In what would create the largest publicly traded mineral and royalty company in the United States, Sitio Royalties Corp. and Brigham Minerals Inc. have announced an agreement to merge in a $4.8 billion all-stock transaction.
The deal “brings together two of the largest public companies in the oil and gas mineral and royalty sector with complimentary high-quality assets in the Permian Basin and other oil-focused regions,” the companies said. These oil-focused regions include Eagle Ford Shale in Texas, the Denver-Julesburg, Williston in North Dakota, Anadarko in Oklahoma, and Appalachian basins in Ohio, Pennsylvania, and West Virginia.
The companies’ combined assets span 259,510 net royalty acres with second-quarter net production of 32,000 barrels of oil equivalent per day (BOE/D).
“Both companies are focused on asset quality, maintain disciplined acquisition underwriting standards, understand the benefits of scale, and prioritize shareholder alignment in our approaches to capital allocation and best-in-class governance,” Sitio Chief Executive Officer Chris Conoscenti told Natural Gas Intelligence (NGI).
The merger would create an industry leader with 30% coverage in the Permian Basin and 100 rigs running at all combined locations, according to Brigham Chief Executive Officer Robert Roosa.
“We believe the merger is the logical next step in the continued evolution of the minerals space and creates an entity of scale with ever-improving liquidity and float, as well as a streamlined cost structure that further reinforces the scalability of our industry,” Roosa told NGI.
Including its deal with Brigham, Denver-based Sitio has consolidated more than 195,000 net royalty acres via six such transactions since its launch in 2016. In August, Austin-based Brigham announced a $132.5 million acquisition of Permian mineral and royalty interests from Avant Natural Resources LLC.
The deal marks a change for the industry, which has seen trends toward publicly traded options, according to Andrew Dittmar, Director of energy analyst Enverus.
“For companies on the mineral and royalty side of the upstream business, which receive payments for oil and gas production on their land but don’t pay costs to develop it, there has been less pressure to consolidate since they tend to already have low overhead costs and the need for operational synergies for development isn’t the same as other E&Ps,” Dittmar told NGI. “However, there are still benefits from having a larger presence in public markets as these companies look to reach out beyond the investors focused on this niche space to a broader audience.”