Franco-Nevada Pens Strategic Deal with Continental Resources

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.

Click here to read the full press release