Matador Resources Acquires Paloma Permian for $1.275 Billion to Build 240,000-Acre Delaware Basin Position as EnCap Exits Two Assets

Matador Resources Company announced on July 23, 2026 that it will acquire Paloma Permian LLC for $1.275 billion in cash. The deal adds 16,235 net undeveloped acres in Eddy and Lea Counties, New Mexico. Proved reserves total 55 million BOE, and the seller produced roughly 10,600 to 11,600 BOE per day from the package, with oil comprising 57% of that volume. Both the Paloma acquisition and a related Ridge Runner transaction are expected to close in Q4 2026.

Deal Structure and EnCap's Dual Exit

Paloma Permian LLC is a portfolio company of EnCap Investments, one of the largest dedicated oil and gas private equity firms in the United States. Matador simultaneously agreed to acquire Ridge Runner Resources II, LLC, also from EnCap, for approximately $1.3 million per net Woodford location. Both transactions carry the same seller: this is a dual exit by a single private equity sponsor to a single buyer. That structure reflects Matador's strategic fit as the buyer most capable of integrating both packages through its existing Lea County operations and midstream subsidiary.

Valuation at a 56% Premium to Proved Reserve Value

Paloma's PV-10, which discounts proved reserve cash flows at a 10% rate, was $816 million as of May 31, 2026. Matador's $1.275 billion purchase price implies a 1.56x multiple to that benchmark. The premium reflects Matador's expectation that the Woodford formation below the Paloma acreage holds undeveloped resources not captured in the PV-10 calculation. Per flowing BOE of production, Matador is paying roughly $114,900 per BOE per day, and roughly $23.18 per BOE of total proved reserves.

Woodford Formation: First Well Results

Matador's Rae's Creek well, the first Woodford exploratory well on the combined acreage, produced more than 2,200 BOE per day during a 24-hour flow test on June 29, 2026. Oil comprised 72% of that initial rate. The well outperformed comparable Texas Woodford wells by approximately 20% on a 60-day cumulative basis. Management said the result validates commercial viability of the Woodford in this part of the Delaware Basin.

The Ridge Runner acquisition adds approximately 50,000 contiguous net Woodford acres at an average cost of $4,000 per acre. Matador has identified more than 150 net operated Woodford locations, normalized to two-mile lateral lengths. Management projects well costs in the Woodford will fall 30 to 40% within 12 to 18 months of closing, citing efficiency gains from prior Delaware Basin acquisitions in 2018.

San Mateo Midstream Integration

Matador's midstream subsidiary, San Mateo Midstream, expanded its Delaware Basin footprint in June 2026 through the Cardinal Midstream acquisition. That transaction extended San Mateo's gathering, processing, and water management infrastructure across Eddy County. The new Paloma acres are concentrated in Eddy and Lea Counties, and their production will flow through San Mateo's gathering system. Retaining midstream throughput inside the Matador enterprise reduces the per-barrel cost of moving oil and gas to market.

Financing and Free Cash Flow Target

Matador will fund the Paloma acquisition with cash on hand and its reserve-based lending credit facility. The company fully repaid that facility in May 2026, and management expects roughly $1 billion in adjusted free cash flow for 2026. The company targets a corporate leverage ratio near 1.0x within 12 to 18 months of closing. The two new packages bring Matador's total Delaware Basin acreage to approximately 240,000 net acres upon close.

WTI crude traded at $88.35 per barrel in late morning on the CME on July 24, 2026, down 4.2% on the day, per OilPrice.com. At that price and Paloma's 57% oil cut, the new production stream will generate positive free cash flow within Matador's projected $1 billion full-year FCF target. CEO Joseph Wm. Foran cited expectations for 'efficient integration' and 'significant efficiency gains, increases in oil and natural gas production, and reserve growth' from both packages.