provide a little bit of color like what pulling forward these wells? We can kind of see what happens in 2021, based on your guidance, but can you talk through, like what that might look like in 2022 at a high level? Based on our numbers, it looks like you all should be able to get firmly above 100 a day, in 2022 at this point.
Yes, good morning, Scott. This is David. I think that we expect to see quite a bit of improvement next year, as a result of what we're doing here. I mean, when you think about it, as Joe mentioned, not only will we turn these Boros and Stebbins wells in the fourth quarter, some of which we'll have to share the end the Boros well, some of them for a little bit. But we'll also have this, the pull through from turning these mining wells to sales now probably in February, as opposed to April, May, as we were originally planning so that in of itself, should help us out quite a bit in terms of our expectations for 2022. I don't know that I want to comment on whether we're going to be at 100,000 BOE a day. At this point, I think it's a little early, I think we'll want to wait and see, want to wait and see what - how these wells come in what they do, if there are any other modifications that we might make, between then and now, but, look, I think that we're very optimistic about the about how 2022 is going to look and, I certainly think that the first quarter of 2022 will start off very well for us.
Okay, fair enough. And, maybe a little bit on your federal acreage, obviously, you all have secured a number of permits, and I think you have some extensions that, we're looking to get in addition to some sundries. Can you give us an update where we're at there?
Yes, sure. First off, I think we feel like that things are going very well with the BLM, and officer in Carlsbad, and we certainly, thank all of our colleagues there in that office for their help in pushing through the various approvals that we need. I think as we mentioned on the call last time, we have focused more in recent months on getting approvals of the sundries, which are sort of the amendments to the existing permits. And a lot of that is because it's allowed us to make some modifications to the drilling, our completion designs that we really have - that we'd originally proposed for those wells. As an example, one that I find often is the fact that at Stateline, we had permitted all those wells for four strings of casing pretty early in the process, our drilling team determined that those wells could be completed or drilled and then completed, which is three strings of casing, and so but in order to achieve that, we had to go back and get a sundry or an amendment to the permit.
Those have all been granted. And we've been really focused, Scott, on kind of getting those just sort of ahead of the spading of new wells. And that's all gone great. I don't think we've missed a beat there. So I think that's all proceeded very well. You are correct. We did have an extension that was pending. And I'm pleased to say that we got it. So we have received the first extension and feel like that process looks like that it's working well. And we'll continue, we've got more in the hopper, and we'll continue to pursue that as well. So all-in-all, I think that our team is very pleased with the way things are going and again, appreciate the help of the BLM, certainly appreciate the help of our own staff, to continue to do what we need to do to make sure we've got the permits that we need. I think we're all gratified that in this first seven months of the year, that really, we haven't faced any significant impediments at all to our ability to drill, complete, operate our wells and things continue to move forward just fine.
Your next question comes from Neal Dingmann with Truist Securities.
Sorry about that, guys. I couldn't help but notice, guys, just the upside we're seeing on San Mateo, you guys have been laying that out now for quite some time really come to fruition. I'm just wondering what again, you're talking about $70 million already in EBITDA potential this year, I'm just wondering, what type of growth could we see there? Could that go commensurate with what you might see in the upside? I mean, just any details, David, you or Matt or other guys could talk about that.
Yes, Neal, this is Matt, good morning. Thanks for the question. Where we stand right now, Neal, we've kind of, we've built the bigger components of our midstream business there. We are kind of in the add-on stage, if you will. So I think one of the things that we're looking forward to be continuing to service Matador certainly is the tenant, anchor tenant, but also add any third party volumes. And so as we've done that, and we've been successful this year in all three parts, we've added oil, we've added water, we've added gas. So which is the point where if we get a customer that comes along with enough volumes that we need to add to that system, it's not like we have to have a big investment to go that direction, we can go ahead and say it's water, we can go ahead and drill in salt water disposal, well, here's some salt water disposal well, if it's just connecting along pipe, it's a pretty quick build to get that done. So I think we'll keep our eyes on that. And if we do end up landing a big fish, certainly something that we would do is make sure that we have some sort of commitment from that. That customer that would assure us that we would get our assets paid for.
