Matador Resources Co. (NYSE: MTDR) struck affordable bolt-ons in the Northern Delaware Basin in December, which it will fund using net proceeds of about $146 million from a recently closed sale of common stock.
Dallas-based Matador planned to acquire 4,600 net leasehold acres and estimated net production of 1,150 barrels of oil equivalent per day (boe/d) from producing wells in Eddy and Lea counties, N.M., in fourth-quarter 2016, the company said Dec. 9. Matador also intends to purchase 475 net mineral acres in Eddy and Lea.
Analysts said the acquisitions cost Matador about $62.5 million.
The acquisition equates to roughly $5,000 to $6,000 per acre, adjusted for proved developed producing reserves, “which we think is a good value,” said Scott Hanold, an analyst with RBC Capital Markets.
Matador said it would also use its equity offering to repay debt and fund general expenses, including capex for a fourth drilling rig. The additional rig will likely focus in the Rustler Breaks area in Eddy, where another operated rig is active, Hanold said.
While few financial details about the deals were disclosed, Wunderlich Securities analyst Irene O. Haas said the capital raise should cover the company’s 2017 funding gap and its fourth-quarter 2016 acquisitions.
The company has raised cash with debt as well as equity. On Dec. 5, the company sold 6 million shares and borrowed $175 million.
Matador’s deals in the Rustler Breaks area of New Mexico have increased its total land position to 97,775 net acres.
“In addition, the company has multiple midstream initiatives ongoing such as a water disposal well in Rustler Breaks and a gathering system in both Rustler Breaks and Wolf areas,” Haas said.
Hanold said that Matador’s midstream development leaves the company with several strategic alternatives.
“Based on our conversations with management, we believe several midstream projects remain in the pipeline,” he said. “This includes potential construction of oil gathering lines and gas processing infrastructure at Rustler Breaks and [the] Wolf areas. The Rustler Breaks midstream monetization remains a strong possibility in 2017, which could result in a fifth operated rig.”
In first-quarter 2016, Matador had said it would continue to lease and acquire acreage in the Delaware and would consider purchases in the Eagle Ford and Haynesville. By November, the company reported that the Eagle Ford and Haynesville had no or limited nonoperated drilling activity in 2016.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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