Franco-Nevada has entered into a partnership with US-based oil and gas firm Continental Resources to jointly acquire mineral rights in the Scoop and Stack shale plays of Oklahoma.
In this regard, the Canada-based Franco-Nevada has agreed to pay around $220m for acquiring existing mineral rights held by a subsidiary of Continental Resources.
The partners have also committed to invest up to $100m an year for the next three years to acquire additional mineral rights, which will be subject to satisfaction of agreed upon development thresholds.
Franco-Nevada CEO David Harquail said: “We are pleased to be able to work with a best-in-class operator in Continental.
“For Franco-Nevada, collaborating on mineral rights with an operator is a new business development opportunity. It will allow for the ongoing growth of Franco-Nevada’s oil & gas interests through the acquisition of mineral rights at the grass-roots level.”
The existing mineral rights along with those to be acquired in the future will be jointly owned by Franco-Nevada and Continental Resources through a newly-formed company.
The new firm will purchase mineral rights in areas of the Scoop and Stack mainly within acreage operated by Continental Resources. According to the partners, the areas provide prolific well results, excellent economics along with proximity to infrastructure and future upside through stacked hydrocarbon-bearing horizons.
As per the terms agreed, Continental Resources will fund 20% of future mineral acquisitions and will be entitled to 25-50% of total revenues earned by the minerals subsidiary depending on performance relative to certain predetermined targets.
Continental Resources chairman and CEO Harold Hamm said: “We could not be more pleased to team up with a leading royalty corporation in Franco-Nevada, who has a vast understanding of the value of mineral ownership as evidenced by their long track-record of acquiring assets globally.
“We are pleased to announce yet another growth vehicle to Continental within our core business, complementing our existing assets and capturing incremental value for Continental shareholders while also applying proceeds for further debt reduction.”