Matador Resources said its midstream joint venture San Mateo Midstream will acquire the operating units of Cardinal Midstream Partners for $752 million in cash, expanding its natural gas gathering and processing footprint in the Delaware Basin.
The deal underscores continued consolidation in the U.S. energy sector as producers and midstream operators build scale and expand infrastructure to support rising shale output and growing LNG export demand.
Locations that are included in the deal
Cardinal's assets include a cryogenic natgas processing complex in Loving County, Texas, with an inlet capacity of 320 million cubic feet per day and roughly 145 miles of gathering pipelines across West Texas and southern Eddy County, New Mexico.
The assets are located in the Delaware Basin, a key U.S. shale-producing region.
"We view the transaction as strategically positive," said Gabriele Sorbara, analyst at Siebert Williams Shank, adding that the acquisition further increases the potential value of San Mateo.
The deal, expected to close on or before July 31, is expected to increase San Mateo's processing capacity to more than 1 billion cubic feet per day and expand its gathering system to over 800 miles of pipeline, while also adding new third-party customers.
"The Cardinal system effectively 'completes the circle' for San Mateo infrastructure in the Delaware Basin," Matador CEO Joseph Foran said, adding that it connects Cardinal's gathering and processing assets to San Mateo's existing natural gas system.
It would also give the joint venture the ability to move natural gas throughout the northern Delaware Basin.
San Mateo Midstream, Matador's 51%-owned joint venture with private equity firm Five Point Infrastructure, expects to finance the acquisition, in part, through a new term loan of up to $650 million under its existing credit facility.
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Matador acquired 5,154 net undeveloped acres in the core of the Delaware Basin in southeast New Mexico for about $1.1 billion in May, strengthening its position in the region and in the prolific shale play, as reported by Reuters.
