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Franco-Nevada

Permian Basin (Oil)

Location: Texas, United States
Operator: Pioneer Natural Resources, 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 have been the key drivers behind U.S. oil 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 1,025 acres (net to Franco-Nevada). The acreage is host to numerous operators, however, Pioneer Natural Resources is the operator for the largest portion of royalty acreage and 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 acquired 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 775 acres (net to Franco-Nevada). There are various operators across the acreage who continue to direct capital toward the Delaware Basin, which will result in continued development of our assets over time.

In 2019, Franco-Nevada generated $20.0M from the Permian Basin royalties. During the year, 423 wells were drilled and completed on royalty lands. With an unrisked inventory of approximately 10,875 estimated undeveloped well locations in multiple horizons, the 2019 drilling rate implies an inventory life of around 26 years, which will be followed by a long tail of production.

ASSET HIGHLIGHTS

  • Royalties provide exposure to Midland & Delaware Basins
  • Permian represents one of most active and economic plays in North America
  • Exposure to upside through multiple formations at depth

2019 2018 2017
Revenue to Franco-Nevada ($ million)11 $ 20.0 $ 23.1 $ 2.3

1 Revenue refers only to payments made to Franco-Nevada