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Matador Resources Co. has closed its $1.6 billion acquisition of Advance Energy Partners Holdings LLC from EnCap Investments LP, bolting on producing properties in the Delaware Basin’s Lea County, New Mexico, and Ward County, Texas.
The transaction, announced in January, also includes undeveloped acreage and midstream assets located and comes as E&Ps jockey for position — and inventory — in the Permian Basin.
The final deal amount is subject to customary post-closing adjustments. The transaction includes a contingency in which EnCap will be paid an additional $7.5 million cash for each month of 2023 in which the average oil price exceeds $85 per barrel.
Advance’s position includes 18,500 net acres, 99% HBP, in what Matador described as “the core of the northern Delaware” — and adjacent or near acreage Matador’s best acreage.
The company said the transaction includes inventory in primary development zones, adding 174 net operated locations in core target formations and an additional 35 net upside locations in the Wolfcamp D Formation.
Matador said the additional leasehold provides further expansion opportunities for the company’s wholly owned subsidiary, Pronto Midstream LLC.
Joseph Wm. Foran, Matador’s founder, chairman and CEO, said the Advance assets are a opportunity for Matador to create value for its stakeholders and “sets up Matador nicely for a great 2023 and an even better 2024.”
The transaction was funded with a combination of cash on hand and borrowings under the company’s credit agreement.
On March 31, Matador increased the elected commitment under its credit agreement from $775 million to $1.25 billion, Foran said.
“We express our appreciation to each of our banks for their continued support,” he said. “Importantly, 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 going forward from here as well as increasing the value of the company and increasing the amount of our shareholder returns over time.”
Foran said the company would further discuss the acquisition and its plans for 2023 during its first quarter earnings call.
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