Matador Resources Co. (NYSE: MTDR) has completed the combination of its Delaware Basin assets with Harvey E. Yates Co. (HEYCO), a subsidiary of HEYCO Energy Group Inc. As a result of the transaction, Matador will assume operatorship of all of HEYCO’s operated properties in the Northern Delaware Basin.
Key attributes of HEYCO’s properties include approximately 58,600 gross (18,200 net) acres located in Lea and Eddy counties, New Mexico. Approximately one-third of the acreage is operated, one-third is non-operated, and operations on the remaining third will be pursued by Matador under various operating, farm-in, and other agreements. Essentially all of the acreage is held by production from existing wells and production units with high net revenue interests greater than 75%.
The HEYCO assets link Matador’s existing acreage in its Ranger and Rustler Breaks prospect areas. The acquired acreage increases Matador’s total acreage position in the Permian Basin to approximately 152,400 gross (85,400 net) acres.
Pursuant to the final terms of the transaction, Matador paid approximately $21.6 million in cash, assumed debt obligations of $12 million, issued 3,300,000 shares of Matador common stock and issued 150,000 shares of a new series of Series A convertible preferred stock to HEYCO Energy Group Inc. (convertible into 10 shares of Matador common stock for each share of Series A convertible preferred stock). The transaction makes HEYCO Energy Group one of Matador’s largest shareholders with approximately 6% ownership on an as-converted basis. In addition, Matador paid approximately $3 million for customary purchase price adjustments, including adjusting for production, revenues, and operating and capital expenditures from Sept. 1, 2014, to closing.
KLR Group LLC acted as advisor to HEYCO, and BMO Capital Markets acted as advisor to Matador in this transaction.