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 Advance Energy Partners Holdings, LLC (“Advance”),
including certain oil and natural gas producing properties and
undeveloped acreage located in Lea County, New Mexico and Ward
County, Texas (the “Advance Transaction”). The consideration for
the Advance Transaction will consist of an initial cash payment of
$1.6 billion, subject to customary closing adjustments, plus
additional cash consideration of $7.5 million for each month during
2023 in which the average oil price as defined in the securities
purchase agreement exceeds $85 per barrel. Advance is a portfolio
company of EnCap Investments L.P. (“EnCap”).
The Advance Transaction is subject to customary closing
conditions and is expected to close early in the second quarter of
2023 with an effective date of January 1, 2023. A short slide
presentation summarizing the Advance Transaction 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 Advance
Transaction on Tuesday, January 24, 2023 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 by this strategic bolt-on
opportunity as well as the opportunity to work with Advance and
EnCap. We view this transaction as a unique value-creating
opportunity for Matador and its shareholders. We evaluated this
transaction based on rock quality, the strong existing production
and cash flow profile, the potential reserves additions, the
high-quality inventory, the available midstream opportunities and
the strategic fit within our existing portfolio of properties. We
intend to fund the Advance Transaction with a combination of cash
on hand, free cash flow prior to closing and borrowings under our
credit agreement, under which we expect to increase our elected
commitment in connection with this transaction. Importantly, this
acquisition should not significantly impact Matador’s leverage
profile, as we expect to maintain a pro forma leverage ratio below
1.0x throughout 2023. In late November 2022, as part of the fall
2022 redetermination process, Matador’s lenders completed their
review of the Company’s proved oil and natural gas reserves at June
30, 2022. As a result, the borrowing base under our credit
agreement was increased by 13% from $2.0 billion to $2.25
billion.”
Transaction Highlights
- Expected to generate forward one-year Adjusted EBITDA1 of
approximately $475 to $525 million at strip prices as of
mid-January 2023, which represents an attractive purchase price
multiple of 3.2x
- Accretive to relevant key financial and valuation metrics
- Significant increase in pro forma drilling locations in primary
development zones
- Provides upside related to potential midstream opportunities
for Pronto Midstream, LLC (“Pronto”), Matador’s wholly-owned
midstream subsidiary, which operates in this area of Lea County,
New Mexico
- PV-10 (present value discounted at 10%)2 at December 31, 2022
of $1.92 billion on total proved oil and natural gas reserves
utilizing strip pricing as of mid-January 2023, which is in excess
of the $1.6 billion purchase price
- PV-102 of proved developed (PD) oil and natural gas reserves at
December 31, 2022 of $1.14 billion, or approximately $45,600 per
flowing BOE, utilizing strip pricing as of mid-January 2023
- Preserves Matador’s strong balance sheet with leverage expected
to remain below 1.0x, allowing Matador to maintain operational and
financial flexibility while continuing to return value to
shareholders through its fixed quarterly dividend
Asset Highlights
- Estimated production in the first quarter of 2023 of 24,500 to
25,500 barrels of oil and natural gas equivalent (“BOE”) per day
(74% oil)
- Approximately 18,500 net acres (99% held by production) in the
core of the northern Delaware Basin, most of which is strategically
located in Matador’s Ranger asset area in Lea County, New Mexico
near Matador’s existing properties
- 406 gross (203 net) horizontal locations identified for future
drilling, including prospective targets throughout the Wolfcamp,
Bone Spring and Avalon formations
- Include 21 gross (20 net) drilled but uncompleted wells
(“DUCs”) expected to be turned to sales in the second half of
2023
- Include 206 gross (174 net) operated locations (84% working
interest) and 200 gross (29 net) non-operated locations (15%
working interest)
- 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
- 38 gross (35 net) additional upside locations in the Wolfcamp D
formation
- Conducive to drilling longer laterals with an expected average
lateral length for operated locations of approximately 9,400
feet
- Advance is currently utilizing one drilling rig to drill 21
gross (19 net) wells in the northern portion of Matador’s Antelope
Ridge asset area in Lea County, New Mexico, but these wells are not
expected to be turned to sales until early 2024
- Estimated drilling, completing and equipping (“D/C/E”) capital
expenditures of $300 to $350 million in 2023 based upon one
drilling rig operating on the Advance properties,
- Includes anticipated completion costs for the 21 gross DUCs
noted above
- Approximately $225 to $275 million is expected to be incurred
between the anticipated closing date and year end 2023
Matador estimates total proved oil and natural gas reserves
associated with these properties of approximately 106.4 million BOE
(73% oil) at December 31, 2022. PV-102 of the proved oil and
natural gas reserves of these properties at December 31, 2022 was
approximately $2.86 billion using the same unweighted arithmetic
average first-day-of-the-month prices for the previous 12-month
period being used to value the Company’s reserves at December 31,
2022, which are $90.15 per barrel of oil and $6.36 per MMBtu of
natural gas. Matador expects to add future proved reserves and
reserves value as a result of the development of these properties
going forward. These reserves estimates were prepared by Matador’s
engineering staff and audited by Netherland, Sewell &
Associates, Inc., independent reservoir engineers.
