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Matador (MTDR) Signs $1.6B Deal to Buy Delaware Basin Assets

Matador Resources Company MTDR entered an agreement to acquire Advance Energy Partners Holdings LLC for a cash consideration of $1.6 billion.

Along with the cash payment, Matador might have to pay an additional $7.5 million of cash each month in 2023 if the average oil price exceeds $85 per barrel.

The to-be-acquired assets involve certain oil and natural gas-producing properties, and undeveloped acreage in Lea County of New Mexico and Ward County of Texas. The acquisition also includes 35 miles of in-field gas and water-gathering pipelines. The company is acquiring an active Devonian Salt Water Disposal well with a strong proven injection capacity.

The acquisition will add 18,500 net acres (99% held by production) in the center of the northern Delaware Basin in Matador’s Ranger asset area in Lea County. In first-quarter 2023, estimated production from the assets totaled 24,500-25,500 barrels of oil equivalent per day.

The acquisition will significantly increase Matador’s inventory by 406 gross drillable horizontal locations, with potential targets across the Wolfcamp, Bone Spring and Avalon formations. The company expects the acquired assets to generate forward one-year adjusted earnings before interest, taxes, depreciation and amortization of $475-$525 million.

The acquisition offers Matador additional operational scale in the Delaware Basin, which is expected to improve the company’s overall rates of return and unit-of-production cost. The transaction is expected to complete in the second quarter of 2023.

Mergers and acquisitions are becoming increasingly common as companies intend to achieve their growth objectives. These allow for more flexibility in structure than a stock purchase. Here are some energy companies that are actively involved in asset acquisitions.

Marathon Oil Corporation MRO recently acquired the Eagle Ford assets of Ensign Natural Resources for a total cash consideration of $3 billion. The deal resulted in MRO almost doubling its position in South Texas’ Eagle Ford Shale Basin.

The Houston, TX-based Marathon Oil expects the transaction to be immediately and significantly accretive to its key financial metrics. It will drive 17% growth in MRO’s 2023 operating cash flow and a 15% rise in its free cash flow.

The Williams Companies WMB recently concluded a $423-million deal to acquire Houston-based NorTex Midstream, a fully contracted natural gas pipeline and storage asset, from the private equity firm Tailwater Capital’s affiliate.

As part of the contract, the Tulsa, OK-based pipeline operator Williams will take over NorTex assets. These include roughly 80 miles of natural gas transmission pipelines, along with 36 billion cubic feet of natural gas storage, in the Dallas-Fort Worth market. The assets also enable Williams to provide storage services for the Permian gas directed toward the rising Gulf Coast LNG demand.

Diamondback Energy FANG recently agreed to acquire all leasehold assets and related assets in the Permian Basin from Lario Oil & Gas in cash and stock. Per the deal, which is anticipated to be closed on Jan 31, 2023, Lario will receive 4.18 million Diamondback shares and $850 million as cash consideration.

The acquisition includes 25,000 gross (15,000 net) acres in the core of the Northern Midland Basin, with an 2023 estimated average production of 25 thousand barrels of oil equivalent per day. Diamondback expects to reduce the operated rig count from two currently to one or less post-closing for 2023 development.

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Matador Resources Company (MTDR) : Free Stock Analysis Report

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