A huge amount of capital has been chasing minerals in recent years as the importance of mineral holdings grows in the oil and gas development chain.

Maybe nothing highlighted that sentiment more than the duo of oil and gas minerals deals this past week totaling more than $1.2 billion.

First, Kimbell Royalty Partners LP (NYSE: KRP) said May 29 it agreed to acquire one of the nation’s largest mineral and royalty acquisition companies, Haymaker Minerals & Royalties LLC. The cash-and-stock deal worth about $404 million included interest in Permian and Midcontinent shale plays.

Less than a week later, Osprey Energy Acquisition Corp. (NASDAQ: OSPR) dropped another blockbuster deal with the announcement on June 4 it will acquire Blackstone Energy Partners LP's entire portfolio of mineral interests in the Eagle Ford Shale for roughly $800 million in cash and stock.

Osprey’s deal includes the combination of the blank-check company with Blackstone-managed Royal Resources Partners LP that will result in the formation of Falcon Minerals Corp.—the first public minerals company with oil-weighted assets concentrated in the core-of-the-core Eagle Ford Shale, according to a press release.

George Soulis, vice president and business development manager for Oil & Gas Clearinghouse, said the driving force behind these deals is simple: mineral holdings have become even more valuable thanks to the nature of unconventional plays.

“Minerals have changed as the industry has moved from formation exploration to prospect exploitation,” Soulis explained during the opening keynote for a pre-conference minerals workshop at Hart Energy’s recent DUG Permian Basin conference and exhibition in Fort Worth, Texas.

Predictable “exploration plans are available through permit documents” so nowadays “the type curve is more important than a structure or trap. Today, location is paramount,” he said.

Further, good rock, reservoir characteristics and basin specifics make minerals very attractive to investors, he added.

Osprey has done that with the formation of Falcon Minerals.

First-Of-Its-Kind Minerals Company

As part of its definitive agreement with Blackstone, Osprey will acquire the assets of Royal Resources, which includes Eagle Ford and Austin Chalk asset positions covering 251,000 gross unit mineral acres. Net production for 2018 is expected to be about 6,352 boe/d.

Currently, the Eagle Ford properties have more than 1,789 producing wells with expected 2018 liquids production of greater than 73%, and more than 80% of revenue derived from oil. The largest operators on the acreage are ConocoPhillips Co. (NYSE: COP), EOG Resources Corp. (NYSE: EOG), BHP Billiton Ltd. (NYSE: BHP) and Devon Energy Corp. (NYSE: DVN).

The acquired assets also include more than 58,000 gross unit mineral acres in the Marcellus Shale.

Upon closing of its combination, the newly formed Falcon Minerals is expected to be a first-of-its-kind mineral company with a total enterprise value of about $894 million. Falcon will be led by Osprey’s management team in partnership with Blackstone and structured as a C-corp.

Osprey is a special-purpose acquisition company (SPAC) led by CEO Jonathan Z. Cohen, the co-founder of Atlas Pipeline Partners LP and Atlas Energy Inc.

Cohen said the company went public in July 2017 with the intent to acquire a “world-class and unique” energy business that would benefit from a new phase as a public company.

“We believe that is exactly what we are creating with Falcon Minerals,” he said in a statement.

Further, Cohen sees “tremendous opportunity” to grow Falcon Minerals in the future.

“There is a tremendous opportunity to build on this excellent business by utilizing our organic growth and acquisition skills in a highly fragmented oil and gas minerals industry, and we are thrilled to partner with Blackstone and benefit from their vast experience in the sector,” he said.

Blackstone will retain a significant ownership stake in Falcon Minerals representing roughly 47% of its outstanding common stock, which will be listed on the New York Stock Exchange upon completion of the transaction.

Credit Suisse Securities (USA) LLC was capital markets advisers to Osprey and sole placement agent on a private investment in public equity deal. Wachtell, Lipton, Rosen & Katz was the company's legal counsel and Paul Hastings LLP and Ledgewood PC acted as its oil and gas counsel.

Citi was Blackstone's financial capital markets adviser as well as its lead arranger and administrative agent on the fully underwritten reserve-based lending facility. Kirkland & Ellis LLP was its legal counsel.

Kimbell’s Haymaker Transformation

In its largest transaction to date, Kimbell will acquire Haymaker, which itself has acquired more than 5 million gross mineral acres through over 700 individual transactions since it was founded in 2013 with invested capital on behalf of KKR & Co. LP and Kayne Anderson Capital Advisors LP.

In total, Haymaker assembled a diversified portfolio of mineral and royalty interests in more than 35,000 producing wells across 26 states and over 500 counties. Of the combined royalty acreage, 52% is in the Permian Basin and Midcontinent areas, including mineral interests in the Midland Basin and Scoop/Stack plays, Kimbell said.

Diversified minerals and royalties are just starting to get the recognition they deserve, according to Haymaker CEO Karl Brensike.

Brensike said he expects the transaction to kick off a new phase of consolidation across the sector as private equity looks to divest their mineral interests to longer-term holders.

Following the closing of the acquisition, Kimbell will have an 11.1 million gross acre position with a total of 73 active rigs on its properties, which represents 7% of total active rigs in the U.S. In addition, 95% of all rigs in the Lower 48 are located in counties where Kimbell will hold mineral interest positions.

Kimbell is also pursuing to change the combined company’s tax status and transition to a C-Corp. KKR, Kayne and Haymaker management have all agreed to vote in favor of the company’s proposed election to change to a taxable entity.

“Kimbell's diversified asset base and access to capital through their proposed tax structure will position them to continue to make accretive acquisitions over the coming years,” Brensike said.

The combined company will be operated by Kimbell’s management team, led by Kimbell Chairman and CEO Bob Ravnaas, following closing of the transaction.

Ravnaas said in a statement, “This is a transformative acquisition for our company which we expect to deliver significant value and benefits through both increased scale and significant operating leverage that will drive improved profitability. Through this combination of highly complementary minerals portfolios, Kimbell is uniquely positioned to be a major participant in the best-performing, highest-growth oil and gas basins in the Lower 48. We expect the acquisition to be immediately accretive to distributable cash flow per unit and look forward to continued successes in this new and exciting chapter for Kimbell.”

Following the closing of the acquisition, Haymaker’s private equity sponsors, KKR and Kayne Anderson, along with Haymaker management, will collectively own roughly 37% of the then outstanding common units of Kimbell.

Credit Suisse Securities (USA) LLC was exclusive financial adviser and sole placement agent on the preferred units to Kimbell and Baker Botts LLP was its legal counsel. UBS Investment Bank was exclusive capital markets adviser to Kimbell in connection with the election to change to a taxable entity.

RBC Richardson Barr was exclusive financial adviser to Haymaker. Kirkland & Ellis LLP was legal counsel to KKR and Haymaker. DLA Piper LLP was legal counsel to Kayne and Haymaker. Kirkland & Ellis LLP also represented Apollo Global Management LLC in connection with the preferred unit offering by Kimbell.

Emily Patsy can be reached at epatsy@hartenergy.com.