product-knowledge

Mewbourne-led Cleveland activity jump bucks Anadarko trend

E&P activity targeting the Cleveland formation in the Anadarko Basin more than doubled in 2023 with 46 new wells reaching first production, compared to 20 in 2022 and similar levels the previous two years. The increase has bucked the overall trend in the Anadarko Basin, where completion activity decreased to 589 new wells in 2023 from 630 in 2022.

A large portion of the increase is attributable to privately owned Mewbourne Oil increasing its program from 11 wells in 2022 to 21 in 2023. In particular, Mewbourne ramped up activity in Ellis County, Oklahoma, to 16 new wells last year versus two in 2022.

Even excluding Mewbourne from the tallies, there was still an 11-well increase last year at 25, with the most active operators being Duncan Oil Properties (six wells), Latigo Petroleum (six) and Upland Operating (five). Each of these companies at least doubled their tally YOY. Nine companies had new wells tapping the Cleveland in 2023, up from six in 2022.

So far in 2024, permitting activity suggests another active year for the formation. A total of 72 Cleveland permits were approved in 2023 compared to 25 in 2022. As of April 10, 19 permits have been approved YTD, including 14 filed by Mewbourne.

Big increase in laterals and frac loads helped boost Mewbourne IP90s 44%.

Besides being the most active Cleveland player, Mewbourne’s productivity in the formation also leads its peers. In 2023, the company’s new wells delivered 90-day cumulative volumes of 71,608 boe (59% oil) per well—a 44% increase from its 2020-2022 average. To achieve that increase, Mewbourne is using 31% longer laterals at 9,201 ft, more than 2.5x higher proppant intensity at 1,703 lb/ft and more than double the fluid intensity at 43 bbl/ft, according to Enverus Foundations data. On a normalized basis, the company’s 2023 IP90s averaged 6% higher than the previous three years at 91 boe/d per 1,000 ft.

About Enverus Intelligence Publications 

Enverus Intelligence Publications presents the news as it happens with impactful, concise articles, cutting through the clutter to deliver timely perspectives and insights on various topics from writers who provide deep context to the energy sector. 

evolve-conference
summer-outlook-pjm

California Dreamin’ | Long-Term LCFS Price Forecast

Renewable fuel uptake has surged in California in recent years, contributing to a 141% increase in the California Low Carbon Fuel Standard (LCFS) credit bank surplus and resulting in a drop in credit prices from ~$185/tonne to $75/tonne from 2019 through 2023. A tsunami of renewable diesel (the largest credit-generating fuel type), renewable natural gas/biomethane and electric vehicles have flooded into the state, accounting for 81% of the credits generated in 3Q23. Fuel volumes grew by 233%, 62% and 130% since 1Q19, respectively, while the corresponding credits generated increased by 166%, 674% and 206%. The program might be on the brink of working too well, desensitizing investments in nascent clean fuel technologies and ultimately failing to achieve California’s stated emission reduction targets in the long term.

In our first LCFS Price Forecast, available to Energy Transition Research clients only, Enverus Intelligence Research (EIR) explores the relationship between credit bank volumes and the historical prices of LCFS credits, finding an R2 value of 0.98. EIR’s forecast includes our long-term price curve assumptions for LCFS under the California Air Resource Board’s latest scoping plan, which will be critical to navigating the volatile market dynamics of low-carbon fuels.

Research Highlights

(You must be an Enverus Intelligence® Research subscriber to access links below.)

About Enverus Intelligence®| Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Click here to learn more.

Enverus Blog - Coterra’s big Permian projects defy degradation worries

SLB taking home the prize in $8.2B ChampionX acquisition

In the biggest oilfield services transaction since 2016, SLB agreed to acquire ChampionX Corp. for $7.76 billion in stock, bringing an industry leader in production chemicals into the OFS giant’s fold. ChampionX’s $420 million in net debt brings the transaction to an $8.18 billion enterprise value.

Of the $3.76 billion in revenue that ChampionX reported for 2023, 64% came from its production chemicals segment and 27% from production and automation technologies, which include artificial lift equipment and digital automation applications. The offerings of its smaller segments include polycrystalline diamond cutter inserts and fracking additives. ChampionX posted 2023 net income of $314 million. The company was the product of drilling and production technology company Apergy Corp.’s $4.39 billion acquisition of Ecolab Inc.’s upstream chemicals technology business in 2020.

