Shown is about 40 feet of Matador Resources' oil-saturated interval in the Third Bone Spring sands. Under fluorescent light, blue indicates oil saturation. (Source: Matador Resources)
Matador Resources Co. (NYSE: MTDR) continues to expand its Delaware Basin boundaries, adding about 6,600 net acres in Eddy and Lea counties, N.M., at about $7,800 per acre, the company said.
So far in 2017, Matador’s A&D activity stands to add 28% more acreage to its position.
The $38 million deal will be paid from the proceeds of Matador’s Oct. 10 equity offering, which grossed about $208.7 million or $26.09 per share. The seller was not disclosed.
Matador said that it expects to close the acquisition and others previously announced by mid-November. When completed, the company’s transactions in 2017 will add 24,800 net acres to its portfolio for a total of 112,200 net acres.
In total, Matador’s acquisitions tally $217 million so far this year or about $8,750 per acre, Scott Hanold, an analyst at RBC Capital Markets said in an Oct 9 report.
Matador’s Delaware transactions have largely centered on Lea and Eddy counties as well as Loving County, Texas. The company’s new deal is located near its positions in the Arrowhead and Rustler Breaks areas.
“The transaction equates to roughly $7,760 per acre which we think is a good price,” Hanold said.
From January to Sept. 30, Matador acquired or leased about 18,200 net acres in leasehold and mineral interests in the Delaware. In the third quarter, the company acquired an additional 3,400 net acres.
Matador also holds the rights to 3,500 net mineral acres in the basin.
Remaining proceeds from Matador’s equity offering will fund its 2018 outspend and midstream expenses, Hanold said. The company will fund midstream initiatives either in progress or what it expects to begin by first-quarter 2018.
Matador will likely spend $60 million to 70 million on midstream projects, including an extra $7.5 million in 2017 that is not in its midstream capital budget. The company entered into a joint venture with San Mateo Midstream LLC in March.
At the end of 2018, Matador’s ratio of net debt to EBITDA should fall to 1.5x compared to RBC Capital’s previous 2x estimate.
Hanold said the acquisition and equity selloff will dilute Matador’s earnings estimates but won’t greatly affect its net asset value. The company’s cash flow per share in 2017 and 2018 will decrease by about 7%, partially offset by lower debt interest payments and a slight increase in midstream EBITDA.
BMO Capital Markets served as a book-runner for the company’s equity offering.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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