Matador Resources Co. said Thursday it had closed on the purchase of Advance Energy Partners Holdings LLC from EnCap Investments LP for about $1.6 billion, adding 18,500 net acres to its assets in the Delaware Basin.
The transaction, which involves a wholly owned subsidiary of Matador as the buyer, includes Advance’s oil and natural gas producing properties. Located in the heart of the northern Delaware Basin, most of the acquisitions are “strategically located in Matador’s Ranger asset area in Lea County, New Mexico, close to Matador’s existing properties,” Matador said on January 24 announcing the deal.
The assets provide “a significant increase in Matador’s inventory in primary development areas, with 206 gross (174 net) operated locations in prime target formations and an additional 38 gross (35 net) up-operated locations in the Wolfcamp D formation,” Matador told Thursday’s Announcement.
Matador projected that Advance’s inventory additions would produce 24,500 to 25,500 barrels of oil and natural gas equivalent at 74 percent oil in the first quarter of this year. They include 21 drilled but unfinished wells expected to begin sales in the second half of 2023 and “406 gross (203 net) horizontal locations identified for future drilling,” Matador said in the January press release.
Its new properties had an estimated proven oil and natural gas reserve of 106.4 million barrels of oil equivalent with 73 percent oil at the end of 2022, according to the disclosure.
In addition to the $1.6 billion cash payment, Matador must pay EnCap a “potential additional cash consideration of $7.5 million for each month in 2023 in which the average oil price, as defined in the stock purchase agreement, exceeds $85 per barrel.” said the press release.
To fund the acquisition, the company has increased its chosen commitment to lenders to $1.25 billion as of March 31, said Joseph Wm Foran, Matador’s founder, chairman and chief executive officer.
He said, “this acquisition does not significantly impact Matador’s leverage profile, and we remain committed to maintaining a strong balance sheet, growing our assets at a measured pace, and paying down our debt with free cash flow from here on out.” , as well as increasing the value of the company and increasing the amount of returns for our shareholders over time”.
Matador raised $1.98 billion in net cash from operating activities, a new high for the company, last year with record free cash flow of $1.22 billion. It produced 105,500 barrels of oil equivalent per day in 2022, its highest annual average, according to the company’s Feb. 21 earnings report.
Drilling, completion and equipment for the forward acquisitions were estimated to be $300 million to $350 million in capital expenditures this year.
Matador announced on April 3 that it had filed a private offering of 6.875% senior unsecured notes due 2028 for an aggregate principal amount of $500 million. The placement was expected to close on April 11, 2023.
“Matador intends to use the net proceeds of the offering for general corporate purposes,” the company said in a statement.
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