Business Context and Reporting Period
Company: Matador Resources Company
Filing Type: Form 8-K (Current Report)
Date of Report: February 17, 2017
Event: Formation of a joint venture named San Mateo Midstream, LLC with FP MMP Holdings LLC (a subsidiary of Five Point Capital Partners LLC). Matador's subsidiary, Longwood Midstream Holdings, LLC, contributed midstream assets and cash to the venture.
Key Financial Metrics and Transaction Details
- Asset Valuation: Matador contributed midstream assets (pipelines and water resources in Wolf and Rustler Breaks areas) valued at $350.0 million.
- Matador's Initial Contribution: $350.0 million in assets plus $5.1 million in cash.
- Ownership Structure: Matador (via Longwood Holdings) holds 51.0% of San Mateo Midstream; Five Point holds 49.0%.
- Five Point's Contribution: $176.4 million in cash.
- Cash Proceeds to Matador: $171.5 million was immediately distributed to Longwood Holdings from Five Point's contribution, partially reimbursing capital expenditures.
- Future Commitments: Longwood Holdings committed to an additional $71.4 million; Five Point committed to an additional $68.6 million.
- Debt Impact: Longwood Holdings was designated as a guarantor under Matador's existing Indenture, while DLK Black River Midstream, LLC and Black River Water Management Company, LLC were released as guarantors.
Material Changes Versus Prior Period
This filing reports a discrete transaction rather than a periodic financial performance update. The material change is the structural shift of specific midstream assets from Matador's wholly-owned balance sheet into a 51% owned joint venture. The filing does not provide comparative revenue, profit, or cash flow metrics for the reporting period versus prior periods, as it is a Current Report focused on the transaction closing.
Guidance, Outlook, and Risks
- Adjustments: Initial capital contributions are subject to customary adjustments within 120 days based on net working capital and net operating income of the contributed entities between February 1, 2017, and the closing date.
- Pro Forma Information: Unaudited pro forma financial information is provided in Exhibit 99.2 to show financial condition as if the transaction occurred on September 30, 2016, or January 1, 2015/2016. The filing explicitly states this does not indicate future results.
- Risk Disclosures: The filing includes standard disclaimers that representations and warranties in the Contribution Agreement are for the benefit of the contracting parties only and may not reflect the actual state of facts for security holders. Information may change after the agreement date.
Important Facts for Investor Verification
- Verify the final adjusted capital contributions after the 120-day working capital and operating income reconciliation period.
- Review the Unaudited Pro Forma Condensed Consolidated Financial Information (Exhibit 99.2) to understand the impact on leverage and liquidity ratios.
- Confirm the specific terms of the Fourth Supplemental Indenture regarding Longwood Holdings' new guarantor status and the release of DLK and Black River.
- Assess the operational control and governance structure of the new 51/49 joint venture, San Mateo Midstream.