Matador Resources Co. (NYSE: MTDR) said Jan. 20 that it entered into a definitive agreement to acquire Harvey E. Yates Co. (“HEYCO”), a subsidiary of HEYCO Energy Group Inc. The acquisition includes certain oil- and natural gas-producing properties and undeveloped acreage in Lea and Eddy counties, N.M.

Roswell, N.M.-based HEYCO is privately owned, Matador added.

Matador agreed to pay about $37.4 million in cash including assumed debt. It will also issue about 3.1 million of its common shares, and 150,000 shares of a new series of its convertible preferred stock, to HEYCO Energy Group. Until closing these will be convertible into 10 common shares of Matador for each preferred share, the company said.

The properties include:

· About 58,600 gross (18,200 net) acres in Lea and Eddy counties. These are located between Matador’s existing acreage in its Ranger and Rustler Breaks prospect areas.

· About one-third of the acreage is operated, one-third is nonoperated, and Matador will operate the remaining one-third through agreements, including operating agreements and farm-in agreements.

· More than 95% of the acquired acreage position consists of state and federal leases, most with favorable net revenue interests greater than 80% and some as high as 87.5%.

· Essentially all of the acreage is HBP from existing wells and production units.

· The two most recent Second Bone Spring wells drilled horizontally and completed on this acreage -- the CTA State Com #4H and #3H wells operated by COG Operating LLC, a subsidiary of Concho Resources, Inc. -- averaged 1,063 barrels of oil equivalent per day (boe/d), 78% oil, and 992 boe/d, 84% oil, respectively, during their first 30 days of production. HEYCO owns a 14.3% working interest in both wells.

· Average net daily production during the fourth quarter of 2014 was about 530 boe/d, about 70% oil. This included average net daily production from the CTA State Com #3H and #4H wells, the company said.

· Net proved developed producing (PDP) oil and natural gas reserves of about 1.3 MMboe, 60% oil. This was as of Sept. 1, 2014 and based on analysis from Netherland, Sewell & Associates Inc., excluding any contributions from the CTA State Com #3H and #4H wells. The PDP reserves were valued at $27.9 million.

Source: Business Wire, Matador

When the transaction closes Matador will operate all the operated properties. The transaction is scheduled to close Feb. 27. Also, when it closes, George M. Yates is expected to join Matador’s board of directors. He is HEYCO Energy Group’s CEO, the company said.

“Matador’s operational excellence in horizontal drilling and its top-tier organization make me confident that this partnership will maximize the value of our properties in the Delaware Basin, where HEYCO pioneered vertical development in the Bone Spring in the 1980s,” Yates said.

KLR Group LLC was HEYCO’s adviser, and BMO Capital Markets was Matador’s adviser.