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Franco-Nevada

Permian Basin (Oil)

Location: Texas, United States
Operator: Pioneer Natural Resources, Anadarko, Occidental Petroleum, Cimarex, others
Royalty: Various Royalty Rates

Franco-Nevada has exposure to the Permian Basin in West Texas, through both the Midland and Delaware sub-basins. Both of these basins are considered among the most economic and prolific shale plays in the U.S. and are the key drivers behind U.S. production growth during the last several years.

Effective in the first quarter of 2017, Franco-Nevada purchased a package of royalties in the Midland Basin for approximately $115 million. The Midland Basin comprises the eastern portion of the broader Permian Basin. The Permian is the most active shale play in North America. The royalty acreage is very diversified, covering a significant portion of the core of the Midland basin providing exposure to multiple benches in the Wolfcamp and Spraberry formations. The royalties consist of approximately 97% mineral title rights, along with some GORR interests, which apply to approximately 970 acres (net after royalties). The acreage is host to numerous operators, however, Pioneer Natural Resources is the operator for the largest portion of royalty acreage. Pioneer is one of the largest companies operating in the basin. Pioneer is focused solely on its Midland Basin acreage and achieves some of the best well results in the area.

In the third quarter of 2017, Franco-Nevada agreed to acquire a package of royalties in the Delaware Basin for approximately $101 million. The Delaware Basin comprises the western portion of the broader Permian Basin, which is located in West Texas and southeast New Mexico. Sitting to the west of the Midland Basin, the Delaware Basin shares many similarities geologically, but the Delaware Basin has been increasing in focus for operators, due to the stacked pay potential and premier economics. The royalties consist of approximately 94% mineral title rights, along with some GORR interests, which apply to approximately 675 acres (net after royalties. There are various operators across the acreage, and companies continue to direct capital toward the Delaware Basin, which is expected to result in increased production levels going forward.

In 2018, Franco-Nevada generated $23.1M from the Permian Basin royalties.

ASSET HIGHLIGHTS:

  • Royalties provides exposure to Midland & Delaware Basins
  • Permian represents one of most active and economic plays in North America
  • Revenues expected to ramp-up as royalty acreage is developed

2018 2017 2016
Revenue to Franco-Nevada ($ million)1 $ 23.1 $ 2.3 $ -