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Matador Expands In Delaware; Purchases Acreage from Advance Energy at $1.6 Billion
02/21/2023
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.
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Grand Prix Pipeline Will Be Completely Owned by Targa: To Buy Remaining Stake For $1.05 Billion
On January 3, Targa Resources Corp asserted that it is purchasing the remaining stake for $1.05 billion in cash from BlackstoneInc's energy unit in its Grand Prix NGL Pipeline that it does not already own. Targa, which is going to acquire a 25% stake from Blackstone Energy Partners, purchased 75% interest in the pipeline last year when it repurchased interests in its development company joint ventures from investment firm Stonepeak Partners LP for almost $925 million. The Stonepeak agreement also included 100% interest in its Train 6 fractionator in Mont Belvieu, Texas, and a 25% equity interest in the Gulf Coast Express Pipeline. Grand Prix has the capacity to transfer up to 1 MMbbl/d of NGL to the NGL market hub at Mont Belvieu. The same day Targa maintained the price of the Blackstone Energy Partners agreement, which is anticipated closing in the first quarter of 2023, representing roughly 8.75 times Grand Prix's valued 2023 adjusted EBITDA multiple.
NOG Grows Its Acreage Position in Delaware
According to the company’s press release on December 19, Northern Oil and Gas Inc. (NOG) closed its announced deal with a private seller of non-operated interests in the Northern Delaware Basin for $131.6 million in cash. The acquisition was announced with a $13 million deposit in October and is the third Permian Basin acquisition since August, adding to NOG’s $400 million of Permian Basin acquisitions in 2022. The assets of 2,100 net acres are primarily operated by a private company Mewbourne Oil Co., with production anticipated to total almost 2,500 boe/d in 2023. Also, Coterra Energy Inc. and Permian Resource Corp. are operators of the assets. The assets contain high-quality, low breakeven development that is leveraged to some of NOG’s top operating partners, as our investors have come to expect.
The Williston Basin is a big area filled with layers of rock that sits next to the Rocky Mountains in western North Dakota, eastern Montana, and the southern part of Saskatchewan in Canada. This area covers roughly 110,000 square miles. Geologically, it's very similar to the Alberta Basin in Canada. People started drilling for oil in the Williston Basin back in 1936, and by 1954, most of the land where oil could likely be found was already claimed for drilling. The Bakken Formation with parts of Montana, North Dakota, Saskatchewan, and Manitoba has become one of only ten oil fields globally to yield over 1 million barrels per day (bpd) since the late 2000s. It is currently the third-largest U.S. shale oilfield, behind the Permian and Eagle Ford. The boom in the Bakken started around September 2008, coinciding with the U.S. housing market crash. The application of new technologies, such as swell packers enabling multiple-stage fracturing, significantly enhanced oil recovery, making the Bakken Formation a key player in the U.S. In 2022, the Bakken oil field saw big improvements in how much oil and gas it could produce. At the start of the year, 27 drilling rigs were working there, more than double the 11 rigs from the start of 2021. Important upgrades included making the Tioga Gas Plant able to process 150 million cubic feet more gas each day, and making the Dakota Access Pipeline bigger, increasing its oil transport capacity from 570,000 to 750,000 barrels every day.
Continental Resources is expanding its operations in the Midland Basin, including taking over some assets that used to belong to Occidental Petroleum. The company plans to use its expertise in exploration in this area.
Equinor and EQT Corporation have agreed that Equinor will exchange its operated assets in the Marcellus and Utica shale formations in Ohio for a stake in EQT’s non-operated interests in the Northern Marcellus formation.