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ACQUISITIONS

12 Months Ended

Dec. 31, 2023

ACQUISITIONS

3.ACQUISITIONS

Boulders

On October 13, 2021, we acquired approximately 1,480 oil & gas net royalty acres in the Delaware Basin from Boulders for a purchase price of $31.0 million, which was funded with cash on hand. This acquisition gives us increased exposure to a prolific area of the Delaware Basin and is within close proximity to reserves acquired in previous acquisitions. The acreage acquired in the Boulders Acquisition was mostly undeveloped. Because more than 90% of the mineral interests acquired in the acquisition represent undeveloped properties with a similar risk profile, including proved undeveloped, we have determined that the Boulders Acquisition should be accounted for as an asset acquisition.

The following table summarizes the purchase price allocation of the assets acquired in the Boulders Acquisition:


		(in thousands)

Mineral interests in proved properties		$	12,542
Mineral interests in unproved properties			18,418
		$	30,960

Belvedere

On September 9, 2022 (the "Belvedere Acquisition Date"), we acquired approximately 394 oil & gas net royalty acres in the Delaware Basin from Belvedere for a cash purchase price of $11.4 million, which was funded with cash on hand. This acquisition gives us additional exposure to a productive area of the Delaware Basin and is within close proximity to reserves that we currently own. Because the mineral interests acquired in the Belvedere Acquisition include royalty interests in both developed properties and undeveloped properties with different risk profiles, we have determined that the acquisition should be accounted for as a business combination and the underlying assets should be recorded at fair value as of the Belvedere Acquisition Date on our consolidated balance sheet.

The following table summarizes the fair value allocation of assets acquired as of the Belvedere Acquisition Date:


		(in thousands)

Mineral interests in proved properties		$	7,724
Mineral interests in unproved properties			3,667
		$	11,391

The fair value of the mineral interests was determined using an income approach consisting of a discounted cash flow model. The assumptions used in the discounted cash flow model included estimated production, projected cash flows, forward oil & gas prices and risk adjusted discount rates. Certain assumptions used are not observable in active markets; therefore, the fair value measurements represent Level 3 fair value measurements.

The amounts of revenue and earnings from the mineral interests acquired in the Belvedere Acquisition included in our consolidated statements of income from the Belvedere Acquisition Date through December 31, 2022 are as follows:


	Year Ended
	December 31,
	2022

	(in thousands)

Revenue	$	722
Net income		488

The following represents our supplemental pro forma consolidated revenues and net income for the years ended December 31, 2022 and 2021 as if the mineral interests acquired in the Belvedere Acquisition had been included in our consolidated results since January 1, 2021. These amounts have been calculated after applying our accounting policies.


		Year Ended
		December 31,
		2022			2021

		(in thousands)
		(unaudited)
Revenues		$	2,420,824		$	1,580,373
Net income			588,916			184,361

Jase

On October 26, 2022 (the "Jase Acquisition Date"), we acquired approximately 3,928 oil & gas net royalty acres in the Midland and Delaware Basins from Jase for a cash purchase price of $81.2 million which was funded with cash on hand. This acquisition further enhanced our ownership position in the Permian Basin. Because the mineral interests acquired in the Jase Acquisition include royalty interests in both developed properties and undeveloped properties with different risk profiles, we have determined that the acquisition should be accounted for as a business combination and the underlying assets should be recorded at fair value as of the Jase Acquisition Date on our consolidated balance sheet.

The following table summarizes the fair value allocation of assets acquired as of the Jase Acquisition Date:


		(in thousands)

Mineral interests in proved properties		$	35,918
Mineral interests in unproved properties			43,740
Receivables			1,569
Net assets acquired		$	81,227

The fair value of the mineral interests was determined using an income approach consisting of a discounted cash flow model. The assumptions used in the discounted cash flow model included estimated production, projected cash flows, forward oil & gas prices and risk adjusted discount rates. The fair value of the receivables was determined using estimated production during the period between the Jase Acquisition Date and the effective date of the agreement and observable sales prices during the period. Certain assumptions used are not observable in active markets; therefore, the fair value measurements represent Level 3 fair value measurements.

