San Mateo Signs Two Long-Term Natural Gas Gathering and Processing Agreements

en.Wedoany.com Reported - On November 2, two wholly-owned subsidiaries of U.S. natural gas midstream company San Mateo Midstream signed two long-term gathering and processing agreements with a major natural gas producer in the northern Delaware Basin, covering natural gas resource development in Lea County and Eddy County, New Mexico. One is a new fixed-fee contract, and the other is an extension of an existing contract. The associated gas volumes will be connected to the Marlan and Black River natural gas processing facilities, respectively.

The new agreement covers newly designated natural gas supply areas in Lea County and Eddy County. San Mateo will be responsible for natural gas gathering, treating, and subsequent processing, and will deliver the natural gas to the Marlan processing plant in Eddy County. The contract adopts a long-term fixed-fee model and involves a large-scale acreage dedication.

The other agreement extends the natural gas gathering and processing contract first announced in October 2018, with San Mateo continuing to provide services through the Black River natural gas processing plant in Eddy County. The parties will further extend the original contract term by several years, with existing facilities handling the processing volumes under the extended contract.

To accommodate the new contracted gas volumes and the expected increase in natural gas production from Matador Resources, San Mateo plans to add a natural gas processing unit with a capacity of 300 million cubic feet per day at the Marlan natural gas processing plant, along with a new nitrogen removal unit. The company also plans to lay approximately 20 miles (about 32.2 kilometers) of natural gas pipeline to connect the newly designated gas field supply areas, and to build a carbon dioxide removal facility.

The Marlan expansion project is scheduled for completion by the end of 2028, with implementation progress subject to permitting approvals, equipment procurement, and construction scheduling. Upon completion of the expansion, San Mateo's total natural gas processing capacity is expected to exceed 1.3 billion cubic feet per day, equivalent to approximately 36.81 million cubic meters per day. The company expects natural gas processing volumes under the new agreements to begin growing in 2028.

Matador Resources will raise its full-year 2026 midstream capital expenditure forecast by approximately $25 million, bringing the adjusted budget to $170 million to $190 million, with the additional funds allocated to the Marlan expansion project and preliminary construction of supporting gathering facilities. The company expects the expansion project, once operational, to generate more than $100 million in adjusted EBITDA by the end of 2029.

San Mateo also plans to build the Northern Connection Pipeline in 2027, connecting existing gathering facilities in Lea County with the Cardinal gathering system in Eddy County, enabling natural gas transportation between the northern Marlan processing facilities and the southern Pecos River processing facilities. The connection of the two systems in southern Eddy County was completed in the third quarter of 2026.