Matador Resources Company Announces Firm Natural Gas Sales Agreement at Gulf Coast Pricing, Recent Well Results and Credit Rating Upgrade
Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”)
today announced:
(i) it has successfully executed a firm natural gas sales agreement
based on Texas Gulf Coast pricing effective upon completion of the Gulf
Coast Express Pipeline Project,
(ii) its midstream affiliate, San Mateo Midstream, LLC, has completed
its expanded oil gathering system in the Wolf asset area in Loving
County, Texas,
(iii) the results from several notable strong new wells Matador recently
completed and turned to sales in both the Arrowhead and Wolf asset areas
and
(iv) S&P Global Ratings has raised both its corporate credit rating on
Matador to “B+” and its issue-level rating on Matador’s senior unsecured
notes to “BB-”.
Matador Enhances its Delaware Basin Natural Gas Takeaway Position and
Flow Assurance
Matador is pleased to announce it has successfully executed a firm sales
agreement (the “Firm Sales Agreement”) with an affiliate of Kinder
Morgan, Inc. (“Kinder Morgan”) beginning on the in-service date of the
Gulf Coast Express Pipeline Project (the “GCX Project”). This agreement
secures firm natural gas sales for an average of approximately 110,000
to 115,000 million British Thermal Units (“MMBtu”) per day at a price
based upon Houston Ship Channel pricing. The GCX Project is expected to
be in service in October 2019 and is expected to transport natural gas
from the Permian Basin to Agua Dulce, Texas near the Texas Gulf Coast.
The GCX Project’s proximity to the Gulf Coast and Gulf Coast natural gas
pricing, including Houston Ship Channel, are attractive because of the
access to industrial users like refineries and petrochemical facilities,
utilities, liquefied natural gas (LNG) exports and Mexican markets.
During the first quarter and early in the second quarter of 2018,
Matador also entered into agreements with third-party natural gas
transportation companies, including most recently with El Paso Natural
Gas Company, L.L.C., to secure firm takeaway capacity for all of its
anticipated natural gas volumes in both the Wolf and Rustler Breaks
asset areas, which represented approximately 93% of Matador’s Delaware
Basin natural gas production of 82.8 million cubic feet of natural gas
per day in the first quarter of 2018. These agreements should also
ensure firm takeaway capacity for anticipated Matador and other
producers’ natural gas volumes at the tailgate of San Mateo’s Black
River Processing Plant in the Rustler Breaks asset area. As a result,
Matador believes it already had sufficient firm capacity and flow
assurance for its existing and anticipated natural gas production
volumes prior to entering into the Firm Sales Agreement. The Firm Sales
Agreement provides further flow assurance and significantly reduces
Matador’s exposure to the Waha basis differential, which has widened
significantly in the last year.
The Firm Sales Agreement is the latest of several recent accomplishments
by Matador’s operational, marketing and midstream teams that have
significantly enhanced Matador’s takeaway position at favorable rates
for Matador’s oil, natural gas and natural gas liquids (“NGLs”)
throughout its various asset areas in the Delaware Basin and increased
shareholder value. Other recent notable achievements include:
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In late March 2018, Matador’s midstream affiliate, San Mateo
Midstream, LLC (“San Mateo”), completed on time and on budget the
expansion of its Black River cryogenic natural gas processing plant in
Eddy County, New Mexico (the “Black River Processing Plant”), adding
an incremental designed inlet capacity of 200 million cubic feet of
natural gas per day and bringing the total designed inlet capacity of
the Black River Processing Plant to 260 million cubic feet of natural
gas per day. The expanded Black River Processing Plant supports
Matador’s exploration and development activities in the Delaware Basin
and, with the expanded capacity, San Mateo can now offer natural gas
processing services to other producers as well. Please see San Mateo’s
and Matador’s April 19, 2018 press releases for additional details.
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In March 2018, San Mateo completed an NGL pipeline connection at the
tailgate of the Black River Processing Plant to the NGL pipeline owned
by EPIC Y-Grade Pipeline, LP. The NGL connection ensures Matador and
other San Mateo customers’ firm NGL takeaway out of the Delaware
Basin. As compared to trucking the NGLs out of the area, this NGL
connection should also allow Matador and other San Mateo customers to
achieve increased NGL recoveries and improved pricing realizations
through lower transportation and fractionation costs, among other
benefits. Please see San Mateo’s and Matador’s April 19, 2018 press
releases for additional details.
