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Matador Resources Company (NYSE:MTDR) shares are trading higher after the company disclosed that its subsidiary has entered into an agreement to acquire Ameredev II’s oil and gas properties in Lea County, New Mexico, and Loving and Winkler Counties, Texas, for $1.905 billion.
The Ameredev acquisition also includes a 19% stake in Piñon Midstream, LLC, which has assets in southern Lea County, New Mexico. Ameredev is a portfolio company of EnCap Investments L.P.
The Ameredev acquisition, effective June 1, 2024, is expected to close late in the third quarter of 2024, pending customary conditions.
The deal will expand Matador’s midstream footprint with a 19% stake in Piñon, enhancing coordination in gathering, transporting, and treating natural gas from the Ameredev properties.
Synergies: After deal closure, Matador expects to have over 190,000 net acres in the Delaware Basin, around 2,000 net locations, production exceeding 180,000 BOE per day, proven reserves of over 580 million BOE, and an enterprise value surpassing $10 billion.
The acquisition is expected to generate forward one-year Adjusted EBITDA of approximately $425 to $475 million at strip prices as of late May 2024, representing an attractive purchase price multiple of 4.2x for the upstream assets.
Ameredev asset highlights include an estimated production of 25,000 to 26,000 BOE daily, with 65% oil, in the third quarter of 2024.
Matador estimates the total proved oil and natural gas reserves linked to the Ameredev properties to be 118 million BOE (60% oil) as of May-end.
Upon combining with Ameredev, the pro forma company is projected to possess 578 million BOE, marking a 26% increase from Matador’s total proved reserves of 460 million BOE as of December 31, 2023.
Joseph Wm. Foran, Matador’s Founder, Chairman, and CEO, said, “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.”
“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.”
“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.”
To assist in financing this all-cash transaction, Matador has received firm commitments from PNC Bank, the lead bank under its reserves-based credit facility.
As of March-end, Matador Resources’ cash and restricted cash stood at $74.3 million.
Investors can gain exposure to the stock via Invesco S&P MidCap 400 GARP ETF (NYSE:GRPM) and Nuveen Small Cap Select ETF (NYSE:NSCS).
Price Action: MTDR shares are up 1.21% at $60.33 at the last check Wednesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo via Shutterstock
