UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________

FORM 10-Q

____________________

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2020~~2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number: 001-38870

Brigham Minerals, Inc.

(Exact name of registrant as specified in its charter)


Delaware			83-1106283
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

5914 W. Courtyard Drive, Suite 200 Austin, Texas			78730
(Address of principal executive offices)			(Zip code)

(512) 220-6350

(Registrant’s telephone number, including area code)

___________________

Securities registered pursuant to section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.01

MNRL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐☒
Non-accelerated filer	☒☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The registrant had ~~43,315,863~~45,241,745 shares of Class A common stock and ~~13,167,687~~11,544,807 shares of Class B common stock outstanding as of ~~November 2, 2020.~~July 31, 2021.

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BRIGHAM MINERALS, INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2020~~2021

TABLE OF CONTENTS


		Page
	Glossary of Oil and Natural Gas Terms	ii
	Cautionary Statement Regarding Forward-Looking Statements	iv

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020	1
	Condensed Consolidated ~~and Combined Statement~~Statements of Operations for the Three and ~~Nine~~ S ix Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	2
	Condensed Consolidated ~~and Combined Statement~~Statements of Changes in ~~Shareholders' and Members'~~ Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	3
	Condensed Consolidated ~~and Combined Statement~~Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	5
	Notes to Condensed Consolidated ~~and Combined~~ Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2320

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4337

Item 4.	Controls and Procedures	4538

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	4539

Item 1A.	Risk Factors	4539

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5139

Item 6.	Exhibits	5340
	SIGNATURES	5441

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GLOSSARY OF OIL AND NATURAL GAS TERMS

The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:


Term						Definition
Basin						A depression in the Earth's crust formed from plate tectonics providing accommodation space for the accumulation of sedimentary rocks and organic material. When subjected to the appropriate depth and duration of burial, hydrocarbon generation can occur creating oil and natural gas bearing strata.
Bbl						One stock tank barrel of 42 U.S. gallons liquid volume used herein in reference to crude oil, condensate or NGLs.
Boe						One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil. This is an energy content correlation and does not reflect a value or price relationship between the commodities.
Boe/d						One Boe per day.
British thermal unit or Btu						The quantity of heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.
Completion						The process of treating a drilled well followed by the installation of permanent equipment for the production of oil and natural gas, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.
Development well						A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.
Differential						An adjustment to the price of oil or natural gas from an established spot market price to reflect differences in the quality and/or location of oil or natural gas.
Drilled but Uncompleted Well (DUC)						A well that an operator has spud but has not yet begun hydraulic fracturing or completion operations.
Gross acres or gross wells						The total acres or wells, as the case may be, in which a mineral or royalty interest is owned.
MBbl						One thousand barrels of crude oil, condensate or NGLs.
MBoe						One thousand Boe.
Mcf						One thousand cubic feet of natural gas.
Mcf/d						One Mcf per day.
MMBtu						One million British thermal units.
MMcf						One million cubic feet of natural gas.
Net royalty acre						Mineral ownership standardized to a 12.5%, or 1/8th, royalty interest.
Net well						The percentage of net revenue interest an owner has out of a gross well. For example, an owner who has an 25% royalty interest in a single well owns 0.25 net wells.
NGLs						Natural gas liquids. Hydrocarbons found in natural gas that may be extracted as liquefied petroleum gas and natural gasoline.
NYMEX						The New York Mercantile Exchange.
Operator						The individual or company responsible for the development and/or production of an oil or natural gas well or lease.
Possible Reserves						Reserves that are less certain to be recovered than probable reserves.
Probable reserves						Reserves that are less certain to be recovered than proved reserves but that, together with proved reserves, are as likely as not to be recovered.
Prospect						A specific geographic area that, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.
Proved developed reserves						Proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well or through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

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Term						Definition
Proved reserves						Those quantities of oil, natural gas and NGLs that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible-from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations-prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. For a complete definition of proved oil and natural gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(22).
Proved undeveloped reserves or PUDs						Proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. The following rules apply to PUDs: (i) Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances; (ii) Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time; and (iii) Under no circumstances shall estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.
Realized price						The cash market price less all applicable deductions such as quality, transportation and demand adjustments.
Reserves						Estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market and all permits and financing required to implement the project. Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).
Reservoir						A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.
Royalty						An interest in an oil and natural gas lease that gives the owner the right to receive a portion of the production from the leased acreage (or of the proceeds from the sale thereof), but does not require the owner to pay any portion of the production or development costs on the leased acreage. Royalties may be either landowner’s royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.
Spot market price						The cash market price without reduction for expected quality, transportation and demand adjustments.
Spud						Commenced drilling operations on an identified location.
Undeveloped acreage						Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil, natural gas or NGLs regardless of whether such acreage contains proved reserves.

iii

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2020~~2021 (this "Quarterly Report") includes “forward-looking statements.” All statements, other than statements of historical fact, included in this Quarterly Report regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In particular, our statements regarding the ongoing COVID-19 pandemic and its expected impact on our business, financial position, results of operations and cash flows are forward-looking statements. When used in this Quarterly Report, the words “may,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions and the negative of such words and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Such statements may be influenced by factors that could cause actual outcomes and results to differ materially from those projected. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in this Quarterly Report our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the "Q1 2020 Quarterly Report"), our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 (the "Q2 2020 Quarterly Report") and in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the "Annual Report"), as well as the risk factors and other cautionary statements contained in our other filings with the United States Securities and Exchange Commission (the "SEC").

The following important factors, in addition to those discussed elsewhere in this Quarterly Report, could affect the future results of the energy industry in general, and our company in particular, and could cause actual results to differ materially from those expressed in such forward-looking statements:

•our ability to execute on our business objectives;

•the effect of changes in commodity prices;

•the level of production on our properties;

•risks associated with the drilling and operation of oil and natural gas wells;

•the availability or cost of rigs, equipment, raw materials, supplies, oilfield services or personnel;

•legislative or regulatory actions pertaining to hydraulic fracturing, including restrictions on the use of water;

•the availability of pipeline capacity and transportation facilities;

•the effect of existing and future laws and regulatory actions;

•the effects of current or future litigation, including the recent U.S. Supreme Court ruling involving the Muscogee (Creek) Nation reservation in Eastern Oklahoma and similar rulings regarding reservations;

•~~the~~ impact of derivative instruments;

•conditions in the capital markets and our ability to obtain capital on favorable terms or at all;

•the overall supply and demand for oil, natural gas and NGLs, and regional supply and demand factors, storage availability, delays, or interruptions of production, including voluntary shut-ins;

•operator budget ~~constraints;~~constraints and their ability to obtain capital on favorable terms or at all;

•the actions of the Organization of Petroleum Exporting Countries ("OPEC") and other significant producers and governments and the ability of such producers to agree to and maintain oil price and production controls;

•competition from others in the energy industry;

•the impact of reduced drilling activity in our focus areas and uncertainty as to whether development projects will be pursued;

~~Table of Contents~~

•global or national health events, including the ongoing outbreak and resulting economic effects of the COVID-19 pandemic;

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•uncertainty of estimates of oil and natural gas reserves and production;

•the cost of developing the oil and natural gas underlying our properties;

•our ability to replace our oil, natural gas and NGL reserves;

•our ability to identify, complete and integrate acquisitions;

•title defects in the properties in which we invest;

•the cost of inflation;

•technological advances;

•weather conditions, natural disasters and other matters beyond our control;

•general economic, business, political or industry conditions; and

•certain factors discussed elsewhere in this Quarterly Report.

Should one or more of the risks or uncertainties described in this ~~Quarterly Report, our Q1 2020 Quarterly Report, our Q2 2020~~ Quarterly Report, our Annual Report or any of our other SEC filings occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.

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PART I — FINANCIAL INFORMATION

Item 1. — Financial Statements (Unaudited)

BRIGHAM MINERALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December 31,
(In thousands, except share amounts) 2020 2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 8,182 $ 51,133
Restricted cash 338 0
Accounts receivable 19,680 30,291
Prepaid expenses and other 2,464 1,688
Total current assets 30,664 83,112
Oil and gas properties, at cost, using the full cost method of accounting:
Unevaluated property 318,693 291,664
Evaluated property 472,687 449,061
Less accumulated depreciation, depletion, and amortization (116,532) (61,103)
Total oil and gas properties, net 674,848 679,622
Other property and equipment 5,435 5,095
Less accumulated depreciation (4,570) (3,703)
Other property and equipment, net 865 1,392
Deferred tax asset 16,750 18,823
Other assets, net 825 1,213
Total assets $ 723,952 $ 784,162
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 7,423 $ 11,533
Total current liabilities 7,423 11,533
Long-term bank debt 5,000 0
Other non-current liabilities 1,813 803
Temporary equity 127,182 454,507
Shareholders' equity:
Preferred stock, $0.01 par value; 50,000,000 authorized; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019 0 0
Class A common stock, $0.01 par value; 400,000,000 authorized, 43,752,493 shares issued and 43,315,863 outstanding at September 30, 2020; 400,000,000 authorized, 34,040,934 issued and outstanding at December 31, 2019 438 340
Class B common stock, $0.01 par value; 150,000,000 authorized, 13,167,687 shares issued and outstanding at September 30, 2020; 150,000,000 authorized, 22,847,045 shares issued and outstanding at December 31, 2019 0 0
Additional paid-in capital 633,634 323,578
Accumulated deficit (48,011) (6,599)
Treasury stock, at cost; 436,630 shares at September 30, 2020 and 0 shares at December 31, 2019 (3,527) 0
Total shareholders' equity attributable to Brigham Minerals, Inc. 582,534 317,319
Total liabilities and shareholders' equity $ 723,952 $ 784,162


	June 30,		December 31,
(In thousands, except share amounts)	2021		2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	6,414	$	9,144

Accounts receivable	25,672		17,632
Prepaid expenses and other	3,075		3,693


Total current assets	35,161		30,469
Oil and gas properties, at cost, using the full cost method of accounting:
Unevaluated property	333,082		325,091
Evaluated property	520,082		488,301
Less accumulated depreciation, depletion, and amortization	(207,875)		(189,546)
Total oil and gas properties, net	645,289		623,846
Other property and equipment	5,614		5,587
Less accumulated depreciation	(4,750)		(4,632)
Other property and equipment, net	864		955

Deferred tax asset	25,821		24,920
Other assets, net	688		771
Total assets	$	707,823	$	680,961

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	8,200	$	7,905


Total current liabilities	8,200		7,905
Long-term bank debt	43,000		20,000

Other non-current liabilities	1,503		1,126

Temporary equity	0		146,280
Equity:

Preferred stock, $0.01 par value; 50,000,000 authorized; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020	0		0
Class A common stock, $0.01 par value; 400,000,000 authorized, 45,570,421 shares issued and 45,133,791 outstanding at June 30, 2021; 400,000,000 authorized, 43,995,124 issued and 43,558,494 outstanding at December 31, 2020	456		440
Class B common stock, $0.01 par value; 150,000,000 authorized, 11,652,761 shares issued and outstanding at June 30, 2021; 150,000,000 authorized, 13,167,687 shares issued and outstanding at December 31, 2020	0		0
Additional paid-in capital	580,181		601,129

Accumulated deficit	(99,303)		(92,392)
Treasury stock, at cost; 436,630 shares at June 30, 2021 and December 31, 2020	(3,527)		(3,527)
Total equity attributable to Brigham Minerals, Inc.	477,807		505,650
Non-controlling interest	177,313		0
Total equity	$	655,120	$	505,650
Total liabilities and equity	$	707,823	$	680,961

The accompanying notes are an integral part of these condensed consolidated ~~and combined~~ financial statements.

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BRIGHAM MINERALS, INC.

CONDENSED CONSOLIDATED ~~AND COMBINED STATEMENT~~STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2021		2020		2021		2020
REVENUES
Mineral and royalty revenues	$	37,005	$	12,543	$	69,181	$	40,917
Lease bonus and other revenues	806		62		2,403		3,968
Total revenues	37,811		12,605		71,584		44,885
OPERATING EXPENSES
Gathering, transportation and marketing	1,593		1,625		3,326		3,404
Severance and ad valorem taxes	2,300		1,034		4,133		2,786
Depreciation, depletion, and amortization	9,080		11,200		18,447		24,026

General and administrative	5,697		5,890		11,139		11,400
Total operating expenses	18,670		19,749		37,045		41,616
INCOME (LOSS) FROM OPERATIONS	19,141		(7,144)		34,539		3,269

Interest expense, net	(387)		(545)		(654)		(577)


Other income, net	2		23		15		25
Income (loss) before income taxes	18,756		(7,666)		33,900		2,717
Income tax expense (benefit)	3,430		(850)		6,503		732
NET INCOME (LOSS)	$	15,326	$	(6,816)	$	27,397	$	1,985

Less: net (income) loss attributable to non-controlling interest	(4,138)		2,766		(7,613)		(1,329)
Net income (loss) attributable to Brigham Minerals, Inc. shareholders	$	11,188	$	(4,050)	$	19,784	$	656

NET INCOME (LOSS) PER COMMON SHARE
Basic	$	0.25	$	(0.11)	$	0.45	$	0.02
Diluted	$	0.25	$	(0.11)	$	0.44	$	0.02
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	43,916		35,282		43,717		34,631
Diluted	45,281		35,282		45,091		34,631

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share data) 2020 2019 2020 2019
REVENUES
Mineral and royalty revenues $ 21,568 $ 24,135 $ 62,485 $ 64,774
Lease bonus and other revenues 1,510 972 5,478 3,127
Total revenues 23,078 25,107 67,963 67,901
OPERATING EXPENSES
Gathering, transportation and marketing 1,702 1,113 5,106 3,750
Severance and ad valorem taxes 1,393 1,377 4,179 4,206
Depreciation, depletion, and amortization 11,801 8,434 35,827 20,310
Impairment of oil and gas properties 18,905 0 18,905 0
General and administrative 5,162 5,068 16,562 16,779
Total operating expenses 38,963 15,992 80,579 45,045
(LOSS) INCOME FROM OPERATIONS (15,885) 9,115 (12,616) 22,856
Gain (loss) on derivative instruments, net 0 91 0 (521)
Interest expense, net (118) (65) (695) (5,160)
Loss on extinguishment of debt 0 0 0 (6,933)
Other income, net 4 130 29 165
(Loss) income before income taxes (15,999) 9,271 (13,282) 10,407
Income tax (benefit) expense (2,982) 807 (2,250) 1,114
NET (LOSS) INCOME $ (13,017) $ 8,464 $ (11,032) $ 9,293
Less: net income attributable to Predecessor 0 0 0 (5,092)
Less: net loss (income) attributable to temporary equity 3,552 (5,318) 2,223 (2,377)
Net (loss) income attributable to Brigham Minerals, Inc. shareholders $ (9,465) $ 3,146 $ (8,809) $ 1,824
NET (LOSS) INCOME PER COMMON SHARE
Basic $ (0.24) $ 0.14 $ (0.24) $ 0.07
Diluted $ (0.24) $ 0.14 $ (0.24) $ 0.07
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 40,124 21,838 36,475 13,299
Diluted 40,124 21,926 36,475 13,346

The accompanying notes are an integral part of these condensed consolidated ~~and combined~~ financial statements.

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BRIGHAM MINERALS, INC.

CONDENSED CONSOLIDATED ~~AND COMBINED STATEMENT~~STATEMENTS OF CHANGES IN ~~SHAREHOLDERS' AND MEMBERS'~~ EQUITY

(Unaudited)

Class A
Common Stock Class B
Common Stock Additional Paid-In Capital Accumulated Deficit Treasury Stock Total Shareholders' Equity
(In thousands) Shares Amount Shares Amount Shares Amount
Balance - December 31, 2019 34,041 $ 340 22,847 $ 0 $ 323,578 $ (6,599) 0 $ 0 $ 317,319
Shares surrendered for tax withholdings on vested equity awards (7) — — — — — — — —
Conversion of shares of Class B Common Stock to Class A Common Stock 140 2 (140) — 1,524 — — — 1,526
Deferred tax asset arising from conversion of shares of Class B Common Stock to Class A Common Stock — — — — 204 — — — 204
Share-based compensation — — — — 3,402 — — — 3,402
Dividends declared — — — — — (12,945) — — (12,945)
Dividend equivalent rights declared — — — — — (596) — — (596)
Net income attributable to shareholders — — — — — 4,706 — — 4,706
Adjustment of temporary equity to carrying value — — — — 206,017 — — — 206,017
Balance - March 31, 2020 34,174 $ 342 22,707 $ 0 $ 534,725 $ (15,434) 0 $ 0 $ 519,633
Shares surrendered for tax withholdings on vested equity awards (11) — — — (185) — — — (185)
Conversion of shares of Class B Common Stock to Class A Common Stock 5,094 51 (5,094) — 51,518 — — — 51,569
Deferred tax asset arising from conversion of shares of Class B Common Stock to Class A Common Stock — — — — (780) — — — (780)
Share-based compensation 50 — — — 3,332 — — 3,332
Restricted stock forfeitures (9) — — — — — — — —
Dividends declared — — — — — (12,710) — — (12,710)
Dividend equivalent rights declared — — — — — (562) — — (562)
Net loss attributable to shareholders — — — — — (4,050) — — (4,050)
Adjustment of temporary equity to redemption value — — — — (37,445) — — — (37,445)
Balance - June 30, 2020 39,298 $ 393 17,613 $ 0 $ 551,165 $ (32,756) 0 $ 0 $ 518,802
Conversion of shares of Class B Common Stock to Class A Common Stock 4,445 45 (4,445) — 44,351 — — — 44,396
Deferred tax asset arising from conversion of shares of Class B Common Stock to Class A Common Stock — — — — (2,845) — — — (2,845)
Purchase of treasury stock (437) — — — — — 437 (3,527) (3,527)
Share-based compensation 10 — — — 3,518 — — — 3,518
Dividends declared — — — — — (5,567) — — (5,567)
Dividend equivalent rights declared — — — — — (223) — — (223)
Net loss attributable to shareholders — — — — — (9,465) — — (9,465)
Adjustment of temporary equity to carrying value — — — — 37,445 — — — 37,445
Balance - September 30, 2020 43,316 $ 438 13,168 $ 0 $ 633,634 $ (48,011) 437 $ (3,527) $ 582,534


	Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Deficit		Treasury Stock			Non-controlling Interest		Total Equity
(In thousands)	Shares	Amount		Shares	Amount						Shares	Amount
Balance - December 31, 2020	43,558	$	440	13,168	$	0	$	601,129	$	(92,392)	437	$	(3,527)	$	0	$	505,650
Adjustment of temporary equity to carrying value	—	—		—	—		(54,294)		—		—	—		—		(54,294)
Reclassification from temporary equity to non-controlling interest	—	—		—	—		—		—		—	—		202,496		202,496
Conversion of shares of Class B Common Stock to Class A Common Stock	112	1		(112)	—		1,720		—		—	—		(1,721)		0
Reduction in deferred tax asset arising from conversion of shares of Class B Common Stock to Class A Common Stock	—	—		—	—		(480)		—		—	—		—		(480)


Share-based compensation	—	—		—	—		3,933		—		—	—		—		3,933
Restricted stock forfeitures	(4)	—		—	—		—		—		—	—		—		—
Dividends and distributions declared	—	—		—	—		—		(11,788)		—	—		(3,447)		(15,235)


Net income	—	—		—	—		—		8,596		—	—		1,553		10,149
Balance - March 31, 2021	43,666	$	441	13,056	$	0	$	552,008	$	(95,584)	437	$	(3,527)	$	198,881	$	652,219


Conversion of shares of Class B Common Stock to Class A Common Stock	1,403	14		(1,403)	—		21,243		—		—	—		(21,257)		—
Deferred tax asset arising from conversion of shares of Class B Common Stock to Class A Common Stock	—	—		—	—		2,666		—		—	—		—		2,666

Share-based compensation	—	—		—	—		4,410		—		—	—		—		4,410
Restricted stock forfeitures	(1)	—		—	—		—		—		—	—		—		—
Shares surrendered for tax withholdings on vested RSAs	(9)	—		—	—		(145)		—		—	—		—		(145)
Issuance of common stock upon vesting of RSUs, net of shares withheld for income taxes	75	1		—	—		(1)		—		—	—		—		0
Dividends and distributions declared	—	—		—	—		—		(14,907)		—	—		(4,449)		(19,356)
Net income	—	—		—	—		—		11,188		—	—		4,138		15,326
Balance - June 30, 2021	45,134	$	456	11,653	$	0	$	580,181	$	(99,303)	437	$	(3,527)	$	177,313	$	655,120

~~The accompanying notes are an integral part of these condensed consolidated and combined financial statements.~~

Table of Contents


	Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Equity
(In thousands)	Shares	Amount		Shares	Amount
Balance - December 31, 2019	34,041	$	340	22,847	$	0	$	323,578	$	(6,599)		$	317,319
Adjustment of temporary equity to carrying value	—	—		—	—		206,017		—			206,017

Conversion of shares of Class B Common Stock to Class A Common Stock	140	2		(140)	—		1,524		—			1,526
Deferred tax asset arising from conversion of shares of Class B Common Stock to Class A Common Stock	—	—		—	—		204		—			204

Shares surrendered for tax withholdings on vested RSAs	(7)	—		—	—		—		—			—
Share-based compensation	—	—		—	—		3,402		—			3,402

Dividends and distributions declared	—	—		—	—		—		(13,541)			(13,541)

Net income	—	—		—	—		—		4,706			4,706
Balance - March 31, 2020	34,174	$	342	22,707	$	0	$	534,725	$	(15,434)		$	519,633
Adjustment of temporary equity to redemption value	—	—		—	—		(37,445)		—			(37,445)

Conversion of shares of Class B Common Stock to Class A Common Stock	5,094	51		(5,094)	—		51,518		—			51,569
Reduction in deferred tax asset arising from conversion of shares of Class B Common Stock to Class A Common Stock	—	—		—	—		(780)		—			(780)

Shares surrendered for tax withholdings on vested RSAs	(11)	—		—	—		(185)		—			(185)
Share-based compensation	50	—		—	—		3,332					3,332
Restricted stock forfeitures	(9)	—		—	—		—		—			—
Dividends and distributions declared	—	—		—	—		—		(13,272)			(13,272)
Net loss	—	—		—	—		—		(4,050)			(4,050)
Balance - June 30, 2020	39,298	$	393	17,613	$	0	$	551,165	$	(32,756)		$	518,802

~~BRIGHAM MINERALS, INC.~~

~~CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' AND MEMBERS' EQUITY~~

~~(Unaudited)~~

~~(CONTINUED)~~

Members' Contributed Capital Class A
Common Stock Class B
Common Stock Additional Paid-In Capital Accumulated Deficit Total Shareholders' and Members' Equity
(In thousands) Shares Amount Shares Amount
Balance - December 31, 2018 $ 208,728 0 $ 0 0 $ 0 $ (3,057) $ 168,277 $ 373,948
Net income attributable to shareholders — — — — — — 534 534
Net income attributable to predecessor — — — — — — 3,502 3,502
Balance - March 31, 2019 $ 208,728 0 $ 0 0 $ 0 $ (3,057) $ 172,313 $ 377,984
Net income attributable to shareholders — — — — — — 314 314
Net income attributable to predecessor — — — — — — 1,590 1,590
Balance prior to corporate reorganization and IPO $ 208,728 0 $ 0 0 $ 0 $ (3,057) $ 174,217 $ 379,888
Conversion of PE Units for Class A Common Stock and Class B Common Stock (208,728) 5,322 53 28,778 — 380,205 (171,530) 0
Issuance of common stock in IPO, net of offering cost — 16,675 167 — — 274,746 — 274,913
Deferred tax asset arising from the IPO — — — — — 13,664 — 13,664
Reclassification of noncontrolling interests to temporary equity — — — — — (518,000) — (518,000)
Share-based compensation — — — — — 7,505 — 7,505
Net loss attributable to shareholders — — — — — — (2,170) (2,170)
Adjustment of temporary equity to redemption value — — — — — (97,344) — (97,344)
Balance - June 30, 2019 $ 0 21,997 $ 220 28,778 $ 0 $ 57,719 $ 517 $ 58,456
Issuance of common stock in IPO, net of offering cost — — — — — (1,465) — (1,465)
Share-based compensation — — — — — 3,152 — 3,152
Dividends declared — — — — — — (7,206) (7,206)
Dividend equivalent rights declared — — — — — — (402) (402)
Net income attributable to shareholders — — — — — — 3,146 3,146
Adjustment of temporary equity to redemption value — — — — — 3,797 — 3,797
Balance - September 30, 2019 $ 0 21,997 $ 220 28,778 $ 0 $ 63,203 $ (3,945) $ 59,478

The accompanying notes are an integral part of these condensed consolidated ~~and combined~~ financial statements.

Table of Contents

BRIGHAM MINERALS, INC.

CONDENSED CONSOLIDATED ~~AND COMBINED STATEMENT~~STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income		$	(11,032)	$	9,293
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net income						Net income	$	27,397	$	1,985
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	Depreciation, depletion and amortization	35,827		20,310		Depreciation, depletion and amortization	18,447		24,026
Impairment of oil and gas properties		18,905		0

Share-based compensation expense	Share-based compensation expense	5,692		8,232		Share-based compensation expense	4,855		3,736
Loss on extinguishment of debt		0		6,933

Amortization of debt issuance costs	Amortization of debt issuance costs	545		354		Amortization of debt issuance costs	141		485
Deferred income taxes	Deferred income taxes	(1,351)		2		Deferred income taxes	1,286		463
Loss on derivative instruments, net		0		521
Net cash received for derivative settlements		0		356

Bad debt expense	Bad debt expense	299		293		Bad debt expense	0		299
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Decrease (increase) in accounts receivables		10,312		(2,612)
(Increase) decrease in other current assets		(776)		970
Decrease in other deferred charges		45		0
(Decrease) increase in accounts payables and accrued liabilities		(4,269)		1,827
(Decrease) increase in other long-term liabilities		(465)		46
(Increase) decrease in accounts receivable						(Increase) decrease in accounts receivable	(8,040)		11,980
Decrease (increase) in other current assets						Decrease (increase) in other current assets	581		(592)

Increase (decrease) in accounts payable and accrued liabilities						Increase (decrease) in accounts payable and accrued liabilities	448		(3,509)
Increase (decrease) in other long-term liabilities						Increase (decrease) in other long-term liabilities	16		(256)
Net cash provided by operating activities	Net cash provided by operating activities	$	53,732	$	46,525	Net cash provided by operating activities	$	45,131	$	38,617
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Additions to oil and gas properties	Additions to oil and gas properties	(45,996)		(181,484)		Additions to oil and gas properties	(36,331)		(28,755)
Additions to other fixed assets	Additions to other fixed assets	(340)		(400)		Additions to other fixed assets	(27)		(286)
Proceeds from sale of oil and gas properties, net	Proceeds from sale of oil and gas properties, net	1,565		2,001		Proceeds from sale of oil and gas properties, net	0		1,565

Net cash used in investing activities	Net cash used in investing activities	$	(44,771)	$	(179,883)	Net cash used in investing activities	$	(36,358)	$	(27,476)
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES

Payments of short-term debt		0		(4,596)

Payments of long-term debt	Payments of long-term debt	0		(195,404)		Payments of long-term debt	(4,000)		0
Borrowing of long-term debt	Borrowing of long-term debt	5,000		70,000		Borrowing of long-term debt	27,000		0
Payment of debt extinguishment fees		0		(2,091)
Proceeds from issuance of Class A common stock		0		277,075
Purchase of treasury stock		(3,527)		0

Dividends paid	Dividends paid	(31,340)		(7,206)		Dividends paid	(25,537)		(25,772)
Distribution to holders of temporary equity		(21,504)		(9,379)
Distribution to holders of non-controlling interest						Distribution to holders of non-controlling interest	(7,809)		(19,834)
Debt issuance costs	Debt issuance costs	(203)		(1,211)		Debt issuance costs	(21)		(203)
Net cash (used in) provided by financing activities		$	(51,574)	$	127,188
Payment of employee tax withholding for settlement of equity compensation awards						Payment of employee tax withholding for settlement of equity compensation awards	(1,136)		0
Net cash used in financing activities						Net cash used in financing activities	$	(11,503)	$	(45,809)
Decrease in cash and cash equivalents and restricted cash	Decrease in cash and cash equivalents and restricted cash	(42,613)		(6,170)		Decrease in cash and cash equivalents and restricted cash	(2,730)		(34,668)
Cash and cash equivalents and restricted cash, beginning of period	Cash and cash equivalents and restricted cash, beginning of period	51,133		32,018		Cash and cash equivalents and restricted cash, beginning of period	9,144		51,133
Cash and cash equivalents and restricted cash, end of period	Cash and cash equivalents and restricted cash, end of period	$	8,520	$	25,848	Cash and cash equivalents and restricted cash, end of period	$	6,414	$	16,465

Supplemental disclosure of noncash activity:	Supplemental disclosure of noncash activity:					Supplemental disclosure of noncash activity:

Accrued capital expenditures	Accrued capital expenditures	$	163	$	286	Accrued capital expenditures	$	100	$	23
Capitalized share-based compensation cost	Capitalized share-based compensation cost	$	4,560	$	2,425	Capitalized share-based compensation cost	$	3,487	$	2,998
Temporary equity cumulative adjustment to redemption value	Temporary equity cumulative adjustment to redemption value	$	(206,017)	$	93,546	Temporary equity cumulative adjustment to redemption value	$	54,294	$	(168,572)
Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash payments for loan commitment fees and interest	Cash payments for loan commitment fees and interest	$	570	$	5,657	Cash payments for loan commitment fees and interest	$	(437)	$	(442)
Cash taxes paid		$	113	$	1,014
Tax (payment) /refund received						Tax (payment) /refund received	$	(2,881)	$	113

The accompanying notes are an integral part of these condensed consolidated ~~and combined~~ financial statements.

Table of Contents

BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED ~~AND COMBINED~~ FINANCIAL STATEMENTS

(Unaudited)

1.Business and Basis of Presentation

Description of the Business

Brigham Minerals, Inc. (together with its wholly owned subsidiaries, ~~“Brigham Minerals”~~"Brigham Minerals," “we," "us," "our," or the ~~“Company”~~"Company") is, a Delaware corporation, ~~formed in June 2018 to become~~is a holding ~~company. Brigham Minerals acquired an indirect~~company whose sole material asset consists of a 79.5% interest in Brigham Resources, LLC (“Brigham Resources”), our predecessor, on July 16, 2018 in a series of restructuring transactions pursuant to which certain entities affiliated with Warburg Pincus LLC (“Warburg Pincus”) contributed all of their respective interests in the entities through which they held interests in Brigham Resources to Brigham Minerals in exchange for all of the outstanding shares of common stock of Brigham Minerals (the “July 2018 Restructuring”). As a result of such restructuring transactions, Brigham Minerals became wholly owned by an entity affiliated with Warburg Pincus, and Brigham Minerals indirectly owned a 16.5% membership interest in Brigham Resources. The remaining outstanding membership interests of Brigham Resources remained with certain other entities affiliated with Warburg Pincus, Yorktown Partners LLC and Pine Brook Road Advisors, LP, Brigham Minerals’ management and its other investors (collectively, the “Original Owners”).

On November 20, 2018, Brigham Resources underwent a second series of restructuring transactions (the “November 2018 Restructuring”). In the November 2018 Restructuring, Brigham Resources became a wholly owned subsidiary of Brigham Minerals Holdings, LLC (“Brigham LLC”), which was a wholly owned subsidiary of Brigham Equity Holdings, LLC (“Brigham Equity Holdings”), and Brigham Equity Holdings became wholly owned by the owners of Brigham Resources immediately prior to such restructuring, directly or indirectly through Brigham Minerals. As a result of the foregoing transactions, there was no change in the control or economic interests of the Original Owners and Brigham Minerals in Brigham Resources, although their ownership became indirect through Brigham Equity Holdings and its wholly owned subsidiary, Brigham LLC. The July 2018 Restructuring and the November 2018 Restructuring are collectively referred to herein as the “2018 corporate reorganizations.”

~~Brigham Resources wholly~~ owns Brigham Minerals, LLC and Rearden Minerals, LLC (collectively, the “Minerals Subsidiaries”)~~, which~~. The Minerals Subsidiaries acquire and actively manage a portfolio of mineral and royalty ~~interests. The Minerals Subsidiaries are Brigham Resources’ sole material assets.~~interests in the core of what we view as the most active, highly economic, liquids-rich resource plays across the continental United States.

~~Initial Public Offering~~

~~In April 2019, Brigham Minerals completed the initial public offering (the "IPO")~~Our portfolio is comprised of 16,675,000 shares of Class A common stock at a price to the public of $18.00 per share. This resulted in net proceeds of approximately $273.4 million, after deducting underwriting commissions and discounts and offering expenses, which proceeds were used to repay $200.0 million of existing indebtedness and to fund mineral and royalty ~~acquisitions. As a result~~interests across six of the ~~IPO~~most highly economic, liquids-rich resource plays in the continental United States, including the Delaware and Midland Basins in the Permian Basin in West Texas and New Mexico, the SCOOP and STACK plays in the Anadarko Basin in Oklahoma, the Denver-Julesburg (“DJ”) Basin in Colorado and Wyoming and the ~~corporate restructuring described~~Williston Basin in ~~"Note 10—Temporary Equity", Brigham Minerals became~~North Dakota. Our highly technical approach towards mineral acquisitions in the geologic core of top-tier resource plays has purposefully led to a holding company whose sole material asset consisted of a 43.3% interest in Brigham LLC, which wholly owns Brigham Resources. Brigham Resources continues to wholly own the Minerals Subsidiaries, which own all of Brigham Resources’ operating assets. In connection with the IPO, Brigham Minerals became the sole managing member of Brigham LLC and is responsible for all operational, management and administrative decisions relating to Brigham LLC’s business and consolidates the financial results of Brigham LLC and its wholly owned subsidiary, Brigham Resources.

~~December 2019 Offering~~

On December 16, 2019, Brigham Minerals completed an offering of 12,650,000 shares of its Class A common stock (the "December 2019 Offering"), including 6,000,000 shares issued and sold by Brigham Minerals and an aggregate of 6,650,000 shares sold by certain shareholdersconcentrated portfolio covering 37 of the Company (the "Selling Shareholders"), of which 5,496,813 represents shares issued upon redemption of an equivalent number of their common units in Brigham LLC (the "Brigham LLC Units") (together with a corresponding number of shares of Class B common stock in Brigham Minerals), at a price to the public of $18.10 per share ($17.376 per share net of underwriting discounts and commissions). After deducting underwriting discounts, commissions and offering expenses, Brigham Minerals received net proceeds of approximately $102.7 million which were used to repay $80.0 million of existing indebtedness and to fund future mineral and royalty acquisitions. Brigham Minerals did not receive any proceeds from the sale of shares of Class A common stock by the Selling Shareholders.

~~June 2020 Secondary Offering~~

~~Table of Contents~~

~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

On June 12, 2020, Brigham Minerals completed an offering of 6,600,000 shares of its Class A common stock (the "June 2020 Secondary Offering"), all of which were sold by certain shareholders of the Company (the “June 2020 Selling Shareholders”), and 4,872,669 of which represented shares issued upon redemption of an equivalent number of the June 2020 Selling Shareholders’ Brigham LLC Units (together with a corresponding number of shares of Class B common stock in Brigham Minerals), at a price to the public of $13.75 per share. Brigham Minerals did not sell any shares of its common stockmost highly active counties for horizontal drilling in the ~~June 2020 Secondary Offering and did 0t receive any proceeds pursuant to the June 2020 Secondary Offering.~~

~~September 2020 Secondary Offering~~

On September 15, 2020, Brigham Minerals completed an offering of 5,021,140 shares of its Class A common stock, including 654,931 shares issued pursuant to the option granted to the underwriter to purchase additional shares to cover over-allotments (the "September 2020 Secondary Offering"), all of which were sold by certain shareholders of the Company (the "September 2020 Selling Shareholders"), and 3,062,011 of which represented shares issued upon redemption of an equivalent number of the September 2020 Selling Shareholders’ Brigham LLC Units (together with a corresponding number of shares of Class B common stock in Brigham Minerals), at a price to the public of $8.20 per share. Brigham Minerals did not sell any shares of its Class A common stock in the September 2020 Secondary Offering and did 0t receive any proceeds pursuant to the September 2020 Secondary Offering. In addition, in connection with the September 2020 Secondary Offering, Brigham Minerals repurchased 436,630 shares of its Class A common stock from the September 2020 Selling Shareholders in a privately negotiated transaction at a price equal to the price per share at which the underwriter purchased shares from the September 2020 Selling Shareholders in the September 2020 Secondary Offering (and Brigham LLC redeemed a corresponding number of Brigham LLC Units held by Brigham Minerals). The repurchased shares are presented in the Company's condensed consolidated balance sheet as Treasury Stock, at cost.