“The majority of ChampionX revenue is driven by opex, which will become an increasing part of overall upstream exploration and production spend,” SLB CEO Olivier Le Peuch said in an April 2 conference call. “Deliberately increasing our exposure to the production chemicals and artificial lift markets positions us in a growing and resilient spend category into the next decade and beyond. The chemicals sector offers a steady and stable base load of activity decoupled from traditional rig count cycles and commodity prices. As assets age, chemical intensity and usage will further accelerate, and ChampionX is vertically integrated in this market with a significant manufacturing network that is well positioned to deliver on this growing demand.”

ChampionX’s products target E&Ps looking to boost recovery instead of capex.

The company formerly known as Schlumberger estimates that E&P companies spent twice as much on capex as on opex in 2010 but that by 2023 opex made up 46% of spending. By 2040, it expects opex to exceed capex as E&P companies prioritize maximizing production and recovery.

“In artificial lift, nearly 90% of all the wells require one or several forms of lift solution during their producing life,” Le Peuch said. ChampionX’s manufacturing network will help meet the rising chemical demand while its technologies would give SLB a broad lift portfolio, he added. In addition, SLB’s international reach will broaden ChampionX’s global footprint while the OFS giant leverages ChampionX’s U.S. customer relationships, operational agility and fit-for-basin technology, he said.

The transaction’s exchange rate of 0.735 SLB common shares for each ChampionX share values ChampionX at $14.70/share, a 14.7% premium based on April 1’s closing price. At closing, ChampionX shareholders will own 9% of SLB’s outstanding common shares. The transaction requires the approval of ChampionX shareholders and regulators.

Closing is expected by YE24. The transaction will be accretive to free cash flow per share in 2025 and earnings per share in 2026, SLB CFO Stephane Biguet said. SLB expects to realize annual pretax synergies of $400 million within the first three years through revenue growth and cost savings.

The SLB/ChampionX deal is the largest in the OFS sector since the short-lived merger of GE Oil & Gas and Baker Hughes, a $33.9 billion deal announced in 2016. According to Enverus M&A Analytics, four OFS M&A deals of more than $8 billion have closed since 2009. Schlumberger was the buyer in two of them: the $12.3 billion acquisition of Smith International in 2010 and the $14.8 billion acquisition of Cameron International in 2015.

Biggest deal in OFS since GE Oil & Gas briefly merged with Baker Hughes.

Even as this major deal was presumably in the works, ChampionX and SLB have recently dipped into the M&A space. ChampionX announced two deals to boost its artificial lift offering in the previous 35 days: buying Artificial Lift Performance Ltd. for an undisclosed amount then agreeing to acquire RMSpumptools Ltd. for £86 million ($108 million).

Less than a week before the ChampionX announcement, SLB agreed to contribute its carbon capture business to Aker Carbon Capture and pay NOK 4.12 billion ($380 million) to own 80% of the combined company. Le Peuch said April 2 that the transactions were not part of an effort to promote market consolidation but to grow into a key new energy business and align SLB to customer priorities.

While Biguet said ChampionX will not bring meaningful benefits until 2025, SLB will add $500 million in stock repurchases this year, raising its 2024 total target for return of capital to shareholders to $3 billion. SLB returned $2.01 billion to stockholders in 2023, with $1.32 billion in dividends and the rest in stock repurchases. In January, its directors approved a 10% increase in 2024 dividends. Biguet said the company will return $4 billion to shareholders in 2025.

About Enverus Intelligence Publications 
Enverus Intelligence Publications presents the news as it happens with impactful, concise articles, cutting through the clutter to deliver timely perspectives and insights on various topics from writers who provide deep context to the energy sector. 

drilling-services-professional

Navigating the Intricacies of Offshore Drilling

Offshore drilling is a complex and multifaceted process essential for accessing oil and gas reserves beneath the seabed. Exploration drilling is the initial phase, crucial for identifying potential oil or gas reservoirs. It involves the deployment of mobile drilling units to conduct exploratory drilling on selected sites.

During exploratory drilling, wells are drilled targeting prospects identified through seismic surveys, typically taking 60 to 90 days each to complete. Geologists obtain cutting and core samples to analyze the geological formations and look for signs of petroleum, known as a “show.” If a show is detected, additional tests are conducted to assess the quality and quantity of the oil or gas present and hopefully identify a commercial petroleum discovery.

