Matador Resources Company (NYSE: MTDR) (“Matador” or the
“Company”) today announced that a wholly-owned subsidiary of
Matador has entered into a definitive agreement to acquire a
subsidiary of Ameredev II Parent, LLC (“Ameredev”), including
certain oil and natural gas producing properties and undeveloped
acreage located in Lea County, New Mexico and Loving and Winkler
Counties, Texas (the “Ameredev Acquisition”). The Ameredev
Acquisition also includes an approximate 19% stake in Piñon
Midstream, LLC (“Piñon”), which has midstream assets in southern
Lea County, New Mexico. The consideration for the Ameredev
Acquisition will consist of a cash payment of $1.905 billion,
subject to customary closing adjustments. Ameredev is a portfolio
company of EnCap Investments L.P. (“EnCap”).
The Ameredev Acquisition is subject to customary closing
conditions and is expected to close late in the third quarter of
2024 with an effective date of June 1, 2024. A short slide
presentation summarizing the Ameredev Acquisition is also included
on the Company’s website at www.matadorresources.com on the Events
and Presentations page under the Investor Relations tab. Matador’s
management will host a live conference call to discuss the Ameredev
Acquisition on Wednesday, June 12, 2024 at 10:00 am Central Time.
Further details are provided at the end of this press release.
Joseph Wm. Foran, Matador’s Founder, Chairman and CEO,
commented, “Matador is very excited to work with EnCap again on
this strategic bolt-on opportunity (see Exhibit A). As with
the successful Advance Energy deal we completed in April of 2023,
we view the Ameredev transaction as another unique opportunity to
work with EnCap and another value-creating opportunity for Matador
and its shareholders. We evaluated this opportunity based on the
high rock quality, the strong existing production and cash flow
profile, the significant reserves additions, the high-quality
inventory, the strategic fit within our existing portfolio of
properties and the expansion of our midstream footprint with an
ownership interest in Piñon. The equity and debt securities
offerings and the revolving credit facility amendment we completed
earlier this year, together with our historical balance sheet
conservatism, have provided Matador with the opportunity to acquire
these high-quality assets and continue Matador’s consistent history
of profitable growth at a measured pace.”
Transaction Highlights
- On a pro forma basis following closing of the acquisition,
Matador expects to have over 190,000 net acres in the Delaware
Basin, approximately 2,000 net locations, production of over
180,000 barrels of oil and natural gas equivalent (“BOE”) per day,
proved oil and natural gas reserves of over 580 million BOE and an
enterprise value in excess of $10 billion (see Exhibit
B)
- Expected to generate forward one-year Adjusted EBITDA1 of
approximately $425 to $475 million at strip prices as of late May
2024, which represents an attractive purchase price multiple of
4.2x for the upstream assets:
- Strip prices for the remainder of 2024 averaged $77 per barrel
of oil and $2.76 per MMBtu of natural gas.
- Accretive to relevant key financial and valuation metrics
- Significant increase in high quality pro forma drilling
locations in primary development zones (see Exhibit C)
- PV-10 (present value discounted at 10%)2 at May 31, 2024 of
$1.46 billion on total proved oil and natural gas reserves
utilizing strip pricing as of late May 2024. The PV-10 of $1.46
billion does not include the interest in Piñon or certain
undeveloped but prospective locations included in Matador’s
valuation of the Ameredev assets:
- PV-10 of proved developed (PD) oil and natural gas reserves at
May 31, 2024 of $1.20 billion, or approximately $47,100 per flowing
BOE, utilizing strip pricing as of late May 2024.
- Preserves Matador’s strong balance sheet with pro forma
leverage expected to be approximately 1.3x at closing and back
below 1.0x by the middle of 2025 based upon current commodity
prices, allowing Matador to maintain operational and financial
flexibility while continuing to return value to shareholders
through its fixed quarterly dividend and protecting cash flows
through its appropriate commodity hedges
- Expanding Matador’s midstream footprint with an approximate 19%
stake in Piñon, which allows for increased coordination between
Matador and Piñon in gathering, transporting and treating natural
gas from the Ameredev properties
Ameredev Asset Highlights
- Estimated production in the third quarter of 2024 of 25,000 to
26,000 BOE per day (65% oil)
- Approximately 33,500 highly contiguous net acres (82% held by
production; over 99% operated) in the northern Delaware Basin, most
of which is located in Matador’s Antelope Ridge asset area in
southern Lea County, New Mexico and Matador’s West Texas asset area
in Loving and Winkler Counties, Texas (see Exhibit A
again)
- Adds 431 gross (371 net) operated locations (86% working
interest) identified for future drilling, including prospective
targets throughout the Wolfcamp and Bone Spring formations
- Locations are consistent with Matador’s methodology for
estimating inventory with typically three to four (or fewer)
locations per section, or the equivalent of 160-acre (or greater)
spacing, in all prospective completion intervals
- Prior to transaction closing, Matador expects Ameredev to
operate one drilling rig and to continue operations on 13 drilled
but uncompleted (DUC) wells with one completion crew:
- The prospectivity of the Ameredev acreage immediately competes
for development capital with Matador’s existing acreage (see
Exhibit C again), so Matador expects to continue operating a
total of nine drilling rigs for the immediate future on the
combined approximately 192,000 net acres of the Matador-Ameredev
properties.