The amounts of revenue and earnings from the mineral interests acquired in the Jase Acquisition included in our consolidated statements of income from the Jase Acquisition Date through December 31, 2022 are as follows:


	Year Ended
	December 31,
	2022

	(in thousands)

Revenue	$	1,689
Net income		854

The following represents our supplemental pro forma consolidated revenues and net income for the years ended December 31, 2022 and 2021 as if the mineral interests acquired in the Jase Acquisition had been included in our consolidated results since January 1, 2021. These amounts have been calculated after applying our accounting policies.


		Year Ended
		December 31,
		2022			2021

		(in thousands)
		(unaudited)
Revenues		$	2,430,734		$	1,588,914
Net income			596,759			190,765

JC Resources

On February 22, 2023, we completed the JC Resources Acquisition, which gives us increased exposure to a prolific area of the Delaware Basin that is within close proximity to reserves that we currently own. This acquisition was approved by the conflicts committee of MGP's board of directors, which is comprised entirely of independent directors. Because JC Resources is under common control with us, we recorded the acquisition at JC Resources' carrying value for each period presented. The carrying value of the mineral interests as well as related receivables and payables at February 22, 2023 was $65.0 million inclusive of $25.4 million and $37.8 million of mineral interests in proved and unproved properties, respectively. The JC Resources Acquisition increased revenues included in our consolidated statements of income by $10.6 million for the year ended December 31, 2023.

Acquisition Agreement

On January 27, 2023, we entered into a one-year collaborative agreement with a third party, effective January 1, 2023, committing up to $35.0 million for the acquisition of oil & gas mineral interests in the Midland and Delaware Basins. Under the agreement, the third party assists us in the identification, evaluation, and acquisition of target oil & gas mineral interests. In exchange for these services, the third party receives a participation share, partially funded by the third party, and is paid a periodic management fee. As of December 31, 2023, we have purchased $6.5 million and $6.7 million of oil & gas mineral interests in proved and unproved properties, respectively, pursuant to this agreement. Management fees paid under this agreement have been immaterial. On February 19, 2024, we renewed this agreement for an additional one-year term, committing up to $25.0 million.

Skyland Acquisition

On December 7, 2023 (the "Skyland Acquisition Date"), we acquired approximately 2,372 oil & gas net royalty acres in the Anadarko, Williston and Delaware Basins from Skyland and Haymaker for a cash purchase price of $14.5 million which was funded with cash on hand. This acquisition further enhanced our ownership position in these basins. Because the mineral interests acquired in the Skyland Acquisition include royalty interests in both developed properties and undeveloped properties with different risk profiles, we have determined that the acquisition should be accounted for as a business combination and the underlying assets should be recorded at fair value as of the Skyland Acquisition Date on our consolidated balance sheet.

The following table summarizes the fair value allocation of assets acquired as of the Skyland Acquisition Date:


		(in thousands)

Mineral interests in proved properties		$	8,694
Mineral interests in unproved properties			5,765
Net assets acquired		$	14,459

The fair value of the mineral interests was determined using an income approach consisting of a discounted cash flow model. The assumptions used in the discounted cash flow model included estimated production, projected cash flows, forward oil & gas prices and risk adjusted discount rates. Certain assumptions used are not observable in active markets; therefore, the fair value measurements represent Level 3 fair value measurements.

The amounts of revenue and earnings from the mineral interests acquired in the Skyland Acquisition included in our consolidated statements of income from the Skyland Acquisition Date through December 31, 2023 are immaterial.

The following represents our supplemental pro forma consolidated revenues and net income for the years ended December 31, 2023 and 2022 as if the mineral interests acquired in the Skyland Acquisition had been included in our consolidated results since January 1, 2022. These amounts have been calculated after applying our accounting policies.


		Year Ended
		December 31,
		2023			2022

		(in thousands)
		(unaudited)
Revenues		$	2,568,516		$	2,423,313
Net income			637,757			591,140

Miscellaneous Acquisitions

In addition to the acquisitions discussed above, we purchased $6.8 million and $4.3 million of oil & gas mineral interests in proved and unproved properties, respectively, during the year ended December 31, 2023 and $1.3 million and $0.4 million in proved and unproved properties, respectively, during the year ended December 31, 2022.