Matador Resources Co. has agreed to acquire Advance Energy Partners Holdings LLC for $1.6 billion in cash, the company’s biggest deal to date. The acquisition is expected to be completed in Q2 according to a Dallas Morning News article. They say,

 

“Consolidation in the Texas Oil Patch is gaining momentum this week after Dallas-based Matador Resources Co. agreed to acquire Advance Energy Partners Holdings LLC for about $1.6 billion in cash, the largest deal in Matador’s 20-year history. 

 

The purchase of Advance, which is currently controlled by private equity firm EnCap Investments LP, is expected to be completed early in the second quarter, Matador said Tuesday in a statement. Matador also agreed to pay an additional cash consideration of $7.5 million for each month this year in which the average oil price exceeds $85 a barrel.”

 

Matador CEO Joseph Wm. Foran is excited about the acquisition and will fund it with cash on hand, free cash flow, and credit agreement borrowings. The deal will not significantly impact Matador’s leverage profile, and the borrowing base under its credit agreement was increased according to a DMagazine article which says, 

 

“Matador is very excited by this strategic bolt-on opportunity, as well as the opportunity to work with Advance and EnCap,” Matador CEO Joseph Wm. Foran said. “We view this transaction as a unique, value-creating opportunity for Matador and its shareholders. We evaluated this transaction based on rock quality, the strong existing production and cash flow profile, the potential reserves additions, the high-quality inventory, the available midstream opportunities, and the strategic fit within our existing portfolio of properties.”

 

Matador’s acquisition is expected to produce a one-year adjusted EBITDA of $475-$525 million, representing a purchase price multiple of 3.2x.