In a deal mode that has become reliable money for E&Ps in 2015, Matador Resources Co. (MTDR) has agreed to sell its midstream assets to EnLink Midstream Partners LP (ENLK) for $143 million.

In tiny Loving County, Texas, where 86 people occupy 668 square miles, Dallas-based Matador built its largest midstream project, the Loving County System. Its processing plant was barely running two weeks when the deal was announced Sept. 15.

Amid the iffy upstream A&D market, E&Ps have been successfully selling midstream assets. In the first half of 2015, Hess Corp. (HES) sold 50% interest in its Bakken Shale midstream assets for $5.4 billion. In the Eagle Ford, Pioneer Natural Resources (PXD) received about $1 billion for its midstream assets.

More recently, Eclipse Resources Corp. (ECR) sold EnLink its Utica Shale condensate stabilization facilities in August for $37.3 million.

Matador’s cryogenic natural gas processing plant has an inlet capacity of a 35 million cubic feet per day (MMcf/d). The deal also includes a leasehold dedication and six miles of high-pressure gathering pipeline.

Both companies come up roses in the transaction.

Matador estimates it will have $500 million in liquidity and nothing drawn against its $375 million borrowing base at closing, which is expected in the fourth quarter of 2015. Matador can also defer taxes related to the sale of the Loving County System through potential like-kind exchange transactions.

For EnLink, a spinoff of Devon Energy Corp.’s (DVN) midstream assets that merged with Crosstex Energy, the acquisition doesn't meaningfully change its 2016 outlook, said Darren Horowitz, analyst, Raymond James.

The Matador assets provide EnLink a leverage-able foothold in the Delaware Basin.

However, the upside could be generated by potential commercial synergies related to EnLink's other regional assets. To that point, EnLink expects to allocate $400-500 million in capital, including the Matador acquisition, to the Delaware Basin over the next 18 months.

Mark Reichman, research director, Simmons & Co. International, said the transaction will make EnLink more competitive in the Delaware Basin with Matador as an anchor customer.

Matador’s processing plant currently handles 19 MMcf/d of natural gas.

Under the terms of the transaction, Matador will dedicate about 11,000 gross acres under development in Loving. Matador will also enter a 15-year, fixed-fee gathering and processing agreement and provide a volume commitment in exchange for priority one service.

“The transaction enhances ENLK's competitive position in the Permian,” Reichman said. “It enhances the partnership's ability to grow revenue sourced from customers apart from its largest customer and sponsor, Devon Energy and offers significant expansion potential.”

Matador will hold on to its natural gas gathering system up to a central delivery point and its other midstream assets in the area, including oil and water gathering systems and salt water disposal wells.

The company had several opportunities to do a deal on the assets from a number of midstream companies, said Joseph Wm. Foran, chairman and CEO. Matador chose EnLink because of its record of integrity and performance.

“This transaction reflects the tremendous opportunity both Matador and EnLink see in the Delaware Basin, particularly in and around our Wolf prospect area in Loving County, Texas,” Foran said.

Contact the author, Darren Barbee, at dbarbee@hartenergy.com.

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