Midstreamer Matador Resources announced this morning it’s again partnering with a unit of private equity firm Five Point Energy in a deal to expand midstream operations in the Delaware Basin.
San Mateo II will expand San Mateo’s natural gas gathering and processing, salt water gathering and disposal and oil gathering operations in the Delaware Basin. Ownership will be owned in the same proportions as San Mateo I—51% by Matador and 49% by Five Point.
Additional processing
As part of the expansion, an additional cryogenic natural gas processing plant will be constructed near the existing Black River cryogenic natural gas processing plant near Carlsbad, New Mexico, Kallanish Energy reports.
The existing Black River Processing Plant had a designed inlet capacity of 60 million cubic feet per day (Mmcf/d) of natural gas. In February 2017, San Mateo I was formed. The Black River plant was expanded to a designed inlet capacity of 260 Mmcf/d in April 2018.
Pipeline expansion
San Mateo will nearly double Black River’s capacity. San Mateo also plans to expand its natural gas pipeline system to run from the Black River facility north to Matador’s Stebbins leasehold area and south to Matador’s new Stateline asset area that was acquired in connection with the U.S. Bureau of Land Management New Mexico Oil and Gas Lease Sale in September 2018.
“This transaction represents another significant step forward for Matador and the midstream team and the accomplishment of one of our strategic goals for 2019 and was made possible in part by Matador’s acquisition of its BLM properties at the September 2018 BLM Lease Sale,” said Joseph Wm. Foran, Matador chairman and CEO.
Additional salt water gathering and disposal and oil gathering facilities will be located across Matador’s Eddy County, New Mexico, acreage, additional portions of which will be dedicated to San Mateo.
Dedicated acreage
To facilitate this transaction and add economies of scale, Matador dedicated to San Mateo acreage under 15-year, fixed-fee contracts in the Stebbins and surrounding acreage in the Arrowhead asset area, as well as Matador’s Stateline asset area — totaling roughly 25,500 gross acres.
In exchange for this acreage dedication to San Mateo and certain minimum volume commitments, Matador received:
* A capital carry to fund the expansion of the Black River plant and the construction of the gathering and salt water disposal systems related to San Mateo’s expansion into the Stateline asset area and the Greater Stebbins Area, under which Matador will pay $25 million of the first $150 million in capital expenditures related to this expansion
* Deferred performance incentives of up to $150 million over the next five years as Matador executes its operational plans in and around the Stateline asset area and the Greater Stebbins Area;
* Additional deferred performance incentives for Matador, as manager of San Mateo, to bring in additional third-party customers
operational control over the midstream assets.
This post appeared first on Kallanish Energy News.
