Themes from Q3 Earnings Calls

Part 2: Mineral Aggregators

Mineral and Royalty Rights Special Topics

Prevalent themes in our Q2 mineral aggregator earnings calls digest included capital discipline by operators, expectations of a very favorable price environment, and increases in distributions to shareholders, resulting in an overall optimistic outlook for the sector.

Last week, we reviewed the Q3 earnings calls for a select group of E&P companies and briefly discussed the macro themes affecting the upstream operators.  This week we focus on the key takeaways from the mineral aggregator Q3 2021 earnings calls.

Increased Acquisition Activity

Global energy prices were shaken in early 2020 with the onset of the COVID-19 pandemic and Russia’s refusal to support Saudi Arabia’s demand for additional oil production cuts. However, as energy prices recovered, mineral portfolio valuations have also generally increased, providing for exit opportunities for those needing to monetize their holdings, which, in turn, appears to signal a near-term increase in acquisition and divestiture (A&D) activity in the mineral aggregator space.

  • “The opportunity set there, as I mentioned earlier, is you’ve got a whole host of investors, private equity firms, even individuals, family offices, etc., that over multiple years has invested in and acquired minerals in different basins.  And now with the market where it is, crude oil pricing where it is, they’re seeing a nice opportunity to divest those minerals.  And so it’s our job to cycle through as many of those opportunities as possible.” – Robert Roosa, CEO, Brigham Minerals
  • “We’ve been active on the M&A front. We’ll still look at acquisitions. We are looking at issuing units directly to sellers and we’ve had a lot of success in doing that in the past.  So we’re still making bids.” Davis Ravnaas, President & CFO, Kimbell Royalty Partners 
  • “The smaller deals are still very, very competitive in the Permian. I’d say we have probably a little bit of an advantage on Diamondback on permitted properties, but the permitted small deals are still very competitive throughout the basin.  What was unique is that [the Viper Energy Partners acquisition of] Swallowtail is probably the largest mineral deal I’ve seen in a long time.  And that just highlights the size and scale we have that we can put that much cash into a deal and that Blackstone was willing to own a good amount of stock in Viper.”Kaes Van’t Hof, President, Viper Energy Partners GP LLC

Private Companies Production Increased But Still Flat Overall

As noted in our Q2 E&P operator earnings calls blog post, production volumes from private E&P operator activity were projected to outpace the relatively flat production levels of public operators.  This trend persisted in Q3, and was noteworthy enough to be mentioned in two of the aggregator calls.

  • “Investors have sent a very clear message that too much focus on growth and not enough focus on value creation and, particularly, recycling capital back to investors.  So, my sense is that the executives of the public companies are going to remain disciplined until the investors beg them to significantly elevate capex. … I think we will continue to see the privates pick up some of the slack and increasing activity to deliver some supply response.  But still, that’s not going to be enough in my view to meet the growing demand.” – Bud Brigham, Founder & Executive Chairman, Brigham Minerals
  • “Certainly, the privates have really leaned into this commodity price and their activity levels continue to increase month over month, and we try to conservatively take that into account as we forecast future volumes.  But volume growth will, in no small part, be influenced by the private operators.”  Travis Stice, CEO, Viper Energy Partners

Continued Optimism

Mineral aggregators started ramping up shareholder distributions in Q2, citing the rebound in energy prices as a primary driving factor.  The aggregators continue to see an upward trajectory for the oil and gas sector in the near term.

  • “I still believe there is upside to oil prices, particularly relative to the strip.  And I should point out that this is a period in these cycles when we’ve historically compounded the most value, when costs are lowest coming out of the trough of the disruption and now with demand.” Bud Brigham, Founder & Executive Chairman, Brigham Minerals
  • “While significant uncertainties remain in the U.S. energy sector, primarily related to the pace of new drilling and completions for the remainder of 2021 and into 2022, we remain very optimistic about the future of the U.S.  energy industry and our business specifically.”  Robert Ravnaas, Chairman & CEO, Kimbell Royalty Partners


Mercer Capital has its finger on the pulse of the minerals market.  As the oil and gas industry evolves through these pivotal times, we take a holistic perspective to bring you thoughtful analysis and commentary regarding the full hydrocarbon stream, including the mineral aggregators with working and royalty interests in the underlying production.

For more targeted energy sector analysis to meet your valuation needs, please contact the Mercer Capital Oil & Gas Team for further assistance.