Black Stone Minerals LP agreed to buy mineral and royalty assets in some of the major U.S. oil and gas production areas, including the Permian Basin and the SCOOP play, from subsidiaries of Noble Energy Inc. for $340 million.
The assets include about 1.1 million gross mineral acres, 380,000 gross acres of non-participating royalty interests and 600,000 gross acres of overriding royalty interests in acreage in over 20 states, mostly in Texas, Oklahoma and North Dakota, according to a Nov. 27 news release.
With the deal, Black Stone Minerals would add exposure in the Permian basin by about 8,300 net royalty acres in the Midland Basin and about 7,200 net royalty acres in the Delaware Basin. The deal would increase exposure by over 10,000 net royalty acres in the Bakken/Three Forks play. The partnership also acquired positions in the Powder River Basin in Wyoming, the SCOOP play in Oklahoma, and the Granite Wash play in Texas.
The acquisition "substantially expands" Black Stone Minerals' Permian and other positions, with assets complementary to its existing asset base, according to president and CEO Thomas Carter Jr. The assets have an estimated average daily production for November 2017 of 2.6 Mboe/d, 56% oil and 44% natural gas, excluding NGLs, and are set to generate annualized current run-rate cash flows of about $34 million per year.
The deal is scheduled to close on Nov. 28, with an effective date of July 1.
The partnership intends to partly fund the deal using proceeds from a $300 million private placement of newly issued series B cumulative convertible preferred units to an affiliate of The Carlyle Group LLC. The private placement was priced at $20.3926 per preferred unit, equivalent to a 15% premium to the 20-day volume weighted average price of the units. The transaction is scheduled to close on Nov. 28.
In addition, Black Stone Minerals struck a long-term farmout agreement with the Tailwater Capital LLC company Pivotal Petroleum Partners LP covering all of Black Stone Minerals' remaining working interests in the Shelby Trough area of East Texas, with particular focus in the Haynesville and Bossier shales.
Under the deal, Pivotal would get Black Stone Minerals' working interest in the remaining 20% of its working interest in wells operated by XTO Energy Inc. and 100% working interest in wells operated by another major operator. In exchange, Pivotal is bound to fund Black Stone Minerals' working interest in more than 80 wells across certain development areas. The bulk of the farmed-out working interest and associated net revenue would then revert to Black Stone Minerals upon Pivotal's achievement of a preferred return.
"With this transaction, we have essentially eliminated future drilling and completion capital requirements related to our working interest assets in the Shelby Trough for the foreseeable future, yet we will continue to benefit from the working interest through a meaningful retained economic interest in those wells through the farmout, in addition to our base royalty," Carter said.
Black Stone Minerals, a major owner of oil and natural gas mineral interests in the U.S., has closed or entered into agreements worth about $500 million in 2017. Bank of America Merrill Lynch and Barclays served as lead placement agents for the private placement, while Vinson & Elkins LLP acted as legal counsel. Porter Hedges LLP advised Black Stone on the Noble deal.
