San Mateo Midstream, LLC (“San Mateo” or the “Company”), a midstream joint venture between Matador Resources Company (“Matador”) and Five Point Infrastructure (“Five Point”), today announced that it has entered into a definitive agreement to acquire the operating subsidiaries of Cardinal Midstream Partners, LLC (“Cardinal”), a portfolio company of EnCap Flatrock Midstream, for total cash consideration of $752 million. The transaction is expected to close on or before July 31, 2026, subject to customary closing conditions (the “Cardinal Acquisition”).
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Cardinal Acquisition Highlights
- Complementary Midstream Assets. Cardinal’s midstream assets are complementary to San Mateo’s existing natural gas gathering and processing system and provide San Mateo the ability to move natural gas more easily throughout the northern Delaware Basin in southeast New Mexico and West Texas (see map, Exhibit A). Cardinal’s assets consist of (i) a cryogenic natural gas processing plant complex in Loving County, Texas with a designed inlet capacity of approximately 320 million cubic feet of natural gas per day, and (ii) approximately 145 miles of low-pressure and high-pressure natural gas gathering pipelines located in West Texas and southern Eddy County, New Mexico. The Cardinal plant complex sits on approximately 75 acres with two residue natural gas takeaway connections and four natural gas liquids takeaway connections, providing San Mateo the ability to expand processing capacity in the future.
- Third-Party Customer Relationships and Volumes. Nine of Cardinal’s natural gas gathering and processing customers would be new natural gas customers for San Mateo. The mix of Cardinal’s major, mid-cap and private Delaware Basin producers is expected to directly increase San Mateo’s customer base, volume throughput and revenue generation from third-party customers.
- Expanded Scale. The Cardinal Acquisition is expected to increase San Mateo’s designed natural gas processing capacity to more than one billion cubic feet per day and expand San Mateo’s gathering systems to over 800 miles of pipeline.
- Enhanced Flow Assurance for Matador and Other Customers. The combined natural gas system is expected to provide immediate synergies for San Mateo’s gas gathering and processing system. These expected synergies include the ability to flow volumes between Cardinal’s natural gas processing plant in Loving County, Texas and San Mateo’s existing Marlan Processing Plant and Black River Processing Plant, both located in Eddy County, New Mexico. Once acquired, the Cardinal plant complex in Texas as shown on the map should provide additional options and coverage to producers in the area.
- Accretive to Adjusted EBITDA and Cash Flows. San Mateo expects the Cardinal assets to be immediately accretive to both San Mateo’s Adjusted EBITDA and cash flows. Adjusted EBITDA from the Cardinal assets is expected to increase to up to $110 million on an annualized basis by 2028 when the Cardinal plant complex is anticipated to be completely full.
Financing Highlights
San Mateo expects to finance the Cardinal Acquisition, in part, through a new term loan of up to $650 million under its existing credit facility. This new term loan will be led by PNC Bank, the lead bank under Matador’s reserves-based credit facility, and Truist Bank, the lead bank under San Mateo’s existing credit facility. The new term loan will become due and payable 364 days following the closing of the Cardinal Acquisition. The remainder of the purchase price is expected to be funded through a combination of cash on hand, borrowings under San Mateo’s existing credit facility and capital contributions from its partners.
Management Comments
Brian J. Willey, San Mateo’s Chairman of the Board and the Executive Vice President of Midstream for Matador, commented, “The Cardinal Acquisition is an important step for San Mateo in terms of growth, scale and providing continued flow assurance for our customers. This acquisition is expected to further establish San Mateo as one of the leading midstream companies in the Delaware Basin. With this acquisition, San Mateo not only gains more processing capacity, a larger pipeline system and a more diverse customer base but also improves its positioning for strategic transactions in the future.
“Upon completion of this transaction, the Cardinal system will significantly expand San Mateo’s gas system and will effectively “complete the circle” for San Mateo’s infrastructure in the Delaware Basin. With over one billion cubic feet per day of natural gas processing capacity, this expanded footprint is expected to add increased flow assurance for San Mateo’s anchor customer, Matador, as well as San Mateo’s and Cardinal’s third-party customers. We believe that the integrated nature of the San Mateo and Cardinal infrastructure will create additional opportunities for San Mateo to pursue third-party volumes in the future. By connecting Cardinal’s natural gas gathering and processing assets to San Mateo’s existing natural gas system, San Mateo will have the ability to move natural gas throughout the northern Delaware Basin—north to south or south to north—creating better flow assurance and system flexibility that we believe few midstream providers can match.
“We express our appreciation to PNC Bank and Truist Bank for their continued support and to each of San Mateo’s lenders that we anticipate participating in the new term loan. This new term loan is expected to effectively provide a bridge to San Mateo’s potential future strategic transactions.
