Kimbell Royalty Partners LP said Wednesday it has signed an agreement to buy MB Minerals LP’s interests in the North Midland Basin that would add about 806 net royalty acres and more than 300 producing wells to its Permian inventory.
The purchase includes assets of Sabalo Holdings LLC’s subsidiary in northern Howard County and southern Borden County. The transaction has an initial value of approximately $143.1 million, subject to price and other customary adjustments. The purchase is expected to close in the second quarter of this year, Kimbell said in a news release.
Upon completion of the deal, “Kimbell is expected to have more than 16 million gross acres, more than 125,000 gross wells and a total of 97 active rigs on its holdings, representing approximately 13% of the total active onshore rigs drilling in the continental United States.” States,” the New York-listed company said.
Kimbell expects, based on the status of the acquisitions as of April 1, that these assets will produce about 1,901 barrels of oil equivalent per day (boepd) over the next 12 months. Production is expected to contain 1,459 barrels of oil per day, 1,338 million cubic feet of natural gas per day and 219 barrels of natural gas liquids per day.
The new assets are expected to increase Kimbell’s average daily production to over 19,000 boe/d (6:1) and reduce cash G&A. [general and administrative expenses] per boe by 11%,” the company said in the announcement.
With more than 60,000 gross hectares, the acquisitions are estimated at 5.3 Mbp.
“Furthermore, more than 97% of all platforms in the continental United States are located in counties where Kimbell is expected to have mineral interest positions following the consummation of the acquisition,” Kimbell added.
Pursuant to the initial purchase valuation, Kimbell will pay MB Minerals $48.8 million in cash and deliver $85.4 million worth of approximately 5.4 million newly issued common units of Kimbell Royalty Operating LLC and $8.9 million of approximately 600,000 newly issued common shares of Kimbell Royalty Partners LP.
‘Main Consolidator’
In an earlier Permian acquisition completed in December, Kimbell bought interests from Hatch Royalty LLC, primarily in the Texas Delaware Basin, giving Kimbell 889 net royalty acres on 230,000 gross acres. Kimbell estimated that the assets, acquired for about $270.7 million in cash and stock divestment, will produce approximately 2,522 boepd by 2023.
Robert Ravnaas, chairman and CEO of Kimbell Royalty Partners, co-owner of Kimbell Royalty GP, said in Kimbell Royalty Partners’ 2022 earnings report, “reflecting on our growth since our IPO. [initial public offering]we have now increased production from 3,116 boepd to 17,176 boepd, 451% more”.
“We expect to continue our role as a major consolidator in the highly fragmented U.S. oil and natural gas royalty sector, which we estimate is over $700 billion,” he said in the earnings release on 23 February.
“And as I’ve said in the past, there are only a handful of public entities in the United States and Canada that have the financial resources, infrastructure, network and technical expertise to complete large-scale, multi-basin acquisitions.” , added. .
Ravnaas explained that energy investment has now shifted the focus on stable production, profitability and inventory quality from the “hyper-growth models of the past.”
“While the US rig count increased during the year and is now approaching pre-Covid levels, we do not expect much in the way of significant growth in oil production from US operators ” he said, citing declining drilling but unfinished wells since 2020 as the main reason.
“While many companies will focus on replenishing their DUC inventories in the near term, we believe inflationary pressures on the drilling, completion and labor aspects of their businesses will continue to moderate oil production growth over the 2023,” Ravnaas added.
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