Kimbell Royalty Partners LP (NYSE: KRP) is kicking off 2019 by continuing its buying spree of oil and gas mineral and royalties in the U.S., this time with a multimillion-dollar acquisition from private-equity firm EnCap Investments LP.
The Fort Worth, Texas-based company said Feb. 7 that EnCap agreed to sell certain oil and gas royalty assets in a 100% equity transaction worth about $151.3 million. The majority of the asset’s production is located in the Eagle Ford Shale, Permian Basin, Haynesville Shale and Powder River Basin.
The deal will add about 1,600 barrels of oil equivalent per day (boe/d) of production and 12,200 net royalty acres, increasing Kimbell’s total net royalty acre position by 9% to roughly 144,100 net royalty acres across the continental U.S.
Including the pending EnCap transaction, Kimbell has completed over $700 million in acquisitions in less than six months, which Bob Ravnaas, CEO of Kimbell’s general partner, said positions the company as one of the leading consolidators within the U.S. royalty and minerals space.
“This acquisition kicks off what we believe will be another year of consolidation within the oil and gas mineral and royalty space in the U.S.,” Ravnaas said in a statement. “After giving effect to this transaction, we have nearly quadrupled our production since our IPO and will have royalty interests in approximately 95,000 wells across the U.S.”
Mineral and royalty deal making hit a new high last year with a transaction volume of roughly $3 billion and Kimbell played a large role in that jump, according to a recent report by RBC Capital Markets.
In 2018, Kimbell agreed to acquire one of the nation’s largest mineral and royalty acquisition companies, Haymaker Minerals & Royalties LLC, in a cash-and-stock deal worth roughly $404 million.
The announcement of the Haymaker transaction was part of a blockbuster week for oil and gas mineral deals last summer that also included the $800 million purchase of Blackstone Energy Partners LP’s entire portfolio of mineral interests in the Eagle Ford Shale by Falcon Minerals Corp. (NASDAQ: FLMN).
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Kimbell wrapped up last year with the purchase of a diversified minerals package across the Eagle Ford Shale, Permian Basin, Appalachian Basin and Bakken in a stock deal worth about $90 million when it closed in December.
“Like the Haymaker acquisition and the recent dropdown transaction, we believe this acquisition is an excellent fit with our existing portfolio of mineral and royalty assets,” Ravnaas said. “We expect not only immediate cash flow accretion in the near term, but also additional future development from an outstanding list of leading operators.”
The EnCap acquisition includes oil and natural gas mineral and royalty interests controlled by the private-equity firm through Phillips Energy Partners, Phillips Energy Partners II and Phillips Energy Partners III.
More than 64% of production from the assets is in the Eagle Ford Shale, Permian Basin, Haynesville Shale and Powder River Basin. The production mix of the EnCap assets is about 38% oil, 48% natural gas and 14% NGL on a 6:1 basis and roughly 77% of revenue is from oil and NGL.
Kimbell said 17 rigs are actively drilling on the EnCap acreage.
The purchase price of the EnCap acquisition is composed of 9.4 million newly issued units in Kimbell Royalty Operating LLC, which Kimbell expects will further reduce its leverage ratio.
“EnCap has elected to receive 100% equity in this transaction, demonstrating our commitment to partner with the Kimbell team as they continue to execute on their impressive growth strategy,” Marty Phillips, managing partner and founder of EnCap, said in a statement.
The transaction has an effective date of Jan. 1. EnCap will be subject to a 120-day lockup after the closing of the transaction, which Kimbell expects to occur in late March, according to the company press release.
Baker Botts LLP was legal adviser to Kimbell Royalty Partners in connection with the acquisition. RBC Richardson Barr was exclusive financial adviser and Vinson & Elkins LLP acted as legal adviser to EnCap, the release said.
Emily Patsy can be reached at firstname.lastname@example.org.