Matador Resources Company (NYSE: MTDR) (“Matador”) today announced that wholly owned subsidiaries of San Mateo Midstream, LLC (“San Mateo” or the “Company”), Matador’s 51%-owned midstream joint venture with Five Point Infrastructure LLC (“Five Point”), have entered into two agreements with a large producer in the Northern Delaware Basin:
- New Long-Term Agreement: A new long-term fixed fee natural gas gathering and processing agreement for San Mateo to gather and treat natural gas from certain newly dedicated acreage in Lea and Eddy Counties, New Mexico and process such natural gas at the Marlan natural gas processing complex (the “Marlan Plant”) in Eddy County, New Mexico (the “New Agreement”)
- Long-Term Extension of Existing Agreement: An amendment to extend a natural gas gathering and processing agreement for San Mateo to continue to gather and treat natural gas from Eddy County, New Mexico and process such natural gas for several years past the original term at the Black River natural gas processing plant (the “Black River Plant”) in Eddy County, New Mexico (“the Black River Extension”). The Black River Extension extends the natural gas gathering and processing agreement previously announced by San Mateo in October 2018
Under both agreements, San Mateo will provide long-term, fee-based natural gas gathering, processing, treating and related midstream services supporting this producer’s development of its Northern Delaware Basin acreage. The New Agreement includes a large scale acreage dedication. The total volume gathered and processed under these agreements is expected to provide San Mateo with substantial long-term volume growth and increased utilization of its integrated midstream infrastructure.
The new commercial agreements are expected to add meaningful long-term volumes across San Mateo’s existing gathering and processing footprint. To provide service for these volumes and the anticipated volumes from Matador, San Mateo expects to both utilize existing infrastructure and construct a new natural gas processing train at its Marlan Plant complex. San Mateo expects the agreements will enhance the Company’s growth profile and provide increased long-term cash flow generation.
Highlights
- Establishes a new long-term fee-based midstream agreement with a large producer across a new acreage dedication to support the continued development of its Delaware Basin acreage in Lea and Eddy Counties, New Mexico
- Secures a long-term extension to an existing gathering and processing agreement, which is expected to lock in long-term value with no incremental capital expenditures
- Adds new acreage dedication for natural gas gathering, processing, treating and related midstream services
- Further strengthens San Mateo’s long-term relationship with a large producer in the Delaware Basin
- To service the volumes from these agreements, combined with Matador production estimates, San Mateo expects to construct a new 300 MMcf per day processing train at the Marlan Plant Complex in addition to approximately 20 miles of new natural gas pipeline
Growth and Capital Expenditures Update
To accommodate volumes associated with these agreements and additional volumes from Matador, San Mateo plans to expand its Marlan Plant by adding a 300 MMcf per day natural gas processing train and a new nitrogen rejection unit. Subject to routine permitting, procurement and construction, target completion for this expansion is year-end 2028. San Mateo also expects to construct approximately 20 miles of natural gas pipeline to connect the new dedicated acreage, along with a field treating facility for carbon dioxide removal. To fund initial work on the expansion and associated gathering assets, Matador now expects its full-year 2026 midstream capital expenditures to increase by approximately $25 million and be between $170 and $190 million. Upon completion of the expansion in 2028, San Mateo expects immediate capacity utilization and volume additions, which San Mateo believes could generate San Mateo Adjusted EBITDA1 in excess of $100 million by the end of 2029. Once completed, San Mateo’s total natural gas processing capacity will exceed 1.3 billion cubic feet per day—nearly tripling its 460 MMcf per day capacity prior to Matador’s contribution of Pronto Midstream, LLC to San Mateo in December 2024.
Long-Term Outlook
Joseph Wm. Foran, Matador’s Founder, Chairman and CEO and San Mateo’s Founder, commented, “We believe these agreements are a strong validation of San Mateo’s integrated midstream strategy and the quality of our assets and people. Our ability to provide scalable gathering, processing and related services gives our customers confidence that their infrastructure requirements will be met as their production grows. This ‘repeat business’ showcases San Mateo’s ability to provide the first-class midstream services and the flow assurance that oil and natural gas producers require.
“This deal also builds upon what has already been a transformative year for San Mateo. Following the closing of the previously announced Cardinal Midstream acquisition in the third quarter, we completed the connection of the San Mateo and Cardinal systems in southern Eddy County, New Mexico. In 2027, San Mateo plans to complete the full system connection with a northern pipeline connecting San Mateo’s Lea County, New Mexico gathering infrastructure with the terminus of Cardinal’s gathering infrastructure in Eddy County, New Mexico. This 2027 connection is expected to allow gas volumes to flow from the Marlan Plant complex in the north to the Pecos River Plant in the south providing further flexibility for San Mateo and its customers. Looking ahead, rising utilization from the Cardinal system is projected to drive meaningful volume growth and contribute an estimated $100 to $115 million in San Mateo Adjusted EBITDA1 by 2028. Additionally, these new agreements are expected to provide increased volumes and financial growth starting in 2028.