Offshore drilling is a complex and multifaceted process essential for accessing oil and gas reserves beneath the seabed. Exploration drilling is the initial phase, crucial for identifying potential oil or gas reservoirs. It involves the deployment of mobile drilling units to conduct exploratory drilling on selected sites.
Rig Tracker Dashboard showing current activity

Once the estimated value of a petroleum discovery is established, the focus shifts to the development phase. Production wells are drilled to begin tapping the discovered resources. Offshore production platforms, built to withstand harsh marine conditions, are fixed directly to the seabed using metal and concrete foundations or tethering cables or subsea infrastructure linked to floating facilities at the surface. Directional drilling techniques allow wells to be drilled at angles to reach distant targets.

Drilling a well occurs in phases or hole sections, starting with the surface hole, followed by the installation of casing to prevent wellbore instability through leaks and caving. Specialized drill bits, rotated by a turntable or top drive on the rig drill floor, cut and grind through the rock, while drilling mud is continuously circulated to lubricate the bit, seal the uncased formation walls, and control pressure. Blowout preventors  are installed on fixed rigs or platforms or on the seabed for floating rigs to manage high-pressure kicks and prevent loss of control of the well and potential environmental disasters.

Rig Tracker Dashboard showing historic trends”

Mobile drilling rigs come in various forms, each suited to different water depths and drilling conditions. Jack-up rigs have legs that are lowered to stabilize the platform above the seabed while semi-submersible rigs operate in deeper waters with the aid of massive anchors or dynamic positioning. Drillships are also equipped with dynamic positioning systems allowing them to operate in very deep water and rough sea conditions. Offshore drilling represents a significant investment and requires meticulous planning, advanced technology and adherence to strict safety and environmental regulations. Mobile drilling rigs are the workhorses that get the wells drilled and accurately tracking their activity provides a key metric in measuring the health of the offshore E&P industry. 

The Enverus offshore mobile rig tracker provides the most accurate weekly insight into the activity of the 800 mobile rigs making up the global drilling fleet. Up-to-date rig locations are supplemented with details on drilling contractor, current E&P operator and future contracts plus current activity linked to the Enverus well, block and field attributes.

team

360km, 12 runners, 4 countries, #OneTeam

Did you know that Enverus now has 18 offices around the world, with the most recent addition of the Brno office in Czechia. To mark the expansion of our #OneTeam values, a group of runners will participate in the country’s legendary relay event, the Vltava Run, May 11-12.

Spanning an epic distance and stunning landscapes, the Vltava Run begins in the mountainous region of Southwest Czechia, in Šumava, and follows the Vltava River into the historic city of Prague. Covering a total of 360km, the run is segmented between 12 runners. Half of these runners will come from our Brno office, while the others are from offices across North America and Europe.

Lacing Up

The excitement is tangible at Enverus as we’re gearing up for this challenge. Our team will traverse this extraordinary distance, not only chasing the finish line but also soaking in the breathtaking beauty of the Czech Republic.

Our participation in this event is a testament to Enverus’ dedication to team building and camaraderie, irrespective of geographic boundaries. Participating in the event is not merely a race – it’s a tangible example of our global reach and a celebration of our growing international community, and Team Enverus is proud to participate.

Enverus Mission

For the team at Enverus, this event is a metaphor for our mission – powering the global quality of life [link]. Energy is the largest industry in the world, and it impacts every facet of our lives. Enverus provides intelligent connections that enable and accelerate the energy transition strategies of our customers. We continuously aim to create a positive impact and strive to provide affordable and reliable energy for the entire world. As we map our strategy towards the finish line, we’ll be embracing every step of the run with enthusiasm and embracing our #OneTeam values. We will be building connections between people and fostering a worldwide community committed to energy excellence.

Meet the Team

Stay Tuned

We can’t wait to share our journey with you, both on the pathways of the Vltava River and in the innovative pathways of our industry. Stay tuned for updates as we run, overcome, and celebrate together. Here’s to every kilometer bringing us closer to each other and to a world that thrives on sustainable energy partnerships.

Keep cheering for Team Enverus – where every step is toward innovation and every mile a new connection.

Wish us luck and keep an eye out for the team as we conquer the Vltava Run!

