Site Royalties Corp. and Brigham Minerals Inc. have reached an agreement to merge to form one of the largest publicly traded minerals and royalty companies in the United States, valued at approximately $4 billion, the companies announced Tuesday.
Sitio and Brigham, like the rest of the industry, have both posted rising profits in recent months on the back of rising oil prices. The combination of the two companies would allow the new company to achieve economies of scale and become a leader in the mineral rights industry, the companies said.
“The minerals and royalty business benefits from scale like no other company in the energy value chain,” said Chris Conoscenti, Sitio’s chief executive officer, in an interview on Monday.
After the deal was announced, shares of Sitio fell about 2% to $24.71 in morning trade. Brigham shares fell 3.54% to $28.36.
Mineral owners take home a portion of the oil and gas pumped on their land in the form of royalties, often 12.5% to 20% of the value of the fuel. They don’t control the pace of development, but neither are they dependent on drilling or overhead costs and benefit from high commodity prices.
Both Brigham Minerals and Sitio made major acquisitions in the oil-rich Permian Basin this year.
Photo: Michael Nagle/Bloomberg News
Upon closing of the transaction, Noam Lockshin, a partner at private equity firm Kimmeridge Energy Management, which currently owns 43.2% of Sitio’s outstanding shares, would become chairman of the new company, the companies said. Mr. Lockshin is currently Chairman of Sitio. Mr. Conoscenti will serve as CEO of the combined company, which will be based in Denver and will operate under the Sitio name.
The all-stock deal is expected to close in the first quarter of 2023, according to the companies. Under the terms of the transaction, Sitio shareholders will own approximately 54% of the company, while Brigham’s will own the remaining 46%, the companies said.
Both Sitio and Brigham have pursued a strategy of consolidation in the oil-rich Permian Basin of West Texas and New Mexico, making significant acquisitions this year.
Sitio was formed following the merger of Desert Peak Minerals Inc., owned by Kimmeridge, and Falcon Minerals Corp., backed by Blackstone Inc., earlier this year.
Brigham has announced approximately $150 million in mineral and royalty contracts in the region so far this year. Sitio, meanwhile, acquired more than 40,000 net royalties in the Perm during the second and third quarters of the year, the company told its investors last month, including a roughly $323 million acquisition in June.
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The newly formed company would have interests in more than 34% of all wells drilled in the Permian during the fourth quarter of 2021, the companies said.
Robert Roosa, CEO of Brigham, said last month he was bullish on oil prices, citing supply chain issues limiting production at the oil field, problems related to Russia’s energy supply, the need to replenish the drawn strategic oil reserve, and what he described as the Organization of Petroleum Exporting Countries’ inability to ramp up production.
“We’ve seen long-term structural benefits from being in the energy sector,” he told investors.
—Collin Eaton contributed to this article.
write to Benoît Morenne at [email protected]
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