Following the completion of the September 2020 Secondary Offering and as of September 30, 2020, Brigham Minerals owned a 76.7% interest in Brigham LLC and the Original Owners owned 23.3% of the outstanding voting stock of Brigham Minerals. Certain other entities affiliated with Yorktown Partners LLC and Pine Brook Road Advisors, LP, which are a subset of the Company's Original Owners, collectively owned 17.0% of the outstanding voting stock of Brigham Minerals as of September 30, 2020.continental United States.

Basis of Presentation

Subsequent to the July 2018 Restructuring and prior to the IPO, Brigham Minerals used the equity method of accounting for its investment in Brigham Resources, its predecessor, because its 16.5% ownership in Brigham Resources provided Brigham Minerals with significant influence, but not with a controlling financial interest or the ability to direct the most significant activities of Brigham Resources. Upon the completion of the IPO, Brigham Minerals indirectly owned an approximate 43.3% interest of Brigham Resources and 100% of the voting rights and consolidated the results of operations of Brigham Resources. In order to furnish comparative financial information, the accompanying consolidated and combined financial statements and related notes of Brigham Minerals for periods prior to the IPO, including the 2019 amounts presented, have been retrospectively recast to include the combined historical financial information of both Brigham Resources (at historical carrying values) and Brigham Minerals, taking into account state and federal income taxes and liabilities associated with Brigham Minerals. All intercompany transactions between Brigham Minerals and Brigham Resources have been eliminated. Because Brigham Minerals acquired an interest in Brigham Resources as part of certain reorganization transactions in 2018, net income is attributable to stockholders of Brigham Minerals in addition to its predecessor beginning in 2018.

The accompanying unaudited condensed consolidated ~~and combined~~ interim financial statements of Brigham Minerals have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), except that, in accordance with the instructions to Form 10-Q, they do not include all of the notes required for financial statements prepared in conformity with U.S. GAAP. Accordingly, the accompanying unaudited interim financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February ~~28, 2020~~25, 2021 (the "Annual Report"). The unaudited interim financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair representation. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, ~~2020.~~2021. Brigham Minerals operates in 1 segment: oil and natural gas exploration and production.

~~Table~~As the primary beneficiary, Brigham Minerals consolidates the financial results of ~~Contents~~

~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~Brigham LLC and its subsidiaries and reports the interest related to the portion of the units in Brigham LLC not owned by Brigham Minerals as temporary equity at December 31, 2020 and as non-controlling interest at March 31, 2021 and thereafter, which will reduce net income attributable to the holders of Brigham Minerals' Class A common stock. For more information, see "Note 9—Temporary equity and Non-controlling interest.”

2.Summary of Significant Accounting Policies

Use of Estimates

These condensed consolidated ~~and combined~~ financial statements and related notes are presented in accordance with GAAP. Preparation in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the condensed consolidated ~~and combined~~ financial statements and accompanying notes. Although management believes these estimates are reasonable, actual results could differ from these estimates. Changes in estimates are recorded prospectively.

The accompanying condensed consolidated ~~and combined~~ financial statements are based on a number of significant estimates including quantities of oil, natural gas and NGL reserves that are the basis for the calculations of depreciation, depletion, amortization (“DD&A”) and impairment of oil and natural gas properties. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas and there are numerous uncertainties inherent in estimating quantities of proved oil and natural gas reserves. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. As a result, reserve estimates may differ from the quantities of oil and natural gas that

Table of Contents

BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

are ultimately recovered. Brigham Minerals’ year-end reserve estimates are audited by Cawley, Gillespie & Associates, Inc. ~~(“CG&A”)~~, an independent petroleum engineering firm. Quarterly reserve estimates are internally generated by our in-house engineering staff. Other items subject to significant estimates and assumptions include the carrying amount of oil and natural gas properties, ~~valuation of derivative instruments,~~ share-based compensation costs, and revenue accruals.

Significant Accounting Policies

Significant accounting policies are disclosed in Brigham Minerals' audited consolidated and combined financial statements and notes for the year ended December 31, ~~2019,~~2020, presented in the Annual Report. There have been no changes in such policies or the application of such policies during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

~~Recently Adopted Accounting Standards~~

Restricted cash includes cash that is contractually restricted for its use through an agreement with a non-related party. On December 31, 2019, the Company adopted ASU 2016-18, Statement of Cash Flows, which amends ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The ASU requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows.

The adoption resulted in a decrease in reported investing cash flow of $33,000 for the nine months ended September 30, 2019. The September 30, 2019 accompanying statement of cash flow that was adjusted as a result of adoption of ASU 2016-18 is summarized below:

Nine Months Ended September 30, 2019
(In thousands) As reported As adjusted
Changes in restricted cash held in escrow for acquisitions $ 33 $ 0
Net cash used in investing activities $ (179,850) $ (179,883)
Decrease in cash, cash equivalents and restricted cash (6,137) (6,170)
Cash, cash equivalents and restricted cash, beginning of period $ 31,985 $ 32,018

~~Accounts Receivables~~Non-Controlling Interest

As of ~~September~~February 19, 2021 and thereafter, the holders of Class B common stock no longer control a majority of the votes of the Company's board of directors (the "Board of Directors") through direct representation on the Board of Directors, and no longer control the determination of whether to make a cash payment upon each holder of Brigham LLC Unit's (each a "Brigham LLC Unit Holder") exercise of its Redemption Right (as hereinafter defined). As such, at June 30, 2021, Brigham Minerals accounts for Brigham LLC Unit Holders' 20.5% interest in Brigham LLC not owned by Brigham Minerals as non-controlling interest. For further discussion, see “Note 9—Temporary equity and Non-controlling interest.”

Accounts Receivable

Brigham Minerals routinely reviews outstanding balances, assesses the financial strength of its operators and records a reserve for amounts not expected to be fully recovered. We calculate bad debt expense using the allowance method. We did 0t record bad debt expense for the three and six months ended June 30, 2021. We recorded bad debt expense of $0.1 million and $0.3 million for the three and six months ended June 30, 2020, respectively, which was included in general and administrative expenses.

As of June 30, 2021 and December 31, ~~2019,~~2020, accounts ~~receivables~~receivable was comprised of the following:

~~Table of Contents~~

~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	June 30, 2021		December 31, 2020
Accounts receivables
Accounts receivable						Accounts receivable
Oil and gas sales	Oil and gas sales	$	17,727	$	27,888	Oil and gas sales	$	24,998	$	17,413
Reserve for bad debt	Reserve for bad debt	(855)		(556)		Reserve for bad debt	(770)		(855)
Other	Other	2,808		2,959		Other	1,444		1,074
Total accounts receivables		$	19,680	$	30,291
Total accounts receivable						Total accounts receivable	$	25,672	$	17,632

Concentration of Credit Risk and Significant Customers

Financial instruments that potentially subject Brigham Minerals to concentrations of credit risk consist of cash, accounts receivable, ~~commodity derivative financial instruments~~ and its revolving credit facility. Cash and cash equivalents are held in a few financial institutions in amounts that may, at times, exceed federally insured limits. However, no losses have been incurred and management believes that counterparty risks are minimal based on the reputation and history of the institutions selected. Accounts receivable are concentrated among operators and purchasers engaged in the energy industry within the United States. Management periodically assesses the financial condition of these entities and institutions and considers any possible credit risk to be minimal. Concentrations of oil and gas sales to significant customers (operators) are presented in the table below.

Three Months Ended September 30, Nine Months Ended September 30,
Customer (Operator) Name 2020 2019 2020 2019
Continental Resources Inc 12 % 12 % 9 % 10 %
Occidental Petroleum Corp 11 % 14 % 13 % 18 %
Exxon Mobil Corp 10 % 15 % 9 % 8 %
Royal Dutch Shell PLC 9 % 1 % 13 % 1 %

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(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
Customer (Operator) Name	2021		2020		2021		2020
Exxon Mobil Corp	14	%	12	%	15	%	9	%
Occidental Petroleum Corp	12	%	15	%	12	%	14	%
Continental Resources Inc.	10	%	6	%	10	%	8	%
Royal Dutch Shell PLC	7	%	10	%	8	%	14	%

Management does not believe that the loss of any customer would have a long-term material adverse effect on our financial position or the results of operations. For the three and ~~nine~~six months ended ~~September~~June 30, 2021, we received revenues from over 130 operators with approximately 67% of revenues coming from the top ten operators on our properties. For the three and six months ended June 30, 2020, we received revenues from over 150 operators with approximately 64% and 63%, respectively, of revenues ~~for both periods~~ coming from the top ten operators on our properties.

Recently Issued Accounting Standards Not Yet Adopted

Brigham Minerals’ status as an emerging growth company ("EGC") under Section 107 of the Jumpstart Our Business Startups Act of 2012 permits it to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Brigham Minerals ~~is choosing~~originally chose to take advantage of this extended transition ~~period~~period. Brigham Minerals will become a large accelerated filer as of December 31, 2021 and ascease to be an EGC. As a result, Brigham Minerals will ~~comply with~~be required to accelerate the adoption of new or revised accounting standards as indicated on the ~~relevant~~ dates ~~on which adoption of such standards is required for private companies.~~below.

In February 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016-02, Leases, which requires all leasing arrangements to be presented in the balance sheet as liabilities along with a corresponding asset. ASU 2016-02 does not apply to leases of mineral rights to explore for or use crude oil and natural gas. The ASU will replace most existing lease guidance in GAAP when it becomes effective. In January 2018, the FASB issued ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842, to provide an optional practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases under Topic 840. In July 2018, the FASB issued ASU 2018-11 Leases (Topic 842): Targeted Improvements, which provides for another transition method, in addition to the existing transition method, by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption (i.e. comparative periods presented in the financial statements will continue to be in accordance with current GAAP (Topic 840, Leases)). The new standard becomes effective for us during the fiscal year ending December 31, ~~2022~~2021 and ~~interim periods within~~we will use January 1, 2021, the ~~fiscal year ending December 31, 2023 and early~~beginning of the period of adoption, ~~is permitted.~~as the date of initial application. We are ~~currently~~ evaluating the ~~impact that the adoption~~provisions of this accounting standards update and finalizing the impact it will have on our consolidated statement of operations, consolidated balance sheets and financial disclosures. While we have yet to finalize the impact this standards update will have on our ~~condensed~~ consolidated ~~and combined~~ financial statements, the adoption will increase our recorded assets and liabilities related ~~disclosures.~~to our leases.

~~Table~~We will adopt ASU 206-02 using a modified retrospective approach and will recognize a right of ~~Contents~~use asset and lease liability on the date of initial application. We are applying the following practical expedients as provided in the standards update:

~~BRIGHAM MINERALS, INC.~~• an election to not apply the recognition requirements in the new standards update to short-term leases (a lease that at commencement date has a lease term of twelve months or less and does not contain a purchase option); and

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~• a package of practical expedients to not reassess whether a contract contains a lease, lease classification and initial direct costs; and

~~(Unaudited)~~• a practical expedient to not reassess certain land easements in existence prior to January 1, 2021.

We have not yet determined the extent of the adjustments that will be required upon implementation of this new standards update.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. In May 2019, ASU 2016-13 was subsequently amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. ASU 2016-13, as amended, affects trade receivables, financial assets and certain other instruments that are not measured at fair value through net income. This ASU will replace the currently required incurred loss approach with an expected loss model for instruments measured at amortized ~~cost and is~~cost.

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(Unaudited)

The new standard becomes effective for ~~financial statements issued for~~us during the fiscal ~~years beginning after~~year ending December ~~15, 2022, including~~31, 2021 and interim periods within ~~those~~the fiscal ~~years.~~year ending December 31, 2022. ASU 2016-13 will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. WeAlthough we are ~~currently~~still evaluating the impact, ~~that the adoption of this update will have on our condensed consolidated and combined financial statements and related disclosures.~~we do not expect it to be material.

3.Oil and Gas Properties

Brigham Minerals uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition costs incurred for the purpose of acquiring mineral and royalty interests ~~including certain internal costs,~~ are capitalized into a full cost pool. ~~Costs associated with~~In addition, certain internal costs (or "capitalized general and administrative costs"), are also included in the full cost pool. Capitalized general and administrative costs were $3.0 million and $2.6 million for the three months ended June 30, 2021 and 2020, respectively, and $5.7 million and $5.0 million for the six months ended June 30, 2021 and 2020, respectively. Capitalized costs do not include any costs related to general corporate overhead or similar activities, which are expensed in the period incurred. Oil and gas properties as of the dates shown consisted of the following:


(In thousands)	(In thousands)	September 30, 2020		December 31, 2019		(In thousands)	June 30, 2021		December 31, 2020
Oil and gas properties, at cost, using the full cost method of accounting:	Oil and gas properties, at cost, using the full cost method of accounting:					Oil and gas properties, at cost, using the full cost method of accounting:
Unevaluated property	Unevaluated property	$	318,693	$	291,664	Unevaluated property	$	333,082	$	325,091
Evaluated property	Evaluated property	472,687		449,061		Evaluated property	520,082		488,301
Total oil and gas properties, at cost	Total oil and gas properties, at cost	791,380		740,725		Total oil and gas properties, at cost	853,164		813,392
Less accumulated depreciation, depletion, and amortization	Less accumulated depreciation, depletion, and amortization	(116,532)		(61,103)		Less accumulated depreciation, depletion, and amortization	(207,875)		(189,546)
Total oil and gas properties, net	Total oil and gas properties, net	$	674,848	$	679,622	Total oil and gas properties, net	$	645,289	$	623,846

Capitalized costs are depleted on a unit of production basis based on proved oil and natural gas reserves. Depletion expense was ~~$11.6~~$9.0 million and ~~$8.3~~$11.1 million for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$35.0~~$18.3 million and ~~$19.9~~$23.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Average depletion of proved properties was ~~$13.58~~$11.03 per Boe and ~~$11.49~~$13.74 per Boe for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$13.40 per Boe~~$11.30 and ~~$10.91 per Boe~~$13.31 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019, respectively.~~

The costs associated with unevaluated properties primarily consist of acquisition costs and capitalized general and administrative costs. Under the full cost method of accounting, Brigham Minerals capitalizes certain overhead expenses and other internal costs attributable to the acquisition of mineral and royalty interests as part of its investment in oil and gas properties over the periods benefitted by these activities. Capitalized costs do not include any costs related to general corporate overhead or similar activities. Capitalized costs were $2.6 million and $2.3 million for the three months ended September 30, 2020, ~~and 2019, respectively, and $7.6 million and $5.0 million for the nine months ended September 30, 2020 and 2019,~~ respectively.

Under the full cost method of accounting, total capitalized costs of oil and natural gas properties, net of accumulated depletion and related deferred income taxes, may not exceed an amount equal to the present value of future net revenues from proved reserves, discounted at 10% per annum ("PV-10"), plus the cost of unevaluated properties, ~~(full cost ceiling limitation)~~less related income tax effects (the "ceiling test"). A write-down of the carrying value of the full cost pool ("impairment charge") is a noncash charge that reduces earnings and impacts equity in the period of occurrence and typically results in lower depletion expense in future periods. A ceiling ~~limitation~~test is calculated at each reporting period. The ceiling ~~limitation~~test calculation is prepared using an unweighted arithmetic average of oil ~~price~~prices ("SEC oil price") and natural gas ~~price~~prices ("SEC gas price") as of the first day of each month for the trailing 12-month period ended, ~~September 30, 2020,~~adjusted by area for energy content, transportation fees and regional price differentials, as required under the guidelines established by the SEC. As of ~~September~~June 30, 2021 and June 30, 2020, the SEC oil price and SEC gas price used in the calculation of the ceiling test ~~was $43.55~~were $49.78 and $47.13, respectively, per barrel of oil, and ~~$1.98~~$2.47 and $2.08, respectively, per ~~MMbtu~~MMBtu of natural ~~gas, respectively. Using these prices, the net book value of oil and natural gas properties exceeded the ceiling limitation resulting in an~~gas. There were 0 impairment ~~charge of $18.9 million to oil and gas properties, net~~charges during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020. There was 0 impairment charge during the three~~2021 and ~~nine months ended September 30, 2019.~~2020.

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~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~Based on the~~A decline ~~subsequent to September 30, 2020~~ in the ~~unweighted arithmetic average~~ SEC oil ~~prices used~~price or the SEC gas price could lead to impairment charges in the ~~full cost ceiling test, an additional~~future and such impairment ~~charge may~~charges could be ~~necessary~~material, such as occurred in the third and fourth ~~quarter~~quarters of ~~2020 and such amount could be material.~~2020. In addition to the impact of lower prices, any future changes ~~in the fourth quarter of 2020~~ to assumptions of drilling and completion activity, development timing, acquisitions or divestitures of oil and gas properties, proved undeveloped locations, and production and other estimates may require revisions to estimates of total proved reserves which would impact the amount of any impairment charge.

During the three months ended September 30, 2020, Brigham Minerals reduced its proved undeveloped reserves by 228 Mboe primarily due to conversion from proved undeveloped reserves to proved developed reserves within the quarter as well as the 8% reduction in SEC oil pricing over the quarter. During the nine months ended September 30, 2020, Brigham Minerals reduced its proved undeveloped reserves by 5,279 Mboe primarily as a result of a 22% reduction in SEC oil prices over the period, conversion from proved undeveloped reserves to proved developed reserves and a decrease in rig activity. The reduction in rig activity led to changes in the development timing and a reduction of the number of proved undeveloped locations that Brigham Minerals expects will be developed within five years after the date of booking.

4. Acquisitions

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(Unaudited)

~~4. Acquisitions and Divestitures~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, Brigham Minerals entered into a number of acquisitions of mineral and royalty interests from various sellers in Texas, Oklahoma, Colorado, New Mexico, and North Dakota, as reflected in the tables below. The change in the oil and natural gas property balance is comprised of payments for acquisitions of minerals, land brokerage costs and capitalized general and administrative expenses that for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 were funded with ~~proceeds from the December 2019 Offering~~our retained operating cash flow and our revolving credit facility (as ~~defined below)~~hereinafter defined). The changes in the oil and natural gas property balance for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 were partially funded with proceeds from the ~~Owl Rock credit facility (as defined below), our revolving credit facility, and the IPO.~~

Oil and Gas Properties Acquired Cash Consideration Paid
(In thousands) Evaluated Unevaluated
Quarter Ended March 31, 2020 $ 9,471 $ 15,947 $ 25,418
Quarter Ended June 30, 2020 805 2,493 3,298
Quarter Ended September 30, 2020 6,881 10,499 17,380
Total $ 17,157 $ 28,939 $ 46,096

Oil and Gas Properties Acquired Cash Consideration Paid
(In thousands) Evaluated Unevaluated
Quarter Ended March 31, 2019 $ 27,929 $ 13,403 $ 41,332
Quarter Ended June 30, 2019 25,050 14,925 39,975
Quarter Ended September 30, 2019 63,787 35,251 99,038
Total $ 116,766 $ 63,579 $ 180,345
December 2019 Offering.


