MNRL Sub (MNRL) Financial Report Summaries

Risks

• Risks Related to Our Business
• Risks Related to Environmental and Regulatory Matters
• Risks Related to Our Class A Common Stock
• Substantially all of our revenues are derived from royalty payments that are based on the price at which oil, natural gas and NGLs produced from the acreage underlying our interests are sold. Prices of oil, natural gas and NGLs are volatile due to factors beyond our control. A significant drop in the price of oil or a substantial or extended decline in commodity prices in the future may adversely affect our business, financial condition or results of operations.
• We depend on various unaffiliated operators for all of the exploration, development and production on the properties underlying our mineral and royalty interests. Substantially all of our revenue is derived from royalty payments made by these operators. A reduction in the expected number of wells to be drilled on our acreage by these operators or the failure of our operators to adequately and efficiently develop and operate our acreage could have an adverse effect on our results of operations. In particular, partly in response to the significant decrease in prices for oil in 2020, many of our operators substantially reduced their development activities and capital expenditures in 2021. The number of new wells drilled in many of our focus areas decreased in 2021, and such slower development pace may occur again in the future.
• Our failure to successfully identify, complete and integrate acquisitions could adversely affect our growth and results of operations.
• Any acquisitions of additional mineral and royalty interests that we complete will be subject to substantial risks.
• Our operators’ identified potential drilling locations are susceptible to uncertainties that could materially alter the occurrence or timing of their drilling.
• We may experience delays in the payment of royalties and be unable to replace operators that do not make required royalty payments, and we may not be able to terminate our leases with defaulting lessees if any of the operators on those leases declare bankruptcy. We may also experience improper deductions in the payment of royalties.
• Acquisitions and our operators’ development activities of our leases will require substantial capital, and we and our operators may be unable to obtain needed capital or financing on satisfactory terms or at all.
• We have little to no control over the timing of future drilling with respect to our mineral and royalty interests.
• Project areas on our properties, which are in various stages of development, may not yield oil, natural gas or NGLs in commercially viable quantities.
• The unavailability, high cost or shortages of rigs, equipment, raw materials, supplies or personnel may restrict or result in increased costs for operators related to developing and operating our properties.
• The marketability of oil, natural gas and NGL production is dependent upon transportation, pipelines and refining facilities, which neither we nor many of our operators' control. Any limitation in the availability of those facilities could interfere with our or our operators’ ability to market our or our operators’ production and could harm our business.
• Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.
• SEC rules could limit our ability to book additional proved undeveloped reserves in the future.
• If oil, natural gas and NGL prices decline significantly, we could be required to record additional impairments of our proved oil, natural gas and NGL properties that would constitute a charge to earnings and reduce our stockholders’ equity.
• The results of exploratory drilling in shale plays will be subject to risks associated with drilling and completion techniques and drilling results may not meet our expectations for reserves or production.
• Acreage must be drilled before lease expiration, generally within three to five years, in order to hold the acreage by production. Our operators’ failure to drill sufficient wells to hold acreage may result in the deferral of prospective drilling opportunities. In addition, our ORRIs may be lost if the underlying acreage is not drilled before the expiration of the applicable lease or if the lease otherwise terminates.
• Drilling for and producing oil, natural gas and NGLs are high-risk activities with many uncertainties that may materially adversely affect our business, financial condition and results of operations.
• Operating hazards and uninsured risks may result in substantial losses to us or our operators, and any losses could adversely affect our results of operations and free cash flow.
• Competition in the oil and natural gas industry is intense, which may adversely affect our and our operators’ ability to succeed.
• Title to the properties in which we have an interest may be impaired by title defects.
• We rely on a few key individuals whose absence or loss could adversely affect our business.
• Loss of our or our operators’ information and computer systems, including as a result of cyber attacks, could materially and adversely affect our business.
• A terrorist attack or armed conflict could harm our business.
• A deterioration in general economic, business, political or industry conditions, such as those experienced in 2020, could materially adversely affect our results of operations, financial condition and free cash flow.
• Conservation measures, technological advances and increasing attention to ESG matters could materially reduce demand for oil, natural gas and NGLs, availability of capital and adversely affect our results of operations and the trading market for shares of our Class A common stock.
• Oil, natural gas and NGL operations are subject to various governmental laws and regulations. Compliance with these laws and regulations can be burdensome and expensive for our operators, and failure to comply could result in our operators incurring significant liabilities, either of which may impact our operators’ willingness to develop our interests.
• Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in our operators incurring increased costs, additional operating restrictions or delays and fewer potential drilling locations.
• Restrictions on the ability of our operators to obtain water may have an adverse effect on our financial condition, results of operations and free cash flow.
• A series of risks arising out of the threat of climate change could result in increased operating costs, limit the areas in which oil and natural gas production may occur, and reduce demand for the oil, natural gas and NGLs that our operators produce.
• Additional restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our operators’ ability to conduct drilling activities.
• Our derivative activities could result in financial losses and reduce earnings.
• Our revolving credit facility has substantial restrictions and financial covenants that may restrict our business and financing activities and our ability to declare dividends.
• The borrowings under our revolving credit facility expose us to interest rate risk.
• Our debt levels may limit our flexibility to obtain additional financing and pursue other business opportunities.
• Risks Related to Our Class A Common Stock
• Brigham Minerals is a holding company. Brigham Minerals’ sole material asset is its equity interest in Brigham LLC and it is accordingly dependent upon distributions from Brigham LLC to pay taxes, cover its corporate and other overhead expenses and pay any dividends on our Class A common stock.
• The requirements of being a public company, including compliance with the reporting requirements of the Exchange Act and the requirements of the Sarbanes-Oxley Act, may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.
• Our Sponsors have the ability to direct the voting of a substantial portion of the voting power of our common stock, and their interests may conflict with those of our other stockholders.
• Certain of our directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.
• Our Sponsors and their affiliates are not limited in their ability to compete with us, and the corporate opportunity provisions in our amended and restated certificate of incorporation could enable our Sponsors to benefit from corporate opportunities that might otherwise be available to us.
• Our amended and restated certificate of incorporation and amended and restated bylaws, as well as Delaware law, contain provisions that could discourage acquisition bids or merger proposals, which may adversely affect the market price of our Class A common stock and could deprive our investors of the opportunity to receive a premium for their shares.
• Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
• Our ability to pay dividends to our stockholders may be limited by our holding company structure, contractual restrictions and regulatory requirements.
• In certain circumstances, Brigham LLC will be required to make tax distributions to the Brigham Unit Holders, including Brigham Minerals, and such tax distributions may be substantial. To the extent Brigham Minerals receives tax distributions in excess of its actual tax liabilities and retains such excess cash, the Original Owners that hold Brigham LLC Units would benefit from such accumulated cash balances if they exercise their Redemption Right.
• The U.S. federal income tax treatment of distributions on our Class A common stock to a holder will depend upon our tax attributes and the holder’s tax basis in our stock, which are not necessarily predictable and can change over time.
• Future sales of shares of our Class A common stock in the public market, or the perception that such sales may occur, could reduce our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
• Our organizational structure confers certain benefits upon the Original Owners that hold Brigham LLC Units that will not benefit the holders of our Class A common stock to the same extent as it will benefit those Original Owners.
• We may issue preferred stock whose terms could adversely affect the voting power or value of our Class A common stock.
• If securities or industry analysts adversely change their recommendations regarding our Class A common stock or if our operating results do not meet their expectations, our stock price could decline.