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On January 22, 2018, San Mateo and Matador announced a strategic
relationship between a subsidiary of San Mateo and a subsidiary of
Plains All American Pipeline, L.P. (NYSE: PAA) (“Plains”) to gather
and transport crude oil for Matador and additional customers in Eddy
County, New Mexico. Subsidiaries of San Mateo and Plains have agreed
to work together through a joint tariff arrangement and related
transactions to offer producers located within a joint development
area of approximately 400,000 acres in Eddy County, New Mexico crude
oil transportation services from the wellhead to Midland, Texas with
access to other end markets. Please see below, as well as San Mateo’s
and Matador’s January 22, 2018 press releases for additional details
regarding this strategic relationship and the oil transportation and
gathering systems related thereto.
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Matador has further mitigated the exposure of its Delaware Basin oil
production to the Midland-Cushing oil basis differential, which has
widened in the last several months, by entering into oil basis swaps.
At June 1, 2018, Matador had approximately 55% of its anticipated
Delaware Basin oil production hedged for the remainder of 2018 based
on its production guidance as of and as provided on February 21, 2018,
limiting Matador’s differential for this production at a
weighted-average price of ($1.02) per barrel.
In addition to its Midland-Cushing oil basis hedges, Matador continues
to seek other opportunities to address the widening Midland-Cushing oil
price differentials. In the second quarter through May 2018, however,
Matador had not yet realized double-digit oil price differentials. In
April 2018, for example, Matador received an average unhedged realized
oil price of $63.41 per barrel for its oil production company-wide and
an average unhedged realized oil price of $63.11 per barrel for its
Delaware Basin oil production, inclusive of pipeline transportation or
trucking costs. On an unhedged basis, the oil price differentials in
April were ($2.92) per barrel and ($3.22) per barrel for Matador’s
company-wide and Delaware Basin oil production, respectively, as
compared to an average NYMEX West Texas Intermediate price of $66.33 per
barrel in April 2018. Midland-Cushing basis swaps contributed an
additional $1.6 million to Matador’s oil revenues in April. In May 2018,
Matador estimates that the average unhedged realized oil price for its
Delaware Basin oil production widened to approximately ($7.50) per
barrel, inclusive of pipeline transportation or trucking costs, as
compared to the average NYMEX West Texas Intermediate price, but these
wider oil differentials were further mitigated by Matador’s
Midland-Cushing basis swaps. Further, the strategic relationship between
San Mateo and Plains should also afford Matador important options,
including the option to buy back its oil production from the Rustler
Breaks and Wolf asset areas at Midland should a preferred downstream
market be identified. Finally, Matador currently sells its oil
production from the Eagle Ford shale based on Louisiana Light Sweet
(LLS) pricing, which currently comprises approximately 10% of its
company-wide oil production. Should these widening oil differentials
persist in the Delaware Basin, Matador would also have the option of
shifting a portion of its drilling activities from the Delaware Basin to
its largely held-by-production properties in the Eagle Ford shale where
oil pricing is currently more favorable.
San Mateo Completes Expanded Oil Gathering System in the Wolf Asset
Area
Matador is also pleased to announce that San Mateo completed its
expanded oil gathering system in the Wolf asset area in Loving County,
Texas in May 2018. Because substantially all of Matador’s oil production
from the Wolf asset area is now on pipe, the Company has simultaneously
improved its realized pricing relative to trucking barrels of oil and
enhanced flow assurance through the reduction of operational and shut-in
risks—for example, interruptions from ice storms in the winter months or
insufficient trucking capacity. In addition, Matador’s crude oil
purchase agreement allows for optionality in getting its crude oil to
other markets from Midland.
In addition, Plains is currently constructing a mainline extension from
its current long-haul oil pipeline system located in Culberson County,
Texas to a central delivery point on San Mateo’s Eddy County, New Mexico
crude oil pipeline system, which is currently under construction.
Matador expects construction will be complete in the third quarter of
2018. In addition, San Mateo will be able to accept crude oil onto its
Eddy County system from trucks near the city of Loving, New Mexico. This
crude oil trucking station will provide producers in Eddy County whose
oil is not yet connected to pipe at the wellhead a favorable option to
transport oil to Midland and other end markets. The crude oil will be
shipped from New Mexico under a Joint Tariff that is expected to be
filed with the Federal Energy Regulatory Commission (FERC) prior to the
oil transportation pipeline being placed into service. San Mateo expects
to benefit from Matador’s activities in this area and from Plains’
extensive midstream asset footprint, long-term customer relationships
and outstanding reputation for oil gathering and transportation services
to open up additional market opportunities while also capitalizing on
San Mateo’s own ability to offer services across all three production
streams—oil transportation and gathering, natural gas gathering and
processing and salt water gathering and disposal.
Matador Announces Recent Well Results in Arrowhead and Wolf Asset
Areas
Matador is also pleased to announce the results from four notable wells
recently completed and turned to sales during the second quarter of 2018
– two in the Arrowhead asset area and two in the Wolf asset area. The
following table highlights the 24-hour initial potential (“IP”) test
results from these wells.
