Have It All, Part 3 - San Mateo Midstream's Delaware Basin Gathering Systems

The run-up in Permian crude oil production over the past few years — and the expectation of continued gains — has been spurring the development of a number of crude gathering systems in the play’s Midland and Delaware basins. These small-diameter pipeline networks are critically important to producers and shippers in that they enable them to transport crude more quickly and cost-effectively than by truck, and (ideally) they connect to takeaway pipelines that flow to multiple destinations. But there is more than one approach to developing a gathering system. For example, a midstream company could plan a system that appeals to several producers in an area and then try to sign them up. Or, it might work closely with a single producer — sometimes an affiliated company — and design a gathering system to meet its specific needs, then work to add other producers and shippers later. Today, we look at the West Texas and southeastern New Mexico systems developed by a joint-venture company of Matador Resources and Five Point Energy to serve Matador and others.

This is the third episode in our series. In Part 1, we said that while crude gathering systems, with their smaller-bore pipes and lower capacities, might at first glance seem like secondary players in the midstream space, they actually play significant roles in reducing transportation costs and maximizing producer and shipper profits. We noted that successfully developing gathering systems requires a keen understanding of three key factors: lining up producer commitments, providing takeaway optionality, and minimizing the total cost of moving crude from the lease to the Gulf Coast, Cushing or other destinations. And we discussed the newly announced Beta Crude Connector, a 100-mile-plus, 150-Mb/d gathering system that a joint venture of Concho Resources and Frontier Energy Services is developing in the heart of the Midland Basin. In Part 2, we discussed another Midland-area system: Reliance Gathering’s 185-Mb/d pipeline network, which was originally developed to serve affiliated producer Reliance Energy, but which has since undergone expansions to serve a number of other producers.

Today, it’s San Mateo Midstream’s turn. The Dallas-based company was formed in February 2017 by Matador Resources (a producer in the Permian, Eagle Ford and Haynesville) and Five Point Energy (a private equity firm that focuses on energy infrastructure) to build, own and operate crude oil gathering systems, associated gas gathering systems, natural gas processing plants, and produced-water gathering systems and disposal wells in the Delaware Basin. So far, the crude gathering systems it’s developed only serve Matador’s wells, but its gas gathering systems, two gas processing plants and produced-water networks serve other producers as well as Matador.