Kimbell Royalty Partners has agreed to acquire the mineral and royalty interests owned by Haymaker Minerals & Royalties and Haymaker Resources, (collectively, Haymaker) for about $404m.
Both Haymaker Minerals & Royalties and Haymaker Resources are US-based mineral and royalty acquisition companies. On the other hand, Kimbell Royalty owns oil and gas mineral and royalty stakes in 20 US states.
The acquisition will be carried out by a payment of $210m in cash and issuance of 10 million common units of Kimbell, worth about $194m to the sellers.
After the acquisition, Kimbell will own 11.1 million gross acres with 73 active rigs across its assets. Apart from that, 95% of all rigs in the Lower 48 are in counties where Kimbell will own mineral interest positions.
The acquisition is expected to help Kimbell consolidate its position in the Permian Basin with the addition of mineral interests in the Midland Basin. It will also help in further strengthening its mid-continent position, which includes the SCOOP / STACK.
Haymaker CEO Karl Brensike said: “Diversified minerals and royalties are just starting to get the recognition they deserve as a lower risk strategy to capitalize on the tremendous advancements being made in the U.S. oil and natural gas industry.
“We believe this acquisition will kick off a new phase of consolidation across the sector, as private equity looks to divest their mineral interests to longer term holders.”
Through the acquisition, Kimbell will increase its average daily net production by more than 50% for first quarter 2018. Further, the Haymaker acreage is highly complementary to Kimbell Royalty and it increases its net royalty acres per unit by 10%.
According to Kimbell, half of the combined net royalty acreage is in the high growth Permian and Mid-Continent regions.
Kimbell chairman and CEO Bob Ravnaas said: “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.”
Kimbell plans to continue as a liquids-focused company in the future with oil and natural gas liquids (NGLs) making up for nearly 67% of estimated first quarter production this year.
Upon closing of the acquisition, which is likely to be in the third quarter of 2018, KKR & Co. and Kayne Anderson Capital Advisors, Haymaker’s private equity sponsors along with Haymaker management, will collectively own about 37% in of the then outstanding common units in Kimbell.