Matador Inks Deal With Kinder Morgan Arm, Gets Rating Upgrade

Matador Resources Company (NYSE:MTDR) recently announced that it has carried out a natural gas sales agreement with a unit of Houston, TX-based energy infrastructure company, Kinder Morgan, Inc. (NYSE:KMI) . Moreover, Matador’s subsidiary, San Mateo Midstream, LLC that focuses on midstream operations, has finished its enhanced crude gathering system. The gathering system is located in Loving County, TX.

The deal with Kinder Morgan’s unit is expected to give Matador a flow assurance, as it lifts the company’s natural gas takeaway position from its prolific Delaware Basin assets. The firm sales agreement will commence once the Gulf Coast Express Pipeline project of Kinder Morgan comes online. Per the agreement, Matador will transport 110,000-115,000 million British Thermal Units per day (MMBtu/d) of natural gas based on Houston Ship Channel pricing. Notably, the 2 billion cubic feet per day pipeline is anticipated to come online in October 2019. The deal will enable Matador’s products to reach the refineries and petrochemical facilities in the Gulf Coast.

Additionally, Matador secured natural gas takeaway deals with third-party shipping companies, enabling it to transport its Wolf and Rustler Breaks asset productions. Output from these assets marks 93% of the company’s Delaware Basin total gas production, which stood at 82.8 thousand cubic feet per day in the first quarter of 2018.

In May 2018, the expansion of San Mateo’s Loving County oil gathering system was completed, which can help the company improve its realized pricing. The expansion is also expected to help the company in lowering the risks related to operations and crude flows.

Additionally, the company witnessed an upgrade from the S&P Global Ratings for its corporate credit rating scenario, on May 22. Matador received a ‘B+’ for its corporate credit rating, upgraded from ‘B’, while its issue-level rating on senior unsecured notes was upgraded to ‘BB-‘ from ‘B’.

Price Performance

Dallas, TX-based Matador has gained 12.6% in the past year compared with 13.1% growth of its industry.

Zacks Rank and Stocks to Consider

Currently, Matador carries a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for some better-ranked stocks in the same space like Anadarko Petroleum Corporation (NYSE:APC) and Delek US Holdings, Inc. (NYSE:DK) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Woodlands, TX-based Anadarko is an exploration and production company. For 2018, its bottom line is likely to be up 239.3%. In the last reported quarter, the company delivered a positive earnings surprise of 20.1%.

Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 230.2%.

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