A subsidiary of Matador Resources Co., Dallas, has agreed to acquire Advance Energy Partners Holdings LLC, including certain oil and natural gas producing properties and undeveloped acreage in Lea County, New Mexico, and Ward County, Texas, for an initial cash payment of $1.6 billion. An additional cash consideration of $7.5 million is to be paid for each month in 2023 in which the average oil price exceeds $85/bbl.
The deal is expected to increase pro forma drilling locations in primary development zones and provide upside related to potential midstream opportunities for Pronto Midstream LLC, Matador’s wholly owned midstream subsidiary, which operates in this area of Lea County, New Mexico, the company said in a release Jan. 24.
The deal includes about 18,500 net acres (99% held by production) in the core of the northern Delaware basin in Matador’s Ranger asset area in Lea County, New Mexico. Estimated production in first-quarter 2023 is 24,500-25,500 boe/d (74% oil). Some 406 gross (203 net) horizontal locations have been identified for future drilling, including prospective targets throughout the Wolfcamp, Bone Spring, and Avalon formations, Matador said.
Assets include 21 gross (20 net) drilled but uncompleted wells (DUCs) expected to be turned to sales in second-half 2023, 206 gross (174 net) operated locations (84% working interest), 200 gross (29 net) non-operated locations (15% working interest), and 38 gross (35 net) additional upside locations in the Wolfcamp D formation.
Advance, an EnCap Investments portfolio company, is currently using one drilling rig to drill 21 gross (19 net) wells in the northern portion of Matador’s Antelope Ridge asset area, but these wells are not expected to be turned to sales until early 2024, Matador said.
Estimated drilling, completing, and equipping capital expenditures of $300-350 million are expected this year based on one drilling rig operating on the Advance properties, including anticipated completion costs for the 21 gross DUCs. Some $225-275 million is expected to be incurred between the anticipated closing date and yearend 2023.
The deal is subject to customary closing conditions and is expected to close early in this year’s second quarter.