BUSINESS COMBINATIONS |
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Sep. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUSINESS COMBINATIONS | Cardinal Acquisition On July 31, 2026, a wholly-owned subsidiary of San Mateo completed the acquisition of the operating subsidiaries of Cardinal Midstream Partners, LLC (“Cardinal”), a portfolio company of EnCap Flatrock Midstream, for total cash consideration of $761.0 million, subject to certain customary post-closing purchase price adjustments (the “Cardinal Acquisition”). The Cardinal Acquisition provides San Mateo with increased processing capacity, future expansion opportunities, new natural gas customers and enhanced flow assurance for producers, including Matador, in the northern Delaware Basin. The results of operations of the acquired business and the assets acquired and liabilities assumed in the Cardinal Acquisition are included in the Company’s midstream segment. The purchase price for the Cardinal Acquisition was funded through a combination of (i) borrowings under a new $650.0 million incremental senior secured term loan due July 30, 2027 under the San Mateo Credit Facility (as defined below) (the “San Mateo Term Loan”), (ii) capital contributions by Matador and a subsidiary of Five Point Infrastructure LLC (“Five Point”), the Company’s joint venture partner in San Mateo, to San Mateo of $51.0 million and $49.0 million, respectively, and (iii) cash on hand. The Cardinal Acquisition was accounted for under the acquisition method of accounting as a business combination in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”). Under ASC 805, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values as of the respective acquisition date, with any excess purchase price allocated to goodwill. As San Mateo acquired 100% of the membership interests of Cardinal, the acquisition was treated as an asset acquisition for tax purposes. The preliminary allocation of the total purchase price for the Cardinal Acquisition is set forth below (in thousands). As of the date of this filing, the valuation of property, plant and equipment and intangible assets, as well as certain working capital adjustments in connection with the final settlement, remain ongoing and adjustments may be made. The Company expects to complete the final purchase price allocation during the 12-month period subsequent to the Cardinal Acquisition closing date.
_____________________ (1)Other long-term assets and other long-term liabilities represent lease balances, and current liabilities includes current lease liabilities of $4.7 million. The historical carrying values of the current assets acquired and the current liabilities assumed approximated their fair values due to their short-term maturities. The fair value measurements of the intangible assets acquired and asset retirement obligations were based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair values of property, plant and equipment were measured using the replacement cost new and the reproduction cost new methods under the cost approach of valuation. Significant inputs to the valuation of property, plant and equipment include estimates of: (i) replacement or reproduction cost, (ii) adjustments for physical deterioration and (iii) remaining useful lives of the assets. Asset retirement obligations were measured using the discounted cash flow method under the cost approach of valuation. The fair value of the intangible assets was measured using the multi-period excess earnings method under the income approach of valuation, which considers the incremental cash flows attributable only to the subject intangible asset after deducting contributory asset charges. Significant inputs to the valuation of intangible assets include estimates of: (i) future throughput volumes, (ii) future margins, (iii) cash flows attributable to returns on contributory assets, (iv) the weighted average cost of capital and (v) the economic lives of the customer relationships. These inputs require significant judgments and estimates and are the most sensitive and subject to change. Goodwill represents the excess of the purchase price of an acquired business over the fair value of net assets acquired. The goodwill recognized in connection with the Cardinal Acquisition reflects the value to San Mateo of flowing additional volumes through the system, including those of Matador. The goodwill is deductible over 15 years for tax purposes, which creates associated deferred tax balances post closing. The results of operations for the Cardinal Acquisition since the closing date have been included in the Company’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2026. Additionally, the Company incurred $3.1 million and $4.1 million in acquisition-related costs for the Cardinal Acquisition during the three and nine months ended September 30, 2026, respectively, which were included in general and administrative expenses in the unaudited condensed consolidated statements of operations. The pro forma impacts of this business combination to revenues and net income for the three and nine months ended September 30, 2026 and 2025 were not material to the Company’s revenues and net income as reported. Bureau of Land Management Oil and Gas Lease Acquisition In May 2026, the Company completed the acquisition of 5,154 net undeveloped acres in the core of the Delaware Basin in Southeast New Mexico for approximately $1.16 billion as part of the Bureau of Land Management Oil and Gas Lease Sale (the “BLM Acquisition”). The acquired acreage complements the Company’s existing acreage position, and as a result, includes proved undeveloped reserves in addition to unproved and unevaluated reserves. The BLM Acquisition was accounted for as an asset acquisition. The purchase price is allocated to the underlying assets acquired based upon their relative fair values as of the acquisition date as set forth below (in thousands).
The fair value measurements of the assets acquired were based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of evaluated oil and gas properties were measured using the discounted cash flow technique of valuation. Significant inputs to the valuation of oil and gas properties include estimates of: (i) future production volumes, (ii) future commodity prices and (iii) the weighted average cost of capital. These inputs require significant judgments and estimates and are the most sensitive and subject to change.
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