Skip to content

The Mitchell Group and Redhawk Launch New Mineral Rights Acquisition Offering

Redhawk Minerals Fund I LP, a $58 million mineral rights acquisition offering, was recently launched by The Mitchell Group and Redhawk Investment Group, two Dallas-based companies that specialize in energy investments.

The fund will focus on acquiring, owning and administering mineral interests in the “famously productive” STACK area in the Anadarko Basin in central Oklahoma. STACK stands for Sooner Trend (an oilfield), Anadarko (Basin), Canadian and Kingfisher counties – named for the geographic regions that encompass the targeted area. The partners said their goal is to purchase the mineral rights “in front of the bit.”

Redhawk Minerals management noted that the timing is perfect for mineral acquisition because the price-related expectations of owners and sellers generally declines in proportion to the price of oil, and this can translate into acquiring acreage at very competitive prices.

Mineral ownership in the STACK is highly fragmented and can involve first-time sellers whose ownership dates back to the Oklahoma Sooner Land Rush days in 1889. This may result in smaller individual tracts that can often be acquired at lower prices.

Mineral rights ownership, as an asset category, is a lesser known form of investment vehicle more commonly found in institutional type offerings. Owners can potentially receive up-front, lump-sum bonus premiums to lease plus royalty payments, ranging anywhere from 12.5-25 percent of the gross revenues from producing properties.

Mineral rights, which never expire, are leased by oil companies from the mineral owner and pay bonuses to have the right to drill. When they find oil, the mineral owner will receive royalty checks until the lease is no longer commercially profitable. If the oil company never drills or if their leases expire, the whole lease bonus, royalty payment process can repeat itself.

The STACK play, now in its infancy, is being compared to the early days of the Bakken Shale in North Dakota. Large Independent oil companies, like Devon Energy, Cimarex Energy, Continental Resources and Newfield Exploration have large acreage positions in the play and can average 500 – 1,000 barrels of oil equivalent per day.

The Mitchell Group invests in publicly traded energy securities for institutional and high net worth clients, and Redhawk Investment Group offers direct and alternative oil and gas investment opportunities.

Click here to visit The DI Wire directory page.