	Oil and Gas Properties Acquired				Cash Consideration Paid
(In thousands)	Evaluated		Unevaluated
Quarter Ended March 31, 2021	$	9,073	$	12,776	$	21,849
Quarter Ended June 30, 2021	$	8,842	$	5,594	$	14,436
	$	17,915	$	18,370	$	36,285


	Oil and Gas Properties Acquired				Cash Consideration Paid
(In thousands)	Evaluated		Unevaluated
Quarter Ended March 31, 2020	$	9,471	$	15,947	$	25,418
Quarter Ended June 30, 2020	$	805	$	2,493	$	3,298
Total	$	10,276	$	18,440	$	28,716

5. Revenue ~~from contracts with customers~~From Contracts With Customers

Contract Balances

Oil, natural gas and ~~NGLs~~NGL sales revenues are recognized when control of the product is transferred to the customer, the performance obligations under the terms of the contracts with customers are satisfied and collectability is reasonably assured. Lease bonus and other revenues are recognized when the lease agreement has been executed, payment has been received, and the Company has no further obligation to refund the payment. All of the Company's oil, natural gas and NGL sales are made under contracts with customers (operators). The performance obligations for the Company's contracts with customers are satisfied at a point in time through the delivery of oil and natural gas to its customers. Accordingly, the Company’s contracts do not give rise to contract assets or liabilities. As of ~~September~~June 30, ~~2020,~~2021, accounts receivable from oil and gas sales of ~~$17.7~~$25.0 million represent rights to payment for which Brigham Minerals has satisfied its obligations under contracts with customers.

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~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Prior-period performance obligations

~~As a non-operator,~~Given we do not operate our properties, Brigham Minerals has limited visibility into the timing of when new wells start producing and is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. The amount of production delivered to the purchaser is estimated on the basis of state-reported production data or production statements from operators. The difference between the Company’s estimates and the actual amounts received for oil and natural gas sales is recorded in the month that payment is received from the third party. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, revenue recognized in the reporting periods related to performance obligations satisfied in prior reporting periods was immaterial.

Allocation of transaction price to remaining performance obligations

Brigham Minerals’ right to royalty income does not originate until production occurs and, therefore, is not considered to exist beyond each day’s production. Brigham Minerals does not recognize lease bonus or other income until a lease agreement has been executed, at which point its performance obligation has been satisfied, and payment is received. Accordingly, there are no remaining performance obligations under any of our royalty income or lease bonus contracts.

6. ~~Derivative Instruments~~Fair Value Measurements

~~Brigham Minerals periodically uses commodity derivative instruments to reduce its exposure to commodity price volatility for a portion~~

Table of its forecasted crude oil and natural gas sales and thereby achieve a more predictable level of cash flows. None of the derivative instruments are designated as hedges. Brigham Minerals does not enter into derivative instruments for speculative or trading purposes.Contents

Because the counterparties to Brigham Minerals derivative instruments have investment grade credit ratings, Brigham Minerals believes it does not have significant credit risk and does not anticipate nonperformance from its counterparties. Brigham Minerals continually monitors the credit ratings of its counterparties.BRIGHAM MINERALS, INC.

Concurrent with the termination of its prior revolving credit facility in July 2018, Brigham Resources posted cash collateral of $1.4 million for its existing WTI fixed price swap contracts. The cash collateral was $1.6 million in May 2019 prior to the termination of the Owl Rock credit facility and was returned to Brigham Resources upon entering into the revolving credit facility. See "Note 8—Long-Term Debt."NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Brigham Minerals had no derivative contracts in place as of September 30, 2020 and December 31, 2019. Prior to December 31, 2019, we had certain oil swap contracts based on the NYMEX futures index.~~

The following table summarizes Brigham Minerals' gain (loss) on derivative instruments, net on its condensed consolidated and combined statement of operations for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2020 2019 2020 2019
Realized gain $ 0 $ 119 $ 0 $ 356
Unrealized gain (loss) 0 (28) 0 (877)
Combined - realized/unrealized gain (loss) $ 0 $ 91 $ 0 $ (521)

(Unaudited)

~~7. Fair Value Measurements~~

We classify financial assets and liabilities that are measured and reported at fair value on a recurring basis using a hierarchy based on the inputs used in measuring fair value. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We classify the inputs used to measure fair value into the following hierarchy:

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~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

• Level 1: Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.

• Level 2: Inputs based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable and can be corroborated by observable market data.

• Level 3: Inputs that reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer would be reported at the beginning of the period in which the change occurs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We had no financial assets and liabilities that were accounted for at fair value on a recurring basis at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~

Brigham Minerals had no derivative contracts in place as of September 30, 2020 and December 31, 2019 as disclosed in "Note 6��Derivative Instruments." Commodity derivative instruments are valued using a third-party industry-standard pricing model using contract terms and prices and assumptions and inputs that are substantially observable in active markets throughout the full term of the instruments, including forward oil and gas price curves, discount rates and volatility factors. The fair values are also compared to the values provided by the counterparties for reasonableness and are adjusted for the counterparties’ credit quality for derivative assets and our credit quality for derivative liabilities. As such, these derivative contracts are classified within Level 2.2020.

Brigham Minerals had no transfers into or out of Level 1 and no transfers into or out of Level 2 for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~September~~June 30, ~~2019.~~2020.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Certain non-financial assets and liabilities, such as assets and liabilities acquired in a business combination, are measured at fair value on a nonrecurring basis on the acquisition date and are subject to fair value adjustments under certain circumstances. The inputs used to determine such fair value are primarily based upon internally developed cash flow models and include factors such as estimates of economic reserves, future commodity prices and a risk-adjusted discount rates, and are classified within Level 3.

Fair Value of Other Financial Instruments

The carrying value of cash, trade and other receivables and trade payables are considered to be representative of their respective fair values due to the short-term nature of these instruments. The carrying amount of debt outstanding pursuant to our revolving credit facility approximates fair value as interest rates on the revolving credit facility approximate current market rates. We categorized our long-term debt within Level 2 of the fair value hierarchy.

8.7. Long-Term Debt

~~Owl Rock Credit Facility~~

On July 27, 2018, Brigham Resources entered into a credit facility (the “Owl Rock credit facility”) with Owl Rock Capital Corporation as administrative agent and collateral agent. Brigham Resources used the proceeds from the Owl Rock credit facility to repay the outstanding $70 million of principal under its prior revolving credit facility and to fund mineral and royalty acquisitions. The Owl Rock credit facility was subject to customary fees, guarantees of subsidiaries, restrictions and covenants, including certain restricted payments, and was collateralized by certain oil and natural gas properties of Brigham Resources. The Owl Rock credit facility provided for a $125 million initial term loan, a $75 million delayed draw term loan and a $10 million revolving credit facility, bore interest at a rate per annum equal to, at Brigham Resources’ option, (a) the base rate plus 4.50%, or

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~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

(b) the adjusted LIBOR rate for such interest period (subject to a 1.00% floor) plus 5.50%, matured on July 27, 2024 and required Brigham Resources to maintain compliance with certain financial and collateral coverage ratios.

On May 7, 2019, the Owl Rock credit facility was terminated and the outstanding balance of $200.0 million was fully repaid using the proceeds generated from the IPO. As a result of the debt repayment, Brigham Minerals recognized a loss on extinguishment of debt of $6.9 million, which consisted of a $4.0 million write-off of capitalized debt issuance costs, a $2.1 million prepayment fee and legal fees of $0.8 million.

Revolving Credit Facility

On May 16, 2019, Brigham Resources, LLC, a wholly-owned subsidiary of Brigham LLC ("Brigham Resources"), entered into a credit agreement with Wells Fargo Bank, N.A., as administrative agent (the "Administrative Agent") for the various lenders from time to time party thereto, providing for a revolving credit facility (our “revolving credit facility”). Our revolving credit facility is guaranteed by Brigham Resources’ domestic subsidiaries and is collateralized by a lien on ~~substantially all~~a substantial portion of Brigham Resources and its domestic subsidiaries’ assets, including ~~substantially all~~a substantial portion of their respective royalty and mineral properties.

Availability under our revolving credit facility is governed by a borrowing base, which is subject to redetermination ~~semi-annually in May and November of each year.~~semi-annually. In addition, lenders holding two-thirds of the aggregate commitments may request one additional redetermination each year. Brigham Resources can also request one additional redetermination each year, and such other redeterminations as appropriate when significant acquisition opportunities arise. The borrowing base is subject to further adjustments for asset

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

dispositions, material title deficiencies, certain terminations of hedge agreements and issuances of permitted additional indebtedness. Increases to the borrowing base require unanimous approval of the lenders, while decreases only require approval of lenders holding two-thirds of the aggregate commitments at such time. ~~We fully repaid~~The weighted average interest rate for the ~~$80.0 million of outstanding borrowings under our revolving credit facility in December 2019 using a portion of the net proceeds from the December 2019 Offering.~~three and six months ended June 30, 2021 was 1.98% and 1.95%, respectively. As of ~~September~~June 30, ~~2020,~~2021, the elected borrowing base on our revolving credit facility was $135.0 million, with outstanding borrowings of ~~$5.0~~$43.0 million, resulting in ~~$130.0~~$92.0 million ~~availability~~available for future borrowings.

Our revolving credit facility matures on May 16, 2024. Loans drawn under our revolving credit facility may be prepaid at any time without premium or penalty (other than customary LIBOR breakage) and must be prepaid in the event that exposure exceeds the lesser of the borrowing base and the elected availability at such time. The principal amount of loans that are prepaid are required to be accompanied by accrued and unpaid interest and fees on such amounts. Loans that are prepaid may be reborrowed. In addition, Brigham Resources may permanently reduce or terminate in full the commitments under our revolving credit facility prior to maturity. Any excess exposure resulting from such permanent reduction or termination must be prepaid. Upon the occurrence of an event of default under our revolving credit facility, the ~~administrative agent~~Administrative Agent acting at the direction of the lenders holding a majority of the aggregate commitments at such time may accelerate outstanding loans and terminate all commitments under our revolving credit facility, provided that such acceleration and termination occurs automatically upon the occurrence of a bankruptcy or insolvency event of default.

Our revolving credit facility contains customary affirmative and negative covenants, including, without limitation, reporting obligations, restrictions on asset sales, restrictions on additional debt and lien incurrence and restrictions on making distributions (subject only to no default or borrowing base deficiency) and investments. In addition, our revolving credit facility requires us to maintain (a) a current ratio of not less than 1.00 to 1.00 and (b) a ratio of total net funded debt to consolidated EBITDA of not more than 4.00 to 1.00. As of ~~September~~June 30, ~~2020,~~2021, we were in compliance with all covenants in accordance with our revolving credit facility.

On July 7, 2021, the borrowing base and elected commitments on our revolving credit facility were increased from $135.0 million to $165.0 million and additional affirmative, negative and financial maintenance covenants were included. For more information, see "Note 14—Subsequent Events."

~~9. Shareholders'~~8. Equity

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~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Class A Common Stock

Brigham Minerals had approximately ~~43.3~~45.1 million shares of its Class A common stock outstanding as of ~~September~~June 30, ~~2020.~~2021. Holders of Class A common stock are entitled to 1 vote per share on all matters to be voted upon by the ~~stockholders~~shareholders and are entitled to ratably receive dividends when and if declared by the Company’s ~~board~~Board of ~~directors.~~Directors. Upon liquidation, dissolution, distribution of assets or other winding up, the holders of Class A common stock are entitled to receive ratably the assets available for distribution to the ~~stockholders~~shareholders after payment of liabilities.

Class B Common Stock

Brigham Minerals had approximately ~~13.2~~11.7 million shares of its Class B common stock outstanding as of ~~September~~June 30, ~~2020.~~2021. Holders of the Class B common stock are entitled to 1 vote per share on all matters to be voted upon by the ~~stockholders.~~shareholders. Holders of Class A common stock and Class B common stock generally vote together as a single class on all matters presented to Brigham Minerals’ ~~stockholders~~shareholders for their vote or approval. Holders of Class B common stock do not have any right to receive dividends or distributions upon a liquidation or winding up of Brigham Minerals.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Treasury Stock

Brigham Minerals repurchased 436,630 shares of its Class A common stock from the September 2020 Selling Shareholders at a price of $8.08 per share (and Brigham LLC redeemed a corresponding number of Brigham LLC Units held by Brigham Minerals). See "Note 1—Business and Basis of Presentation." As of ~~September~~June 30, ~~2020,~~2021, there were 436,630 shares of Class A common stock held in treasury.

Earnings per Share

Basic earnings per share (“EPS”) measures the performance of an entity over the reporting period. Diluted earnings per share measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. Brigham Minerals uses the “if-converted” method to determine the potential dilutive effect of exchanges of outstanding shares of Class B common stock (and corresponding units of Brigham LLC ~~Units)~~("Brigham LLC Units")), and the treasury stock method to determine the potential dilutive effect of vesting of its outstanding RSAs, RSUs, PSUs ~~and unvested Incentive Units~~ (each as defined in "Note ~~11—~~10—Share-Based Compensation"). and unvested Incentive Units. Brigham Minerals does not use the two-class method because the Class B common stock and the unvested share-based awards are nonparticipating securities. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Incentive Units, ~~RSUs,~~ RSAs, and shares of Class B common stock were not recognized in dilutive EPS calculations as the effects would have been antidilutive. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the Incentive Units, RSUs, RSAs and shares of Class B common stock were not recognized in dilutive EPS calculations as the effect would have been antidilutive. ~~For the nine months ended September 30, 2019, the RSAs were not recognized in dilutive EPS calculations as the effect would have been antidilutive.~~ As of ~~September~~June 30, 2020, there were 1,187,811 shares related to PSUs (based on target), that could vest in the future dependent on predetermined ~~performance goals.~~market condition. These units were not included in the computation of EPS for the three and ~~nine~~six months ended ~~September~~June 30, 2020, because the performance goals had not been met, assuming the end of the reporting period was the end of the contingency period.

For the nine months ended September 30, 2019, Brigham Minerals' EPS calculation includes only its share of net income for the period subsequent to the IPO, and omits income or loss prior to the IPO. In addition, the basic weighted average shares outstanding calculation is based on the actual days in which the shares were outstanding from the IPO through September 30, 2019. The following table reflects the allocation of net income to common shareholders and EPS computations for the period indicated based on a weighted average number of common stock outstanding for the period:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands, except per share data)	2021		2020		2021		2020
Basic EPS
Numerator:
Basic net income (loss) attributable to Brigham Minerals, Inc. shareholders	$	11,188	$	(4,050)	$	19,784	$	656
Denominator:
Basic weighted average shares outstanding	43,916		35,282		43,717		34,631
Basic EPS attributable to Brigham Minerals, Inc. shareholders	$	0.25	$	(0.11)	$	0.45	$	0.02

Diluted EPS
Numerator:
Basic net income (loss) attributable to Brigham Minerals, Inc. shareholders	$	11,188	$	(4,050)	$	19,784	$	656
Effects of dilutive securities	0		0		0		0

Diluted net income (loss) attributable to Brigham Minerals, Inc. shareholders	$	11,188	$	(4,050)	$	19,784	$	656
Denominator:
Basic weighted average shares outstanding	43,916		35,282		43,717		34,631
Effects of dilutive securities:

Unvested PSUs	1,107		0		1,023		0
Unvested RSUs	258		0		351		0
Diluted weighted average shares outstanding	45,281		35,282		45,091		34,631

Diluted EPS attributable to Brigham Minerals, Inc. shareholders	$	0.25	$	(0.11)	$	0.44	$	0.02

9. Temporary equity and Non-controlling interest

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BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED ~~AND COMBINED~~ FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share data) 2020 2019 2020 2019
Basic EPS
Numerator:
Basic net (loss) income attributable to Brigham Minerals, Inc. shareholders $ (9,465) $ 3,146 $ (8,809) $ 1,824
Less: net income attributable to Brigham Minerals, Inc. shareholders pre-IPO 0 0 0 (848)
Basic net (loss) income attributable to Brigham Minerals, Inc. shareholders post-IPO $ (9,465) $ 3,146 $ (8,809) $ 976
Denominator:
Basic weighted average shares outstanding 40,124 21,838 36,475 13,299
Basic EPS attributable to Brigham Minerals, Inc. shareholders $ (0.24) $ 0.14 $ (0.24) $ 0.07
Diluted EPS
Numerator:
Basic net (loss) income attributable to Brigham Minerals, Inc. shareholders $ (9,465) $ 3,146 $ (8,809) $ 976
Effects of dilutive securities:
Effect of time-based restricted stock awards 0 0 0 0
Diluted net (loss) income attributable to Brigham Minerals, Inc. shareholders $ (9,465) $ 3,146 $ (8,809) $ 976
Denominator:
Basic weighted average shares outstanding 40,124 21,838 36,475 13,299
Effects of dilutive securities:
Time-based restricted stock awards 0 88 0 47
Diluted weighted average shares outstanding 40,124 21,926 36,475 13,346
Diluted EPS attributable to Brigham Minerals, Inc. shareholders $ (0.24) $ 0.14 $ (0.24) $ 0.07

~~10.~~ Temporary ~~Equity~~equity

Temporary equity ~~represents~~represented the ~~Original Owners' 23.3% ownership~~23.2% interest in the units of Brigham LLC not owned by Brigham Minerals, as of ~~September~~December 31, 2020. Class B common stock was classified as temporary equity in the condensed consolidated balance sheet as of December 31, 2020, as pursuant to the Amended and Restated Limited Liability Company Agreement of Brigham LLC (the "Brigham LLC Agreement"), the Redemption Rights of a Brigham LLC Unit Holder for either shares of Class A common stock or an equivalent amount of cash was not solely within Brigham Minerals' control. This was due to the fact that the holders of Class B common stock controlled a majority of the votes of the Board of Directors through direct representation on the Board of Directors, which allowed the holders of Class B common stock to control the determination of whether to make a cash payment upon a Brigham LLC Unit Holder's exercise of its Redemption Right.

As a result of the appointment of an additional independent member to our Board of Directors on February 19, 2021, the holders of Class B common stock no longer hold a majority of the votes of the Board of Directors and no longer control the Board of Directors through direct representation on the Board of Directors. Consequently, after February 19, 2021, Class B common stock is presented as non-controlling interest (as discussed below) in the condensed consolidated balance sheet of Brigham Minerals.

