The EnLink Midstream companies have signed a definitive agreement to acquire gathering and processing assets in the Delaware Basin. EnLink Midstream Partners LP and EnLink Midstream LLC announced the deal Sept. 15 to purchase the Delaware Basin System in Texas from a subsidiary of Matador Resources Co. for approximately $143 million, subject to certain adjustments.
The strategic acquisition positions EnLink in the Delaware Basin as a full-service midstream provider, with Matador as a high-quality producer customer. The acquisition complements the EnLink Midstream Partners’ crude oil gathering, transportation and marketing services in the region, which the company entered into when it acquired LPC Crude Oil Marketing LLC in February.
The Delaware Basin System is located in Loving County, Texas, an area with robust drilling activity, strong well results and significant stacked pay potential. The system’s assets include a cryogenic gas processing plant with approximately 35 million cubic feet per day (MMcf/d) of inlet capacity and approximately 6 miles of high-pressure gathering pipeline, which connects a Matador-owned low-pressure gathering system to the processing plant.
Matador will be the largest customer on the system and will dedicate approximately 11,000 gross acres currently under development pursuant to a 15-year, fixed-fee gathering and processing agreement. The Delaware Basin System has current inlet volumes of approximately 19 MMcf/d with two rigs currently running on the dedicated acreage.
Including this acquisition, the EnLink Midstream Partners expects to deploy growth capital of up to $500 million to expand its position in the Delaware Basin over the next 18 months. The company anticipates that this expansion will include additional processing capacity, including the installation of a 120 MMcf/d natural gas processing plant currently owned by EnLink Midstream Partners, and the construction of additional gathering pipelines in Loving and Reeves counties, Texas, and Eddy and Lea counties, New Mexico.
“This transaction establishes EnLink as a full-service midstream operator in the liquids-rich Delaware Basin, one of the most active producing areas in the United States,” said EnLink president and CEO Barry E. Davis. “These assets are located in a highly-attractive part of the Delaware Basin, providing us with an immediate foothold in the region. We look forward to working with Matador and other producers as we grow in one of the most promising regions in our industry.
“We plan to replicate the successful growth strategy we have used in the Midland Basin by expanding our presence both organically and through acquisitions. The Delaware Basin and the entire Permian region will be a significant area for future growth.”
Matador, an independent energy company engaged in the exploration, development and production of oil and natural gas resources, is currently focused on the Wolfcamp and Bone Spring formations across Southeast New Mexico and West Texas.
“We continue to be pleased with our well results in the Delaware Basin, particularly in our Wolf prospect area in Loving County where our wells continue to exceed expectations,” said Matador chairman and CEO Joseph Wm. Foran. “These strong results, coupled with the sustainable drilling and completion efficiencies we have achieved, give us the confidence to remain active even in today’s challenged commodity price environment. We look forward to working with EnLink as a midstream partner in the region.”
The transaction value represents a multiple of approximately seven to eight times adjusted earnings of the Delaware Basin System in three to four years, taking into consideration expected additional capital investments of approximately $250 million to $350 million. The Delaware Basin System is currently in startup operations.
The transaction is expected to close in the fourth quarter and is subject to customary regulatory approvals and closing conditions.
Tags: Delaware Basin System, EnLink Midstream LLC, EnLink Midstream Partners, Matador Resources Co.