Mr. Foran further commented, “We have carefully managed and
strengthened our balance sheet over time in order to be in a
position for a special opportunity like this. The specific location
and quality of these select assets, the strong existing cash flow,
the multi-pay potential, the cost savings associated with
developing these assets via longer laterals on multi-well pads with
centralized facilities, the midstream synergies with Pronto and the
held-by-production status of the acreage were key features that
attracted us to this unique opportunity and should significantly
enhance our already strong Delaware Basin portfolio. This
acquisition also provides us with increased operational scale in
the Delaware Basin, which we expect will improve our overall rates
of return and unit-of-production costs.
“Gary Petersen is one of the Founders and Managing Partners of
EnCap. I have known Gary for many years. Gary is one of the people
I have most admired and respected in our industry. We have always
wanted to do a deal like this together. The relationship with Gary
was critical to the smooth negotiation of this transaction, and I
want to thank Gary, the other individuals at EnCap, the Advance
team and the Matador team for their hard work and integrity in
reaching a deal that is a win-win for both parties. We also
appreciate the support of our other friends and shareholders, and
we look forward to the additional opportunities and free cash flow
that this new acreage will provide for Matador.”
Conference Call Information
Management will host a live conference call to discuss the
Advance Transaction on Tuesday, January 24, 2023 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/BId769e220508c4d2ca6aa8480e2b08f0a
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 Advance.
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.
The Company’s predecessor, Foran Oil Company, was founded in
1983 by Joseph Wm. Foran, the Company’s Chairman and Chief
Executive Officer, with $270,000 in contributed capital from 17
friends and family members. Foran Oil Company was later contributed
to Matador Petroleum Corporation upon its formation by Mr. Foran in
1988. Mr. Foran served as Chairman and Chief Executive Officer of
that company from its inception until it was sold in June 2003 to
Tom Brown, Inc., in an all-cash transaction for an enterprise value
of approximately $388.5 million. On the following Monday, Mr. Foran
founded Matador Resources Company with $6 million. Today, Matador
has a market cap of approximately $7.4 billion (based upon the
Company’s closing share price on January 23, 2023) and is one of
the top 20 public exploration and production companies in the
country by market capitalization and one of the top 10 oil and
natural gas producers in New Mexico.
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 Advance
Transaction, 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 Advance Transaction, 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 Advance Transaction in the
anticipated timeframe or at all; risks related to the satisfaction
or waiver of the conditions to closing the Advance Transaction in
the anticipated timeframe or at all; risks related to obtaining the
requisite regulatory approvals; disruption from the Advance
Transaction making it more difficult to maintain business and
operational relationships; significant transaction costs associated
with the Advance Transaction; the risk of litigation and/or
regulatory actions related to the Advance Transaction, 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;
availability of sufficient capital to execute its business plan,
including from future cash flows, available borrowing capacity
under its revolving credit facilities and otherwise; its ability to
make acquisitions on economically acceptable terms; its ability to
integrate acquisitions; the operating results of and the
availability of any potential distributions from our joint
ventures; weather and environmental conditions; the impact of the
worldwide spread of the novel coronavirus, or COVID-19, or variants
thereof, on oil and natural gas demand, oil and natural gas prices
and its business; and the other factors which 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/20230124005559/en/
Mac Schmitz Vice President - Investor Relations (972) 371-5225
investors@matadorresources.com
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