Black Stone Minerals, L.P. Announces Farmout Agreement Substantially Reducing Future Working Interest Capital Requirements
February 21 2017 - 4:00AM
Business Wire
Black Stone Minerals, L.P. (NYSE: BSM) (“Black Stone Minerals,”
“Black Stone,” or “the Partnership”) announced today that it has
entered into a farmout agreement with Canaan Resource Partners
(“Canaan”), which will reduce Black Stone’s future capital
requirements and will generate additional royalty income. The
farmout covers the Partnership’s working interests within an
approximate 34,000 gross acre block in San Augustine County, Texas.
Black Stone expects the farmout agreement to reduce its capital
obligations by approximately $35 million in 2017 and by an average
of $40-$50 million annually thereafter during the three program
phases discussed below.
Management Commentary
“This is a great example of the creative deal structures that
Black Stone Minerals pursues to generate value for its
unitholders,” said Thomas L. Carter, Jr., Black Stone Minerals’
President, Chief Executive Officer and Chairman. “This transaction,
involving our most concentrated area of working interest
investment, accomplishes several important things for Black Stone
Minerals. It meaningfully reduces our near-term capital exposure
while facilitating the continued development of a play where we
have significant royalty interests. We will also benefit from the
anticipated growth in volumes from this asset through the
overriding royalty interests we are retaining. Lastly, it delivers
on our commitment to our unitholders to remain focused on managing
and growing our core minerals and royalty business.”
Transaction Highlights
- Agreement covers certain Haynesville
and Bossier shale acreage in the Shelby Trough in San Augustine
County, Texas operated by XTO Energy. Black Stone has an average
50% working interest in the acreage and is the largest mineral
owner.
- A total of 58 wells are anticipated to
be drilled over an initial phase and two additional phases that
Canaan may participate in at its option, with each phase estimated
to last approximately two years, beginning with wells spud after
January 1, 2017.
- During the first three phases of the
agreement, Canaan will commit on a phase-by-phase basis and fund
80% of Black Stone’s drilling and completion costs and will be
assigned 80% of Black Stone’s working interests in such wells (40%
working interest on an 8/8ths basis).
- After the third phase, Canaan can earn
40% of the Partnership’s working interest (20% working interest on
an 8/8ths basis) in additional wells drilled in the area by
continuing to fund 40% of Black Stone’s costs for those wells on a
well-by-well basis.
- Black Stone Minerals receives a base
overriding royalty interest (“ORRI”) before payout and an
additional ORRI after payout on all wells drilled under the
agreement.
Canaan Resource Partners (www.crpok.com) has directed and
managed energy investments through a number of current and
predecessor investment vehicles since 1990.
Tudor, Pickering, Holt & Co. served as the sole financial
advisor for Black Stone Minerals. Legal advice was provided by
Vinson & Elkins LLP.
About Black Stone Minerals, L.P.
Black Stone Minerals is one of the largest owners of oil and
natural gas mineral interests in the United States. The Partnership
owns mineral interests and royalty interests in over 40 states and
60 onshore basins in the continental United States. The Partnership
also owns and selectively participates as a non-operating working
partner in established development programs, primarily on its
mineral and royalty holdings. The Partnership expects that its
large, diversified asset base and long-lived, non-cost-bearing
mineral and royalty interests will result in production and reserve
growth, as well as increasing quarterly distributions to its
unitholders.
Forward-Looking Statements
This news release includes forward-looking statements. All
statements, other than statements of historical facts, included in
this news release that address activities, events, or developments
that the Partnership expects, believes, or anticipates will or may
occur in the future are forward-looking statements. Terminology
such as “will,” “may,” “should,” “expect,” “anticipate,” “plan,”
“project,” “intend,” “estimate,” “believe,” “target,” “continue,”
“potential,” the negative of such terms, or other comparable
terminology often identify forward-looking statements. Except as
required by law, Black Stone Minerals undertakes no obligation and
does not intend to update these forward-looking statements to
reflect events or circumstances occurring after this news release.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
news release. All forward-looking statements are qualified in their
entirety by these cautionary statements. These forward-looking
statements involve risks and uncertainties, many of which are
beyond the control of Black Stone Minerals, which may cause the
Partnership’s actual results to differ materially from those
implied or expressed by the forward-looking statements. Important
factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not
limited to, those summarized below:
- the Partnership’s ability to execute
its business strategies;
- the volatility of realized oil and
natural gas prices;
- the level of production on the
Partnership’s properties;
- regional supply and demand factors,
delays, or interruptions of production;
- the Partnership’s ability to replace
its oil and natural gas reserves; and
- the Partnership’s ability to identify,
complete, and integrate acquisitions.
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version on businesswire.com: http://www.businesswire.com/news/home/20170221005553/en/
Black Stone Minerals, L.P.Brent Collins, 713-445-3200Vice
President, Investor
Relationsinvestorrelations@blackstoneminerals.com
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