Franco-Nevada

Haynesville (Natural Gas)

Haynesville

Location: East Texas, United States
Operator: Rockcliff Energy, Others
Royalty: Various Royalty Rates

In December of 2020, Franco-Nevada acquired a portfolio of royalty rights in the Haynesville natural gas play in Texas from Mesa Minerals Partners LLC, a Quantum Energy Partners portfolio company, for $135 million. The Haynesville represents one of the most active natural gas plays in North America, owing to its strong well performance and close proximity to infrastructure along the U.S. Gulf Coast, which reduces transportation costs.

The royalties consist of approximately 2,740 net acres of mineral rights, located in Harrison and Panola counties, and provide a perpetual interest in land. The royalty position is situated in a core area of the East Texas portion of the Haynesville, which represents a shallower part of the basin where the producing formation is thickest. The portfolio was assembled in strategic partnership with Rockcliff Energy II LLC (“Rockcliff”), which allowed for acreage to be selected on the basis of geologic quality as well as prioritization under the company’s drilling schedule. Approximately 75% of the royalty position is operated by Rockcliff, who has been the most active operator in the East Texas Haynesville and has been carrying out a 4 rig drilling program in the area since the beginning of 2018.

The portfolio has a proven production history which generates revenue from dry natural gas production. Between the October 1, 2020 effective date for the transaction and December 31, 2020, the asset generated approximately $4.2 million in royalty revenue from the production of approximately 2,040,000 mcf of natural gas. During 2020, approximately 55 wells were drilled and completed on royalty lands. With a potential inventory of approximately 700 estimated undeveloped Haynesville well locations, the 2020 drilling rate implies an inventory life of around 12.5 years, which will be followed by a long tail of production. The royalties also provide further development potential in the Cotton Valley formation, which may be further exploited in the future.

ASSET HIGHLIGHTS

  • Natural gas exposure concentrated under strong operator
  • Close proximity to U.S. Gulf Coast enhances economics
  • Secure land title with proven production history

2020 2019 2018
Revenue to Franco-Nevada ($ million)1 $ 4.2 $ – $ –

1 Revenue refers to payments from effective date to year-end