Yes, I'd like add. Neal all add to that is that Matt and his group and Greg and Matt Spicer have done a really good job of attracting quality third party business to us for companies that are A rated, the big companies and if you see their client list, there's not one company that dominates it. It's a whole bunch of very long time operators after just a quality list. So that takes also a lot of the risk out of the project. And we're happy to expand. And then I've got to give them command, Neal, nearly all the companies on that list are now repeat customers that done more than one project with us. So that's a good sign of the service and very pleased with the way that Five Point has worked with us. They have been a good partner and we felt like we've made a good team.
Yes, Joe, just feel wondering - you've had known us long enough and you saw us for our acreage position, together innovation and as David says brick by brick and you were taking the same approach with the same entail and what Joe said, we'd gone out and, and no deal is too small for us. We want to make sure that the deals we do we make money on which we do but we've been able to build this business brick by brick, just like we did into [Indiscernible]
Very well seen. And then just a follow up maybe a little bit on Scott's, but I'm just taking a little bit different approach on really like what you guys are doing, moving the operations on the completion. And I'm just wondering, maybe, Matt, for you, or Billy, I'm just wondering more, sort of qualitatively, how does - I'm sure that gets you excited from an operations standpoint, I'm just wondering, by moving that, and having more of a constant sort of operation, could you just walk us through, what gets you more excited about moving the program? I know, David touched on this a little bit, but would sure love to hear, more on just, what you think kind of just maybe qualitative improvements, and what will this will do not through this year, but even in the next year.
Neal, I'm going to start off and the others will back clean up on this. But one of the first things is that on the bores well there was I think 800 or more frac stages, they got them all done without a single, without any material downtime, all done. And then on the Voni wells, I think there were 750, some in that order. 1,500. So you had 1500 frac stages, they were done without any material downtime, all the costs aside; we wanted those same guys continue to work for us. So that instead of releasing them, so somebody else can get the benefit of their scales and their fee to get many francs done in a day, we've elected to keep them, which have brought about lower cost rider efficiency. And when you think of 1500 frac stages done pulled off right, then that says a lot about the crew, we feel like they're in the varsity. And we don't want to give them up to some less proven people. That was important to me, but I'll let Matt or Billy or David say what was important to them.
Yes, I think Joe, you've hit on a lot of things, the efficiencies you get doing operations like this are meaningful. And you've got a couple of frac crews out there; you get these different efficiencies related to having both crews running at the same time. But really, what you get is a constant area where you can improve. I mean it's like some type of sports team, you practice for a reason you practice to get better. And so if we just look back, if you look back in 2018, our cycle times to complete these wells to frac them and get them drilled out, getting ready for flowback was about 45 days. And so in the first half of this year, we've reduced that down to 24 days, which is a 19 day improvement. So there's 19 days that you don't have to pay supervision, you don't have to pay rental, or you don't have to pay these other things. On the other side of it, there's 19 days there that you don't have to shutting offset wells.
So you get the efficiency not only on the cost side, but on the production side of things. And so that's one metric we look at. And, we just recently did our simul frac. And we did really well there. We were well over 2,000 feet is completed laterally per day. If you compare that back to 2018, that's about 900. So you can see we've more than doubled that with our first simul frac. And so we anticipate that probably 60% of these wells that we will drill and complete in the back half of 2021 will be simul frac wells. And so we've calculated and actually with our first experience with simul frac, we saved about $250,000 per well. So that's about 6% of the completion cost, just on the simul frac, and so on our four well pad, that's $1 million per well, that we're saving on that. So there's some real savings and real efficiencies that we'll see going forward. I don't know, Billy, if you has something to -
Well, it was all real good. I mean, I've piled on and mentioned things we talked about, David was talking about cutting, and eliminating casing strings and that improves our cycle time we get a little faster, but also, depending on what string it is, I'd say was another $0.5 million to $1 million. So that's a good thing too. And like you mentioned with $1 million saving with the simul frac that's a big deal. But even the worlds where we're doing the zipper fracs, we're getting better at those two and getting more footage per day and improving all the way around there. And we also talked about, on the production side, doing great things there and getting all everything on path, everything on water and all along path and that's helping us out there to take in trucks off the road, we all know, increase in cost and fuel and things like that. So eliminating all that just doing better all around.