Temporary equity was recorded at the greater of the carrying value or redemption amount with a corresponding adjustment to additional paid-in capital. For the period from January 1, 2021 to February 18, 2021, Brigham Minerals recorded adjustments to the value of temporary equity as presented in the table below:


(In thousands)	Temporary Equity Adjustments
Balance - December 31, 2020 (1)	$	146,280
Net income attributable to temporary equity	1,922
Adjustment of temporary equity to redemption value	54,294
Reclassification to non-controlling interest (2)	$	(202,496)
Balance - February 18, 2021	$	0

(1)Based on 13,167,687 shares of Class B common stock outstanding and Class A common stock 10-day volume-weighted average closing price of $11.11 at December 31, 2020.

(2)Based on 13,167,687 shares of Class B common stock outstanding and Class A common stock 10-day volume-weighted average closing price of $15.38 at February 18, 2021. The February 18, 2021 redemption value of temporary equity became the carrying value of non-controlling interest, as discussed below.

Non-controlling Interest

Non-controlling interest represents the 20.5% interest in the units of Brigham LLC not owned by Brigham Minerals, as of June 30, ~~2020.~~ 2021. Class B common stock is classified as non-controlling interest in the condensed consolidated balance sheet as of February 19, 2021 and thereafter.

Each share of Class B common stock does not have any economic rights but entitles its holder to 1 vote on all matters to be voted on by our ~~stockholders~~shareholders generally, and holders of Brigham LLC Units (and Class B common stock) have a redemption right into shares of Class A common stock. ~~As discussed below, following~~Under the ~~IPO:~~

•~~Each holder of~~ Brigham LLC ~~Units (each a "Brigham Unit Holder") other than~~Agreement, each Brigham ~~Minerals and its subsidiaries, received a number of shares of Class B common stock equal to the number of Brigham~~ LLC ~~Units held by such Brigham Unit Holder following the IPO;~~

•Brigham Minerals contributed, directly or indirectly, the net proceeds of the IPO to Brigham LLC in exchange for an additional number of Brigham LLC Units such that Brigham Minerals held, directly or indirectly, a total number of Brigham LLC Units equal to the number of shares of Class A common stock outstanding following the IPO; and

•~~Under the Amended and Restated Limited Liability Company Agreement of Brigham LLC (the "Brigham LLC Agreement"), each Brigham~~ Unit Holder, subject to certain limitations, has a right (the "Redemption Right") to cause Brigham LLC to acquire all or a portion of its Brigham LLC Units for, at Brigham LLC’s election, (i) shares of our Class

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~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

A common stock at a redemption ratio of 1 share of Class A common stock for each Brigham LLC Unit redeemed, subject to conversion rate adjustments for stock splits, stock dividends and reclassification and other similar transactions or (ii) an equivalent amount of cash. We will determine whether to issue shares of Class A common stock or cash based on facts in existence at the time of the decision, which we expect would include the relative value of the Class A common stock (including trading prices for the Class A common stock at the time), the cash purchase price, the availability of other sources of liquidity (such as an issuance of preferred stock) to acquire the Brigham LLC Units and alternative uses for such cash. Alternatively, upon the exercise of the Redemption Right, Brigham Minerals (instead of Brigham LLC) will have a call right to, for administrative convenience, acquire each tendered Brigham LLC Unit directly from the redeeming Brigham LLC Unit Holder for, at its election, (x) 1 share of Class A common stock or (y) an equivalent amount of cash (the "Call Right"). The decision to make a cash payment upon a Brigham LLC Unit Holder's exercise of its Redemption Right is required to be made by

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BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

the Company's directors who are independent under Section 10A-3 of the Securities Act and do not hold any Brigham LLC Units subject to such redemption. In connection with any redemption of Brigham LLC Units pursuant to the Redemption Right or acquisition pursuant to our Call Right, the corresponding number of shares of Class B common stock will be cancelled.

~~Class B common stock~~Non-controlling interest is classified as temporary equity in the condensed consolidated balance sheet as, pursuant to the Brigham LLC Agreement, the Redemption Rights of each Brigham Unit Holder for either shares of Class A common stock or an equivalent amount of cash is not solely within Brigham Minerals' control. This is due to the fact that the holders of Class B common stock control a majority of the votes of the board of directors through direct representation on the board of directors, which allows the holders of Class B common stock to control the determination of whether to make a cash payment upon a Brigham Unit Holder's exercise of its Redemption Right. Temporary equity is recorded at the greater of the carrying value or redemption amount with a corresponding adjustment to additional paid-in capital. At March 31, 2020, the redemption amount was lower than its carrying value and as a result, the cumulative adjustment of temporary equity to redemption amount was reversed and temporary equity was presented at its carrying value. At June 30, 2020, temporary equity was adjusted to redemption value based on 17,612,638 shares of Class B common stock outstanding and Class A common stock 10-day volume-weighted average closing price of $12.16. This was subsequently reversed at September 30, 2020 because the redemption amount was lower than its carrying value, and as a result, temporary equity was presented at its carrying value. For the ~~nine months ended September~~period from February 19, 2021 to June 30, ~~2020,~~2021, the Company recorded adjustments to the value of ~~temporary equity~~non-controlling interest as presented in the table below:


(In thousands)	~~Temporary Equity Adjustments~~Non-controlling interest
Balance - ~~December 31, 2019 (1)~~February 19, 2021	$	~~454,507~~0
Reclassification from temporary equity (1)	202,496
Conversion of Class B common stock to Class A common stock	~~(1,526)~~(1,721)
Net income attributable to ~~temporary equity~~non-controlling interest (2)	~~4,095~~1,553
Distribution to holders of ~~temporary equity~~non-controlling interest declared	~~(10,240)~~
~~Adjustment of temporary equity to carrying value (2)~~	~~(206,017)~~(3,447)
Balance - March 31, ~~2020~~2021	$	~~240,819~~198,881
Conversion of Class B common stock to Class A common stock	~~(51,569)~~(21,257)
Net ~~loss~~income attributable to ~~temporary equity~~non-controlling interest	~~(2,766)~~4,138
Distribution to holders of ~~temporary equity~~non-controlling interest declared	~~(9,783)~~$
~~Adjustment of temporary equity to redemption value (3)~~	~~37,445~~ (4,449)
Balance - June 30, ~~2020~~2021	$	~~214,146~~
~~Conversion of Class B common stock to Class A common stock~~	~~(44,396)~~
~~Net loss attributable to temporary equity~~	~~(3,552)~~
~~Distribution to holders of temporary equity~~	~~(1,571)~~
~~Adjustment of temporary equity to carrying value (4)~~	~~(37,445)~~
~~Balance - September 30, 2020~~	$	~~127,182~~177,313

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~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

(1)Represents the February 19, 2021, redemption value of temporary equity, prior to its reclassification to non-controlling interest. Based on ~~22,847,045~~13,167,687 shares of Class B common stock outstanding and Class A common stock 10-day volume-weighted average closing price of ~~$19.89~~$15.38 at ~~December 31, 2019.~~February 18, 2021.

(2)~~In connection with~~Net income attributable to non-controlling interest includes the ~~IPO, the balance transferred~~period from additional paid-in capital to temporary equity was the greater of redemption value or carrying value of the shares of Class B common stock at IPO and included an initial upward adjustment to redemption amount totaling $194.5 million. The redemption amount was lower than the carrying value as ofFebruary 19, 2021 through March 31, ~~2020, and as such, Brigham Minerals adjusted temporary equity to equal carrying value.~~2021.

~~(3)Based on 17,612,638 shares of Class B common stock outstanding and Class A common stock 10-day volume-weighted average closing price of $12.16 at June 30, 2020.~~

~~(4)The redemption amount was lower than the carrying value as of September 30, 2020, and as such, Brigham Minerals adjusted temporary equity to equal carrying value.~~

~~11.~~10. Share-Based Compensation

~~LLC Incentive Units~~

As part of the Second Amended and Restated Limited Liability Company Agreement of Brigham Resources, LLC dated May 8, 2015, Brigham Resources authorized 120,000 restricted incentive units for issuance to management, independent directors, employees, and consultants (such incentive units, as converted as described below, the "Incentive Units”). Brigham Resources granted Incentive Units in April 2013 and September 2015 and 2018. In connection with the 2018 corporate reorganizations and the corporate reorganization consummated in connection with Brigham Minerals' IPO (collectively with the 2018 corporate reorganizations, the "corporate reorganization"), these Incentive Units were converted into units in Brigham Equity Holdings, LLC with equivalent rights, responsibilities, and preferences. The Incentive Units are subject to vesting as follows: 20% of the Incentive Units were vested on the date of grant and 20% of the Incentive Units vest on each anniversary of the date of grant if the holder remains continuously employed by Brigham Resources or its affiliates through the applicable vesting date. In connection with our IPO, holders of Incentive Units that were vested at such time received 1 share of Brigham Minerals' Class B common stock and 1 Brigham LLC Unit for each vested Incentive Unit. Upon vesting of the Incentive Units following the IPO, holders of the Incentive Units will receive 1 share of Brigham Minerals' Class B common stock and 1 Brigham LLC Unit for each vested Incentive Unit.

In connection with the completion of the IPO, Brigham LLC and Brigham Equity Holdings discontinued granting new Incentive Units; however Brigham Equity Holdings will continue to administer the existing awards that remain outstanding until they are fully vested. As discussed in "Note 10—Temporary Equity," participants may receive 1 share of Brigham Minerals' Class A common stock in exchange for one share of Class B common stock and 1 Brigham LLC Unit, or cash at the option of Brigham Minerals. Brigham Minerals accounts for the Incentive Units as compensation cost measured at the fair value of the award on the date of grant. No compensation expense was recognized prior to the IPO because the IPO was not considered probable.

~~A summary of Incentive Unit activity for the nine months ended September 30, 2020 is as follows:~~

Incentive Units
Number of Incentive Units Grant-date Fair Value
Outstanding—January 1, 2020 212,733 $ 10.04
Vested 70,911 $ 10.04
Outstanding—September 30, 2020 141,822 $ 10.04

Brigham LLC used the Black-Scholes option pricing valuation model to assist management in its estimation of the grant-date fair value of the Incentive Units on the respective grant dates during 2013, 2015 and 2018.

Long Term Incentive Plan

In connection with the IPO, Brigham Minerals adopted the Brigham Minerals, Inc. 2019 Long Term Incentive Plan (“LTIP”) for employees, consultants and directors who perform services for Brigham Minerals. The LTIP provides for issuance of awards based on shares of Class A common stock. Brigham Minerals has issued restricted stock awards ("RSAs"), restricted stock units subject to time-based vesting ("RSUs") and restricted stock units subject to performance-based vesting ("PSUs") under the LTIP. The shares to be delivered under the LTIP shall be made available from (i) authorized but unissued shares, (ii) shares held as

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~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

treasury stock or (iii) previously issued shares reacquired by Brigham Minerals including shares purchased on the open market. A total of 5,999,600 shares of Class A common stock have been authorized for issuance under the LTIP. At ~~September~~June 30, ~~2020, 3,466,893~~2021, 2,521,992 shares of Class A common stock remained available for future grants. Currently, all RSAs, RSUs and PSUs granted under the LTIP are entitled to receive dividends (in the case of RSAs) or have dividend equivalent rights (“DERs”), which entitle holders of RSUs and PSUs to the same dividend value per share as holders of the Company's Class A common stock. Such dividends and DERs are subject to the same vesting and other terms and conditions as the corresponding unvested RSAs, RSUs, and PSUs. Dividends and DERs are accumulated and paid when the underlying shares vest. The fair value of the RSA awards granted with the right to receive dividends and RSU awards granted with the right to receive DERs are generally based on the trading price of the Company’s Class A common stock as of the date of grant. Brigham Minerals accounts for the awards granted under the LTIP as compensation cost measured at the fair value of the award on the date of grant. Brigham Minerals accounts for forfeitures as they occur.

The Company has granted RSAs to certain employees, which are grants of shares of Class A common stock subject to a risk of forfeiture and restrictions on transferability. The share-based compensation expense of such RSAs was determined using the closing price of Class A common stock on April 23, 2019, the date of grant, of $21.25. On April 23, 2019, 312,189 RSAs were granted and 152,742 RSAs vested immediately. During the three months ended March 31, 2020, the compensation committee of the Board of Directors of Brigham Minerals approved the accelerated vesting of 30,174 RSAs for certain employees who retired in February 2020. For the nine months ended September 30, 2020, the Company remitted $0.2 million in respect of the employee portion of applicable payroll tax withholding associated with vested RSAs which was satisfied through the surrender of 18,651 RSAs, both of which are presented as an adjustment to additional paid-in-capital and Class A common stock, respectively, included in the Company's condensed consolidated and combined statement of changes in shareholders' and members' equity included within this Quarterly Report. The ~~remaining unvested~~ RSAs generally ~~vest~~vested in one-third increments on each of April 23, 2020 and 2021 and will vest as to the final one-third increment on April 23, 2022 and are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases providing services to Brigham Minerals prior to the lapse of such restrictions.

The following table summarizes activity related to RSAs for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

Restricted Stock Awards
Number of RSAs Grant Date Fair Value
Unvested at January 1, 2020 148,456 $ 21.25
Vested (69,601) $ 21.25
Forfeited (9,390) $ 21.25
Unvested at September 30, 2020 69,465 $ 21.25

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BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	Restricted Stock Awards
	Number of RSAs	Grant Date Fair Value
Unvested at January 1, 2021	68,293	$	21.25

Vested	(31,882)	$	21.25
Forfeited	(5,978)	$	21.25
Unvested at June 30, 2021	30,433	$	21.25

The Company has granted RSUs to certain employees and directors, which represent the right to receive shares of Class A common stock at the end of the vesting period in an amount equal to the number of RSUs that vest. The RSUs issued to employees generally vest in one-third increments over a three-year period and RSUs issued to directors vest in one year from the date of grant. RSUs are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases providing services to Brigham Minerals prior to the date the award vests. The share-based compensation cost of such RSUs was determined using the closing price on the applicable date of grant, which is then applied to the total number of RSUs granted. During the ~~three~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company granted 583,998 RSUs. The share-based compensation ~~committee~~expense of such RSUs was determined using the ~~Board~~weighted-average grant date fair value of ~~Directors of Brigham Minerals approved the accelerated vesting of 10,598 RSUs for certain board members who resigned in September 2020.~~$16.31.

The following table summarizes activity related to RSUs for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.


		Restricted Stock Units				Restricted Stock Units
		Number of RSUs	Weighted-Average Grant Date Fair Value			Number of RSUs	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2020		415,815	$	21.25
Unvested at January 1, 2021					Unvested at January 1, 2021	562,871	$	17.81
Granted	Granted	544,045	$	16.52	Granted	583,998	$	16.31
Vested	Vested	(60,242)	$	19.84	Vested	(75,499)	$	12.94
Forfeited	Forfeited	(12,086)	$	20.82	Forfeited	(14,316)	$	18.49
Unvested at September 30, 2020		887,532	$	18.45
Unvested at June 30, 2021					Unvested at June 30, 2021	1,057,054	$	17.32

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~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

The Company has granted PSUs to certain officers and managers, which vest based on continuous employment and satisfaction of a ~~performance metric~~market condition based on the absolute total shareholder return of the Company’s common stock, including paid dividends, over an approximate three-year performance period. The terms and conditions of the PSUs allow for vesting of the awards ranging between 0% (or forfeiture) and 200% of target. Expense related to these PSUs is recognized on a straight-line basis over the length of the applicable performance period. All compensation cost related to the market-based awards will be recognized if the requisite service period is fulfilled, even if the market condition is not achieved. The grant date fair value of such PSUs was determined using a Monte Carlo simulation model that utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award to calculate the fair value of the award. Expected volatilities in the model were estimated on the basis of historical volatility of a group of publicly traded oil and gas companies with a performance period of approximately three years. The risk-free interest rate was based on the United States Treasury rate for a term commensurate with the expected life of the grant.

The following table summarizes activity related to PSUs for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. During the six months ended June 30, 2021, the Company granted 472,377 PSUs. The share-based compensation expense of such PSUs was determined using the valuation date of May 17, 2021, the date of grant, with a preliminary fair value estimate of $20.32. In addition, no0 PSUs became vested or were forfeited during the ~~nine~~six months ended ~~September~~June 30, ~~2020:~~2021:

Performance-Based Restricted Stock Units
Target PSUs Estimated Earned PSUs Grant Date Fair Value
Unvested at January 1, 2020 753,546 450,836 $ 20.36
Granted 434,265 174,106 $ 15.98
Unvested at September 30, 2020 1,187,811 624,942 $ 19.14


	Performance-Based Restricted Stock Units
	Target PSUs	Grant Date Fair Value
Unvested at January 1, 2021	1,187,811	$	10.07
Granted (1)	472,377	$	20.32
Unvested at June 30, 2021	1,660,188	$	12.99

(1)The grant date fair value of $20.32 is a preliminary estimate, subject to revision upon completion of management's review of the related Monte Carlo simulation model.

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BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Share-Based Compensation Expense

Share-based compensation expense is included in general and administrative expense in the Company's condensed consolidated ~~and combined statement~~statements of operations included within this Quarterly Report. Share-based compensation expense recorded for each type of share-based compensation award for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 is summarized in the table below. ~~No share-based compensation expense was incurred prior to the IPO.~~


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)		2021		2020			2021		2020
Incentive Units (1) (4)		$	178	$	559	$	534	$	2,726
Incentive Units (1)										Incentive Units (1)		$	178	$	178		$	356	$	356
RSAs (1) ~~(5)~~(4)	RSAs (1) ~~(5)~~(4)	186		285		1,076		3,741		RSAs (1) ~~(5)~~(4)		163		190			297		891
RSUs (1)	RSUs (1)	2,052		1,686		5,486		2,932		RSUs (1)		2,534		1,840			5,076		3,434
PSUs (2)	PSUs (2)	1,102		622		3,156		1,258		PSUs (2)		1,534		1,124			2,613		2,054
Capitalized share-based compensation (3)	Capitalized share-based compensation (3)	(1,562)		(1,415)		(4,560)		(2,425)		Capitalized share-based compensation (3)		(1,854)		(1,479)			(3,487)		(2,998)
Total share-based compensation expense	Total share-based compensation expense	$	1,956	$	1,737	$	5,692	$	8,232	Total share-based compensation expense		$	2,555	$	1,853		$	4,855	$	3,737

(1)Share-based compensation expense relating to Incentive Units, RSAs and RSUs with ratable vesting is recognized on a straight-line basis over the requisite service period for the entire award.

