Thornton closes on $33 million oil and gas deal

Luke Zarzecki
lzarzecki@coloradocommunitymedia.com
Posted 12/1/22

Thornton received over $33 million after selling mineral rights from 4,000 royalty acres to Phoenix Capital Group on Nov. 4. 

According to a news release from Phoenix Capital Group, the acres …

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Thornton closes on $33 million oil and gas deal

Posted

Thornton will receive more than $33 million after selling mineral rights from 4,000 royalty acres to Phoenix Capital Group.

According to a news release from Phoenix Capital Group, the acres spread across 15 tracts of land in Adams and Weld counties. This was the biggest deal in the history of Phoenix Capital Group, the city announced Nov. 4.

Councilors debated the decision to lease or sell the minerals during a City Council update session back in May. Prior to the sale, the city leased a portion of 8,000 acres of mineral rights,  receiving royalties from the leases. 

According the meeting’s agenda, mineral rights were originally acquired as part of the Thornton Water Project Farm acquisitions. That land isn’t required to complete the project. The city owns approximately 19,000 acres of farmland in both Weld and Larimer counties. 

Scott Twombly, real estate property manager for the city, said in May that it originally made sense to lease the minerals rather than sell them. Now, it makes more sense to sell since the regulatory environment discourages oil development, he said. It is difficult to receive financing for drilling, the supply chain constraints delayed drilling, drillers are drilling more out of fewer wells –  reducing royalties – and oil prices are significantly higher, he said. 

The city has earned $60 million from its oil and gas minerals since it started the leasing program in 2011 until May 2022. Twombly said the city estimated profits of about $14 million from selling the minerals, which is why they recommended council to direct them to begin searching for buyers. 

Mayor Jan Kulmann suggested staff could get more than $14 million, and she was right: Phoenix Capital Group more than doubled that. 

“This is not a recommendation you would have heard several years ago,” Twombly said. 

City Councilor Julia Marvin asked if the city sells the minerals, whether council or staff will have a say in what the operation looks like.

Twombly and Kulmann, who is also an oil and gas engineer, said the amount of oversight the city will have is about the same since it is on Thornton land. 

Marvin asked if they sold the minerals where the money would go, and Twombly said it would be more than likely to go to the water fund. 

City Spokesperson Todd Barnes said the vast majority would go into the water fund and a small amount into the general fund since the water utility owns the properties where the oil rights are located. 

Marvin said she would be in support of the money going towards water sustainability efforts. 

Phoenix Capital Group, oil and gas drilling, mineral rights, Thornton, scott twombly, mineral rights

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