Publicly traded royalty owner Brigham Minerals (NYSE: MNRL) is expanding its Midland Basin royalty exposure with the acquisition of 3,900 net royalty acres (NRA, normalized to 1/8), primarily in Martin and Midland counties, and 850 boe/d (60% oil) mid-point 2023E production from Avant Natural Resources for $132.5 million.
In this insights article, Enverus Intelligence provides detailed analysis into the transaction and its impact on the market, Brigham Minerals and Avant Natural Resources.
While pricey on the basis of NRA, we like that the deal significantly enhanced Brigham’s exposure to the Midland Basin, which made up only 11% of the company’s NRA exposure at the end of 2Q22, boosting it from 3,900 to 12,915. The price is likely consistent with a competitive M&A landscape for Permian royalties with any core offering attracting numerous buyers.
More Report Insights
Transaction Analysis
- Allocating the remaining $82.5 million to NRA results in a price of $21,150/NRA (normalized to 1/8). That is significantly more than the average Permian NRA, which has traded around $10,000/NRA, even factoring in Freehold Royalties’ July 2022 acquisition in Howard County. However, it is close to what Viper Energy Partners paid for a concentrated core position acquired from Swallowtail I and II, which very closely offsets or overlaps Brigham’s purchase.
- The royalty interests purchased by Brigham in the Avant deal or Viper in their transaction last year cover some of the highest quality land in U.S. shale. We see the 3,540 gross locations on the acreage Brigham purchased royalty interest as having an average breakeven price of $35/bbl.
Midland Basin royalty deals and price per NRA
Market Impact
- For royalty owners who don’t control development of their assets, having line of sight to a significant runway of potential locations expected to be TIL’d is key. That makes the Permian, with its depth of economic locations and high rig activity levels relative to other basins, an area of key exposure.
Impact on Brigham Minerals
- Brigham says the current acquisition brings it to pro-forma 12 activity wells or DUCs plus permits, with the addition of 0.5 DUCs and 0.5 permits on top of the 6.8 and 4.2 net, respectively, prior to this deal.
Impact on Avant Natural Resources
- The sale of these core royalty interests likely represents the monetization of a previously assembled portfolio at an attractive price as the company focuses on its working interest Permian assets and other investments.
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