DALLAS–(BUSINESS WIRE)–Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today announced a strategic relationship between a subsidiary of the Company’s 51%-owned midstream joint venture, San Mateo Midstream, LLC (“San Mateo” or the “Joint Venture”), and a subsidiary of Plains All American Pipeline, L.P. (NYSE: PAA) (“Plains”) to gather and transport crude oil for Matador and third-party customers in and around the Rustler Breaks asset area in Eddy County, New Mexico. Subsidiaries of San Mateo and Plains have agreed to work together through a Joint Tariff arrangement and related transactions to offer third-party producers located within a joint development area of approximately 400,000 acres in Eddy County, New Mexico (the “Joint Development Area”) crude oil transportation services from the wellhead to Midland, Texas with access to other end markets, such as Cushing and the Gulf Coast. In addition, another subsidiary of Plains has agreed to purchase Matador’s oil production in the Rustler Breaks asset area and in the Wolf asset area in Loving County, Texas.
In order to transport crude oil from the Joint Development Area to Midland or other end markets, Plains intends to construct a mainline extension from its current long-haul oil pipeline system located in Culberson County, Texas to a central delivery point on San Mateo’s crude oil pipeline system, which is currently under construction throughout the Rustler Breaks asset area near Carlsbad, New Mexico. Matador expects construction will be complete in the second quarter or early in the third quarter of 2018. In addition, San Mateo will be able to accept crude oil onto its system from trucks near the city of Loving, New Mexico. This crude oil trucking station will provide producers in the area whose oil is not yet connected to pipe at the wellhead a favorable option to transport oil to Midland and other end markets. The crude oil will be shipped under a Joint Tariff that will be filed with the Federal Energy Regulatory Commission (FERC) prior to the oil transportation pipeline being placed into service. San Mateo expects to benefit from Matador’s activities in this area and from Plains’ extensive midstream asset footprint, long-term customer relationships and outstanding reputation for oil gathering and transportation services to open up additional market opportunities while also capitalizing on San Mateo’s own ability to offer services across all three production streams—oil transportation and gathering, natural gas gathering and processing and salt water gathering and disposal.
With transportation costs rising in the Delaware Basin, Matador expects to save substantial expenses by transporting increasing volumes of its oil by pipeline. Further, Matador has simultaneously improved its net pricing realizations for the oil it already has on pipe in the Wolf asset area and expects to have additional options for various end markets as a result of this arrangement with Plains. These transactions also provide operational advantages as transportation by pipeline rather than by truck reduces operational and shut-in risks—for example, interruptions from ice storms or insufficient trucking capacity around holidays. In addition, Matador’s agreement with Plains allows for optionality in getting its crude oil to other markets from Midland.
At January 22, 2018, Matador was operating five rigs that were drilling oil and natural gas wells full-time in the Delaware Basin. In addition, Matador was temporarily operating a sixth rig that was drilling an oil and natural gas well in its Antelope Ridge asset area in southern Lea County, New Mexico. Matador expects to continue operating this rig to drill two additional salt water disposal wells in the Rustler Breaks asset area on behalf of San Mateo, which would bring San Mateo’s salt water disposal well count in the Rustler Breaks asset area to five by mid-2018. San Mateo is currently disposing of approximately 100,000 barrels per day of Matador and third-party water in the Rustler Breaks and Wolf asset areas. Matador anticipates providing its 2018 capital expenditures program and production guidance in association with its year-end 2017 earnings release in late February 2018.
Joseph Wm. Foran, Chairman and Chief Executive Officer of Matador, said, “We are excited to announce this strategic relationship between San Mateo, Matador and Plains. Similar to the formation of San Mateo in early 2017, this transaction demonstrates the different ways companies in the same industry can work together to create value for their stakeholders. Not only does this relationship open up additional market opportunities for San Mateo and Matador through Plains’ extensive midstream asset footprint, long-term customer relationships and record of performance, but it also demonstrates San Mateo’s ability to generate value for itself and for third-party customers by providing services across all three production streams—oil, natural gas and water.
“Greg Armstrong and I have known each other for a long time, and I have the utmost respect for Greg and his team at Plains. Plains has a great, well-deserved reputation earned over its 25-plus years in the Permian Basin, and the capacity and interconnectivity of its systems create a lot of opportunities for operating companies like us. We are very pleased to have this opportunity to work with Plains, and we look forward to building upon and strengthening our business relationship with Greg, Harry Pefanis, Willie Chiang and the team at Plains. The value to Matador of this transaction is significant. In addition to Matador’s 51% ownership in San Mateo, the Joint Tariff in Rustler Breaks and the tariff in Wolf provide Matador the ability to lock in attractive and competitive long-term oil transportation rates, obtain additional oil market optionality, reduce shut-in and transportation risk and receive increased takeaway capacity out of the Delaware Basin.
“The Board and I congratulate our midstream team for the value it has created thus far, and we appreciate the support from our San Mateo joint venture partner, Five Point Capital Partners LLC. We look forward to supporting this strategic relationship between San Mateo and Plains as San Mateo continues to expand our midstream operations and continues to create future value for all these equity groups.”
Greg Armstrong, Chairman and CEO of Plains, said, “I, Willie Chiang and the rest of the Plains team are very pleased to enter into this win/win opportunity with Matador and San Mateo Midstream. Building upon their prior successes, Joe Foran and his team have established a leadership role in this part of the Delaware Basin, and we are excited about extending our relationship through this strategic arrangement.”
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 Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. Additionally, Matador conducts midstream operations, primarily through its midstream joint venture, San Mateo Midstream, LLC, in support of its exploration, development and production operations and provides natural gas processing, oil transportation services, natural gas, oil and salt water gathering services and salt water disposal services to third parties.