“We are also grateful for our partners, Matador and Five Point, who have been supportive of San Mateo’s growth since we began as a startup midstream company in 2017 through today when we are one of the premier midstream businesses in the northern Delaware Basin and one of the only midstream companies that provides integrated services for all three streams—natural gas, oil and water. We look forward to closing this acquisition, which we believe will position San Mateo for its next chapter of growth.”
Advisors
Baker Botts L.L.P., led by Preston Bernhisel, and O’Melveny & Myers LLP, led by Jason Schumacher, acted as counsel to San Mateo on the Cardinal Acquisition. Willkie Farr & Gallagher LLP, led by Nathan Meredith, acted as counsel to Cardinal on the acquisition.
About San Mateo Midstream, LLC
San Mateo is a midstream joint venture owned 51% by Matador and 49% by an affiliate of Five Point Infrastructure LLC. San Mateo provides natural gas gathering, treating and processing, produced water gathering and disposal, and oil gathering and transportation services to Matador and third-party customers in the Delaware Basin in Southeast New Mexico and West Texas.
For more information about San Mateo, please visit www.sanmateomidstream.com
About Matador Resources Company
Matador is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Its current operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Haynesville shale and Cotton Valley plays in Northwest Louisiana. Additionally, Matador conducts midstream operations in support of its exploration, development and production operations and provides natural gas processing, oil transportation services, natural gas, oil and produced water gathering services and produced water disposal services to third parties.
For more information, visit Matador Resources Company at www.matadorresources.com.
About Five Point Infrastructure
Five Point Infrastructure LLC is a private equity and infrastructure investor focused on investments within the North American water management, surface management, powered land, and sustainable infrastructure sectors. The firm was founded by industry veterans with demonstrated records of success investing in, building, and running infrastructure companies. Headquartered in Houston, Texas, Five Point has approximately $7.2 billion of assets under management across multiple investment funds.
For more information, please visit www.fpinfra.com.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking statements” are statements related to future, not past, events. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as “could,” “believe,” “would,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “should,” “continue,” “plan,” “predict,” “potential,” “project,” “hypothetical,” “forecasted” and similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements include, but are not limited to, statements regarding the anticipated timing and closing of the Cardinal Acquisition; the expected benefits, opportunities and results of the Cardinal Acquisition, including the expected impact on cash flows and Adjusted EBITDA, third-party volumes, system connectivity, flow assurance, expansion opportunities and other anticipated impacts of the Cardinal Acquisition; the anticipated financing of the Cardinal Acquisition, including any bridge term loan or other financing transaction, or the required capital contributions or sources thereof; other aspects of the Cardinal Acquisition, including guidance, projected or forecasted financial and operating results, future liquidity and the payment of distributions; and San Mateo’s future growth and potential strategic alternatives. Actual results and future events could differ materially from those anticipated in such statements, and such forward-looking statements may not prove to be accurate. These forward-looking statements involve certain risks and uncertainties, including, but not limited to, the satisfaction of closing conditions for the Cardinal Acquisition; the possibility that the Cardinal Acquisition may not close on the anticipated timeline or at all; the ability of San Mateo to integrate the Cardinal assets and realize the anticipated benefits of the Cardinal Acquisition; the availability and terms of financing; commodity price volatility; operational risks; regulatory changes; risks related to obtaining the requisite regulatory approvals for the Cardinal Acquisition; disruption from the Cardinal Acquisition making it more difficult to maintain business and operational relationships; significant transaction costs associated with the Cardinal Acquisition; the risk of litigation and/or regulatory actions related to the Cardinal Acquisition, as well as the other factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. San Mateo undertakes no obligation to update these forward-looking statements to reflect events or circumstances occurring after the date of this press release, except as required by law, including the securities laws of the United States and the rules and regulations of the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.
(1) Adjusted EBITDA is a non-GAAP financial measure. San Mateo defines Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, unrealized derivative gains and losses, non-recurring transaction costs for certain acquisitions, non-cash stock-based compensation expense, loss on debt extinguishment, net gain or loss on asset sales and impairments and certain other non-cash items. The most comparable GAAP measures to Adjusted EBITDA are net income or net cash provided by operating activities. Estimated Adjusted EBITDA attributable to the Cardinal assets is presented on an asset-level basis and reflects earnings before interest expense, income taxes, depreciation, depletion, amortization and certain other non-cash or non-recurring items. San Mateo is unable to provide a reconciliation of this forward-looking non-GAAP financial measure to the most directly comparable GAAP measure without unreasonable effort due to the inherent difficulty in forecasting certain reconciling items.
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