Advance Energy Partners Holdings LLC in the northern Delaware Basin is acquired by Matador Resources Co. for at least $1.6 billion cash.
On January 24, Matador spread the word that it will add oil- and gas-producing assets in Lea County, N.M., and Ward County, Texas, and some midstream infrastructure. Most of the acreage is strategically situated in Matador's Ranger asset area in Lea County.
The bolt-on includes about 18,500 net acres, 99% held by production, in the core of northern Delaware. The deal would also extend Matador's inventory by 406 gross (203 net) drillable horizontal locations with prospective targets in the Wolfcamp, Bone Spring, and Avalon formations.
Advance Energy is now operating one drilling rig to drill 21 gross (19 net) wells in the northern portion of Matador's Antelope Ridge asset area in Lea County, but the wells are not anticipated being turned to sales until early 2024. Additionally to the initial cash payment, Matador agreed to pay an additional $7.5 million for every month in which the average oil price surpasses $85/bbl.
Matador anticipates the Advance Energy assets producing one-year adjusted EBITDA of almost $475 million to $525 million at strip prices as of mid-January 2023, which represents an acquisition price multiple of 3.2x.
According to Matador's estimation, the PV-10 value of the assets at $1.92 billion, depended on proved oil and natural gas reserves at mid-January strip price. Moreover, the company admitted that the PV-10 of proved developed oil and natural gas reserves on December 31, 2022, is $1.14 billion, or roughly $45,600 per flowing boe, utilizing strip pricing as of mid-January 2023.
Matador will maintain a strong balance sheet with leverage anticipated resting below 1.0x. Matador's disclosed production value of $45,600 per boe/d implies about $25,000 to $30,000 per acre (depending on monthly cash payments), and MTDR's disclosed forward EBITDA of $475 million to 525 million implies a 3.2x multiple.
The Advance Energy deal adds about 35 miles of in-field gas and water gathering pipelines to Matador. The company is purchasing an active Devonian Salt Water Disposal well with a strong injection capacity.
For Matador it is the potential connection of undedicated acreage to Matador's midstream subsidiary, Pronto Midstream LLC, to enhance flow assurance and provide upside midstream value.
In late November 2022, as part of the fall 2022 redetermination process, Matador's lenders finished their review of the company's proven oil and natural gas reserves on June 30, 2022. As a result, the borrowing base under Matador's credit agreement was increased by 13% from $2 billion to $2.25 billion.
The acquisition should not importantly impact Matador's leverage profile, as it is anticipated maintaining a pro forma leverage ratio below 1.0x throughout 2023. Baker Botts is representing Matador in the Advance transaction.
