Minerals Investors Mull Midstream Development

Molecules need to reach markets for owners or operators to make money.

(Source: Ralph E. Davis Associates)

Midstream considerations of minerals investing are always present and yet rarely a priority—like air: ubiquitous and thus unremarkable.

“Basin midstream takeaway capacity is an important consideration to our overall acquisition program,” said Darin A. Zanovich, president and CEO of Mesa Minerals Partners II. That is especially the case “as we continue to look at acquisitions of larger mineral and royalty portfolios in new basins, because it influences operator development pace, which ultimately underpins our valuations.”

Zanovich said at Mesa Minerals they frequently think about midstream capacity and constraints as a consideration when buying on the ground in the company’s complimentary ground game strategy in the Haynesville.

“In addition to understanding the basin-level midstream environment, we incorporate gathering, production and transportation costs [GP&T] into our underwriting, which is area- and operator-specific. For large, marketed packages, we review historical data to understand GP&T trends among operators. On the ground, we review individual leases and check stub data to estimate future deductions.”

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Gregory Morris

Gregory DL Morris has covered conventional energy from exploration and production to refining and petrochemicals. He regularly contributes to Oil and Gas Investor and Midstream Business.