The Daley Note: August 10, 2023
In its 2Q23 earnings update, Permian producer Matador Resources (MTDR) bumped up its guidance for 2023 production from the Delaware sub-basin and announced plans to add a 200 MMcf/d gas processing plant in Lea County, NM for flow assurance.
Matador’s new gas production guidance results in 18% gas growth Y-o-Y. Of course, this growth includes the purchase of Advance Energy Partners, which closed in April 2023. East Daley estimates the organic growth rate (excluding the impact of acquired volumes) is closer to 8.5%.
This growth rate combined with the Advance Energy acquisition gives Matador enough confidence to expand gathering and processing capacity in northern Lea County by 200 MMcf/d. Matador already owns the 60 MMcf/d Pronto processing plant it acquired from Summit Midstream (SMLP) in June 2022. Producers on the Pronto system (formerly known as the Lane plant) include ExxonMobil (XOM), Mewbourne Oil, and Matador. The new plant will support MTDR and the acreage acquired with Advance Energy in northern Lea County.
East Daley has highlighted Matador’s moves to build a midstream presence in West Texas and New Mexico. Based on EDA’s system-level forecast for the Matador - Pronto system in Energy Data Studio , we expect producer volumes to eclipse Pronto plant capacity by 4Q26. Our forecast assumes 2 active rigs on average. Recently, we have only seen a lone Mewbourne rig feeding the Matador system, but volumes processed and shipped down Double E Pipeline have ticked up as indicated by the blue line (Flow Sample) in the graph.
Most of Matador’s 7 active rigs in the Delaware are on the San Mateo G&P system, a joint venture with Five Point Energy in Eddy County. As shown in East Daley’s Energy Data Studio, that system is set for rapid growth as well, and likely has some rig attrition risk given MTDR’s plans to focus on the northern Lea acreage acquired from Advance. – Rob Wilson, CFA
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