Matador Resources Company (NYSE: MTDR) (“Matador”) today
announced the successful closing of its previously announced
agreement whereby Matador contributed Pronto Midstream, LLC
(“Pronto”), Matador’s wholly-owned midstream subsidiary, to San
Mateo Midstream, LLC, Matador’s 51%-owned midstream joint venture
(“San Mateo”), for a total implied pre-closing valuation of Pronto
of approximately $600 million. Upon completion of the transaction,
San Mateo has a total estimated asset value of more than $1.5
billion net to Matador.1 Please see Matador’s December 5, 2024,
press release for additional details on the transaction.
Joseph Wm. Foran, Matador’s Founder, Chairman and CEO,
commented, “We are excited to have successfully closed the
combination of San Mateo and Pronto. This transaction is expected
to have substantial benefits for Matador and its shareholders,
including:
- Strengthening Matador’s balance sheet with the receipt of
approximately $220 million in upfront cash plus up to $75 million
in performance incentive payments;
- Increasing flow assurance;
- Providing a long-term sour gas solution in northern Lea County,
New Mexico;
- Expediting the expanded Marlan Processing Plant approaching its
designed capacity of 260 million cubic feet as early as 2026;
- Giving San Mateo additional scale and growth opportunities;
and
- Simplifying Matador’s midstream business by combining San Mateo
and Pronto.
“First, we are pleased to have Five Point participating in this
growth opportunity. The transaction increases the ability for San
Mateo, to which Five Point is already a 49% partner, to provide
flow assurance to Matador and San Mateo’s third-party customers.
Notably, after the upcoming Marlan Processing Plant expansion, San
Mateo is expected to be one of the leading natural gas processors
in New Mexico with over 700 million cubic feet of designed inlet
natural gas processing capacity. The expansion of the Marlan
Processing Plant remains on time and on budget and is expected to
come online in the first half of 2025.
“Second, the transaction provides Matador, San Mateo and their
customers with a long-term sour gas solution in northern Lea
County, New Mexico. At the same time, we are looking forward to
working more closely with Northwind Midstream Partners LLC
(“Northwind”), an affiliate of Five Point, through agreements with
San Mateo. As a part of the transaction, Northwind has agreed to
treat sour gas delivered by San Mateo and re-deliver treated gas
back to San Mateo for processing. This sour gas solution is
expected to allow Matador to continue with its development plans in
the Advance acreage it acquired in 2023 as well as on other acreage
Matador and its third-party customers have acquired in northern Lea
County, New Mexico.
“Third, the transaction should expedite the time for San Mateo
to reach designed capacity at the Marlan Processing Plant. As part
of the transaction, Northwind has agreed to deliver treated sour
gas and sweet gas from Northwind’s third-party customers to San
Mateo for processing. We expect that these additional volumes, as
well as other third-party opportunities, will help the expanded
Marlan Processing Plant approach its designed capacity as early as
2026.
“Fourth, the transaction strengthens Matador’s balance sheet. As
part of the transaction, Matador received an up-front cash payment
of approximately $220 million. We are using this amount to repay
outstanding borrowings under our revolving credit facility. We
expect our leverage ratio (net debt divided by adjusted earnings
before interest expense, income taxes, depletion, depreciation,
amortization and other items, or “Adjusted EBITDA”) to be
approximately 1.1 times at December 31, 2024 with plans to continue
reducing our leverage in 2025. In addition, over the next five
years, Matador expects to receive up to $75 million in performance
incentive payments from Five Point as we execute our drilling and
operational plans in northern Lea County, New Mexico.
“Fifth, San Mateo improves its scale and growth opportunities,
which will also allow San Mateo to continue to explore potential
strategic transactions going forward. The midstream team is focused
on enhancing our midstream assets to continue to provide
best-in-class service to Matador, Northwind and San Mateo’s other
third-party customers. San Mateo’s ability to offer midstream
services across all three production streams—crude oil, natural gas
and water—makes it one of the few full-service midstream companies
in the northern Delaware Basin.
“Matador wishes to thank Five Point for their professionalism
throughout this process and for successfully closing the
transaction on time. Five Point’s friendship, expertise and
investment as a partner in San Mateo over the last seven years has
helped build additional shareholder value and confidence in San
Mateo’s system and facilities while growing Matador’s midstream
business.”
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, natural gas,
oil 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 anticipated benefits, opportunities and
results with respect to the contribution of Pronto to San Mateo,
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, disruption from Matador’s
acquisitions or dispositions, including the Pronto contribution,
making it more difficult to maintain business and operational
relationships; significant transaction costs associated with
Matador’s acquisitions or dispositions, including the Pronto
contribution; the risk of litigation and/or regulatory actions
related to Matador’s acquisitions or dispositions, including the
Pronto contribution, as well as the following risks related to
financial and operational performance: general economic conditions;
Matador’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
Matador’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 Matador’s
operations due to seismic events; its ability to make acquisitions
on economically acceptable terms; its ability to integrate
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.
Supplemental Non-GAAP Financial Measures
Adjusted EBITDA
This press release includes the non-GAAP financial measure of
Adjusted EBITDA. Adjusted EBITDA is a supplemental non-GAAP
financial measure that is used by management and external users of
Matador’s consolidated financial statements, such as securities
analysts, investors, lenders and rating agencies. “GAAP” means
Generally Accepted Accounting Principles in the United States of
America. Matador believes Adjusted EBITDA helps it evaluate its
operating performance and compare its results of operations from
period to period without regard to its financing methods or capital
structure. Matador defines, on a consolidated basis and for San
Mateo, 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, non-recurring transaction costs for certain
acquisitions, certain other non-cash items and non-cash stock-based
compensation expense and net gain or loss on asset sales and
impairment. Adjusted EBITDA is not a measure of net income or net
cash provided by operating activities as determined by GAAP.
Adjusted EBITDA should not be considered an alternative to, or
more meaningful than, net income or net cash provided by operating
activities as determined in accordance with GAAP or as an indicator
of Matador’s or San Mateo’s operating performance or liquidity.
Certain items excluded from Adjusted EBITDA are significant
components of understanding and assessing a company’s financial
performance, such as a company’s cost of capital and tax structure.
Adjusted EBITDA may not be comparable to similarly titled measures
of another company because all companies may not calculate Adjusted
EBITDA in the same manner. This press release does not provide a
reconciliation with respect to forward-looking Adjusted EBITDA,
which is not based on historical fact. Matador could not provide
such reconciliation without undue hardship because such Adjusted
EBITDA amount is an estimation. In addition, it would be difficult
for Matador to present a detailed reconciliation on account of many
unknown variables for Adjusted EBITDA, including future income
taxes, future interest expense and gains or losses on asset sales
and impairment. For the same reasons, Matador is unable to address
the probable significance of the unavailable information, which
could be material to future results.
1 The $600 million implied valuation is represented by Matador’s
receipt of an up-front cash payment of approximately $220 million
plus up to $75 million in performance incentive payments in
exchange for 49% of Pronto. San Mateo’s total estimated asset value
net to Matador is calculated using Matador’s 51% interest in San
Mateo multiplied by (i) a 10x multiple applied to San Mateo’s 2024
estimated Adjusted EBITDA of $240 to $260 million plus (ii) the
$600 million implied valuation for Pronto.
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version on businesswire.com: https://www.businesswire.com/news/home/20241219080202/en/
Mac Schmitz Senior Vice President - Investor Relations (972)
371-5225 investors@matadorresources.com
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