- The additional ninth drilling rig and the associated Ameredev
activities are not expected to increase the range of Matador’s
estimated drilling, completing and equipping (“D/C/E”) capital
expenditures of $1.10 to $1.30 billion for 2024. More information
regarding the capital expenditures associated with the Ameredev
Acquisition and its impact on Matador’s guidance for 2024 will be
included in Matador’s press release announcing its second quarter
2024 results, which is expected to be issued in late July
2024.
Matador estimates total proved oil and natural gas reserves
associated with the Ameredev properties of 118 million BOE (60%
oil) at May 31, 2024. The pro forma combined company is estimated
to have 578 million BOE, a 26% increase from Matador’s total proved
reserves at December 31, 2023 of 460 million BOE (see Exhibit
D). PV-10 of the proved oil and natural gas reserves of the
Ameredev properties at May 31, 2024 was approximately $1.66 billion
using the same unweighted arithmetic average first-day-of-the-month
price methodology for the previous 12-month period being used to
value the Company’s reserves, which are $74.91 per barrel of oil
and $2.35 per MMBtu of natural gas. The PV-10 of $1.66 billion does
not include the interest in Piñon or certain undeveloped but
prospective locations included in Matador’s valuation of the
Ameredev assets. Matador expects to add future proved reserves and
reserves value as a result of the development of the Ameredev
properties going forward. These reserves estimates were prepared by
Matador’s engineering staff and audited by Netherland, Sewell &
Associates, Inc., independent reservoir engineers, as of May 31,
2024.
Mr. Foran further commented, “We took significant strides during
and shortly after the first quarter of 2024 to strengthen our
balance sheet and allow us to participate in another special
opportunity like this one. The specific location and quality of the
Ameredev assets, the strong existing cash flow, the multi-pay
potential and the cost savings associated with developing these
assets via longer laterals on multi-well pads on blocky acreage
were key features that attracted us to this unique opportunity and
significantly enhance our already strong Delaware Basin portfolio
and prospect inventory. This acquisition also positions Matador for
continued success and growth throughout 2024, 2025 and into the
future as one of the top ten producers in the Delaware Basin (see
Exhibit E).
“To assist in financing this all-cash transaction, Matador has
received firm commitments from PNC Bank, the lead bank under our
reserves-based credit facility, to provide at closing (i) a 50%
increase in the elected commitment under our credit facility from
$1.5 billion to $2.25 billion and (ii) a $250 million Term Loan A
under our credit facility to provide additional liquidity following
the closing of the transaction. Importantly, this acquisition
should not significantly impact Matador’s leverage profile in the
long-term, as we expect our pro forma leverage ratio to return to a
ratio below 1.0x by the middle of 2025 based upon current commodity
prices. We especially appreciate PNC Bank for their leadership and
support in arranging this financing commitment and the confidence
and support we have received from the other members of our bank
group.
“This transaction marks the second significant deal Matador has
done with EnCap in the last 18 months. Gary Petersen, one of
EnCap’s Founders, and I have known each other for many years.
Similar to the Advance Energy transaction we closed in April of
2023, the long relationship with Gary and EnCap was critical to the
smooth negotiation of this transaction. Thank you to Gary, the
other senior members of the EnCap team, Parker Reese and the rest
of the Ameredev team and the Matador team for their hard work and
integrity in efficiently reaching a deal that we believe is a
positive development for all parties. We also appreciate the
support of our other friends, shareholders, bankers and vendors in
making this deal happen. We look forward to the additional
commercial opportunities and free cash flow that this new acreage
and production will provide for Matador.”