Enverus News Release - Defying peak oil predictions

Defying peak oil predictions

CALGARY, Alberta (April 9, 2024) — Enverus Intelligence Research (EIR), a subsidiary of Enverus, the most trusted generative AI and energy-dedicated SaaS company, has released a new report highlighting the organization’s view that it does not expect global oil demand to peak or plateau by the end of the decade.

Instead, EIR expects global oil demand to grow to approximately 108 MMbbl/d by 2030. Chief among their evidence is that fuel economy standards have underwhelmed their stated targets, while electric vehicle momentum appears to be slowing in the U.S. Rising supply costs and the lack of new supply projects announced to date are likely to push oil prices higher, particularly in the post-2030 period. This, combined with off-oil measures, could result in peak demand next decade. Overall, EIR does not see the needed material shifts in consumption per-capita trends by region and product, nor does it see the disconnect between economic growth and oil consumption needed for oil consumption to peak prior to 2030.

“Both OPEC and IEA global oil demand estimates require a significant change in consumption behavior or a reversal of off-oil measures over a short period. History is not in their favor. Instead, we believe the rate of demand growth will gradually slow but not peak. However, the regional dispersion of the growth changes dramatically,” said Al Salazar, report author and director at EIR.

“Our demand forecasts result in a world where OPEC’s influence on oil price strengthens, supporting the group’s preference for Brent prices of $85-$105/bbl,” said Salazar.

Key takeaways from the report:

  • Global oil demand will not peak before 2030. Instead, growth will slow modestly, while the regional distribution of this growth will change dramatically.
  • For more bullish (OPEC) or bearish (IEA) estimates for global oil demand growth to come to fruition by 2030, significant changes to consumption per capita trends and a disassociation between global economic growth and oil consumption must occur now. History is not in their favor.
  • Our view results in a world where OPEC’s influence on oil price strengthens, supporting the cartel’s preference for prices of $85-$105/bbl.

You must be an Enverus Intelligence® subscriber to access this report.

About Enverus Intelligence Research
Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, generative AI and energy-dedicated SaaS company, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 98% of U.S. energy producers, and more than 35,000 suppliers. Learn more at Enverus.com.

Enverus Media Advisory - Welcome to Enverus EVOLVE: The pivotal event for energy professionals, thought leaders and experts

Welcome to Enverus EVOLVE: The pivotal event for energy professionals, thought leaders and experts

AUSTIN, Texas (April 4, 2024) — Enverus, the leading generative AI and energy-dedicated SaaS company, is inviting members of the media to EVOLVE 2024, a conference focused on the evolution of the energy industry and what to expect in 2024 and beyond. EVOLVE 2024 will be held May 7-9, 2024, at the Marriott Marquis in downtown Houston (1777 Walker St, Houston, TX 77010).

EVOLVE 2024 is an opportunity for Enverus customers, partners and industry leaders to participate in unique, cross-functional discussions and engage in sessions that explore the most pivotal and relevant energy topics. For the first time ever, members of the media will have the opportunity to demo Enverus Instant Analyst™ technology, where users can type in questions and receive concise, trusted answers derived from the Enverus Intelligence Vault and 25+ years industry research in a matter of seconds complete with links to source documents supporting the answer.

A Press Room and hospitality suite for journalists to meet with Enverus subject matter experts and schedule one-on-one interviews will be provided.

EVOLVE 2024 Agenda Topics & Themes:

  • Macro & Market Outlook: Get the latest details on the impact of supply and demand outlooks, key geopolitical events and investment trends.
  • Asset Optimization: Learn about asset development, optimization opportunities and innovation for oil and gas and renewables.
  • Electrification: Deep dive into details on the power grid, now and in the future, with sessions on battery storage, arbitrage and critical minerals supply.
  • Digitalization & Automation: Attend sessions that reveal how businesses are leveraging automation and digitalization to connect the office to the field, optimizing spend control, accelerating timelines and boosting capital efficiency. (Formerly the SPARK Conference)
  • Carbon Innovation: Gain knowledge about transformative decarbonization investment opportunities most adjacent to the oil and gas value chain, including subsurface innovation, carbon capture and sequestration, direct lithium extraction and low carbon fuels.
  • AI for Energy: This specialized track explores the impact this transformative technology will have on the energy industry. Learn how energy operators and investors leverage generative AI to accelerate business results, how this technology will impact labor markets and consumer prices, and how energy focused companies can incorporate this technology into your daily workflows.

