Appalachian Basin Natural Gas Play Bounty Minerals Files for $100 million IPO

Bounty Minerals, a company with an asset base of natural gas mineral interests in the Appalachian Basin, filed to go public on Wednesday with the SEC. The initial plan is to raise up to $100 million in an initial public offering and plans to list on the NYSE under the symbol BNTY.  Based on its assets, the deal size may be a placeholder for an IPO that could raise $200+ million. Of course, this is all dependent on timing, of natural gas prices, political roadblocks and the general stock market appetite depending on the public float. Raymond James and Stifel are the joint bookrunners on the deal. No pricing terms were disclosed.

BOUNTY MINERALS MASTER INVENTORY

Key Points

  • Headquarters: Fort Worth, TX
  • Founded: 2012
  • Employees: 13
  • Focus Natural gas mineral rights
  • Holds approximately 65,000 net mineral acres in the Appalachian Basin
  • 17% of Bounty Minerals’ existing portfolio has been developed
  • Website: www.bountyminerals.com
  • Underwriters: Raymond James, Stifel, Stephens Inc.
  • Bounty Minerals filed confidentially on July 1, 2022.

The company owns, acquires, and manages mineral interests in the Appalachian Basin and currently holds approximately 65,000 net mineral acres. Bounty Minerals is primarily focused on acquiring non-producing minerals in developing shale plays. As of June 30, 2022, 17% of Bounty Minerals’ existing portfolio has been developed.

The Fort Worth, TX-based company was founded in 2012 and booked $111 million in revenue for the 12 months ended June 30, 2022. It plans to list on the NYSE under the symbol BNTY.

From Their Website:

“We own, acquire and manage mineral interests in the Appalachian Basin with the objective of growing cash flow from our existing portfolio for distribution to stockholders. Our initial target area was guided by a strong technical team that identified the areas of the basin we believe have the highest potential economics, enabling us to acquire our current holdings of approximately 65,000 net mineral acres.

Our focus has been on acquiring primarily non-producing minerals in developing shale plays, which has allowed us to deliver significant organic production and cash flow growth as operators have increasingly developed the core of the basin. We expect this to continue as only 17% of our existing portfolio by identified net proved, probable and possible (“3P”) locations have been developed as of June 30, 2022, which does not include the additional resource potential in our stacked pay areas. Our assets are exclusively mineral interests, which entitle us to the right to receive a share of recurring revenues from production without being”

Natural Gas

For natural gas in 2022 the caveat this year has been the unknown in Europe since Russia’s invasion of Ukraine, the price of coal switching and the shutdown of Freeport LNG. Record production and reduced LNG have pressured U.S. natural gas futures lower. U.S. natural gas dry production reached a record high of 98 bcf/d in September. Over in Europe natural gas volatility continues, Europe and Russia are playing havoc with European prices. All that is left of Russian gas flows to Europe is one operating point in Ukraine via Sudzha. TurkStream, the only other pipeline still in operation supplies gas to Russia ‘friendly’ nations.

Energy prices remain the biggest upward contributor for input inflation. German producer prices in September on annual basis PPI had energy prices again the biggest upward contributor (132.2% vs 139.0% in August), the distribution of natural gas (192.4%) and electricity (158.3%). Excluding energy, producer prices rose 14.0% from a year earlier.

Europe is moving aggressively to wean itself off Russian natural gas supplies with U.S. exports of liquefied natural gas expected to remain strong for some time. Meanwhile a tightening backdrop in the natural gas market, unrelenting export demand highlighted by Germany’s dependance on Russian supplies and its impact on domestic supplies futures continue to be elevated with a lack of sustained production growth fueling concerns about adequate supplies ahead of summer, let alone next winter.

Current Storage Level vs. Last Year; 5-Yr

  • Current Storage Level: 3,580 Bcf
  • Storage 2020/Same Week: 3,617 Bcf
  • 5Yr Avg/Same Week: 3,656 Bcf
EIA Storage Report
us natgasl locations


Global Natural Gas Quick Overview


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Via Ole S Hansen @Ole_S_Hansen

Natural Gas Market Price Influence Factors

Bearish Factors Include

  • Economic damage and reduced natural gas demand caused by the Covid pandemic,
  • Warm U.S. winter that results in weak demand for natural gas for heating.
  • Over long spec positions
  • Freeport LNG Outage
  • Expectations that the high level of oil prices would increase shale drilling and natural gas extraction as a by-product
  • The Gulf coast hurricane season looks to be quite inactive. The North Atlantic Ocean has experienced the quietest months of July and August since 1941. Named storms have skipped August in the Atlantic only three years on record: 1997, 1961, and 2022. (This is bullish or bearish depending on where the storm comes onshore)

Bullish Factors Include

  • Record foreign demand for U.S. nat-gas flows to U.S LNG export terminals on April 18 rose to a record 11.921 bcf (data from 2014) and after U.S. LNG exporters loaded a record 81 cargoes in November, breaking the previous record of 75 set January of 2020, (This was before the Russian invasion of Ukraine – which has led to even greater demand for US LNG)
  • The lower level of oil prices and ESG politics reduced shale drilling and natural gas extraction as a by-product
  • Tighter U.S. natural gas supplies that are down -14.8% y/y and -2.6% below their 5-year average.
  • High power burns
  • Perception that gas supply and demand are more inelastic than ever before.
  • Over short spec positions
  • Discussion of a European gas price cap

European Energy Crisis

In 2022 natural gas prices had been held hostage to the restricted flow of Nord Stream from Russia and the hot weather sweeping the USA. Prices continue to react to tightening European supplies doctored by unplanned outages and Russian planning to halt supplies. These conditions are expected to persist through to upside risk with current weather patterning.


via @ChananaCharu Asia has been vulnerable to rising energy prices, and will now face headwinds

The energy crisis pounding the world with unheard of prices was impacting the domestic pricing. In Europe we saw up near record highs again:

  • Hotter weather hitting demand
  • Russia halting transfer
  • German rationing
  • Freeport LNG down
  • Norway supply to rebound.
  • Putin constant threats
via @ole_S_Hansen

Demand switching and destruction across Europe, overall gas demand down more than 15% on 5-yr avg

All that is left of Russian gas flows to Europe is one operating point in Ukraine via Sudzha. TurkStream the only other pipeline still in operation supplies gas to Russia ‘friendly’ nations

EU gas and power priced in USD per barrel crude oil equivalent.

EU gas and power priced in USD per barrel crude oil equivalent. Chart source: @business

  US Natural Gas Production

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Around 97% of production over the next two years will come from the Lower 48 states (L48), excluding the Federal Offshore Gulf of Mexico (GOM). The other 3% will come from Alaska and the GOM.

U.S. natural gas production growth will primarily come from the Appalachia region in the Northeast, the Permian region in western Texas and southeastern New Mexico, and the Haynesville region in Texas and Louisiana. EIA forecast that the Permian region will contribute 2.2 Bcf/d to production growth in 2022 and 1.2 Bcf/d in 2023.

EIA
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Sources: TradersCommunity, EIA, RonH Energy, Bounty Minerals

From The TradersCommunity US Research Desk