Matador Resources signs agreement to ship Permian gas by pipeline

By Patrick C. Miller | June 05, 2018

Dallas-based Matador Resources Co. has executed a firm sales agreement with an affiliate of Kinder Morgan Inc. to transport natural gas from the Permian Basin to Agua Dulce, Texas, near the Gulf Coast.

The agreement begins in October 2019 on the in-service date of the Gulf Coast Express (GCX) Pipeline Project and secures firm natural gas sales for an average of about 110,000 to 115,000 million BTU per day at a price based upon Houston Ship Channel pricing.

Matador said the pipeline project’s proximity to the Gulf Coast and Gulf Coast natural gas pricing—including the Houston Ship Channel—are attractive because of the access to industrial users such as refineries and petrochemical facilities, utilities, liquefied natural gas (LNG) exporters and Mexican markets.

During the first quarter and early in the second quarter of 2018, Matador also entered into agreements with third-party natural gas transportation companies, including most recently with El Paso Natural Gas Co. LLC. The agreement secures firm takeaway capacity for all of the company’s anticipated natural gas volumes in both the Wolf and Rustler Breaks asset areas. This represents about 93 percent of Matador’s Delaware Basin natural gas production of 82.8 million cubic feet of natural gas per day in the first quarter of 2018.

Matador said the agreements should also ensure firm takeaway capacity for anticipated Matador and other producers’ natural gas volumes at the tailgate of San Mateo’s Black River Processing Plant in the Rustler Breaks asset area. As a result, Matador believes it already had sufficient firm capacity and flow assurance for its existing and anticipated natural gas production volumes.  The agreement provides further flow assurance and significantly reduces Matador’s exposure to the Waha basis differential, which has widened significantly in the last year.

Matador also announced that its midstream affiliate, San Mateo Midstream LLC, last month completed its expanded oil gathering system in the Wolf asset area in Loving County, Texas. Because substantially all of Matador’s oil production from the Wolf asset area is now on pipe, the company has simultaneously improved its realized pricing relative to trucking barrels of oil and enhanced flow assurance through the reduction of operational and shut-in risks. In addition, Matador’s crude oil purchase agreement allows for optionality in getting its crude oil to other markets from Midland.