Matador cuts a deal with Energy Transfer to dodge West Texas gas price pain ahead of 2026 pipeline

Matador Resources is trying to outrun one of the Permian Basin’s most punishing realities: when pipelines out of West Texas fill up, local natural gas prices can crater.

The Dallas-based producer said it has signed a set of new natural gas and natural gas liquids (NGL) agreements with subsidiaries of Energy Transfer, a major U.S. pipeline and midstream operator. The goal is straightforward, lock in outlets for its Delaware Basin production and improve the net price it actually takes home by reducing exposure to the Waha Hub, the West Texas pricing point that can get slammed during congestion.

The deals are designed as a bridge to a bigger shift Matador is betting on: the Hugh Brinson Pipeline, expected to start service in the fourth quarter of 2026. Matador has already reserved 500,000 MMBtu per day of firm capacity on that line, a volume large enough to materially reshape where, and at what price, its gas gets sold.

Why Waha matters, and why Matador wants out

Waha Hub is the key natural gas pricing point near the Permian’s production core. When supply overwhelms takeaway capacity, the local price can trade at a steep discount to benchmark U.S. pricing, squeezing producers even if Henry Hub prices look healthy on paper.

Matador says its new supply agreement with Energy Transfer affiliates is aimed at improving “netbacks”, industry shorthand for the realized price after transportation, processing, and related fees. The company is targeting the second half of 2026 as the period when these interim arrangements should meaningfully reduce its reliance on Waha-linked pricing.

Matador also pointed to a stark incentive: since 2024, it said some markets reachable along the future route have averaged more than $2 per MMBtu higher than other Texas pricing points. At industrial-scale volumes, a $2 spread can translate into a major swing in cash flow.

Energy Transfer’s angle: feeding power plants and AI data centers

Energy Transfer isn’t just a pipeline owner, it’s one of the country’s most vertically integrated midstream companies, with a network spanning more than 130,000 miles of pipelines across 44 states. Securing upstream gas supply helps it keep those assets full and meet demand where it’s growing fastest.

Matador said the gas supply agreement is also intended to help Energy Transfer serve rising demand tied to electricity generation and data centers, including facilities built to support artificial intelligence computing. In the U.S., that surge has become a real grid-planning issue, and natural gas-fired power remains the fastest dispatchable option in many regions.

Energy Transfer has already announced a long-term deal with CloudBurst Data Centers to supply gas for an AI-focused data center project in Central Texas. Matador didn’t say its volumes are earmarked for that specific project, but the direction of travel is clear: midstream companies want reliable supply to match new, power-hungry customers.

NGL agreements add another layer of control in the Delaware Basin

Matador’s announcement wasn’t just about dry gas. The company also signed separate NGL agreements with various Energy Transfer affiliates, dedicating and selling NGL volumes from multiple sources in the Delaware Basin.

NGLs, like ethane, propane, and butane, can make up a meaningful share of a shale well’s economics. But they also require a smooth chain of gathering, processing, and fractionation. Energy Transfer operates NGL transportation, terminals, and fractionation assets, and long-term arrangements can reduce the risk of bottlenecks when the basin ramps up.

The tradeoff is flexibility. Dedicating volumes can limit a producer’s ability to chase the best spot-market pricing elsewhere if NGL markets spike. The financial upside depends on contract details, pricing formulas, service guarantees, and penalties, that typically aren’t fully public.

The Hugh Brinson Pipeline: 500,000 MMBtu a day aimed at better markets

The centerpiece is the Hugh Brinson Pipeline, where Matador has locked in 500,000 MMBtu per day of firm transportation. The line is expected to move gas out of the Permian to Maypearl, Texas, south of the Dallas–Fort Worth area, where it can connect into East Texas and Gulf Coast markets.

For U.S. gas producers, that access matters because the Gulf Coast is where demand is increasingly concentrated: industrial users, major trading hubs, and LNG export terminals that ship U.S. gas overseas. Selling into a better-connected market can mean higher prices and fewer extreme discount episodes.

Matador CEO Joseph Wm. Foran framed the new Energy Transfer agreements as a way to lift realized pricing until the pipeline comes online. The risk, as always in midstream, is timing, large infrastructure projects can slip. That’s why Matador is leaning on interim commercial deals rather than waiting for steel in the ground.

Beyond the Gulf Coast: Henry Hub exposure and a path to Southern California

Matador says it’s also working to diversify where its gas is sold, including greater exposure to markets indexed to NYMEX Henry Hub, the benchmark U.S. natural gas price, and to Gulf Coast LNG-linked demand.

The company also mentioned extending a separate transportation agreement to move some gas to Southern California, a market that has historically posted higher prices than many Texas and Louisiana points. The upside is pricing; the downside is higher transport costs and more complex regulatory constraints.

The broader bet is that “hedging” isn’t just about financial derivatives. For Permian producers, it’s also about contracts and pipes, locking in routes to markets where demand is growing and prices tend to hold up when West Texas gets crowded.