Conference Call Information
Management will host a live conference call to discuss the
Ameredev Acquisition on Wednesday, June 12, 2024 at 10:00 am
Central Time. To access the live conference call by phone, you can
use the following link
https://register.vevent.com/register/BI43dafc62d9a54c13a8b9fab5e226a923
and you will be provided with dial-in details after registering. To
avoid delays, it is recommended that participants dial into the
conference call at least 15 minutes ahead of the scheduled start
time.
The live conference call will also be available through the
Company’s website at www.matadorresources.com on the Events and
Presentations page under the Investor Relations tab. The replay for
the event will be available on the Company’s website at
www.matadorresources.com on the Events and Presentations page under
the Investor Relations tab for one year following the date of the
conference call.
Advisors
Baker Botts LLP served as legal advisor to Matador for the
transaction. Vinson & Elkins LLP served as legal advisor and JP
Morgan served as financial advisor to Ameredev and EnCap.
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. Additionally,
Matador conducts midstream operations in support of its
exploration, development and production operations and provides
natural gas processing, oil transportation services, oil, natural
gas and produced water gathering services and produced water
disposal services to third parties.
For more information, visit Matador Resources Company at
www.matadorresources.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 about the consummation and timing of the Ameredev
Acquisition, the anticipated benefits, opportunities and results
with respect to the acquisition, including the expected value
creation, reserves additions, midstream opportunities and other
anticipated impacts from the Ameredev Acquisition, as well as other
aspects of the transaction, guidance, projected or forecasted
financial and operating results, future liquidity, the payment of
dividends, results in certain basins, objectives, project timing,
expectations and intentions, regulatory and governmental actions
and other statements that are not historical facts. 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 the parties to consummate the Ameredev Acquisition in the
anticipated timeframe or at all; risks related to the satisfaction
or waiver of the conditions to closing the Ameredev Acquisition in
the anticipated timeframe or at all; risks related to obtaining the
requisite regulatory approvals; disruption from the Ameredev
Acquisition making it more difficult to maintain business and
operational relationships; significant transaction costs associated
with the Ameredev Acquisition; the risk of litigation and/or
regulatory actions related to the Ameredev Acquisition, as well as
the following risks related to financial and operational
performance: general economic conditions; the Company’s ability to
execute its business plan, including whether its drilling program
is successful; changes in oil, natural gas and natural gas liquids
prices and the demand for oil, natural gas and natural gas liquids;
its ability to replace reserves and efficiently develop current
reserves; the operating results of the Company’s midstream oil,
natural gas and water gathering and transportation systems,
pipelines and facilities, the acquiring of third-party business and
the drilling of any additional salt water disposal wells; costs of
operations; delays and other difficulties related to producing oil,
natural gas and natural gas liquids; delays and other difficulties
related to regulatory and governmental approvals and restrictions;
impact on the Company’s operations due to seismic events; its
ability to make acquisitions on economically acceptable terms; its
ability to integrate acquisitions; disruption from the Company’s
acquisitions making it more difficult to maintain business and
operational relationships; significant transaction costs associated
with the Company’s acquisitions; the risk of litigation and/or
regulatory actions related to the Company’s acquisitions;
availability of sufficient capital to execute its business plan,
including from future cash flows, available borrowing capacity
under its revolving credit facilities and otherwise; the operating
results of and the availability of any potential distributions from
our joint ventures; weather and environmental conditions; and 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. The Company
defines Adjusted EBITDA as earnings before interest expense, income
taxes, depletion, depreciation and amortization, accretion of asset
retirement obligations, property impairments, unrealized derivative
gains and losses, certain other non-cash items and non-cash
stock-based compensation expense and net gain or loss on asset
sales and impairment. The most comparable GAAP measures to Adjusted
EBITDA are net income or net cash provided by operating activities.
The Company has not provided such GAAP measures or a reconciliation
to such GAAP measures because they would be preliminary and
prospective in nature and would not be able to be prepared without
estimation of a number of variables that are unknown at this time.
2 PV-10 is a non-GAAP financial measure, which differs from the
GAAP financial measure of “Standardized Measure” because PV-10 does
not include the effects of income taxes on future income. The
income taxes related to the acquired properties is unknown at this
time because the Company’s tax basis in such properties will not be
known until the closing of the transaction and is subject to many
variables. As such, the Company has not provided the Standardized
Measure of the acquired properties or a reconciliation of PV-10 to
Standardized Measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240612279533/en/
Mac Schmitz Senior Vice President – Investor Relations (972)
371-5225 investors@matadorresources.com
Matador Resources (NYSE:MTDR)
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