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After largely sitting out A&D in the first half of 2022, mineral and royalty acquisition companies began to warm up to deals in June and July, snapping up interests in Louisiana, North Dakota, Montana and, naturally, the Permian Basin.

The minerals and royalties space has otherwise seen sporadic deals, with occasional transactions such as a February acquisition announced by Brigham Minerals Inc. of interests operated by Pioneer Natural Resources Co. and Endeavor Energy Resources for $32.5 million.

With roughly $770 million spent in the past two months, it’s the first sign that mineral and royalty acquisition companies are coming to grips with the chaos of a global economy beset by ill economic winds and the volatility of commodity prices.

Source: Hart Energy data

Notable Mineral and Royalty Deals, 2022

Announced Value ($MM) Buyer Seller Location
July 7 $119 Freehold Royalties N/A Permian (Midland Basin), Eagle Ford
July 6 $100 Haymaker Minerals & Royalties LLC; Denham Capital N/A Lower 48
June 27 $323 Sitio Royalties Foundation Minerals; Quantum Energy Permian
June 27 $224 Sitio Royalties Momentum Minerals; Apollo Global Management Permian
Feb. 15 $32.5 Brigham Minerals Undisclosed Permian

Sitio Emerges

Recent dealmaking was led by Sitio Royalties Corp., a company born in June after a merger between Desert Peak Minerals and Falcon Minerals Corp. closed. The deal coalesced the two companies into the owner of 140,000 net royalty acres including 105,000 acres in the Permian Basin. As of mid-July, Sitio had a market cap of about $2 billion.

Shortly after the closing of the merger, Sitio made the largest minerals and royalties deals so far in the second half, announcing a pair of acquisitions in the Permian Basin in late June worth about $547 million.

Sitio said it had closed deals to acquire more than 19,700 net royalty acres from Foundation Minerals LLC for approximately $323 million. Separately, the company entered an agreement to acquire over 12,200 net royalty acres from Momentum Minerals LLC for $224 million.

Derrick Whitfield, an analyst with Stifel, said the assets are expected to add 3,500 boe/d to second-half 2022 production and increase net line of sight inventory wells by more than 30%.

“Net-net, we are positive on the deal as it adds substantial scale in the core of the Delaware and Midland basins, increases line-of-sight wells and is accretive to CFPS (cash flow per share)/dividends,” Whitfield wrote in a June 27 report.

Source: Sitio Royalties

Sitio’s Foundation and Momentum Acquisitions

  Sitio Foundation / Momentum Pro forma %
Midland NRAs 21,900 7,400 29,300 34%
Delaware NRAs 85,700 24,500 110,200 29%
Total NRAs 141,800 31,900 173,700 22%
Net permits 11 3 14 32%
Net spuds 8 3 11 35%

The acquisition from Foundation, a Midland, Texas-based portfolio company of Quantum Energy Partners, represents Sitio’s fourth transaction in excess of 10,000 net royalty acres (NRAs) closed or signed since June 2021. Momentum, a Houston-based portfolio company of funds and accounts managed or advised by affiliates of Apollo Global Management, represents the fifth.

Combined, the Foundation and Momentum acquisitions will bring Sitio’s total footprint to 173,700 net royalty acres, the company said.

“We believe that the mineral and royalty sector is ripe for consolidation and are proud to announce these highly accretive acquisitions soon after completing the Falcon Minerals merger and rebranding the company to Sitio,” Noam Lockshin, chairman of the Sitio board of directors, said in a company news release.

Freehold, Haymaker Deals

And in early July, two North American companies, Canada’s Freehold Royalties Ltd. and Haymaker Minerals & Royalties III both announced deals to acquire interests across several basins.

In a July 6 company release, Haymaker said it had acquired a “large-scale diversified mineral portfolio” in partnership with Denham Capital and its affiliates.

Haymaker has used various entities to manage and acquire mineral and royalty interests in over 35,000 oil and gas wells across the U.S.

The company’s affiliate, H3 Minerals LLC, closed the July 6 acquisition, which comprised of a portfolio holding mineral and royalty interests in thousands of wells scattered across more than 30 counties and parishes in Texas, Louisiana, North Dakota and Montana.

The seller and terms of the transaction weren’t disclosed. Kirkland & Ellis LLP acted as legal counsel to Haymaker on the transaction.

“This acquisition fits perfectly within the Haymaker strategy of acquiring diversified mineral portfolios valued at greater than $100 million,” Haymaker Managing Partner Karl Brensike said in the release.

Meanwhile, Freehold’s deal centered on assets in the Permian Basin and Eagle Ford Shale.

On July 7, the company entered into separate agreements with two private sellers to acquire “high-quality U.S. mineral title and royalty assets” located in the Permian Basin and Eagle Ford Shale, according to the Canadian.

Freehold agreed to pay CA$123 million for Midland Basin assets, located predominantly in Howard County, Texas, and CA$32 million for Eagle Ford assets in South Texas. The company plans to fund the acquisitions, totaling CA$155 million (US$119 million), using its existing credit facility.

According to a Freehold company release, the acquisitions will add roughly 1,100 boe/d in production volumes and $31 million in funds from operations in 2023 while growing the company’s U.S. land holdings by about 147,000 gross acres and 8,000 net royalty acres (90% mineral interests).

“The U.S. acquisitions enhance the quality of Freehold’s North American royalty portfolio through further strengthening of our peer leading realized commodity pricing, building on the production growth platform we have established in the Permian Basin, and continuing to position our portfolio in the highest quality oil and gas development areas across North America,” Freehold said in the release.

On July 7, Freehold also reported the close of its $19 million acquisition, previously announced in May, of mineral title and royalty assets in the Midland Basin.