(2)Share-based compensation expense relating to PSUs with cliff-vesting is recognized on a straight-line basis over the performance period for the entire award.

(3)During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, Brigham Minerals capitalized ~~$0.8~~$0.6 million and ~~$2.6~~$1.5 million, respectively, of share-based compensation cost to unevaluated property and ~~$0.7~~$1.3 million and ~~$1.9~~$2.0 million, respectively, of share-based compensation cost to evaluated property. During the three and six months ended June 30, 2020, Brigham Minerals capitalized $0.9 million and $1.8 million, respectively, of share-based compensation cost to unevaluated property and $0.6 million and $1.2 million, respectively, of share-based compensation cost to evaluated property.

(4)~~Includes $2.0~~During the six months ended June 30, 2020, share-based compensation cost included $0.5 million ~~recorded at IPO. No compensation expense was recorded prior to the IPO because the IPO was not considered probable.~~

~~(5)Includes $3.2 million recorded at grant date,~~ associated with ~~152,742~~the accelerated vesting of 30,174 RSAs ~~which vested immediately.~~for certain employees who retired in February 2020.

Future Share-Based Compensation Expense

The following table reflects the future share-based compensation expense expected to be recorded for the share-based compensation awards that were outstanding at ~~September~~June 30, ~~2020,~~2021, a portion of which will be capitalized:

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~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


(In thousands)		Incentive Units		RSAs		RSUs		PSUs		Total
													Incentive Units		RSAs		RSUs		PSUs		Total
Year	Year											Year	(In thousands)
2020		$	178	$	186	$	1,925	$	1,103	$	3,392
2021	2021	712		738		6,770		4,374		12,594		2021	$	356	$	326	$	5,052	$	4,046	$	9,780
2022	2022	534		228		2,662		966		4,390		2022	534		200		5,815		4,624		11,173
2023												2023	0		0		2,822		3,658		6,480
Total	Total	$	1,424	$	1,152	$	11,357	$	6,443	$	20,376	Total	$	890	$	526	$	13,689	$	12,328	$	27,433

~~12.~~11. Income Taxes

The Company ~~computes~~evaluates and updates its annual effective income tax rate on a quarterly ~~taxes~~basis under the effective tax rate method based on applying an anticipated annual effective rate to its year-to-date income, except for discrete items. Consequently, based upon the mix and timing of our actual earnings compared to annual projections, our effective tax rate may vary quarterly and may make comparisons not meaningful. Income taxes for discrete items are computed and recorded in the period that the specific transaction occurs.

Income tax expense was as follows for the periods indicated:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except for tax rate)	(In thousands, except for tax rate)	2020			2019			2020			2019			(In thousands, except for tax rate)	2021			2020			2021			2020
Income tax (benefit) expense		$	(2,982)		$	807		$	(2,250)		$	1,114
Income tax expense (benefit)														Income tax expense (benefit)	$	3,430		$	(850)		$	6,503		$	732
Effective tax rate	Effective tax rate	18.6		%	8.7		%	16.9		%	10.7		%	Effective tax rate	18.3		%	11.1		%	19.2		%	26.9		%

Total income tax expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 differed from amounts computed by applying the U.S. federal statutory tax rate of 21% due to the impact of ~~the temporary equity, net income attributable to predecessor,~~non-controlling interest, state taxes (net of the anticipated

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BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

federal benefit), share-based compensation expense, and percentage depletion in excess of basis. The effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2021 reflects ~~the Company’s indirect 16.5%~~Brigham Minerals’ ownership interest in Brigham ~~Resources as a result~~LLC of ~~the 2018 corporate reorganizations.~~79.5%. The effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, 2020 reflects the Company’s ~~76.7%~~69.1% ownership interest in Brigham LLC as a result of the IPO, the ~~corporate reorganization, all subsequent primary~~December 2019 Offering, the June 2020 Secondary Offering, and ~~secondary equity offerings and~~certain redemptions of Brigham LLC Units ~~and shares of Class B common stock~~ for shares of Class A common stock (and the cancellation of the corresponding number of shares of Class B common stock) completed subsequent to the IPO and prior to ~~September~~June 30, 2020.

~~13.~~12. Commitments and Contingencies

Commitments

Brigham Minerals leases office space under operating leases. Rent expense for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 was $0.3 million and $0.2 million, ~~respectively. Rent expense for the nine months ended September 30, 2020~~respectively, and ~~2019 was $0.8~~$0.6 million and $0.4 million for the six months ended June 30, 2021 and 2020, respectively. Future minimum lease commitments under ~~noncancelable~~non-cancelable operating leases at ~~September~~June 30, ~~2020~~2021 are presented below:


(In thousands)	(In thousands)	Commitment		(In thousands)	Commitment
Year	Year			Year
2020 (remainder of)		$	321
2021		1,345
2021 (remainder of)				2021 (remainder of)	$	640
2022	2022	1,419		2022	1,310
2023	2023	1,498		2023	1,347
2024	2024	1,581		2024	1,384
2025				2025	1,419
Thereafter	Thereafter	4,445		Thereafter	2,251
Total	Total	$	10,609	Total	$	8,351

Contingencies

Brigham Minerals may, from time to time, be a party to certain lawsuits and claims arising in the ordinary course of business. The outcome of such lawsuits and claims cannot be estimated with certainty and management may not be able to estimate the range of possible losses. Brigham Minerals records reserves for contingencies when information available indicates that a loss is

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~~BRIGHAM MINERALS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

probable and the amount of the loss can be reasonably estimated. Brigham Minerals had no reserves for contingencies at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

~~14. Related-Party Transactions~~13. COVID-19 Pandemic and Winter Storm Uri

Brigham Exploration Company, partially owned by Ben M. Brigham, on occasion leases some of our acreage at market rates. Brigham Minerals did not lease any acreage to Brigham Exploration Company during the three and nine months ended September 30, 2020 and therefore did 0t receive any payment for those periods. We did 0t receive payments for the three months ended September 30, 2019 from Brigham Exploration Company and for the nine months ended September 30, 2019, we received payments of $0.4 million.

The Company is party to a services agreement with RS Energy Group, which provides the Company with certain software and services that assist in evaluating the acquisition of mineral interests. Warburg Pincus owned a controlling stake in RS Energy Group until February 2020. The service fees incurred under this agreement were $0.1 million for the three and nine months ended September 30, 2020 and 2019, respectively.

~~15.~~ COVID-19 Pandemic and Impact on Global Demand for Oil and Natural Gas

The ongoing global spread of a novel strain of coronavirus (SARS-Cov-2), which causes COVID-19, ~~has caused~~remains a ~~continuing disruption to~~global pandemic. As a result, stability in the markets and demand for the commodities produced by the oil and natural gas industry have not returned to pre-pandemic levels and may not for some time. Commodity prices have improved from historic lows in 2020, however, the impacts of the pandemic continue to be unpredictable and dynamic, so we are unable to reasonably estimate the period of time that related market conditions could exist or the extent to which they may continue to impact our business, ~~by, among other things, contributing to a significant decrease in global crude oil demand and~~results of operations, financial condition, or the ~~price for oil beginning in the first quarter~~timing of 2020 and continuing through the third quarter of 2020. The declining commodity prices have adversely affected the revenues the Company receives for its royalty interests and could affect its ability to access the capital markets on terms favorable to the Company. Additionally, in response to the decline in commodity prices, many operators on the Company's properties have announced reductions in their estimated capital expenditures for 2020 and beyond, which has and will adversely affect the near-term development of the Company's properties during the second half of the year and into 2021. While these lower commodity prices initially resulted in some of the Company's operators shutting in or curtailing production from wells on its properties during the second quarter of 2020, the Company saw a majority of its operators resume production for previously curtailed and shut in wells in connection with the improvement of commodity prices in the third quarter of 2020.further industry recovery.

In response to the COVID-19 pandemic, the potential risk to Brigham Minerals' workforce and in compliance with stay at home orders, the Company successfully implemented policies and the technological infrastructure for all of its employees to work from home in the first quarter of 2020 and ceased all business travel. In compliance with the requirements for the re-opening of the Texas economy, theThe Company is currently operating its office at ~~75%~~100% capacity while continuing to support remote working for its employees that are considered high-risk pursuant to the Center for Disease Control and Prevention guidelines or have household members meeting the criteria of those guidelines. ~~Due to these efforts, the~~The Company has not experienced material disruptions to its operations or the health of its workforce to date.

Winter Storm Uri

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BRIGHAM MINERALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

delays in drilling and completion of wells, other operational constraints and ultimately adversely impacted our first quarter 2021 production. These curtailments, delay and operational constraints also resulted in increases in commodity prices, primarily natural gas prices. For example, the Henry Hub spot market price for natural gas for the month of February 2021 ranged from a low of $2.66 per MMBtu to a high of $23.86 per MMBtu. Given we do not operate our properties, Brigham Minerals has ~~maintained~~limited visibility into the ~~engagement~~timing of when production resumed and ~~connectivity~~was required to estimate the amount of ~~its personnel.~~production delivered to the purchaser and the price that will be ultimately received for the sale of the product.

As of June 30, 2021, commodity prices, in particular natural gas prices, have stabilized. The Henry Hub spot market price for natural gas for the three months ended June 30, 2021 ranged from a low of $2.43 per MMBtu to a high of $3.79 per MMBtu.

~~16.~~14. Subsequent Events

On ~~November 4, 2020,~~August 3, 2021, the Board of Directors of Brigham Minerals declared a dividend of ~~$0.24~~$0.35 per share of Class A common stock payable on ~~December 7, 2020,~~August 27, 2021, to shareholders of record at the close of business on ~~November 30, 2020.~~August 20, 2021.

On July 7, 2021, the borrowing base and elected commitments on our revolving credit facility were increased from $135.0 million to $165.0 million and the addition of leverage (maximum 3.00x) and liquidity (minimum 10% of total revolving commitments) conditions to Brigham Resources’ ability to pay dividends or distributions (other than permitted tax distributions) to the owners of its equity interests.

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Item 2. — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Brigham Minerals, Inc. (the "Company," "we," "us," or "our") is the managing member of Brigham Minerals Holdings, LLC (“Brigham LLC”) and is indirectly responsible for all operational, management and administrative decisions related to Brigham LLC and its operating subsidiaries’ business. The following discussion and analysis should be read in conjunction with our audited consolidated and combined financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the “Annual Report”), as well as the accompanying unaudited condensed consolidated ~~and combined~~ financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this "Quarterly Report"). In connection with our corporate reorganizations, we became the managing member of Brigham Minerals Holdings, LLC (“Brigham LLC”) and are indirectly responsible for all operational, management and administrative decisions related to Brigham LLC and its operating subsidiaries’ business. In order to furnish comparative financial information, the historical financial information relating to periods prior to our initial public offering, which we completed in April 2019 (the "IPO") in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" has been retrospectively recast to include the combined historical financial information of both Brigham Resources LLC (at historical carrying values) and Brigham Minerals, taking into account state and federal income taxes and liabilities associated with Brigham Minerals. Unless the context otherwise requires, references in this section to the "Company," "we," "us," "our" or like terms, refer to the assets and operations (including reserves, production and acreage) of Brigham Resources LLC, excluding the historical results and operations of Brigham Resources Operating, LLC (which was distributed to our owners prior to the IPO) (“Brigham Operating”) and Brigham Minerals and its subsidiaries.

The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGLs, production volumes, estimates of proved, probable and possible reserves, mineral acquisition capital, economic and competitive conditions, including those resulting from the ongoing spread of the COVID-19 pandemic, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report and in our Annual Report, particularly in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

Overview

Brigham Minerals was formed to acquire and actively manage a portfolio of mineral and royalty interests in the core of what we view as the most active, highly economic, liquids-rich resource plays across the continental United States. Our primary business objective is to maximize risk-adjusted total return to our shareholders through (i) the organic growth of our free cash flow generated from our existing mineral portfolio and (ii) the continued sourcing and execution of accretive mineral acquisitions in the core of highly economic, liquids-rich resource plays. As of ~~September~~June 30, ~~2020,~~2021, we owned ~~84,700~~88,570 net royalty acres across 3937 counties within the ~~Permian Basin~~Delaware and Midland Basins in West Texas and New Mexico, the SCOOP/STACK plays in the Anadarko Basin of Oklahoma, the Denver-Julesburg ("DJ") Basin in Colorado and Wyoming and the Williston Basin in North Dakota.

Financial and Operational Overview:

•Our production volumes ~~increased 19%, to 9,318~~of 8,988 Boe/d ~~(73%~~(70% liquids, ~~53%~~52% oil), for the three months ended ~~September~~June 30, ~~2020, and~~2021 increased ~~43%, to 9,524 Boe/d (72% liquids, 53% oil), for the nine months ended September 30, 2020 as~~1% compared to the ~~corresponding periods from~~three months ended March 31, 2021 and decreased 7% for the ~~prior year.~~six months ended June 30, 2021 compared to the six months ended June 30, 2020.

•Our royalty revenues comprised of crude oil, natural gas and NGL sales ~~decreased 11%,~~for the three months ended June 30, 2021 increased 15% to ~~$21.6~~$37.0 million compared to the three months ended March 31, 2021 due to a 13% increase in realized commodity pricing and a 1% higher production volumes and increased 69% for six months ended June 30, 2021 compared to the six months ended June 30, 2020 due to an 83% increase in realized commodity pricing partially offset by the decrease in production volumes.

•Our net income for the three months ended June 30, 2021 was $15.3 million compared to a net income of $12.1 million for the three months ended ~~September~~March 31, 2021 and net income for six months ended June 30, ~~2020, and decreased 4%,~~2021 of $27.4 million compared to ~~$62.5~~a net income of $2.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020 as compared to the corresponding periods from the prior year.~~2020.

•Our net loss for the three and nine months ended September 30, 2020 was $13.0 million and $11.0 million, respectively, inclusive of a pre-tax impairment to oil and gas properties of $18.9 million for the three and nine months ended September 30, 2020. Our net income for the three and nine months ended September 30, 2019 was $8.5 million and $9.3 million, respectively. Adjusted EBITDA and Adjusted EBITDA ex lease bonus ~~decreased 13%, to $16.8 million, and 17% to $15.3 million, respectively,~~ for the three months ended ~~September~~June 30, ~~2020 and decreased 7% to $47.8~~2021 were $30.8 million, and ~~12% to $42.3~~$30.0 million, respectively, ~~for the nine months ended September 30, 2020~~and increased 14% and 18%, respectively, as compared to the ~~corresponding periods from~~three months ended March 31, 2021 and increased 86% and 105%, respectively, for the ~~prior year.~~six months ended June 30, 2021 to $57.8 million and $55.4 million, respectively, as compared to the six months ended June 30, 2020. Adjusted EBITDA and Adjusted EBITDA ex lease bonus are non-GAAP financial measures. For a definition of Adjusted EBITDA and Adjusted EBITDA ex lease bonus and a reconciliation to our most directly comparable measure calculated and presented in accordance with GAAP, please read "How We Evaluate ~~Our~~our Operations—~~Adjusted EBITDA and Adjusted EBITDA Ex Lease Bonus.~~Non-GAAP Financial Measures."

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•On ~~November 4, 2020,~~August 3, 2021, the Board of Directors of Brigham Minerals declared a dividend of ~~$0.24~~$0.35 per share of Class A common stock payable on ~~December 7, 2020~~August 27, 2021 to shareholders of record at the close of business on ~~November 30, 2020.~~August 20, 2021.

•As of ~~September~~June 30, ~~2020,~~2021, Brigham Minerals had a cash balance of ~~$8.2~~$6.4 million and ~~$130.0~~$92.0 million of capacity on our revolving credit facility, providing the Company with total liquidity of ~~$138.2~~$98.4 million. ~~Associated with~~On July 7, 2021, the ~~Company's~~borrowing

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base and elected commitments on our revolving credit facility were increased from $135.0 million to $165.0 million. Pro-forma for the increase in the borrowing base, ~~redetermination that is expected to be finalized in late November 2020,~~ the ~~administrative agent has recommended a reaffirmation~~Company would have had total liquidity of ~~the Company's borrowing base at $135.0 million.~~$128.4 million as of June 30, 2021.

Market Environment and COVID-19

The ongoing global spread of a novel strain of coronavirus (SARS-Cov-2), which causes COVID-19, ~~has caused~~remains a ~~continuing disruption to~~global pandemic. As a result, stability in the markets and demand for the commodities produced by the oil and natural gas industry have not returned to pre-pandemic levels and may not for some time. Commodity prices have improved from historic lows in 2020, however, the impacts of the pandemic continue to be unpredictable and dynamic, so we are unable to reasonably estimate the period of time that related market conditions could exist or the extent to which they may continue to impact our business, ~~by, among other things, contributing to a significant decrease in demand for crude oil and the price for oil beginning in the first quarter~~results of 2020 and continuing through the third quarter of 2020. Additionally, in March 2020, Saudi Arabia and Russia failed to agree to and maintain oil price and production controls within OPEC and Russia. Subsequently, Saudi Arabia announced plans to increase production and reduce the prices at which they sell oil. While OPEC, Russia, and other oil and gas producing countries ("OPEC+") subsequently agreed to collectively decrease production, these events, combined with the macro-economic impact of the continued outbreak of the COVID-19 pandemic and declining availability of hydrocarbon storage, exacerbated the decline in commodity prices, including the historic record low negative price of $(36.98) per barrel that occurred in April 2020.Additionally, in July 2020, OPEC+ agreed to increase production again starting in August 2020. Market volatility has continued, and we expect it will continue for the foreseeable future. Please see “Risk Factors” for further discussion of these events.

In response to the COVID-19 pandemic, the potential risk to our workforce and in compliance with stay at home orders, we successfully implemented policies and the technological infrastructure for all of our employees to work from home in the first quarter of 2020 and ceased all business travel. In compliance with the requirements for the re-opening of the Texas economy, we are currently operating our office at 75% capacity while continuing to support working from home for our employees that are considered high-risk pursuant to the Center for Disease Control and Prevention guidelines or have household members meeting the criteria of the guidelines. Due to these efforts, we have not experienced material disruptions to our operations, financial condition, or the ~~health~~timing of ~~our workforce.~~

The declining commodity prices have adversely affected the revenues we receive for our royalty interests and could affect our ability to access the capital markets on terms favorable to us. Additionally, in response to the declining commodity prices, many operators on our properties have announced significant reductions in their estimated capital expenditures for 2020 and beyond, which has adversely affected the development of our properties and will continue to affect the development of our properties during the second half of the year and into 2021. While these lower commodity prices initially resulted in some of the Company's operators shutting in or curtailing production from wells on its properties during the second quarter of 2020, the Company saw a majority of its operators resume production for previously curtailed and shut in wells in connection with the improvement of commodity prices in the third quarter 2020. As a result of the shut-ins in the second quarter of 2020 and the depressed commodity prices, our revenues, cash flows from operations and dividend amount we are able to pay our stockholders have continued to be negatively impacted. We cannot predict the extent and duration of these and other impacts on our business from the COVID-19 pandemic, efforts to fight the pandemic and other market events.further industry recovery.

