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Oil and gas mineral and royalty company Sitio Royalties Corp. (NYSE: STR) is headed for a merger with Brigham Minerals (NYSE: MNRL) in an all-stock deal with an aggregate enterprise value of ~$4.8B thus creating one of the largest publicly traded mineral and royalty companies in the United States.
The deal, expected to be announced on Tuesday, is one of the largest tie-ups in the U.S. oil patch this year, and comes in a period of elevated oil prices.
Like the rest of the industry, Sitio and Brigham have seen both their top-and bottom-lines expand at a brisk clip on the back of rising oil prices. Combining the two companies will allow the new entity to achieve significant economies of scale and become a leader in the minerals-rights industry.
The merger will create a company with complimentary high quality assets in the Permian Basin and other oil-focused regions. The combined company will have nearly 260K net royalty acres, 50.3 net line-of-sight wells operated by a well-capitalized, diverse set of E&P companies and pro forma Q2 net production of 32.8K boe/day.
The deal is also expected to bring in $15 million in annual operational cash cost synergies.
Sitio and Brigham shareholders will receive 54% and 46% of the combined company, respectively, on a fully diluted basis.Sitio Royalties recently reported Q2 net income of $72M on revenues of $88M.
Mineral owners receive a 12.5% to 20% cut of the oil and gas pumped on their land in the form of royalty payments. They don’t control the pace of development, but also aren’t on the hook for drilling or overhead costs, either, meaning they directly reap the benefits of high commodity prices.
Both STR and MNRL stocks are down slightly in early trading on Tuesday morning.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.