Members of the media with questions or looking to register for EVOLVE 2024 should contact Jon Haubert to obtain the media registration code.

About Enverus
Enverus is the most trusted, generative AI and energy-dedicated SaaS company, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 98% of U.S. energy producers, and more than 35,000 suppliers. Our platform, with intelligent connections, drives more efficient production and distribution, capital allocation, renewable energy development, investment and sourcing; and our experienced industry experts support our customers through thought leadership, consulting and technology innovations. We provide intelligence across the energy ecosystem: renewables, oil and gas, financial institutions, and power and utilities, with more than 6,000 customers in 50 countries. Learn more at Enverus.com.

available transfer capacity

ERCOT Energy Storage | Paths to Profit

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Figure 1: Total 2023 revenue and profitability index of storage assets. Source | Enverus Intelligence® Research, ERCOT

Renewable integration has experienced a remarkable surge in Texas, with the installation of more than 9 GW of renewable capacity in 2023 alone. This additional renewable capacity has led to increased price volatility, which is advantageous for energy storage assets. As a result, there has been a significant increase in energy storage capacity with 2.7 GW of new installations. The profitability of assets within the energy storage fleet can be attributed to three key factors: battery size, operating strategy and location.

Enverus Intelligence Research (EIR) defines the profitability index as the total annual revenue divided by our estimate of the total capital cost of each asset for batteries operating throughout the entire year of 2023. Contrary to what one might expect, battery size does not play as pivotal a role in profitability as other factors. This is evident from the wide range of profitability observed among 10 MWh batteries (Figure 1). Energy arbitrage and regulation up were the dominant operating strategies for the top-performing assets. Profitability generally decreased with more capacity dedicated to Responsive Reserve Service and ERCOT Contingency Reserve Service, and with fewer services that the asset provides. EIR anticipates that the continued integration of renewables will lead to increased price volatility, which in turn will strengthen the business case for energy storage assets that focus on arbitrage opportunities.

Highlights From Energy Transition Research

(You must be an Enverus Intelligence® Research subscriber to access links below)

Electric Vehicles | Building for the Bull RunEIR has moderated its near-term view on EV adoption, downgrading our call on oil demand reduction.This downward revision to our demand destruction findings, now 0.5 MMbbl/d by 2030 and 2.8 MMbbl/d by 2035. Displacement was also revised downward from 4 MMbbl/d and 14.5 MMbbl/d in 2030 and 2040 to 3.6 MMbbl/d and 13.2 MMbbl/d.

Texas Grid Storage Gold Rush | Keys to Unlocking Profitability  We explore what battery size, operating strategy and location for storage assets in ERCOT are the most profitable.

Geothermal Anywhere | Prioritizing Non-Conventional Project Locations – New drilling technologies are enabling geothermal projects to be sited outside of traditional areas in the Western U.S., expanding the market for this renewable energy source. This report provides an overview of key drivers of project economics and identifies which locations might be optimal for future expansion.

About Enverus Intelligence®| Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations, and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies, and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser.   Click here to learn more.

Enverus Press Release - Blue hydrogen: Greening the bottom line

Hydrogen hype meets reality in EIR’s inaugural fundamentals report

CALGARY, Alberta (April 3, 2024) — Enverus Intelligence Research (EIR), a subsidiary of Enverus, the leading generative AI and energy-dedicated SaaS company, is releasing its inaugural Hydrogen Fundamentals report that evaluates the U.S. clean hydrogen opportunity at national and regional levels. In this comprehensive analysis, EIR assesses the investment landscape, regional and project asset quality, technical and execution risks, and the innovation ecosystem that fosters this developing technology.

Synchronization across three key pillars is key to a successful strategy, said Alex Nevokshonoff, senior associate with EIR.

“First, top performing projects need exposure to superior asset quality, including proximity to abundant and low-cost resources, such as renewable power generation, carbon storage and natural gas basins,” Nevokshonoff said.

“Second, robust innovation ecosystems enable constructive regulatory and policy frameworks which incentivize capital flow towards hydrogen, accelerate the learning curve and drive cost reductions. Finally, supportive partners reduce offtake uncertainty, which minimizes financing risks and project development delays,” Nevokshonoff said.

