Matador Resources Company announced that a wholly-owned subsidiary of Matador has entered into a definitive agreement to acquire a subsidiary of Ameredev II Parent, LLC, including certain oil and natural gas producing properties and undeveloped acreage located in Lea County, New Mexico and Loving and Winkler Counties, Texas.
The Ameredev Acquisition also includes an approximate 19% stake in Piñon Midstream, LLC , which has midstream assets in southern Lea County, New Mexico. The consideration for the Ameredev Acquisition will consist of a cash payment of $1.905 billion, subject to customary closing adjustments. Ameredev is a portfolio company of EnCap Investments L.P.
Joseph Wm. Foran, Matador’s Founder, Chairman and CEO, commented, “Matador is very excited to work with EnCap again on this strategic bolt-on opportunity. As with the successful Advance Energy deal we completed in April of 2023, we view the Ameredev transaction as another unique opportunity to work with EnCap and another value-creating opportunity for Matador and its shareholders. We evaluated this opportunity based on the high rock quality, the strong existing production and cash flow profile, the significant reserves additions, the high-quality inventory, the strategic fit within our existing portfolio of properties and the expansion of our midstream footprint with an ownership interest in Piñon. The equity and debt securities offerings and the revolving credit facility amendment we completed earlier this year, together with our historical balance sheet conservatism, have provided Matador with the opportunity to acquire these high-quality assets and continue Matador’s consistent history of profitable growth at a measured pace.”
Matador estimates total proved oil and natural gas reserves associated with the Ameredev properties of 118 million BOE (60% oil) at May 31, 2024. The pro forma combined company is estimated to have 578 million BOE, a 26% increase from Matador’s total proved reserves at December 31, 2023 of 460 million BOE. PV-10 of the proved oil and natural gas reserves of the Ameredev properties at May 31, 2024 was approximately $1.66 billion using the same unweighted arithmetic average first-day-of-the-month price methodology for the previous 12-month period being used to value the Company’s reserves, which are $74.91 per barrel of oil and $2.35 per MMBtu of natural gas.
The PV-10 of $1.66 billion does not include the interest in Piñon or certain undeveloped but prospective locations included in Matador’s valuation of the Ameredev assets. Matador expects to add future proved reserves and reserves value as a result of the development of the Ameredev properties going forward. These reserves estimates were prepared by Matador’s engineering staff and audited by Netherland, Sewell & Associates, Inc., independent reservoir engineers, as of May 31, 2024.
Mr. Foran further commented, “We took significant strides during and shortly after the first quarter of 2024 to strengthen our balance sheet and allow us to participate in another special opportunity like this one. The specific location and quality of the Ameredev assets, the strong existing cash flow, the multi-pay potential and the cost savings associated with developing these assets via longer laterals on multi-well pads on blocky acreage were key features that attracted us to this unique opportunity and significantly enhance our already strong Delaware Basin portfolio and prospect inventory. This acquisition also positions Matador for continued success and growth throughout 2024, 2025 and into the future as one of the top ten producers in the Delaware Basin.
“To assist in financing this all-cash transaction, Matador has received firm commitments from PNC Bank, the lead bank under our reserves-based credit facility, to provide at closing a 50% increase in the elected commitment under our credit facility from $1.5 billion to $2.25 billion and a $250 million Term Loan A under our credit facility to provide additional liquidity following the closing of the transaction. Importantly, this acquisition should not significantly impact Matador’s leverage profile in the long-term, as we expect our pro forma leverage ratio to return to a ratio below 1.0x by the middle of 2025 based upon current commodity prices. We especially appreciate PNC Bank for their leadership and support in arranging this financing commitment and the confidence and support we have received from the other members of our bank group.
“This transaction marks the second significant deal Matador has done with EnCap in the last 18 months. Gary Petersen, one of EnCap’s Founders, and I have known each other for many years. Similar to the Advance Energy transaction we closed in April of 2023, the long relationship with Gary and EnCap was critical to the smooth negotiation of this transaction. Thank you to Gary, the other senior members of the EnCap team, Parker Reese and the rest of the Ameredev team and the Matador team for their hard work and integrity in efficiently reaching a deal that we believe is a positive development for all parties. We also appreciate the support of our other friends, shareholders, bankers and vendors in making this deal happen. We look forward to the additional commercial opportunities and free cash flow that this new acreage and production will provide for Matador.”