“Finally, the closing of the Cardinal transaction alongside these new agreements continues to diversify San Mateo’s third-party revenue streams and committed volumes. Since inception, San Mateo’s strategy has been to underwrite infrastructure development through Matador’s operations and subsequently build relationships to capture third-party volumes to fill any remaining capacity. Executing on these agreements demonstrates San Mateo’s ability to operate as a self-sustaining business—successfully funding, building and delivering clear, scalable growth into the next decade. San Mateo is now the largest private natural gas processor in the Northern Delaware Basin with more than one billion cubic feet per day of processing capacity and looks forward to providing first-class flow assurance for Matador and its third-party customers for years to come.”
About Matador Resources Company
Matador is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Its current operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Haynesville shale and Cotton Valley plays in Northwest Louisiana. Additionally, Matador conducts midstream operations in support of its exploration, development and production operations and provides natural gas processing, oil transportation services, natural gas, oil and produced water gathering services and produced water disposal services to third parties.
For more information, visit Matador Resources Company at www.matadorresources.com.
About San Mateo Midstream, LLC
San Mateo is a midstream joint venture owned 51% by Matador and 49% by an affiliate of Five Point. San Mateo provides natural gas gathering, treating and processing, produced water gathering and disposal, and oil gathering and transportation services to Matador and third-party customers in the Delaware Basin in Southeast New Mexico and West Texas.
For more information, visit San Mateo Midstream at www.sanmateomidstream.com.
About Five Point Infrastructure
Five Point Infrastructure LLC is a private equity and infrastructure investor focused on investments within the North American water management, surface management, powered land, and sustainable infrastructure sectors. The firm was founded by industry veterans with demonstrated records of success investing in, building, and running infrastructure companies. Headquartered in Houston, Texas, Five Point has approximately $11 billion of assets under management across multiple investment funds. For more information, please visit www.fpinfra.com.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking statements” are statements related to future, not past, events. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as “could,” “believe,” “would,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “should,” “continue,” “plan,” “predict,” “potential,” “project,” “hypothetical,” “forecasted” and similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements include, but are not limited to, statements regarding the expected benefits, opportunities and results of the New Agreement and the Black River Extension (collectively, the “Agreements”) and of San Mateo’s acquisition of the operating subsidiaries of Cardinal Midstream Partners, LLC (the “Acquisition”), including the expected impact on cash flows and Adjusted EBITDA, third-party volumes, system connectivity, flow assurance, expansion opportunities and other anticipated impacts of the Agreements and the Acquisition; the expansion of the Marlan Plant; other aspects of the Agreements and the Acquisition, including guidance, projected or forecasted financial and operating results, capital expenditures, future liquidity, the payment of distributions and the integration of the Acquisition; and San Mateo’s future growth and potential strategic alternatives. Actual results and future events could differ materially from those anticipated in such statements, and such forward-looking statements may not prove to be accurate. These forward-looking statements involve certain risks and uncertainties, including, but not limited to, the ability of San Mateo to integrate the Acquisition and realize the anticipated benefits of the Acquisition; the availability and terms of financing; commodity price volatility; operational risks; regulatory changes; disruption from the Acquisition making it more difficult to maintain business and operational relationships; significant transaction costs associated with the Acquisition; the risk of litigation and/or regulatory actions related to the Acquisition, as well as the other factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. For further discussions of risks and uncertainties, you should refer to Matador’s filings with the Securities and Exchange Commission (“SEC”), including the “Risk Factors” section of Matador’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Matador undertakes no obligation to update these forward-looking statements to reflect events or circumstances occurring after the date of this press release, except as required by law, including the securities laws of the United States and the rules and regulations of the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.
(1) Adjusted EBITDA is a non-GAAP financial measure. Matador and San Mateo define Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, unrealized derivative gains and losses, non-recurring transaction costs for certain acquisitions, non-cash stock-based compensation expense, loss on debt extinguishment, net gain or loss on asset sales and impairments and certain other non-cash items. The most comparable GAAP measures to Adjusted EBITDA are net income or net cash provided by operating activities. Estimated Adjusted EBITDA attributable to the Cardinal assets is presented on an asset-level basis and reflects earnings before interest expense, income taxes, depreciation, depletion, amortization and certain other non-cash or non-recurring items. Matador and San Mateo are unable to provide a reconciliation of this forward-looking non-GAAP financial measure to the most directly comparable GAAP measure without unreasonable effort due to the inherent difficulty in forecasting certain reconciling items.
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