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Matador inks sales agreement tied to Kinder Morgan-led Gulf Coast Express pipe

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Matador inks sales agreement tied to Kinder Morgan-led Gulf Coast Express pipe

Matador Resources Co. executed a firm sales agreement with a Kinder Morgan Inc. affiliate for 110,000 MMBtu/d to 115,000 MMBtu/d of gas that will begin on the in-service date of the Gulf Coast Express pipeline project, scheduled for October 2019.

The sales price is based on Houston Ship Channel pricing, according to a June 4 news release. The new agreement would reduce Matador's exposure to the widening Waha basis differential, the company said in the release.

The $1.75 billion Gulf Coast Express project is a joint venture between Kinder Morgan, DCP Midstream LP and Targa Resources Corp. The pipeline project would deliver gas from the Permian Basin to Agua Dulce, Texas, in the Gulf Coast area, where it would go to refineries, petrochemical facilities, LNG exports and Mexican markets.

Matador has struck agreements with El Paso Natural Gas Co. LLC and other third-party gas transportation providers in the first and second quarters for firm takeaway capacity for its gas production in the Wolf and Rustler Breaks asset areas in the Delaware Basin. The volumes represent about 93% of Matador's production in the basin, which was equivalent to about 82.8 MMcf/d in the first quarter.

Project completions

Matador's midstream affiliate San Mateo Midstream LLC in May completed an expanded oil gathering system in the Wolf asset area in Loving County, Texas. With the project's completion, Matador's entire oil production from the Wolf area is now on pipe, which improved the company's realized pricing and flow reassurance in case of shut-ins, the company said.

In March, San Mateo completed its expansion of the Black River cryogenic gas processing plant in Eddy County, N.M. The project, which was completed on time and on budget, added inlet capacity of 200 MMcf/d, raising the plant's total capacity to 260 MMcf/d.

Also in March, San Mateo completed an NGL pipeline at the Black River plant that connects to the NGL pipeline owned by EPIC Y-Grade Pipeline LP, which boosts NGL takeaway capacity out of the Delaware Basin for San Mateo's customers. The new connection is also expected to increase NGL recoveries and result in improved pricing realizations.

Ratings upgrade

S&P Global Ratings raised its corporate credit rating on Matador to B+ from B, as well as its issue-level rating on Matador's senior unsecured notes to BB- from B. Recovery rating on the senior unsecured notes was also upgraded to 2 from 3.

The rating agency's rating action was based on Matador's growth in reserves and production and better exposure to oil and profitability, according to a May 22 news release. S&P Global Ratings expects Matador to continue the increases while keeping moderate debt leverage ratios.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.