In connection with the previously mentioned COVID-19 pandemic and resulting market and commodity price challenges experienced during 2020, we ~~have experienced and continue to expect a near-term~~saw reduced ~~level~~levels of potential acquisition opportunities. With an improvement in commodity prices in the second half of 2020 and the first half of 2021, along with our financial strength, we believe we are well positioned to capture attractive opportunities ~~which~~for the remainder of 2021 that will ~~delay our ability to execute on our growth strategy.~~generate shareholder value. Given that our capital allocation is within our control, we believe that the liquidity provided by our cash flow from operations and borrowings under our revolving credit facility will provide us with sufficient capital to execute our current strategy.

The company is currently operating its office at 100% capacity while continuing to support working from home for our employees that are considered high-risk pursuant to the Centers for Disease Control and Prevention guidelines or have household members meeting the criteria of the guidelines. The Company has not experienced material disruptions to our operations or the health of our workforce to date.

Winter Storm Uri

In February 2021, Winter Storm Uri caused severe winter weather and freezing temperatures in the southern United States, which effected our properties in the Permian and Anadarko Basins, resulting in the curtailment of a portion of our production, delays in drilling and completion of wells, other operational constraints and ultimately adversely impacted our first quarter 2021 production. These curtailments, delays and operational constraints also resulted in increases in commodity prices, primarily natural gas prices. For example, the Henry Hub spot market price for natural gas for the month of February 2021 ranged from a low of $2.66 per MMBtu to a high of $23.86 per MMBtu. Given we do not operate our properties, Brigham Minerals has limited visibility into the timing of when production resumed and was required to estimate the amount of production delivered to the purchaser and the price that will be ultimately received for the sale of the product.

Operational Update

Mineral and Royalty Interest Ownership Update

During the ~~third~~second quarter ~~2020,~~2021, the Company ~~closed 11~~completed 22 transactions, acquiring ~~1,125~~640 net royalty acres (standardized to a 1/8th royalty interest) and deploying ~~$16.2~~$14.4 million in capital primarily toin the Permian Basin. As of ~~September~~June 30, ~~2020,~~2021, the Company ~~had acquired~~owned roughly ~~84,700~~88,570 net royalty acres, encompassing ~~13,218~~13,462 gross ~~(116.7~~(114.8 net) undeveloped horizontal locations, across 3937 counties in what the Company views as the cores of the ~~Permian Basin~~Delaware and Midland Basins in West Texas and New Mexico, the SCOOP/STACK plays in the Anadarko Basin of Oklahoma, the ~~Denver-Julesburg (“DJ”)~~DJ Basin in Colorado and Wyoming and the Williston Basin in North Dakota.

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The table below summarizes the Company’s mineral and royalty interest ownership at the dates indicated.

Delaware Midland SCOOP STACK DJ Williston Other Total
Net Royalty Acres
September 30, 2020 27,550 4,875 11,400 10,725 15,600 7,825 6,725 84,700
June 30, 2020 26,550 4,800 11,375 10,700 15,600 7,825 6,725 83,575
Acres Added (Sold) Q/Q 1,000 75 25 25 — — — 1,125
% Added (sold) Q/Q 4% 2% —% —% —% —% —% 1%

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	Delaware	Midland	SCOOP	STACK	DJ	Williston	Other	Total
Net Royalty Acres

June 30, 2021	29,270	6,105	11,415	10,650	16,345	7,995	6,790	88,570
March 31, 2021	28,940	5,775	11,400	10,725	16,320	7,980	6,790	87,930

Acres Added (Revised) Q/Q	330	330	15	(75)	25	15	—	640
% Added Q/Q	1%	6%	—%	(1)%	—%	—%	—%	1%

Operating Activity Update

DUC Conversions

The Company identified approximately ~~143~~204 gross ~~(1.2~~(0.7 net) DUCs converted to production during the ~~third~~second quarter 2021, which represented ~~20%~~26% of its gross DUCs ~~(27%~~(16% of net) in inventory as of ~~second~~first quarter ~~2020.~~2021. ~~Third~~Second quarter 2021 DUC and PDP conversion waterfalls are summarized in the charts below:

Drilling Activity

During the ~~third~~second quarter ~~2020,~~2021, the Company identified 57153 gross ~~(0.4~~(1.3 net) wells spud on its mineral ~~position.In 2019 and 2018, respectively, the Company averaged 219 gross (1.4 net) and 135 gross (1.0 net) wells spud per quarter.~~position, which represents a 31% increase in net well drilling activity relative to first quarter 2021. Brigham’s gross and net wells spud activity ~~over the past ten quarters~~per quarter is summarized in the chart below:

2522

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DUC and Permit Inventory

~~Given~~Brigham Minerals ended the ~~current challenges facing~~second quarter 2021 with 5.0 net DUCs and 4.1 net permits versus 4.4 net DUCs and 4.7 net permits as of first quarter 2021, representing a 14% sequential increase in total net DUCs. The sequential DUC inventory increase was largely driven by an increase in net Permian DUCs. Brigham Minerals ended the ~~global crude market, the near-term conversion~~second quarter 2021 with 3.3 net Permian DUCs up from 2.7 net Permian DUCs as of ~~wells from DUC or permits to proved developed producing was delayed and may continue to be deferred relative to historic conversion rates. Brigham's~~first quarter 2021. Brigham Minerals' DUC and permit inventory as of ~~September~~June 30, ~~2020~~2021 by basin is outlined in the table below:


		Development Inventory by Basin (1)									Development Inventory by Basin (1)
		Delaware	Midland	SCOOP	STACK	DJ	Williston	Other	Total		Delaware	Midland	SCOOP	STACK	DJ	Williston	Other	Total
Gross Inventory	Gross Inventory									Gross Inventory
DUCs	DUCs	185	144	72	3	100	112	8	624	DUCs	176	232	50	10	124	123	17	732
Permits	Permits	154	105	16	9	213	213	6	716	Permits	162	99	5	—	149	258	10	683
Net Inventory	Net Inventory									Net Inventory
DUCs	DUCs	2.3	0.5	0.3	—	0.5	0.1	—	3.8	DUCs	1.9	1.4	0.3	—	1.1	0.2	0.1	5.0
Permits	Permits	1.1	0.4	0.1	—	2.2	0.4	0.1	4.3	Permits	1.0	1.1	—	—	1.3	0.6	—	4.1

(1) Individual amounts may not total due to rounding.

~~Regulatory Update~~

~~Muscogee (Creek) Nation Reservation~~

On July 9, 2020, the U.S. Supreme Court ruled that the Muscogee (Creek) Nation reservation in Eastern Oklahoma has not been disestablished. Prior to the court’s ruling, the prevailing view was that all reservations within Oklahoma had been disestablished prior to statehood in 1907. Although the court’s ruling indicates that it is limited to criminal law as applied within the Muscogee (Creek) Nation reservation, the ruling has significant potential implications for civil law within the Muscogee (Creek) Nation reservation, as well as other reservations in Oklahoma that may similarly be found to not have been disestablished. While we cannot predict which other reservations may be similarly found not to have been disestablished or the full extent to which civil jurisdiction may be affected, the ruling could adversely affect title to our mineral interests, to the extent they are found to be located within reservation areas, and significantly impact laws and regulations to which we and our operators and interests are subject in Oklahoma, such as taxation, environmental regulation, and the permitting and siting of energy assets.

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On September 30, 2020, a state district court in Oklahoma, applying the analysis in the U.S. Supreme Court’s ruling regarding the Muscogee (Creek) Nation, ruled that the Cherokee Nation reservation has not been disestablished. We anticipate that similar rulings will be made regarding the Chickasaw Nation, Choctaw Nation, and Seminole Nation reservations in the near future because the reservations of all five nations share a similar history. On October 1, 2020, the U.S. Environmental Protection Agency (“EPA”) granted approval to the State of Oklahoma under Section 10211(a) of the Safe, Accountable, Flexible, Efficient Transportation Equity Act of 2005 (the “SAFETE Act”) to administer all of the State’s existing EPA-approved regulatory programs to Indian County within Oklahoma except: Indian allotment to which Indian titles have not been extinguished; lands that are held in trust by the United States on behalf of any Indian or Tribe; and lands that are owned in fee by any Tribe where title was acquired through a treaty with the United States to which a Tribe is a party and that have never been allotted to any citizen or member of such Tribe. The approval extends Oklahoma’s authority for existing EPA-approved regulatory programs to lands within Oklahoma previously under the jurisdiction of the State before the U.S. Supreme Court’s ruling regarding the Muscogee (Creek) Nation reservation. However, several Tribes have expressed dissatisfaction with the consultation process performed in relation to this approval, and it is possible that the EPA’s approval under the SAFETE Act could be challenged. Additionally, the SAFETE Act provides that any Tribe in Oklahoma may seek “Treatment as a State” by the EPA, and it is possible that one or more of the Tribes in Oklahoma may seek such an approval from the EPA. At this time, we cannot predict how these jurisdictional issues may ultimately be resolved. We will continue to monitor developments concerning these matters.

~~Dakota Access Pipeline ("DAPL")~~

On July 6, 2020, the U.S. District Court for the District of Columbia ordered vacatur of DAPL’s easement from the U.S. Army Corps of Engineers (the “Corps”) and further ordered the shutdown of the pipeline by August 5, 2020 while the Corps completes a full environmental impact statement for the project. On August 5, 2020, the U.S. Court of Appeals for the District of Columbia stayed the court's injunction ordering the shutdown of the pipeline, but did not extend the stay to the vacatur of DAPL's easement.If the legal challenges to DAPL are successful, transportation costs for crude oil will likely increase in the Williston Basin and the operators of our properties in the Williston Basin may choose to shut in wells if they are unable to connect those wells to other pipelines or obtain sufficient capacity on other pipelines at an effective cost, both of which may adversely impact our revenues and future production from our properties in the Williston Basin.

~~Implementation of Colorado SB 19-181 ("SB 181")~~

In September 2020, the Colorado Oil and Gas Conservation Commission (“COGCC”), as part of SB-181’s mandate for the COGCC to prioritize public health and environmental concerns in its decisions, announced that it will consider imposing a 2,000-foot setback requirement for drilling and fracking operations statewide, allowing for variances from the requirement in some circumstances. The vote on this rulemaking is expected to take place at the COGCC’s November 6, 2020 meeting, but we cannot predict the final outcome of the COGCC’s actions. The Colorado Department of Public Health and the Environment also recently finalized rules related to the control of emissions from certain pre-production activities, and the COGCC has also proposed new rules to limit flaring and venting in connection with and oil and natural gas production activities. These and other developments related to the implementation of SB 181 could adversely impact our revenues and future production from our properties.

How We Evaluate Our Operations

We use a variety of operational and financial measures to assess our performance. Among the measures considered by management are the following:

•volumes of oil, natural gas and NGLs produced;

•~~gross~~number of rigs on location, permits, spuds, completions and ~~net well spuds, DUCs, DUC conversions and permits;~~wells turned-in-line;

•commodity prices; and

•Adjusted EBITDA and Adjusted EBITDA ex lease bonus.

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Volumes of Oil, Natural Gas and NGLs Produced

In order to track and assess the performance of our assets, we monitor and analyze our production volumes from the various resource plays that comprise our portfolio of mineral and royalty interests. We also regularly compare projected volumes to actual reported volumes and investigate unexpected variances.

~~Gross~~Number of Rigs on Location, Permits, Spuds, Completions and ~~Net Well Spuds, DUCs, DUC Conversions and Permits~~

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Wells Turned-In-Line

In order to track and assess the performance of our assets, we monitor and analyze the number of ~~gross~~permits, rigs, spuds, completions and ~~net well spuds, as well as DUCs~~wells on ~~our properties. We also constantly monitor the conversions of our DUC and permit inventories by our various operators across~~production that are applicable to our mineral and royalty interests in an effort to evaluate near-term production ~~trends~~growth from the various basins and resource plays that comprise our asset base.

Commodity Prices

Historically, oil, natural gas and NGL prices have been volatile and may continue to be volatile in the future. During the past five years, the posted price for WTI has ranged from a historic, record low price of negative ~~price of $(36.98)~~$36.98 per barrel in April 2020 to a high of $77.41 per barrel in June 2018. The Henry Hub spot market price for natural gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of ~~$6.24~~$23.86 per MMBtu in ~~January 2018.~~February 2021. As of ~~September~~June 30, ~~2020,~~2021, the posted price for oil was ~~$40.05~~$73.52 per barrel and the Henry Hub spot market price of natural gas was ~~$1.66~~$3.79 per MMBtu. Lower prices may not only decrease our revenues, but also potentially the amount of oil, natural gas and NGLs that our operators can produce ~~economically.~~economically as well as the amount of capital they are willing to spend.

The prices we receive for oil, natural gas and NGLs vary by geographical area. The relative prices of these products are determined by factors affecting global and regional supply and demand dynamics, such as economic and geopolitical conditions, the effects of health ~~pandemics~~epidemics such as COVID-19, production levels, availability of transportation and storage, weather cycles and other factors. For example, the effects of the ongoing COVID-19 pandemic, recent actions by oil-producing countries and a declining availability of hydrocarbon storage has contributed to a significant drop in commodity prices beginning in the first quarter of 2020. In addition, realized prices are influenced by product quality and proximity to consuming and refining markets. Any differences between realized prices and NYMEX prices are referred to as differentials. All of our production is derived from properties located in the United States.

Oil. The substantial majority of our oil production is sold at prevailing market prices, which fluctuate in response to many factors that are outside of our control. NYMEX light sweet crude oil, commonly referred to as WTI, is the prevailing domestic oil pricing index. The majority of our oil production is priced at the prevailing market price with the final realized price affected by both quality and location differentials.

The chemical composition of crude oil plays an important role in its refining and subsequent sale as petroleum products. As a result, variations in chemical composition relative to the benchmark crude oil, usually WTI, will result in price adjustments, which are often referred to as quality differentials. The characteristics that most significantly affect quality differentials include the density of the oil, as characterized by its API gravity, and the presence and concentration of impurities, such as sulfur.

Location differentials generally result from transportation costs based on the produced oil’s proximity to consuming and refining markets and major trading points.

Natural Gas. The NYMEX price quoted at Henry Hub is a widely used benchmark for the pricing of natural gas in the United States. The actual volumetric prices realized from the sale of natural gas differ from the quoted NYMEX price as a result of quality and location differentials.

Quality differentials result from the heating value of natural gas measured in Btus and the presence of impurities, such as hydrogen sulfide, carbon dioxide and nitrogen. Natural gas containing ethane and heavier hydrocarbons has a higher Btu value and will realize a higher volumetric price than natural gas that is predominantly methane, which has a lower Btu value. Natural gas with a higher concentration of impurities will realize a lower volumetric price due to the presence of the impurities in the natural gas when sold or the cost of treating the natural gas to meet pipeline quality specifications.

Natural gas is subject to price variances based on local supply and demand conditions and the cost to transport natural gas to end-user markets.

NGLs. NGL pricing is generally tied to the price of oil, but varies based on differences in liquid components and location.

Oil and gas properties

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the guidelines established by the SEC. As of ~~September~~June 30, 2021 and June 30, 2020, the SEC oil ~~prices~~price and SEC gas ~~prices~~price used in the calculation of the ceiling test were ~~$43.55~~$49.78 and $47.13, respectively, per barrel offor oil, and ~~$1.98~~$2.47 and $2.08, respectively, per ~~MMbtu of~~MMBtu for natural ~~gas, respectively. Using these prices, the net book value of oil and natural gas properties exceeded the ceiling limitation resulting in an~~gas. There were no impairment ~~charge of $18.9 million to oil and gas properties, net~~charges during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020. There was no impairment charge during the three~~2021 and ~~nine months ended September 30, 2019.~~2020.

~~Based on the~~A decline ~~subsequent to September 30, 2020,~~ in the ~~unweighted arithmetic average~~ SEC oil ~~prices used~~price or the SEC gas price could lead to impairment charges in the ~~full cost ceiling test, an additional~~future and such impairment ~~charge may~~charges could be ~~necessary~~material, such as occurred in the third and fourth ~~quarter~~quarters of ~~2020 and such amount could be material.~~2020. In addition to the impact of lower prices, any future changes ~~in the fourth quarter of 2020~~ to assumptions of drilling and completion activity, development timing, acquisitions or divestitures of oil and gas properties, proved undeveloped locations, and production and other estimates may require revisions to estimates of total proved reserves which would impact the amount of any impairment charge. Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development activities, production data, economics and other factors, we may be required to write down the carrying value of our properties in future periods. The risk that we will be required to recognize impairments of our oil, natural gas and NGL properties increases during sustained periods of low commodity prices. In addition, impairments could occur if we were to experience sufficient downward adjustments to our estimated proved reserves or the present value of estimated future net revenues. If we incur impairment charges in the future, our results of operations for the periods in which such charges are taken may be materially and adversely affected.

Hedging

We may enter into certain derivative instruments to partially mitigate the impact of commodity price volatility on our cash flow generated from operations. From time to time, such instruments may include variable-to-fixed-price swaps, fixed-price contracts, costless collars and other contractual arrangements. The impact of these derivative instruments could affect the amount of cash flows we ultimately realize. Historically, we have only entered into minimal fixed-price swap contracts. Under fixed-price swap contracts, a counterparty is required to make a payment to us if the settlement price is less than the swap strike price. Conversely, we are required to make a payment to the counterparty if the settlement price is greater than the swap strike price. We may employ contractual arrangements other than fixed-price swap contracts in the future to mitigate the impact of price fluctuations. If commodity prices decline in the future, our hedging contracts may partially mitigate the effect of lower prices on our future revenue.

Our revolving credit facility allows us to hedge up to 85% of our reasonably anticipated projected production from our proved reserves of oil and natural gas, calculated separately, for up to 60 months in the future. We had no natural gas or oil derivative contracts in place as of ~~September~~June 30, ~~2020~~2021 and December 31, 2019. For the three and nine months ended September 30, 2019, we recognized a gain of $0.1 million and a loss of $0.5 million on our commodity derivative instruments, respectively. See “Note 6—Derivative Instruments” to the condensed consolidated and combined financial statements of Brigham Minerals included elsewhere in this Quarterly Report.2020.

