Dallas-based independent Matador Resources Co. is bolstering its balance sheet to support Permian Basin development with the sale of its Loving County, TX, gathering and processing system in the Delaware subbasin to a unit of EnLink Midstream Partners LP for $143 million.
The deal positions EnLink in the Delaware as a full-service provider, with Matador as a customer. The assets complement EnLink's crude oil gathering, transportation and marketing services in the Delaware, which it entered when it acquired LPC Crude Oil Marketing LLC in February (see Shale Daily, Feb. 2).
Matador plans to dedicate its current leasehold interests in Loving County (11,000 gross acres) under a 15-year, fixed-fee gathering and processing agreement and provide a volume commitment in exchange for "priority one" service from EnLink, it said. Matador is retaining its gas gathering system up to a central delivery point and its other midstream assets in the area, including oil and water gathering systems and saltwater disposal wells.
After closing, Matador expects to have more than $500 million in liquidity, including 100% of its $375 million revolver, it said. "This transaction...reflects the tremendous opportunity both Matador and EnLink see in the Delaware Basin, particularly in and around our Wolf prospect area in Loving County, TX," said Matador CEO Joseph W. Foran.
The Delaware assets include a cryogenic gas processing plant with 35 MMcf/d of inlet capacity and six miles of high-pressure gathering pipeline, which connects a Matador-owned low-pressure gathering system to the processing plant. Matador would be the largest customer on the system.
EnLink said it expects to spend $400-500 million to expand in the Delaware over the next 18 months with additional processing capacity by installing a 120 MMcf/d plant currently owned by the partnership, and constructing additional gathering pipelines in Loving and Reeves counties, TX, and Eddy and Lea counties, NM.
"These assets are located in a highly attractive part of the Delaware Basin, providing us with an immediate foothold in the region," said EnLink CEO Barry E. Davis. "We plan to replicate the successful growth strategy we have used in the Midland Basin by expanding our presence both organically and through acquisitions. The Delaware Basin and the entire Permian region will be a significant area for future growth."
Matador is currently focused on the Wolfcamp and Bone Spring formations in the Permian across Southeast New Mexico and West Texas.
"We continue to be pleased with our well results in the Delaware Basin, particularly in our Wolf prospect area in Loving County where our wells continue to exceed expectations," Foran said. "These strong results, coupled with the sustainable drilling and completion efficiencies we have achieved, give us the confidence to remain active, even in today's challenged commodity price environment."
The deal is expected to close during the fourth quarter.