Acquisitions |
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| Acquisitions | 4.ACQUISITIONS During the six months ended June 30, 2026, we acquired 881 oil & gas net royalty acres in the Permian Basin through a series of transactions for an aggregate cash purchase price of $22.0 million which was funded with cash on hand. These acquisitions further enhance our ownership position in the Permian Basin. Because the mineral interests acquired in these acquisitions include royalty interests in both developed properties and undeveloped properties with different risk profiles, we have determined that these acquisitions should be accounted for as business combinations and the underlying assets should be recorded at fair value on their respective acquisition dates on our condensed consolidated balance sheet. The following table summarizes the fair value allocation of assets acquired:
The fair value of the mineral interests was determined using an income approach consisting of discounted cash flow models. The assumptions used in the discounted cash flow models include estimated production, projected cash flows, forward oil & gas prices and risk adjusted discount rates. Certain assumptions used were not observable in active markets; therefore, the fair value measurements represent Level 3 fair value measurements. The amounts of revenues and earnings from the mineral interests acquired included in our condensed consolidated statements of income from their respective acquisition dates through June 30, 2026 are immaterial. The following table represents our supplemental pro forma revenues and net income for the three and six months ended June 30, 2026 and 2025 as if the mineral interests acquired had been included in our consolidated results since January 1, 2025. These amounts have been calculated after applying our accounting policies.
AllDale III &IV Acquisition On July 1, 2026, we acquired certain general partner and limited partner interests in AllDale III & IV for $206.2 million, subject to customary post-closing adjustments. We funded the AllDale III & IV Acquisition using a combination of cash on hand, and borrowings under both our revolving credit facility and the Minerals Term Loan. See Note 10 – Long-Term Debt for more information on the terms of the Credit Agreement and Minerals Term Loan. In connection with the AllDale III & IV Acquisition, certain entities related to Mr. Craft acquired, pursuant to separate definitive agreements, an aggregate of $100.0 million of limited partner interests in AllDale III. Because the underlying mineral interests held by AllDale III & IV include royalty interests in both developed properties and undeveloped properties with different risk profiles, we have determined that the AllDale III & IV Acquisition should be accounted for as a business combination and the underlying assets and liabilities of AllDale III & IV will be recorded at their July 1, 2026 acquisition date fair values on our condensed consolidated balance sheet. We are in the process of performing our valuation of our previously held equity method investment in AllDale III, the acquired assets and liabilities and the noncontrolling interest. Given the recent date of the acquisition, we have not finalized our determination of the fair value of the various measurements as we continue to gather information to determine the assumptions we intend to use in our valuation. Prior to the AllDale III & IV Acquisition, we accounted for our investment in AllDale III as an equity method investment. We anticipate re-measuring our equity method investment immediately prior to the AllDale III & IV Acquisition using a discounted cash flow model. The assumptions to be used in the determination of the fair value measurement include estimated production, projected cash flows, forward oil & gas prices and a risk adjusted discount rate, among others. We anticipate determining the fair value of the mineral interests by determining an entity-wide value using discounted expected cash flows based on estimated production, projected cash flows, forward oil & gas prices and risk adjusted discount rates. AllDale III & IV also hold certain commodity derivative instruments, and we anticipate determining the fair value of these instruments by observing similar transactions and developing a value that is then adjusted for counterparty risk. We anticipate using the carrying values for any acquired receivables, payables and cash, as this represents their fair value given their short-term nature. We anticipate determining the fair value of the noncontrolling interests using a discounted cash flow model. The assumptions to be used in the determination of the fair value measurements include estimated production, projected cash flows, forward oil & gas prices and a risk adjusted discount rate, among others.
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