Matador Resources Expands San Mateo’s Delaware Basin Midstream Infrastructure
Matador Resources Company (NYSE: MTDR) has announced a significant expansion of its midstream operations in the Northern Delaware Basin through two new commercial agreements entered into by wholly owned subsidiaries of San Mateo Midstream, LLC. The agreements are expected to strengthen San Mateo’s natural gas gathering and processing capabilities, increase long-term volumes and support continued production growth across the Delaware Basin.
San Mateo is a midstream joint venture in which Matador holds a 51% ownership interest, while Five Point Infrastructure LLC owns the remaining 49%. The two agreements involve a large producer operating in the Northern Delaware Basin and are designed to provide additional natural gas infrastructure and processing services for its development activities in southeastern New Mexico.
The agreements include a new long-term natural gas gathering and processing arrangement covering newly dedicated acreage in Lea and Eddy Counties, New Mexico, and an extension of an existing gathering and processing agreement in Eddy County. Together, these commercial arrangements are expected to provide San Mateo with substantial long-term volume growth and improve utilization of its integrated midstream infrastructure.
Under the first agreement, San Mateo will provide natural gas gathering, treating and processing services for production from newly dedicated acreage in Lea and Eddy Counties. The natural gas gathered from these properties will be transported and processed at San Mateo’s Marlan natural gas processing complex, located in Eddy County, New Mexico.
The new arrangement is structured as a long-term, fixed-fee agreement and includes a large-scale acreage dedication. This commercial structure is expected to provide San Mateo with additional natural gas volumes and greater visibility into future midstream revenues. It will also support the producer’s planned development activities throughout its Northern Delaware Basin acreage.
The second agreement involves an amendment to an existing natural gas gathering and processing arrangement covering production from Eddy County. Through this amendment, San Mateo will continue providing gathering, treating and processing services for several years beyond the original contract term at its Black River natural gas processing plant in Eddy County.
The Black River extension builds on a commercial relationship originally announced by San Mateo in October 2018. Extending the agreement is expected to preserve long-term volumes and strengthen the value of San Mateo’s existing infrastructure without requiring incremental capital expenditures associated with the contract extension.
Both agreements establish long-term, fee-based arrangements under which San Mateo will provide natural gas gathering, processing, treating and related midstream services. These services are intended to support the producer’s ongoing development of its Northern Delaware Basin properties while expanding San Mateo’s contracted business.
The combined volumes associated with the new agreement and the Black River extension are expected to contribute meaningfully to San Mateo’s long-term growth. The additional commitments will also complement natural gas volumes generated by Matador’s own production activities, creating opportunities to increase the utilization of existing gathering systems and processing facilities.
Expanded Marlan Processing Capacity
To accommodate the expected production volumes from the new commercial agreements and Matador’s anticipated future production, San Mateo plans to expand its Marlan Plant complex. The proposed expansion includes the construction of a new natural gas processing train with a capacity of 300 million cubic feet per day (MMcf/d).
The additional processing train will increase San Mateo’s ability to handle natural gas production from the newly dedicated acreage and other volumes across its operating footprint. The expansion is also expected to include a new nitrogen rejection unit to support the processing requirements associated with the additional natural gas volumes.
In addition to expanding processing capacity, San Mateo expects to construct approximately 20 miles of new natural gas pipeline. The pipeline infrastructure will connect the newly dedicated acreage to San Mateo’s existing midstream network and provide transportation capacity for the anticipated production growth.
San Mateo also plans to develop a field treating facility designed to remove carbon dioxide from natural gas before it enters the processing system. The additional treating infrastructure will help accommodate the characteristics of the incoming gas streams and support reliable operations throughout the expanded gathering and processing network.
Subject to routine permitting, procurement and construction activities, San Mateo is targeting completion of the Marlan Plant expansion by year-end 2028. The company expects to use a combination of existing infrastructure and newly constructed facilities to provide the required services under the agreements.
Capital Expenditure Outlook
The planned infrastructure expansion will require additional investment during 2026 as San Mateo begins initial development work on the processing train and associated gathering assets.
In connection with the anticipated construction activities, Matador now expects its full-year 2026 midstream capital expenditures to increase by approximately $25 million. The company currently anticipates midstream capital spending of between $170 million and $190 million for the year.
The additional investment is intended to support early-stage work associated with the Marlan Plant expansion, new pipeline construction and related infrastructure required to connect and service the newly dedicated acreage.
Although the expansion will require upfront capital investment, the agreements are expected to provide San Mateo with increased long-term fee-based revenues. The company believes the combination of new contracted volumes, extended customer commitments and additional processing capacity will strengthen its midstream business and improve its long-term cash flow generation.
Once the Marlan expansion is completed in 2028, San Mateo expects the additional processing capacity to achieve immediate utilization through the anticipated production volumes associated with the agreements and Matador’s operations.
Long-Term Financial and Operational Benefits
San Mateo expects the additional volumes and infrastructure expansion to contribute significantly to its financial performance. Based on current expectations, the company believes the new processing capacity and associated commercial arrangements could generate San Mateo Adjusted EBITDA in excess of $100 million by the end of 2029.
The expected financial contribution reflects the anticipated benefits of increased natural gas volumes, expanded processing capabilities and improved utilization of San Mateo’s integrated midstream assets.
The new agreements also reinforce San Mateo’s relationship with a major producer in the Northern Delaware Basin. By securing additional acreage commitments and extending an existing commercial arrangement, San Mateo is positioning its infrastructure to support development activity over an extended period.
The agreements are expected to provide greater operational scale and strengthen the company’s ability to serve both third-party producers and Matador’s production operations. The expansion of gathering, treating and processing facilities will also help ensure sufficient infrastructure is available as natural gas production increases across the company’s service area.
Following completion of the planned Marlan Plant expansion, San Mateo expects its total natural gas processing capacity to exceed 1.3 billion cubic feet per day. This would represent nearly three times its processing capacity of 460 MMcf/d before Matador contributed Pronto Midstream, LLC to San Mateo in December 2024.
The planned capacity increase highlights the development of San Mateo’s midstream platform and its growing role in supporting natural gas production across the Delaware Basin.
Through the new long-term agreement, the Black River contract extension and the planned Marlan Plant expansion, Matador and San Mateo expect to strengthen their infrastructure position in southeastern New Mexico. The projects are intended to provide additional processing capacity, secure long-term customer commitments and support future production growth while creating opportunities for increased cash flow generation through 2029 and beyond.
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