Matador partakes in historic NM Delaware basin acreage buy

By Luke Geiver | September 18, 2018

Matador Resources invested $387 million for 8,400 gross acres—or $46,000 per acre—in the New Mexico Counties of Lea and Eddy. Both counties are situated in the prolific Delaware Basin portion of the greater Permian Basin. The acres involved in Matador’s purchase were part of the state’s recent historic Bureau of Land Management lease sale that netted the Federal government more than $1 billion for 142 parcels.

“Matador is very excited by these purchases. Over the past several years, Matador has followed a strategy of primarily building its Delaware Basin land position on a ‘brick by brick’ basis, but we have always believed it is also important to capture unique value-creating opportunities on a select basis, like the recent BLM lease sale, which was the largest BLM New Mexico Oil and Gas Lease Sale in the last 10 years,” said Joseph Foran, chairman and CEO of Matador.

According to Foran, Matador has been building its portfolio of Delaware Basin properties with the hope of someday acquiring the acres recently offered by the BLM. Although the price was higher than most operators have paid this year for acres in the region, Foran said Matador’s research reveals that the purchase price was actually lower than the true valuation assigned to the acres by Matador’s team.

“Each tract we acquired was evaluated based on rock quality, the number of commercial zones, potential additional reserves bookings, the added value from the lower eighth royalty interest, available midstream opportunities and the tract’s strategic fit within our existing portfolio of properties,” Foran said.

“Critics of the [Trump] Administration's American Energy Dominance policy often falsely claim there is little to no interest in Federal oil and gas leases,” said Ryan Zinke, U.S. Department of Interior secretary following the lease sale. “They are eating their words and once again President Trump's policies are bearing fruit for the American people. The people of New Mexico will see about a half a billion dollars of this right back into their roads, schools, and public services," Zinke said.

According to information from BLM, in addition to the record total bonus bids, the first day of the sale also resulted in a national record for the highest bid for a single parcel, and the highest per-acre bid ever placed. The winning bid for a 1,240-acre parcel in Eddy County was $81,889 per acre, bringing in more than $101.5 million. The previous record for a single parcel was $76,680,000, set in September 2016 in New Mexico. The previous record for a per-acre bid was $40,001 set in New Mexico in December 2017. 

Matador Resources team said the acreage acquisition would add 16.3 million barrels of oil equivalent in proved undeveloped reserves to its total proved reserve base, a value of roughly $16,000 per acre. And, a large majority of Matador’s acreage will allow the E&P to drill long laterals in the 2-mile or longer range.