Matador Resources (MTDR) is weighing a spinoff of San Mateo Midstream, management disclosed on its 1Q26 earnings call. The move would take advantage of a hot market for G&P assets in the Delaware Basin, where Permian producers are increasingly focusing their drilling and development programs.
Matador holds a 51% stake in and is the operator of San Mateo Midstream, a joint venture formed in 2017 with private equity firm Five Point Infrastructure (49% stake). San Mateo gathers natural gas, crude oil and produced water in Eddy and Lea counties, NM and Loving County, TX in the northern Delaware.
On the producer’s 1Q26 earnings call, executives said a spinoff of San Mateo is on the table. “We give that a lot of thought,” CEO Joseph Foran said in response to a question about MTDR’s midstream stake. “One thought has been to take it public, although we are not trying to time the market.”
East Daley Analytics tracks the San Mateo assets in the ‘G&P’ dashboard in Energy Data Studio (see asset map below). The gas gathering system includes two processing complexes, Marlan and Black River, with 720 MMcf of combined processing capacity after a recent 200 MMcf/d expansion of the Marlan plant. The system services a number of high-quality producers besides Matador, including ConocoPhillips (COP), Mewbourne, EOG and Chevron (CVX).
The gas plants had run nearly full prior to the Marlan expansion, posting 90%+ utilization for most of 2024 and 2025. They have held steady at ~70% utilization since the expansion, providing runway for long-term growth. East Daley sees the system ramping in the coming years and reaching 80% utilization by 2029.
San Mateo’s services also include water gathering and disposal, as well as oil gathering and transportation. Those assets are split between Eddy County, NM and Loving County, TX. Collectively, San Mateo has 16 water disposal wells with a total disposal capacity of 475 Mb/d. The oil gathering system has 100 Mb/d of capacity and connects to long-haul pipes that can move oil to Midland, TX.
MTDR management highlighted San Mateo’s strong historical performance as a reason it is considering taking it public.
A public midstream company would allow Matador to monetize the G&P assets and raise cash to fund the E&P operations. However, management stressed it doesn’t need the additional cash currently. “We do not want to go out unless it is a good time and we need the capital,” Foran said.
A San Mateo spinoff would also simplify the valuation of MTDR’s operations. Investors currently are exposed to both upstream and midstream risks; a spinoff would provide more clarity to choose which industry they want exposure, and potentially raise the share price.
There are also drawbacks to consider. Even if Matador were to retain a controlling share, an independent San Mateo would have different economic incentives, which could lead to operational friction. There is also a risk to the E&P business if it would need to enter a long-term minimum volume commitment (MVC) to ensure flows to the midstream assets. If oil prices drop, volumes could underperform and become a drag on MTDR’s cash.
The timing of a spinoff makes sense given strong interest in Delaware midstream assets. Industry has been consolidating in the basin, including Targa Resources’ (TRGP) $1.25B Stakeholder Midstream acquisition and Kinetik’s $765MM deal for Durango Midstream. The demand stems from a growing migration into the Delaware by Permian operators.
There are other signs of investor appetite for standalone midstream businesses. For example, Elliott Investment Management has waged a high-profile attempt to take over Phillips 66 (PSX) in an effort to spin off the midstream assets of the refining company, to unlock what Elliott sees as trapped value.
Ultimately, MTDR management made no promises on a San Mateo spinoff, but the company could strike while the iron is hot. – London Spivey, CFA Tickers: COP, CVX, EOG, KNTK, MTDR, PSX, TRGP.
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