Key takeaways:

  • EIR estimates 96% of tracked U.S. clean hydrogen capacity skews to early-stage projects, indicating that the nascent industry still has a long way to go to become a serious contender for capital.
  • Unsubsidized economics favor blue hydrogen production over green in EIR study areas in the Texas Gulf Coast and Appalachia. Investors should target Texas developments based on superior value chain asset quality and offtake opportunities.
  • Subsidized blue hydrogen costs fall below gray for select technologies and capture configurations, creating attractive carbon management opportunities for gray hydrogen producers.
  • Supply in the U.S. far outdistances demand, evidenced by the fact that only 30% of tracked L48 projects with in-service dates through 2030 disclose customers. However, the European Union’s decarbonization targets could provide a significant market for U.S. exports.
  • Roughly 60% of projects expected online by 2030 rely at least partly on novel hydrogen applications including mobility and power.
Enverus graph showing resource analysis for US clean hydrogen evaluation

EIR’s analysis pulls from a variety of Enverus products, including Enverus Intelligence® Research, Enverus ESG® Analytics, Enverus Foundations ® Power & Renewables, Enverus Fusion® Connect, Geoscience Analytics and Subsurface Studio.

Additional Resources:

You must be an Enverus Intelligence® subscriber to access this report.

About Enverus Intelligence Research
Enverus Intelligence ® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations and macro-economic forecasts; and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser. Enverus is the most trusted, energy-dedicated SaaS platform, offering real-time access to analytics, insights and benchmark cost and revenue data sourced from our partnerships to 98% of U.S. energy producers, and more than 35,000 suppliers. Learn more at Enverus.com.

Media Contact: Jon Haubert | 303.396.5996

View all press releases at Enverus.com/newsroom.

minerals-management

Buying Mineral Rights in Texas?

Are you considering buying mineral rights in Texas? Before you take the next steps, familiarize yourself with the comprehensive information we’ve presented in this blog post. It’s not just for beginners — even the savviest mineral and royalty investors can benefit from our 10-point checklist to making confident and informed decisions in the Texas mineral rights market.

Leasing vs. Buying Mineral Rights in Texas

In Texas, mineral rights investors can either choose to buy mineral rights outright or lease them. Leasing offers a way to avoid the risks associated with a hefty capital investment while reaping the benefits of oil, gas and natural gas liquids (NGL) production returns on the leased land. The downside to leasing is that there is a chance that you could receive no payment if oil or gas is not found, payments are low because the operator is holding the lease by production, and lease payments will decline over time. An alternative, though less common, pathway is to option the right to buy, offering the opportunity to exercise purchase within a specific timeframe.

Market Forces Shaping the Texas Mineral Rights Market

Buying mineral rights in Texas can be a complex undertaking influenced by multiple market forces. The fluctuating prices of oil, gas, and NGL invariably impact the value of mineral rights, making timing the most crucial factor to secure lucrative deals. Let’s delve into a few more forces you need to consider:

Big Buckets of Cash

Currently, there are large pools of capital actively investing in Texas mineral rights to gain exposure to world class basins like the Permian, including mineral funds, trusts, hedge funds, venture capital firms, master limited partnerships and family offices. Add to these buckets of cash government agencies, pension funds, sovereign wealth funds and a large pool of individual mineral rights buyers. If you are contemplating investing, it’s critical to stay informed about the intense competition — aptly described by the Houston Chronicle as a knife fight in the Permian. Nonetheless, with careful planning, ample opportunities to secure competitive offers remain across Texas.

Operators Are Non-Ops, Too

Many oil and gas operators also hold extensive non-operated working interests, often owning mineral rights in more wells than they actually operate. E&Ps also consolidate acreage to streamline operations, given that the cost of debt for E&Ps is cheaper and more available. If you are buying mineral rights in Texas, take advantage of E&Ps thirst for expansion by partnering with operators to acquire mineral rights in their areas of interest, broker and flip acquisitions.

Evolving Midstream Infrastructure

A crucial factor to consider when buying mineral rights in Texas is midstream takeaway capacity for oil, natural gas, NGL and produced water. Areas of new development and remote locations increase the lifting costs for producers because transportation costs are higher absent robust gathering and pipeline infrastructure. If you are buying mineral rights in Texas, understanding the midstream pipeline takeaway capacity in your areas of interest will help you pinpoint bottlenecks and opportunities to get in on acquisitions before valuations increase from midstream build out.

