Kimmeridge Energy Management Co. LLC and Desert Royalty Co. LLC are combining their estimable oil and natural gas royalty assets in the Permian Basin to form Desert Peak Minerals, which would become one of the largest pure plays of its kind.
Desert Peak, a pure-play mineral and royalty company focused on the Delaware sub-basin, is to have net royalty acres totaling 70,000 on a one-eighth royalty-adjusted basis, or NRA, across eight counties in West Texas and southeastern New Mexico.
Denver-based Desert Peak is to be led by CEO Chris Conoscenti and the Kimmeridge management team. Conoscenti has been CEO of Kimmeridge Minerals since March, and previously was managing director of oil and gas investment banking for Credit Suisse.
"Desert Peak will be optimally positioned to continue to grow organically and to expand its mineral and royalty ownership in the Delaware Basin,” Conoscenti said.
Net production is expected to be 8,000 boe/d from Day 1, the partners said.
"The creation of a large mineral company with a singular focus on the Delaware Basin is the most interesting development I have observed in 33 years in the mineral business,” Desert Royalty CEO Kyle Stalling said.
Desert Royalty has focused on acquiring and managing oil and gas mineral and royalty properties for more than 25 years. The company is in the process of deploying its sixth mineral fund and in 2020 intends to raise a seventh mineral fund from its existing private investor base.
Lower 48 exploration and production (E&P) companies have been facing a tough road with stagnant commodity prices and a commitment to not overspend. Minerals might be an option, Kimmeridge managing partner Ben Dell said.
“Against the backdrop of a challenging environment for E&P, minerals provide a compelling mix of organic growth and free cash flow generation,” Dell said. “Desert Peak will have our full support as they execute on their strategic growth plans."
Kimmeridge, an energy-focused private equity firm makes direct investments in unconventional U.S. oil and gas assets, which have included PDC Energy Inc. and Resolute Energy Corp., now part of Cimarex Energy Co.
Kimmeridge in 2016 founded a Permian Delaware-targeted company to acquire, own and manage mineral and royalty interests. In the past three years, it has completed more than 130 acquisitions.
Sidley Austin LLP is acting as legal adviser to Kimmeridge. Tudor, Pickering, Holt & Co. is financial adviser to Desert Royalty, while Kirkland & Ellis LLP is acting as legal adviser.