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Completion
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24-hr IP
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Oil
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Asset Area/Well Name
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Interval
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(BOE/d)
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(%)
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Comments
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Arrowhead/Eddy County, NM
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SST 6 State #123H
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Second Bone Spring
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2,056
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85%
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First two Second Bone Spring wells drilled on SST leasehold north of
Stebbins acreage. Both wells flowed at approximately 500 psi during
IP tests.
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SST 6 State #124H
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Second Bone Spring
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1,845
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86%
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Wolf/Loving County, TX
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Wolf 80-TTT-B33 WF #205H
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Wolfcamp A-XY
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2,153
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57%
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Strong 24-hour IPs from Wolfcamp A-XY wells completed in the
south-central portion of the Wolf asset area. Both wells flowed at
approximately 3,200 psi during IP tests.
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Wolf 80-TTT-B33 WF #207H
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Wolfcamp A-XY
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2,104
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59%
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The SST 6 State #123H and #124H wells are the two best Second Bone
Spring wells drilled and completed by Matador to date in the Arrowhead
asset area. These 24-hour IPs were particularly strong at 435 to 490
BOE/d per thousand feet of completed lateral, given that both wells had
completed lateral lengths of just over 4,200 feet. Matador continues to
be very pleased and encouraged by the Second and Third Bone Spring
results it has achieved in the Arrowhead asset area and on its Stebbins
and SST leaseholds in particular.
Corporate Credit and Senior Unsecured Debt Ratings Upgraded by S&P
Finally, Matador is pleased to announce that on May 22, 2018, S&P Global
Ratings (“S&P”) raised its corporate credit rating on Matador to “B+”
from “B” and raised its issue-level rating on Matador’s senior unsecured
notes to “BB-” (one notch above Matador’s corporate credit rating) from
“B”. At the same time, S&P revised its recovery rating on the Company’s
senior unsecured notes to “2” from “3”.
2018 Annual Meeting of Shareholders
Matador will hold its 2018 Annual Meeting of Shareholders on Thursday,
June 7, 2018 at 9:30 a.m. Central Daylight Time. The Annual Meeting will
be held in the San Antonio Ballroom located on the fourth floor of The
Westin Galleria Dallas hotel, 13340 Dallas Parkway, Dallas, Texas 75240.
A continental breakfast will be provided beginning at 8:30 a.m. Central
Daylight Time to provide shareholders the opportunity to have a social
time with directors, management and staff prior to the meeting.
The Annual Meeting will be webcast live. To access the live webcast, you
can use the following link https://edge.media-server.com/m6/p/4aqtdxma
or visit the Events page of the Investors section of Matador’s website
at www.matadorresources.com.
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 and
East Texas. Additionally, Matador conducts midstream operations,
primarily through its midstream joint venture, San Mateo Midstream, LLC,
in support of its exploration, development and production operations and
provides natural gas processing, oil transportation services, natural
gas, oil and salt water gathering services and salt water disposal
services to third parties.
For more information, visit Matador Resources Company at www.matadorresources.com.
About San Mateo Midstream, LLC
San Mateo is a strategic joint venture formed in February 2017 by a
subsidiary of Matador and a subsidiary of Five Point Energy LLC. San
Mateo provides an all-inclusive approach to midstream services for the
three main product streams produced by oil and natural gas activities,
including salt water gathering and disposal services, natural gas
gathering, compression, treating and processing services, and oil
gathering, transportation and blending services. San Mateo owns and
operates oil, natural gas and water gathering and transportation systems
in Eddy County, New Mexico and Loving County, Texas, the Black River
Processing Plant in Eddy County, New Mexico with a designed inlet
capacity of 260 million cubic feet of natural gas per day and six
commercial salt water disposal wells in Eddy County, New Mexico and
Loving County, Texas. San Mateo serves as one of the primary midstream
solutions for multiple customers across the northern Delaware Basin,
including its anchor customer, Matador Resources Company.
For more information, visit San Mateo Midstream, LLC at www.sanmateomidstream.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 guidance, projected or forecasted financial
and operating results, results in certain basins, objectives, project
timing, expectations and intentions 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 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; 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; its ability to make acquisitions on economically
acceptable terms; its ability to integrate acquisitions; availability of
sufficient capital to execute its business plan, including from future
cash flows, increases in its borrowing base and otherwise; weather and
environmental conditions; the operating results of the Company’s
midstream joint venture’s expansion of the Black River cryogenic
processing plant; the timing and operating results of the buildout by
the Company’s midstream joint venture of oil, natural gas and water
gathering and transportation systems and the drilling of any additional
salt water disposal wells; and other important 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.
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