Well, that sounds like we better start taking about a million bucks off the well cost going forward. So I'd love to hear that. [Multiple Speakers]
I think I am going to have to step in. I'd say we've calculated on this, some is completed lateral length per foot, we've calculated that every 300 foot that we get better. It's about $75,000 per well, so those efficiencies are meaningful.
And hats off to Universal and Halliburton, they have been working with us and just doing a really good job and standing behind their work.
Our next question is from John Freeman with Raymond James.
Good morning, guys. I want to follow up just at the end there and what Neal was asking just to get a better idea of sort of what's built into that second half '21 sort of cost per foot guidance, obviously, y'all been just running dramatically ahead of schedule, the first half of the year with the average in the 650,000 foot and realizing y'all, you took down the guidance that was 730 a foot to 695. And I'm just trying to get a sense of, sort of the gives and takes off, I know that the greater seven variants typically, those well a little more expensive, but then, what Matt mentioned on the final facts and the cost reductions there, just trying to get a sense, as Neal was kind of alluding to kind of what's baked into the second half, cost per foot numbers, how much of this is just marking the mark, what happened in the first half of the year and kind of leaving in the second half, the same?
Yes, John, this is Matt I'll take the first stab at this, and think David probably have some comments too, but kind of what we've looked at, we anticipated cost increases, we went throughout the first half of the year, we really didn't see a whole lot of those, the back half of the year, we are seeing some of those, and it's kind of a lot of us dependent on crude price, relative to what the price of diesel is. So on the drilling side, we're seeing cost increases, say as much as 20% on the pre drill stuff, building location, moving in rigs. Anything that involves, a lot of use of diesel, we're seeing those costs. So probably, if you roll everything into it on a drilling completion basis, you may have 4%, 5%, 6% cost increase on the drilling side, on the completion side, you see the same thing you see, obviously, these frac crews run on a lot of diesel. So that cost is up. The cost of transport sand is up; sand itself, though the profit is up 35% or so. But it's a pretty small portion of the completion cost. So we're probably looking at 5% or 6% on the completion side.
So that's kind of built into that 695 number, that you've got, the thing we also anticipate that the operations team, they're going to be able to become more and more efficient as we go along. So I think we feel pretty good about that 695 number.
And, John, I might just add to the second part of your question, I do think that the reduction there does reflect a bit of a mark-to-market or marked as the first half of the year, you know we had done better. And so that's sort of enabled us to lower the full year down a little bit. I don't know that we've made a lot of change one way or the other and our expectations for the rest of the year for the reasons that Matt said, the original estimates we had for 10% inflation in the third and fourth quarters of the year, are still there in what we have budgeted to the extent that we can do better than that or mitigate some of these costs. We might do better here in the second half of the year, but it - those original assumptions are still reflected in our numbers for the rest of the year.
That's helpful. I appreciate the context and then my follow up question. Obviously, historically I've been pretty active on the hedging front. And, now that we've got, the balance sheets got, it's below 2x leverage and pretty good line of sight on, I've been able to reduce that a good bit further over the next 12 months. There's been - some of your other of your peers have sort of talked about as the balance sheet improved kind of across the industry, some companies may be being less inclined to hedge as much as they used to, I'm just curious if your balance sheet strength, if it continues to improve if at any way that might impact your hedging strategy going forward? Or if you think it still is sort of the same as it's been historically?
