Published: September 8, 2022 |

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Sitio Royalties Corp. and Brigham Minerals have entered into a definitive agreement to combine in an all-stock merger, with an aggregate enterprise value of approximately $4.8 billion based on the closing share prices on Friday, September 2, 2022. The combination brings together two of the largest public companies in the oil and gas mineral and royalty sector with complementary high-quality assets in the Permian Basin and other oil-focused regions, creating an industry leader with a proven track record of consolidating oil and gas mineral and royalty interests operated by a diverse set of E&P companies.

“Our merger with Brigham Minerals brings together two complementary businesses that are aligned in every key way, and further advances the business plan that Sitio outlined earlier in the year following the merger of Sitio’s predecessor companies. Both companies are focused on asset quality, maintain disciplined acquisition underwriting standards, understand the benefits of scale, and prioritize shareholder alignment in our approaches to capital allocation and best-in-class governance,” said Chris Conoscenti, chief executive officer of Sitio.

“We believe that achieving material scale in this industry is critical to creating sustained value for our stakeholders and distinguishing Sitio from others, which is why we have been so focused on employing a differentiated, large-scale consolidation strategy. Our combined company will be the largest publicly traded mineral and royalty company in the U.S. by enterprise value that is focused on consolidation across a diverse set of operators and geographies. We will be able to pursue opportunities that few others can because of the size of our business, strength of our balance sheet, optimized cost structure and access to capital,” added Conoscenti.

“I’m extremely proud of the Brigham team’s incredible efforts over the past ten years to assemble an outstanding portfolio of diversified mineral interests across four of the highest quality oil weighted basins under high performing, active operators. Our merger with Sitio creates the industry leading powerhouse in the minerals space with over 30 percent coverage in the Permian Basin, approximately 100 rigs running across all of our operating basins, and greater than 50 activity wells to continue to drive production and cash flow growth,” said Rob Roosa, chief executive officer of Brigham.

“We believe the merger is the logical next step in the continued evolution of the minerals space and creates an entity of scale with ever improving liquidity and float, as well as a streamlined cost structure that further reinforces the scalability of our industry. Overall, I could not be more excited about the future prospects of the combined company to continue to focus on creating value for shareholders through mineral consolidation,” added Roosa.

Under the terms of the definitive merger agreement, Brigham shareholders will receive a fixed exchange ratio of 1.133 shares of common stock in the combined company for each share of Brigham common stock owned on the closing date, and Sitio’s shareholders will receive one share of common stock in the combined company for each share of Sitio common stock owned on the closing date. The transaction has been unanimously approved by the boards of directors of both companies. The closing of the merger, which is expected to occur in the first quarter of 2023, is subject to customary closing conditions, including regulatory clearance and approvals by the shareholders of Sitio and Brigham.

STRATEGIC RATIONALE

• Creating a premier consolidator of oil and gas mineral and royalty interests. The combined company will be the largest publicly traded mineral and royalty company in the U.S. focused on industry consolidation across diverse operators and geographies. As a significantly larger entity than either company on a standalone basis, the combined company will have increased access to capital and the scale to execute on a wider universe of acquisition opportunities, which is a catalyst for accelerating the consolidation of the highly fragmented mineral and royalty interest sector and driving returns for shareholders. Since June of 2021, and including this transaction, Sitio has consolidated more than 195,000 net royalty acres (NRAs) through six large-scale transactions, reducing cash G&A per barrel of oil equivalent and improving margins with each acquisition.

• Top-tier diversified oil-weighted mineral and royalty interest portfolio focused on the front end of operators’ cost curves is unique and difficult to replicate. Sitio and Brigham have been independently building their high-quality mineral and royalty interest portfolios through a series of hundreds of transactions since 2016 and 2012, respectively, and have built sizable positions in some of the most active oil and gas basins in the U.S., including the Permian Basin, Eagle Ford, DJ Basin, Williston Basin, Anadarko Basin, and Appalachia Basin. As of June 30, 2022, the combined company had 50.3 net line-of-sight wells comprised of 29.8 net spuds and 20.5 net permits, a leading indicator for strong near-term activity. The combined company’s asset portfolio is anchored by large-scale diversified Permian Basin mineral and royalty interests, which comprise over 182,500 NRAs, has gross drilling spacing units that cover approximately 32 percent of total Permian Basin acreage and had exposure to more than 34 percent of all wells drilled in the Permian Basin in 2021.

• Significant synergies enhance cost structure, operating efficiencies and drive attractive discretionary cash flow profile. The combined company expects to generate approximately $15 million of annual operational cash cost synergies, resulting in enhanced future margins and discretionary cash flow generation relative to standalone Sitio or Brigham. The merger will reduce Sitio’s projected cash G&A per barrel of oil equivalent from $2.31 to $1.694. Investments made in technology by both Sitio and Brigham should allow the combined company to continue to consolidate the highly fragmented oil and gas mineral and royalty interest sector with limited additional overhead.

• Combining best practices, years of industry experience and long-standing relationships. The combined company intends to integrate best practices and utilize the expansive networks of each predecessor to drive continued success and unlock new opportunities. This includes executing on proven mineral and royalty interest consolidation methodologies that span the entire spectrum of large scale to smaller acquisition opportunities and utilizing proven acquisition underwriting frameworks. The combined company also intends to leverage its existing proprietary data management systems to continue to streamline operations and ensure timely and accurate cash collections on its royalties.

• Commitment to ESG with an emphasis on best-in-class corporate governance. Sitio and Brigham both have strong commitments to industry-leading corporate governance that are well-aligned with shareholder interests and linked to total shareholder returns. The combined company will have no scope 1 emissions, negligible scope 2 emissions, and will target mineral and royalty interests under operators with strong environmental track records.

About Sitio Royalties
Sitio is a shareholder returns-driven company focused on large-scale consolidation of high-quality oil & gas mineral and royalty interests across premium basins, with a diversified set of top-tier operators. With a clear objective of generating cash flow from operations that can be returned to stockholders and reinvested, Sitio has accumulated over 173,500 NRAs through the consummation of over 180 acquisitions to date.

To stop by Sitio’s website, CLICK HERE

About Brigham Minerals
Brigham Minerals is an Austin, Texas, based company that acquires and actively manages a portfolio of mineral and royalty interests in the core of some of the most active, highly economic, liquids-rich resource basins across the continental United States. Brigham Minerals’ assets are located in the Delaware and Midland Basins in West Texas and New Mexico, the Anadarko Basin of Oklahoma, the DJ Basin in Colorado and Wyoming, and the Williston Basin in North Dakota. Brigham Minerals’ primary business objective is to maximize risk-adjusted total return to its shareholders by both capturing organic growth in its existing assets as well as leveraging its highly experienced technical evaluation team to continue acquiring minerals.

To stop by Brigham’s website, CLICK HERE

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