In addition to the acquisition of Permian Basin assets, Sitio has also entered into crude oil and natural gas derivative contracts to enhance the certainty of its cash flows and protect against adverse price variations
Sitio Royalties has wrapped up the acquisition of more than 19,700 net royalty acres (NRAs) in the Permian Basin from Foundation Minerals for a total of around $323m.
Foundation Minerals is a portfolio company of Quantum Energy Partners, a Texas-based private equity firm focused on the energy industry.
Sitio has also signed an agreement to acquire more than 12,200 NRAs in the Permian Basin from Momentum Minerals for nearly $224m.
Momentum Minerals is a Houston-based portfolio company of funds and accounts managed or advised by affiliates of Apollo Global Management.
Sitio chief executive officer Chris Conoscenti said: “We are excited to announce these highly accretive acquisitions in the Permian Basin and continued execution of our returns-focused, large-scale mineral and royalty consolidation strategy.
“We expect our shareholders to significantly benefit from efficiencies due to the increased scale of the Company and a substantial increase to our dividend.
“These acquisitions are the latest in a series of transactions in excess of 10,000 NRAs since June of 2021, building on our track record of executing value-additive M&A and further cementing our position as the top consolidator in the space.”
Sitio has financed the acquisition of Foundation Minerals’ assets using borrowings under its credit facility and proceeds from a 364-day unsecured bridge loan facility.
It intends to fund the acquisition of Momentum Minerals’ assets through debt financing.
The transaction is expected to be completed in the third quarter of this year, subject to certain customary closing conditions.
Furthermore, Sitio has entered into crude oil and natural gas derivative contracts to enhance the certainty of cash flows and protect against adverse price variations.
The company said that the acquisitions would increase its acreage in Permian Basin by 30%, and increase its total acreage by 22%, to reach more than 173,000 NRAs.
Sitio board of directors chairman Noam Lockshin said: “We believe that the mineral and royalty sector is ripe for consolidation and are proud to announce these highly accretive acquisitions soon after completing the Falcon Minerals merger and rebranding the Company to Sitio.
“The acquired assets are in highly valued areas of the Permian Basin, meaningfully increasing our line of sight to strong production growth in the near-term and providing substantial remaining inventory.”