Well, John, this is David, again, I think that - I think the way we view it is I think we always feel like we've been fairly opportunistic and tried to make the right calls with regard to hedging. It's unusual for us to go into a year; I can't think of one recently, where we haven't had some hedging, headed into a year. But sometimes that'll be on the order of, 30% or something like that. And then we'll, we may dial that up a little bit during the course of the year, if we think it's appropriate, I think you can see reflected in the slide deck that we put out along with the presentation that we did in the recent, just recently begin to add to our hedging position for 2022. I think we've got about 10% of our overheads and we added some additional hedges on natural gas through the winter months. So we'll continue to look, we're pretty optimistic on where the commodity is going to be and certainly, as you know, things are backward dated on the strip. So that always kind of impacts your decision, but we monitor it very closely. And I think that as we go forward, it wouldn't surprise me if we added a little more going into the year.
Our next question is from Gabe Daoud with Cowen.
Hey, good morning, everyone. Hopefully we can maybe just go back to San Mateo for a minute. Just curious if this incremental business from third party, just kind of how that impacts volumes this year and next year, and then I know there's a little bit of a CapEx raise associated with that. But curious if that requires any additional build out beyond what's already been communicated?
Yes, Gabe, the things that we have in hand now are in the budget. That was the increase, you in the CapEx for San Mateo, things that are out there that we may get, well; obviously, we can't budget for that yet. So I think for the volumes that we have locked up right now that'll be taken care of with the CapEx we have in there, if we're able to have some success, and we hope we do have that success in the back half of the year, that would probably be incremental to that. So we just don't know what that is at this current time.
Okay, thanks, Matt. That's helpful. And then just a follow up, I guess was just curious if you could give us your latest and greatest thoughts on M&A and just consolidation generally, and if there's anything interesting, that you guys may be looking at from an asset package standpoint, or even if it's just a corporate transaction, just any thoughts on the landscape and color there would be helpful. Thanks, guys.
Gabe, I just say like this is we are public company. And as a public company, we try to play a straight game. If someone makes us a serious offer, or inquiry, we try to take it very seriously. In the past Matador have done a number of transactions public, we sell first Matador to a public company. And then this Matador we did a deal with Chesapeake on part of our Haynesville position that enabled us to go to the Eagle Ford. We established that you could produce oil from the smaller port roads of the shale. And we took profits from that and moved out to Delaware which has been good to us. And we've also had been active in the private markets. We did a deal with Heyko and Heyko is still our partner or still part of our fabric, people that work for Heiko still work for us. George Yates is still a real good friend and valued shareholder. So, we're open to that. And particularly, any what I'd call a small, private old, particularly old school oil and gas family company doing deals with where there's a cultural fit and an outlet fit and we have criteria, we want to be sure that it's a good deal for the shareholders. As you know that David, Matt and I, the other members of our executive team are large shareholders, and we make more money by the shares going up dollar or two than we do from our salary compensation.
So that's our primary deal. Is this good for the shareholders? Because, again, we didn't come up through private equity, we came up through friends and family, and that's primary for is it a good deal for the shareholders, and not necessarily or just a good deal for the management. But we, in the end, we ask ourselves, we think we're optimistic here is we are in hedging. But in the end, we ask, does this I guess is not just bigger, but better. And that's why we've continued most often, with just bolt-on acreage acquisitions that bolt-on to our existing position so that we have less risk there, because we know that area, and small and easy to digest, and then require meshing of systems, computer systems or cultures or people. And we found that to be pretty effective. So we're open to deals, we are - particularly, as I said, with companies, not - we're not as interested or we don't see the appeal of private equity companies, it may create a hangover, or a public to public where we're enjoying good growth right now, with this existing effort in both arms and dealing with people we know. But we're open to it. We want everybody know we play a straight game. And but fortunately, our teams have been able to produce plenty of A plus locations. And that's what we're going after, and that we have a very rich inventory to that 20 years plus that they afford just a lot of choice and haven't had the need to stretch out for some big deal with some big public. Is that help?
Your next question is from Michael Scialla with Stifel.
