Matador buys Paloma permian for $1.2 billion to boost Delaware Basin presence

Matador Resources announced?on Thursday that it will buy the privately-held?Paloma Permian?from EnCap Investments?for about $1.28billion,?adding a high-quality drilling asset in?the oil rich?Delaware Basin.

U.S. shale producers prioritize acquisitions of premium drilling inventory, over rapid production growth. This allows them to maintain capital discipline and sustain output for longer.

The deal grants Matador access to 16,235 acres of net undeveloped land in Eddy County and Lea County, New Mexico. These properties produce approximately 11,100 barrels of oil equivalent (BOE) each day, of which 57% is oil.

The company stated that the acquisition would add 55,000,000 BOE of proven reserves and more than 156 "net drilling locations", primarily in the Bone Spring formation and Wolfcamp Formation. The transaction should close by the end of the fourth quarter.

Matador shares were up 1% on premarket trading.

Ridge Runner Resources II (another EnCap-backed firm) also agreed to purchase a large amount of undeveloped land in the Woodford play, but did not reveal the price.

The company said that the acquisition, in combination with previous land purchases, will increase its Woodford position by about 50,000 contiguous net acres, and its total Delaware Basin acreage would be around 240,000 net acres.

Matador reported positive results for its Rae's Creek exploration well in the Woodford Formation,?where a daily test rate of 2,200 BOE was achieved with 72% oil. (Reporting and editing by Leroy Leo, Sriraj Kalluvila, and Sumit Saha from Bengaluru)

(source: Reuters)