Natural Gas and the Energy Transition

Natural gas is an increasingly attractive investment for mineral rights buyers. Primarily serving local markets and less impacted by global price swings like oil, natural gas prices are relatively stable. Natural gas is also a vital component of the new energy mix as Texas navigates the energy transition, adding wind to the sail of prices. Factor this trend into your decision to buy in pure gas plays like the Barnett or Haynesville Shales or areas of the Permian where natural gas has been flared pending midstream pipeline takeaway capacity improvements.

The Essential 10-Point Checklist to Buying Mineral Rights in Texas

1. Recognize the Risks

There are many risks associated with buying mineral rights. Invest some time in understanding the lifecycle of a well—this can help you circumvent potential investment traps such as buying interest in a closely spaced unconventional Eagle Ford well whose production will decline sharply in the first year or paying a three-times multiple for an older east Texas stripper well that might be plugged in one year.

2. Identify What Types of Mineral Rights You Want To Buy

Want to buy Texas mineral rights ahead of drilling projects? Consider investing in non-producing mineral interests or acquire producing minerals through royalty interests, overriding or non-participating royalty interests.

3. Pick an Area of Interest

Understanding the unique production potential, geology and market for buying minerals in a specific Texas region can help you pinpoint opportunities faster. Get familiar with an area of interest, such as the myriad Permian sub-basins, Eagle Ford, Barnett and Haynesville Shale.

4. Find a Seller

There are multiple outlets where sellers list their mineral rights, including auction sites and online brokers. Look for services that offer choice and transparency. In Texas, Enverus provides the names of mineral owners via Texas Mineral Appraisal Tax Rolls which are publicly published by counties. Enverus Courthouse also allows for searching for owners by abstract or unique key word search in most oil and producing counties in Texas and New Mexico.

5. Estimate Asset Value

Use a simple rule of thumb to estimate the asset value: multiply the owner’s last year’s income by a set multiple (e.g., three- or four-times annual income). Buyers who want to be competitive should also consider location and asset quality in their offer, which can vary widely across Texas basins. Using Enverus Forecast Studio or Forecasted Production can help run a more accurate proven developed producing (PDP) analysis. Know if there is immediate upside in various states using Enverus LandTrac Leases, Courthouse, Activity Analytics and Oklahoma Apps/Orders to find the hidden edge.

6. Check the Facts

The most crucial step in buying mineral rights in Texas is researching what you intend to buy, including historical well performance and production from nearby wells. Verify that the owner has the rights to sell and ensure that the lease does not contain “held by production” clauses that would allow the operator to produce very little just to hold the lease.

7. Make Informed Offers

When presenting an offer for mineral rights, it’s crucial to develop a well-researched proposal that reflects both the asset’s value and your financial goals, including a clear outline of purchase price, terms and conditions contoured by a comprehensive due diligence and valuation analysis.

8. Transfer Ownership

If the seller used a broker, the necessary conveyance and deed will be filed with the appropriate Texas county courthouse and operator. Importantly, expect the operator to send you a revised Division of Interest for signature before you will receive payments on your mineral rights.

9. Keep Detailed Records

Buying and building a portfolio of mineral interests requires careful management of land records and revenue statements. Be sure to store these in a digital folder for quick reference and auditing purposes. Texas mineral buyers can benefit from purpose-built mineral rights management solutions to track land and legal records. Both Enverus MineralSoft and EnergyLink® provide workflows to help you manage and stay on top of your ownership.

10. Maintain and Negotiate Leases

If you are buying mineral rights in Texas, specifically mineral and/or royalty interests, be aware that you are assuming the burden of maintaining and negotiating leases with oil and gas operators. In contrast, overriding royalty interests, non-participating royalty interests and wellbore interests do not, but these revenue streams end when leases expire in Texas.

Buying mineral rights in Texas can resemble a complex chess game, where the right blend of timing, insightful understanding and meticulous scrutiny can yield substantial returns. As with other investments, it is vital to weigh the risks against potential benefits and seek expert advice when necessary. Whether your goal is substantial financial gain or diversifying your investment portfolio, the rich terrain of Texas may very well hold the key to unlocking your financial aspirations.

Market Forces Shaping The Texas Mineral Rights Market

Need assistance with your mineral rights acquisition strategy? Enverus is here to help you succeed with industry-leading mineral management software, robust oil and gas datasets, and a deep bench of mineral management experts.

Explore our Mineral Management Solutions

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