Matador Resources, Five Point Capital form Delaware basin midstream JV

Dallas-based Matador Resources Co. and Houston private equity firm Five Point Capital Partners LLC have formed San Mateo Midstream LLC to operate and expand Matador’s midstream assets in the Delaware basin in Eddy County, NM, and Loving County, Tex.

Dallas-based Matador Resources Co. and Houston private equity firm Five Point Capital Partners LLC have formed San Mateo Midstream LLC to operate and expand Matador’s midstream assets in the Delaware basin in Eddy County, NM, and Loving County, Tex.

Five Point provided initial cash of $176.4 million to the joint venture in exchange for 49% interest, with $171.5 million distributed to Matador as a special distribution. Matador contributed the midstream assets and $5.1 million in cash in exchange for its 51% interest. Matador will continue to operate the assets and control the JV.

The firms also committed to spend as much as an additional $150 million in the aggregate to expand the JV’s midstream operations and asset base.

The assets contributed by Matador to the JV include:

• The 60-MMcfd Black River cryogenic processing plant in the Rustler Breaks area in Eddy County.

• One saltwater disposal well and a related commercial saltwater disposal facility in the Rustler Breaks area.

• Three saltwater disposal wells and a related commercial saltwater disposal facility in the Wolf area in Loving County.

• All related oil, natural gas, and water gathering systems and pipelines in both the Rustler Breaks and Wolf areas.

San Mateo intends to expand the Black River plant to as much as 260 MMcfd. The expansion is expected to be operational as early as first-quarter 2018 and serve both Matador and third-party customers.

San Mateo also plans to accelerate the buildout of oil, gas, and water gathering lines throughout both the Rustler Breaks and Wolf areas, as well as to drill and complete at least one additional commercial saltwater disposal well in Rustler Breaks in 2017.

In connection with the JV, Matador dedicated its current and future leasehold interests in the Rustler Breaks and Wolf areas pursuant to 15-year, fixed-fee gas, oil, and saltwater gathering agreements and saltwater disposal agreements.

Matador also dedicated its current and future leasehold interests in Rustler Breaks pursuant to a 15-year, fixed-fee gas processing agreement. The JV will provide Matador with firm service under each of the agreements in exchange for certain minimum volume commitments.

Matador now plans to add a fifth operated drilling rig in the Delaware beginning early in the second quarter and maintain that total for the remainder of 2017. The rig will be in Rustler Breaks, where three units will primarily be operating during the remainder of the year. Of the other two rigs, one will primarily be in the Wolf area while the other will primarily be in the Arrowhead and Ranger areas.

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