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Matador Resources to Buy More Permian Assets in $1.9B Deal

As American shale patch mergers and acquisitions continue in the consolidation frenzy, oil producer Matador Resources Co has struck a deal to buy EnCap Investments’ Permian basin assets for $1.9 billion in cash. 

In the deal, Matador will acquire new oil and gas producing properties in New Mexico and West Texas currently under the ownership of Ameredev II Parent LLC, according to a Wednesday press release, as well as a 19% stake in Piñon Midstream LLC’s New Mexico pipeline and compression assets.“As much as people are talking about inventory these days, their inventory fits very well with us," Matador Chief Executive Officer Joseph Foran said during a conference call with analysts, as reported by Bloomberg. 

Matador is eyeing this as an extension of its Permian acreage that will allow it to drill longer lateral wells and to increase efficiency in extraction. The acquisition is expected to close in the third-quarter of this year, and the initial announcement on Wednesday saw the company’s stock drop about half a percentage point. 

The deal follows another one earlier this week in which Noble Corporation agreed to buy Diamond Offshore Drilling in a stock-and-cash deal valued at $1.6 billion as the oil and gas mergers continue with the oilfield services sector.

There is some speculation by analysts that the merger mania is being prompted by the notion that American shale production could peak in the 2030s, creating a scramble to scoop up more assets in advance of that. 

In March, ConocoPhillips CEO, Ryan Lance forecast that U.S. production would advance to about 14 mm BOPD in a few years before reaching a plateau.

On the flip side, the International Energy Agency (IEA) said on Wednesday that oil demand growth is expected to slow in the coming years, with global demand peaking in 2029 and rising production leading to a major glut this decade. 

By Charles Kennedy for Oilprice.com

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