According to the announcement, Franco-Nevada is contributing approximately US$220 million for the acquisition of existing mineral rights owned by a Continental subsidiary.
Franco-Nevada Corporation (TSX:FNV) and Continental Resources (NYSE:CLR) have agreed to enter into a strategic relationship to jointly acquire mineral rights in the SCOOP and STACK oil and gas plays of Oklahoma.
According to the announcement, Franco-Nevada is contributing approximately US$220 million for the acquisition of existing mineral rights owned by a Continental subsidiary and has committed, subject to satisfaction of agreed upon development thresholds, to spend up to US$100 million per year over the next three years to acquire additional mineral rights. The existing mineral rights and mineral rights to be acquired will be jointly held through a newly-formed company.
As quoted from the press release:
These areas offer prolific well results, excellent economics, proximity to infrastructure and future upside via stacked hydrocarbon-bearing horizons. The mineral rights represent a perpetual ownership interest in land which provide an entitlement for royalties from oil & gas production. This new relationship will add to Franco-Nevada’s existing interests in the SCOOP and STACK.
“We are pleased to be able to work with a best-in-class operator in Continental,” stated David Harquail, CEO. “For Franco-Nevada, collaborating on mineral rights with an operator is a new business development opportunity. It will allow for the ongoing growth of Franco-Nevada’s oil and gas interests through the acquisition of mineral rights at the grass-roots level.”
“We are very pleased to team up with a world-class corporation in Franco-Nevada, who has a vast understanding of the value of mineral ownership as evidenced by their long track-record of acquiring assets globally”, said Harold Hamm, Chairman and CEO of Continental.
Revenues are expected to build as Continental ramps up full-field development of its land position. The increase in Franco-Nevada’s oil and gas revenues is expected to be more than matched by a significant increase in its precious metals revenue as Cobre Panama ramps-up production next year. Both parties have executed definitive agreements through their respective subsidiaries with funding of the initial US$220 million expected in the fourth quarter subject to customary closing conditions.
Administration of the assets will be handled by the new company.