He, good morning, everybody. Joe, you walked us through the debt production over the past three quarters and you said you're comfortable in sub two times, leverage range. Just want to see how you're thinking about further debt reduction from here versus maybe potentially increasing the dividend. I know you just recently implemented the dividend. But is there a debt level or leverage target you want to achieve before you consider wrapping that up?
Well, Mike, there's always a lot of variables in what you're trying to achieve. And we are certainly in favor of further debt reduction. Exactly, the pace is dependent on a lot of circumstances. But I think shareholders will safely see further debt reduction as we go along. And we fully expect and hope to increase the dividend over time, and certainly can't say what exactly when and where we'll increase it by how much, but it's something that if cost remains steady or operations results remain steady, all those different factors. We expect another increase in the dividend before too long, we want a reputation for raising the dividend from time to time as results, operations and results can justify. So the first priority is debt reduction. And then versus second one is to keep increasing the dividend, though not sure about the pace, but it certainly that we'll study going forward at each of our board meetings here on end, like it comes up every time and we'd look at it and we want to be prudent. And again, I pull in to help have much any shares that are executive group owned. And the dividend increases important that all of us in the company, because our shareholding in the company goes deep, we have turned 50 or so shareholders in the company now between them in our field staff. So you can be sure it'll - any thoughts or dividend increase get a lot of hard study here.
Very good. Thanks for that. And, David, you said that's too early to give guidance on '22, you're not ready to commit to say production is going to go above 100,000 BOE a day. But is it fair to say with the 11 Voni wells coming on in February that first quarter, production should be up pretty sharply from fourth quarter? And given that are you still planning to maintain the four rigs next year? Are there any plans that there any way you do anything differently?
I am really just going to say one or two sentences and then Dave you take over; I just say our plans are always flexible. And we have faith that has to be one of our strengths, that when circumstances change, we will change. And it's not that we are - once we set a course, we're never going to alter it or amended or tweak it or whatever. We're - we think about that all the time. What knobs can we change to make the value go up more? So we're value proposition rather than this is the way it is. And it's we're not going to change and I'm excited about the opportunities and choices we have. David?
Yes, I think that I think if things go as we would expect that, it's fair to assume that we'll see a nice up quarter in the first quarter of 2022. So I think that is a reasonable assumption.
Your next question is from Jake Roberts with Tudor, Pickering, and Holt.
Good morning. I'm just curious looking at the CapEx guide for the remainder of the year, if you could provide some commentary in the non op side of things, and maybe particularly competence, that we won't see that move higher at year end?
Yes, good morning. This is David again. Well, again, I think what we tried to do is just update our shareholders on our expectations with regard to non up activity here at the end of the year. We as I think we pointed out in the release have had a couple of our operating partners that had decided to make some modifications to their own programs and had deferred activity from the latter part of 2021 into 2022. I think that we expect that these non-operated wells will get drilled. And I fully expect that Matador will participate in those opportunities. We have already committed to do so frankly, this is just some minor changes in operations, but the fact is don't think they're going to happen in '21 now think they're more likely to happen in '22. So it just felt like to us that it was the right thing to do to update the shareholders and the market on that. It's really nothing more than that. And just as we change our plans from time to time, they change theirs and we don't really control that, but I will say that I think that our non op team does a very good job of having relationships with our partners and staying close to our partners so that we have a little, I think we have a good insight into what their plans are going forward. So really that's all this reflected today.
Great, thank you. And maybe the second one. Just curious on your thoughts on the Haynesville asset in terms of obviously the gas prices are significantly improved. And just curious in terms of maybe activity or even circling back to the M&A discussion earlier, just your thoughts on Louisiana in general?
