Matador Resources Co. (NYSE: MTDR) said Jan. 22 its midstream joint venture (JV) has entered a strategic partnership with Plains All American LP (NYSE: PAA) in the Delaware Basin, which the Dallas-based E&P expects will result in “substantial” savings on its transportation costs.

As part of the partnership, subsidiaries of San Mateo Midstream LLC, of which Matador owns a 51% stake, and Houston-based Plains agreed to work together to gather and transport crude oil for Matador and third-party customers in and around the Rustler Breaks asset area in Eddy County, N.M.

The agreement also includes a joint tariff arrangement to offer third-party producers located within a joint development area of roughly 400,000 acres in Eddy crude oil transportation services from the wellhead to Midland, Texas, with access to other end markets, such as Cushing, Okla., and the Gulf Coast.

Plains intends to construct a mainline extension from its current long-haul oil pipeline system located in Culberson County, Texas, to a central delivery point on San Mateo’s crude oil pipeline system, which is currently under construction throughout the Rustler Breaks asset area near Carlsbad, N.M. Matador said it expects construction will be complete in second-quarter 2018 or early in the third quarter.

With transportation costs rising in the Delaware Basin, Matador said in its press release that it anticipates saving “substantial expenses” by transporting increasing volumes of its oil by pipeline.

“The value to Matador of this transaction is significant,” Joseph Wm. Foran, chairman and CEO of Matador, said in a statement. “In addition to Matador’s 51% ownership in San Mateo, the joint tariff in Rustler Breaks and the tariff in Wolf provide Matador the ability to lock in attractive and competitive long-term oil transportation rates, obtain additional oil market optionality, reduce shut-in and transportation risk and receive increased takeaway capacity out of the Delaware Basin.”

In addition, Matador said another subsidiary of Plains has agreed to purchase the company’s oil production in the Rustler Breaks asset area and in the Wolf asset area in Loving County, Texas, as well.

As of Jan. 22, Matador was operating five rigs that were drilling oil and natural gas wells full-time in the Delaware Basin as well as a temporary sixth rig in its Antelope Ridge asset area in southern Lea County, N.M., according to the company press release.

San Mateo is a strategic JV formed in February 2017 by Matador and a subsidiary of Five Point Capital Partners LLC. The company serves as the primary midstream solution for Matador, its anchor customer, and also provides midstream services to other producers in the Delaware.

Similar to San Mateo’s formation in early 2017, the transaction with Plains demonstrates the different ways companies can work together to create value for each of its stakeholders, Foran added.

“Not only does this relationship open up additional market opportunities for San Mateo and Matador through Plains’ extensive midstream asset footprint, long-term customer relationships and record of performance, but it also demonstrates San Mateo’s ability to generate value for itself and for third-party customers by providing services across all three production streams—oil, natural gas and water,” he said.