A full deal write-up has been published, with detailed inventory analysis, valuation, strategic considerations, and deal comps. This short note represents our initial reaction to the deal.
On the morning of July 23rd, Matador Resources (NYSE: MTDR) announced two deals to acquire Delaware Basin assets for cash at a combined transaction value of $1.48 billion. The larger transaction is a $1.275 billion acquisition of Paloma Permian, a portfolio company of EnCap. The other component to the announcement consisted of Matador showcasing a newly-acquired 50,000-acre, 150 net location Woodford position it assembled for $205 million by way of ground game leasing and an acquisition from another EnCap portfolio company Ridge Runner Resources II.
Source: Matador Resources Investor Materials
The two transactions further deepen the relationship between Matador and EnCap. Previously, Matador acquired Advance Energy in 2023 for $1.7 billion and Ameredev II in 2024 for $1.8 billion, both upstream EnCap portfolio companies. It also acquired Cardinal Midstream, an EnCap Flatrock portfolio company, last month for $752 million. Similar to today’s two announced deals, all three previous EnCap-Matador exchanges transacted in 100% cash.
Ridge Runner Resources’ operations in NM were not part of the deal, only the Woodford deep rights shown in the map above.
Matador Resources was founded in 2003 by its current CEO, Joseph Foran. When the company IPO’d in 2012, it was focused on the Eagle Ford and Austin Chalk in South Texas, and the Haynesville and Cotton Valley of East Texas and Louisiana, with only a small Delaware Basin position. Today the company retains a small non-op position in NW Louisiana but is effectively a Delaware Basin pure-play.
The company largely built its Delaware Basin position organically, until transforming the company through larger scale M&A beginning in 2023. Including the recent two deals, Matador has spent ~$6.3 billion in upstream acquisitions since 2023.
The acquisitions announced on July 23rd were for largely undeveloped acreage. Matador disclosed that it valued the Paloma PDP PV10 in a $70/$3 flat scenario at $290 million. It attributed $50 million to a midstream component and cites 156 net locations at $6 million per location. This implies $936 million paid for the remaining locations, 73.4% of total deal value.
The $6 million per location figure is the eye-catching component of this deal. As more core proven inventory is depleted, competition for the remaining undeveloped inventory heats up. As proven remaining inventory becomes scarcer, particularly in the Permian, competition is driving the price of inventory to levels that have not previously been seen. One note to keep in mind for inventory in New Mexico is the higher net revenue interest (NRI) received by the operator, due in part to Federal acreage that carries only a 12.5% royalty. Management disclosed a 79% average NRI on the Paloma assets.
The $205 million spend for ~150 net Woodford locations equates to ~$1.3 million per location. The $4K per net acre figure seems to be about or just below the going rate for Woodford leasehold. The Woodford is an emerging play in specific regions of the Delaware Basin, and while the industry has not fully de-risked the ultimate performance or extent of the play, Matador has tested it themselves and is encouraged by the results enough to bet on it.
Acquiring a heavily undeveloped asset bears more risk than normal. Matador is sending a market signal it intends to be not only an acquirer, but a Woodford believer. It has full faith in its underwriting ability and that it can generate outsized returns from white space acreage.
We value Paloma’s PDP value at $322 million using Novi’s proprietary forecasts and Matador’s operating cost assumptions, at Matador’s $70/$3 price deck. Our data shows the front month production to be ~13.4 Mboe/d in June 2026 and Q3 average production to be 11.1 Mboe/d, precisely matching the midpoint of Matador’s disclosed Q3 production. We model a first-year base decline of -53%.
Matador stock closed at $51.71/share on the day the deal was announced, down 5.96% on the day compared to the XOP experiencing a 0.53% drop in the same time period, representing a one-day underperformance of the benchmark of 543 basis points. Interestingly, Magnolia underperformed the XOP by 626 basis points on the day it announced its acquisition of WildFire Energy earlier in the week.
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