Desert Peak Minerals, which focuses on investing in Permian basin mineral and royalty interests, has agreed to merge with rival firm Falcon Minerals in an all-stock transaction.
The agreement is expected to create a premier mineral and royalty company in the US, valued at approximately $1.9bn.
The combined firm will hold more than 139,000 net royalty acres in the Permian Basin.
The total production is expected to reach between 13,500 and 14,500 barrels of oil equivalent per day in the first half of this year.
According to the deal, Falcon will issue 235 million shares of Class C common stock to equity holders of Desert Peak.
Upon completion, Desert Peak will have a 73% stake in the combined company. Falcon will own the remaining stake.
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The new entity will be headquartered in Denver, Colorado, and will be managed by the Desert Peak team.
In addition to focusing on consolidating high-quality mineral and royalty positions in the Permian Basin, the new public minerals company will seek to optimise its existing asset base.
Desert Peak CEO Chris Conoscenti said: “We believe the ownership of Permian minerals and royalties is trending toward larger-scale, more efficient institutional ownership. Our strategy is to be the leading consolidator of these high-quality Permian assets.
“We believe our scale is a clear, strategic advantage in the minerals business, as we are able to drive down fixed costs per unit of production with each acquisition, enhancing our cash margins.”
Falcon board chair Claire Harvey said: “Following our comprehensive review, we believe that a combination with Desert Peak represents the best opportunity to maximise value for Falcon’s shareholders.”
The deal is expected to close in the second quarter of this year, subject to approval from Falcon shareholders, regulatory approvals, and other closing conditions.
Legacy Reserves recently reportedly plans to sell its oil and gas assets in the Permian and Haynesville basins in the US.