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Franco-Nevada

SCOOP/STACK (Continental) (Oil)

Location: Oklahoma, United States
Operator: Continental Resources
Royalty: Royalty Acquisition Venture

In the fourth quarter of 2018, Franco-Nevada and Continental Resources, Inc. entered into a unique strategic relationship to jointly acquire royalty rights in the SCOOP and STACK oil & gas plays of Oklahoma. In exchange for a partial capital carry in favour of Continental, the venture provides Franco-Nevada with an opportunity to acquire royalty rights at the grass-roots level, leverage the value of Continental’s drilling plans, and benefit from the company’s knowledge of local land title and geology. In addition, Continental will manage the assets and Franco-Nevada will not incur any additional administrative burden. The venture was established to acquire royalty rights in areas primarily within acreage operated by Continental. These areas offer excellent economics, proximity to infrastructure and future upside via stacked hydrocarbon-bearing horizons.

Franco-Nevada is responsible for funding 80% of the acquisition capital and Continental is responsible for the remaining 20%. Franco-Nevada is entitled to receive a minimum of 50% of revenue from the venture and up to 75% of revenue, depending on performance against mutually agreed performance thresholds. Continental is entitled to minimum of 25% of revenue and up to 50% of revenue depending on performance against those performance thresholds.

As at December 2018, Franco-Nevada has contributed approximately $262 million to the venture for the acquisition of royalty rights and has committed, subject to satisfaction of agreed upon development thresholds, to spend up to $100 million in 2019, $100 million in 2020, and $58 million in 2021, to acquire additional interests.

Franco-Nevada received some distributions from the venture at the end of 2018, however, the revenue disclosed represents only partial payments from the time of closing and is not representative of a full year of distributions from the royalty venture.

ASSET HIGHLIGHTS:

  • Royalty acreage concentrated in the core of the SCOOP/STACK resource play
  • Continental is a top tier operator with an exceptional land position
  • Royalty volumes are supported by targets from Continental

2018 2017 2016
Revenue to Franco-Nevada ($ million) $ 1.7 $ - $ -

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