Well, I've just said that Haynesville make some great wells. And it's been very good to us. And in particular, in our deal with Chesapeake, we're able to reserve the difference between 75% and the existing [Indiscernible]. So a number of cases were up there with 90% [Indiscernible] that make wells all that much more profitable. The other aspect of it, it's a little known. But I thank you for asking that is when we did the deal with Chesapeake, we reserve all the uphold rights, the Cotton Valley, and we probably have some in the neighborhood of 200 billion cubic feet of reserves in the Cotton Valley. We have no plans to drill it at this time because gas prices have been until this year kind of down and we've had enough opportunities in the Delaware and the Eagle Ford. And in the Haynesville but that were necessary, but it's HBP waiting to be developed and makes for very nice gas buy. So we would probably continue to put more emphasis on selling brick by brick, or our Eagle Ford assets as opposed to our Haynesville assets. But again serious all for good serious consideration.
And our final question comes from Gail Nicholson with Stephens.
Good morning, everybody. Your free cash flow profile is very attractive. And you've had really good progress paying down revolver. I was just kind of curious in the 2016 year notes; I think they become callable in September. And do you guys have any thoughts about that in regards to retiring those, versus potentially like pushing out the maturities at a lower interest rate?
Hey, Gail, it's David. Well, I don't know that we have any immediate plans to do that, but it certainly is something that I think we said it's an option. It's something that we have considered and have talked about; we haven't made any immediate plans to do so. I don't think I'd be doing my job if I wasn't bringing up those kinds of alternatives or opportunities to the company and to the board for consideration. But we haven't, made any immediate plans.
Okay, great. And then just looking LOE, another nice reduction quarter-over-quarter, can you just talk about the inflationary environment surrounding LOE in the back half of '22? And then, let's walk over to - view looks like in '22 versus the back half of '22 versus the first half of '21.
Hey, Gail, this is Matt. LOE, this was another very good quarter for us. And in regards to going forward as cost increases, a lot of the things that we talked about on the drilling and completion that were affected by the price of fuel. LOE is subject to the same thing work overage use fuel, just to deliver the chemicals, this fuel, so we are seeing some increases on that side. I think the next quarter; we got production down a little bit. So that'll make it a little more difficult. But I really liked the way the team's approach and things. We've got through the winter months, and did what I think really well. And summer has its own challenges too. But [Indiscernible] and his team and particularly guys in the field, they get out in front of things. They don't wait till things happen to start reacting. So I think we'll see some good cost control in regards to LOE. And I think the second part was the workover face, was that right, Gail?
Yes, sir.
Yes. So most of the work over work we have comes along with when we're ready to change from one form of artificial lift to another and that's usually baked into the plan. The other part is when we have rods - rod jobs that need to be done, we'll have a rod part and work rig up on that and fix that, or maybe an ESP that goes down and fixes that. So those are kind of, you just kind of have to do some vintage there to know, you've got, say 130 rods on wells, and you're going to have, so many failure a year. So that's just kind of the way we build that in. As far as major work over on the existing horizontal wells, we, most of our wells, we're not contemplating any of that activity.
Thank you, ladies and gentlemen. This ends the Q&A portion of this morning's conference call. I'd like to turn the call over to management for closing remarks.
Thank you, Tina. Again, we appreciate everybody listening and taking the time. And in particular, I'd also give once again, thank the staff, I think everybody really put in the extra effort and we see the result. I would just like to end by talking more formally. We got more questions on the first half of 2021, and the first half of 2022. But I believe not only the second half of 2021 will be exciting for us. But also all of 2022 will be exciting, as we work to continue to generate additional free cash flow, lower cost, reduce debt, pay dividends to our shareholders, and grow the value of our oil and natural gas and midstream assets.
We're pleased with the growth in our capital efficiency and the improvement in our unit cost amounts and the continued building of our inventory of A plus locations. And we believe all this creates a stronger value creation for Matador's stakeholders in the remainder of this year, and going in the years to come. And maybe if you know I started first Matador back in 1983 with $270,000. It's just hard to believe I pinch myself when I say we're now approaching $4 billion in value, even though we sell first Matador and started over in 2003. So it's been quite a ride. Very exciting. But we still think our various fears are yet to come. And with that, I'm signing off. Thanks again. And feel free to come see us or give us a call at any time.
Ladies and gentlemen, thank you for your participation today. This concludes the program.