~~Adjusted EBITDA and Adjusted EBITDA Ex Lease Bonus~~Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA ex lease bonus are non-GAAP supplemental financial measures used by our management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets and their ability to sustain dividends over the long term without regard to financing methods, capital structure or historical cost basis.

We define Adjusted EBITDA as ~~net income (loss)~~Net Income (Loss) before depreciation, depletion and amortization, ~~impairment of oil and gas properties,~~ share-based compensation expense, interest expense, ~~gain or loss on derivative instruments, loss on extinguishment of debt,~~ and income tax expense, less other ~~income and gain or loss on sale of oil and gas properties.~~income. We define Adjusted EBITDA ex lease bonus as Adjusted EBITDA further adjusted to eliminate the impacts of lease bonus and other ~~revenue~~revenues we receive due to the unpredictability of timing and magnitude of the revenue.

Adjusted EBITDA and Adjusted EBITDA ex lease bonus do not represent and should not be considered alternatives to, or more meaningful than, net income ~~income from operations, cash flows from operating activities~~ or any other measure of financial performance presented in accordance with GAAP as measures of our financial performance. Adjusted EBITDA and Adjusted EBITDA ex lease bonus have important limitations as analytical tools because they exclude some but not all items that affect net income, the most directly comparable GAAP financial measure. Our computation of Adjusted EBITDA and Adjusted EBITDA ex lease bonus may differ from computations of similarly titled measures of other companies.

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The following table presents a reconciliation of Adjusted EBITDA and Adjusted EBITDA ex lease bonus to the most directly comparable GAAP financial measure for the periods indicated.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended				Six Months Ended
(In thousands)	(In thousands)	2020		2019		2020		2019		(In thousands)	June 30, 2021		March 31, 2021		June 30, 2021		June 30, 2020
Reconciliation of Adjusted EBITDA and Adjusted EBITDA ex lease bonus to net income:
Net (loss) income		$	(13,017)	$	8,464	$	(11,032)	$	9,293
Reconciliation of Adjusted EBITDA and Adjusted EBITDA ex lease bonus to Net Income:										Reconciliation of Adjusted EBITDA and Adjusted EBITDA ex lease bonus to Net Income:
Net Income (Loss)										Net Income (Loss)	$	15,326	$	12,071	$	27,397	$	1,985

Add:	Add:									Add:
Depreciation, depletion, and amortization	Depreciation, depletion, and amortization	11,801		8,434		35,827		20,310		Depreciation, depletion, and amortization	9,080		9,367		18,447		24,026
Impairment of oil and gas properties		18,905		—		18,905		—
Share based compensation expense		1,956		1,737		5,692		8,232

Share-based compensation expense										Share-based compensation expense	2,555		2,300		4,855		3,736
Interest expense	Interest expense	118		65		695		5,160		Interest expense	387		267		654		577
Loss on extinguishment of debt		—		—		—		6,933
Loss on derivative instruments, net		—		—		—		521

Income tax expense	Income tax expense	—		807		—		1,114		Income tax expense	3,430		3,073		6,503		732
Less:	Less:									Less:
Gain on derivative instruments, net		—		91		—		—

Other income, net	Other income, net	4		130		29		165		Other income, net	2		13		15		25
Income tax benefit		2,982		—		2,250		—

Adjusted EBITDA	Adjusted EBITDA	$	16,777	$	19,286	$	47,808	$	51,398	Adjusted EBITDA	$	30,776	$	27,065	$	57,841	$	31,031
Less:	Less:									Less:
Lease bonus and other revenues	Lease bonus and other revenues	1,510		972		5,478		3,127		Lease bonus and other revenues	806		1,597		2,403		3,968
Adjusted EBITDA ex lease bonus	Adjusted EBITDA ex lease bonus	$	15,267	$	18,314	$	42,330	$	48,271	Adjusted EBITDA ex lease bonus	$	29,970	$	25,468	$	55,438	$	27,063

Sources of Our Revenues

Our revenues are primarily derived from the mineral and royalty payments we receive from our operators based on the sale of oil, natural gas and NGLs produced from our properties, as well as from lease bonus payments. Mineral and royalty revenues may vary significantly from period to period as a result of changes in volumes of production sold by our operators, production mix and commodity prices. Lease bonus and other revenues vary from period to period as a result of leasing activity on our mineral interests.

The following table presents the breakdown of our revenues for the following periods:

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Royalty revenues
Oil sales 71 % 83 % 74 % 79 %
Natural gas sales 12 % 8 % 10 % 10 %
NGL sales 10 % 5 % 8 % 6 %
Total royalty revenue 93 % 96 % 92 % 95 %
Lease bonus and other revenues 7 % 4 % 8 % 5 %
Total revenues 100 % 100 % 100 % 100 %


	Three Months Ended				Six Months Ended June 30,
	June 30, 2021		March 31, 2021		2021		2020

Royalty revenues
Oil sales	71	%	68	%	69	%	74	%
Natural gas sales	18	%	15	%	17	%	10	%
NGL sales	9	%	12	%	11	%	7	%
Total royalty revenue	98	%	95	%	97	%	91	%
Lease bonus and other revenues	2	%	5	%	3	%	9	%
Total revenues	100	%	100	%	100	%	100	%

Principle Components of Our Cost Structure

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The following is a description of the principle components of our cost structure. However, as an owner of mineral and royalty interests, we are not obligated to fund drilling and completion capital expenditures to bring a horizontal well on line, lease operating expenses to produce our oil, natural gas and NGLs nor the plugging and abandonment costs at the end of a well’s economic life. All of the aforementioned costs are borne entirely by the exploration and production companies that have leased our mineral and royalty interests.

Gathering, Transportation and Marketing Expenses

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Gathering, transportation and marketing expenses include the costs to process and transport our production to applicable sales points. Generally, the terms of the lease governing the development of our properties permits the operator to pass through these expenses to us by deducting a pro rata portion of such expenses from our production revenues.

Severance and Ad Valorem Taxes

Severance taxes are paid on sold oil, natural gas or NGLs based on either a percentage of revenues from production sold or the number of units of production sold at fixed rates established by federal, state or local taxing authorities. In general, the production taxes we pay correlate to changes in our oil, natural gas and NGL revenues, which is driven by our production volumes and prices received for our oil, natural gas and NGLs. We are also subject to ad valorem taxes in the counties where our production is located. Ad valorem taxes are generally based on the state or local government’s appraisal of the value of our oil, natural gas and NGL properties, which also trend with anticipated production, as well as oil, natural gas and NGL prices. Rates, methods of calculating property values and timing of payments vary across the different counties in which we own mineral and royalty interests.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization ("DD&A") is the systematic expensing of the capitalized costs incurred to acquire evaluated oil and natural gas properties. We use the full cost method of accounting, and, as such, all acquisition-related costs to acquire evaluated properties are capitalized and amortized in aggregate based on the estimated economic productive lives of our properties. Depletion is the expense recorded based on the cost basis of our properties and the volume of hydrocarbons extracted during each respective period, calculated on a units-of-production basis. Estimates of proved reserves are a major component of our calculation of depletion. We adjust our depletion rates quarterly based upon the quarter-end internally generated reserve reports. The year-end reserve reports are audited by Cawley, Gillespie & Associates, Inc., our independent reserve ~~engineers ("CG&A").~~engineers.

General and Administrative

General and administrative (“G&A”) expenses are costs incurred for overhead, including payroll and benefits for our staff, share-based compensation expense, costs of maintaining our headquarters, costs of managing our properties, audit and other fees for professional services and legal compliance. As a result of becoming a public company, we incurred incremental G&A expenses including, but not limited to, costs associated with hiring new personnel, implementation of compensation programs that are competitive with our public company peer group including share-based compensation, annual and quarterly reports to ~~stockholders,~~shareholders, tax return preparation, independent and internal auditor fees, investor relations activities, ~~capital markets activities, registrar and transfer agent fees,~~ incremental director and officer liability insurance costs, ~~and~~ independent director ~~compensation. These incremental G&A expenses are not reflected in our historical financial statements before the IPO date.~~compensation, other fees for professional services and legal compliance.

Interest Expense

We finance a portion of our working capital requirements and acquisitions with borrowings under our revolving credit facility. As a result, we incur interest expense that is affected by both fluctuations in interest rates and our financing decisions. We reflect interest and loan commitment fees paid to the lenders under our debt arrangements (currently, our revolving credit facility) and amortization of debt issuance costs in interest expense.

Income Tax Expense

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Brigham Minerals is subject to U.S. federal and state income taxes as a corporation. Texas imposes a franchise tax (commonly referred to as the Texas margin tax) at a rate of up to 1.00% on gross revenues less certain deductions, as specifically set forth in the Texas margin tax statute. A portion of our mineral and royalty interests are located in Texas basins. ~~Our predecessor was treated as~~

Results of Operations

On November 19, 2020, the SEC adopted amendments to modernize and simplify Regulation S-K, including its Management’s Discussion and Analysis and certain financial disclosure requirements. Specifically, the final rule gives registrants the option to disclose their results of operations of the most recently completed fiscal quarter compared to the immediately preceding fiscal quarter rather than compared to the corresponding fiscal quarter of the prior year. We believe that a ~~flow-through entity, and~~comparison of the results of operations of the most recently completed fiscal quarter to the immediately preceding fiscal quarter is ~~currently treated as a disregarded entity, for U.S. federal income tax purposes and, as such, is generally not subject to U.S. federal income tax at the entity level.~~more

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~~Results~~meaningful and useful to investors than comparing the most recently completed fiscal quarter to the corresponding fiscal quarter of ~~Operations~~the prior year, and we voluntary complied with the amendments beginning in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. As a result of our voluntary compliance, we are presenting a comparison of the results of operations of the three months ended June 30, 2021 to the three months ended March 31, 2021 and of the six months ended June 30, 2021 to the six months ended June 30, 2020.

Three Months Ended ~~September~~June 30, ~~2020~~2021 Compared to Three Months Ended ~~September 30, 2019~~March 31, 2021

The following table provides the components of our revenues and expenses for the periods indicated, as well as each period’s respective average prices and production volumes:


		Three Months Ended September 30,									Three Months Ended
(Dollars in thousands, except for realized prices and unit expenses)	(Dollars in thousands, except for realized prices and unit expenses)	2020		2019		Variance				(Dollars in thousands, except for realized prices and unit expenses)	June 30, 2021		March 31, 2021		Variance
Production:	Production:									Production:
Oil (MBbls)	Oil (MBbls)	456		388		68		18	%	Oil (MBbls)	424		411		13		3	%
Natural gas (MMcf)	Natural gas (MMcf)	1,371		1,334		37		3	%	Natural gas (MMcf)	1,465		1,451		14		1	%
NGLs (MBbls)	NGLs (MBbls)	172		110		62		56	%	NGLs (MBbls)	150		151		(1)		(1)	%
Equivalents (MBoe)	Equivalents (MBoe)	857		720		137		19	%	Equivalents (MBoe)	818		804		14		2	%
Equivalents per day (Boe/d)	Equivalents per day (Boe/d)	9,318		7,828		1,490		19	%	Equivalents per day (Boe/d)	8,988		8,931		57		1	%
Revenues:	Revenues:									Revenues:
Oil sales	Oil sales	$	16,586	$	20,799	$	(4,213)	(20)	%	Oil sales	$	26,729	$	22,813	$	3,916	17	%
Natural gas sales	Natural gas sales	2,770		2,132		638		30	%	Natural gas sales	6,704		5,437		1,267		23	%
NGL sales	NGL sales	2,212		1,204		1,008		84	%	NGL sales	3,572		3,926		(354)		(9)	%
Total mineral and royalty revenue	Total mineral and royalty revenue	$	21,568	$	24,135	$	(2,567)	(11)	%	Total mineral and royalty revenue	$	37,005	$	32,176	$	4,829	15	%
Lease bonus and other revenue	Lease bonus and other revenue	1,510		972		538		55	%	Lease bonus and other revenue	806		1,597		(791)		(50)	%
Total revenues	Total revenues	$	23,078	$	25,107	$	(2,029)	(8)	%	Total revenues	$	37,811	$	33,773	$	4,038	12	%
Realized prices, without derivatives:
Realized prices										Realized prices
Oil ($/Bbl)	Oil ($/Bbl)	$	36.34	$	53.61	$	(17.27)	(32)	%	Oil ($/Bbl)	$	63.11	$	55.55	$	7.56	14	%
Natural gas ($/Mcf)	Natural gas ($/Mcf)	2.02		1.60		0.42		26	%	Natural gas ($/Mcf)	4.58		3.75		0.83		22	%
NGLs ($/Bbl)	NGLs ($/Bbl)	12.84		10.96		1.88		17	%	NGLs ($/Bbl)	23.77		25.97		(2.20)		(8)	%
Equivalents ($/Boe)	Equivalents ($/Boe)	$	25.16	$	33.51	$	(8.35)	(25)	%	Equivalents ($/Boe)	$	45.24	$	40.03	$	5.21	13	%
Realized prices, with derivatives:
Oil ($/Bbl) (1)		$	36.34	$	53.92	$	(17.58)	(33)	%
Equivalents ($/Boe) (1)		$	25.16	$	33.68	$	(8.52)	(25)	%
Operating expenses:	Operating expenses:									Operating expenses:
Gathering, transportation and marketing	Gathering, transportation and marketing	$	1,702	$	1,113	$	589	53	%	Gathering, transportation and marketing	$	1,593	$	1,733	$	(140)	(8)	%
Severance and ad valorem taxes	Severance and ad valorem taxes	1,393		1,377		16		1	%	Severance and ad valorem taxes	2,300		1,833		467		25	%
Depreciation, depletion, and amortization	Depreciation, depletion, and amortization	11,801		8,434		3,367		40	%	Depreciation, depletion, and amortization	9,080		9,367		(287)		(3)	%
Impairment of oil and gas properties		18,905		—		18,905		***

General and administrative (before share-based compensation)	General and administrative (before share-based compensation)	3,206		3,331		(125)		(4)	%	General and administrative (before share-based compensation)	3,142		3,142		—		—	%
Total operating expenses (before share-based compensation)	Total operating expenses (before share-based compensation)	$	37,007	$	14,255	$	22,752	160	%	Total operating expenses (before share-based compensation)	$	16,115	$	16,075	$	40	—	%
Share-based compensation	Share-based compensation	1,956		1,737		219		13	%	Share-based compensation	2,555		2,300		255		11	%
Total operating expenses	Total operating expenses	$	38,963	$	15,992	$	22,971	144	%	Total operating expenses	$	18,670	$	18,375	$	295	2	%
Other expenses:	Other expenses:									Other expenses:
Interest expense, net	Interest expense, net	$	118	$	65	$	53	82	%	Interest expense, net	$	387	$	267	$	120	45	%
Total other expenses										Total other expenses	$	387	$	267	$	120	45	%

Gain on derivative instruments, net		—		(91)		91		(100)	%
Total other expenses		$	118	$	(26)	$	144	***

~~(1)~~
Hedged prices reflect the effect of our commodity derivative transactions on our average sales prices. Our calculation of such effects include realized gains and losses on cash settlements for commodity derivatives, which we do not designate for hedge accounting.

*** A percentage calculation is not meaningful due to change in signs, zero-value denominator.

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Three Months Ended September 30,
Unit Expenses ($/Boe) 2020 2019 Variance
Gathering, transportation and marketing $ 1.99 $ 1.55 $ 0.44 28 %
Severance and ad valorem taxes 1.63 1.91 (0.28) (15) %
Depreciation, depletion and amortization 13.77 11.71 2.06 18 %
General and administrative (before share-based compensation) 3.74 4.63 (0.89) (19) %
General and administrative, share-based compensation 2.28 2.41 (0.13) (5) %
Interest expense, net 0.14 0.09 0.05 56 %


	Three Months Ended
Unit Expenses ($/Boe)	June 30, 2021		March 31, 2021		Variance
Gathering, transportation and marketing	$	1.95	$	2.16	$	(0.21)	(10)	%
Severance and ad valorem taxes	2.81		2.28		0.53		23	%
Depreciation, depletion and amortization	11.10		11.65		(0.55)		(5)	%
General and administrative (before share-based compensation)	3.84		3.91		(0.07)		(2)	%
General and administrative, share-based compensation	3.12		2.86		0.26		9	%
Interest expense, net	0.47		0.33		0.14		42	%

Revenues

Total revenues for the three months ended ~~September~~June 30, ~~2020 decreased 8%~~2021 increased 12%, or ~~$2.0~~$4.0 million, compared to the three months ended ~~September 30, 2019.~~March 31, 2021. The ~~decrease~~increase was attributable to a ~~$2.5~~$4.8 million ~~decrease~~increase in mineral and royalty revenues, partially offset by ~~a $0.5~~an $0.8 million ~~increase~~decrease in lease bonus and other revenues during the period. The ~~decrease~~increase in mineral and royalty revenue was primarily attributable to the ~~25% decrease~~13% increase in realized commodity prices, resulting in ~~a decrease~~an increase in royalty revenues of ~~$7.1 million. This was partially offset by~~$4.3 million, and a ~~19%~~1% increase in production volumes to ~~9,318~~8,988 Boe/d, resulting in an increase in royalty revenues of $4.6 million, which was primarily attributable to the drilling and completion activity on our mineral and royalty interests in the Permian Basin. In particular, production volumes in the Permian Basin increased 46% compared to the corresponding period from the prior year.$0.5 million.

Oil revenues for the three months ended ~~September~~June 30, ~~2020 decreased 20%~~2021 increased 17%, or ~~$4.2~~$3.9 million, compared to the three months ended ~~September 30, 2019.~~March 31, 2021. The ~~decrease~~increase in oil revenues was ~~primarily~~ attributable to the ~~32% decrease~~14% increase in realized oil prices to ~~$36.34~~$63.11 per barrel, resulting in ~~a decrease~~an increase in revenues of ~~$7.9 million. This was offset by~~$3.2 million, and a ~~18%~~3% increase in oil production volumes to ~~4,961~~4,654 barrels per day, resulting in a ~~$3.7~~$0.7 million increase in oil revenues. The increase in oil production volumes for the period was primarily attributable to the drilling and completion activity on our properties in the Permian Basin. In particular, oil production volumes in the Permian Basin increased 39% compared to the corresponding period from the prior year.

Natural gas revenues for the three months ended ~~September~~June 30, ~~2020~~2021 increased ~~30%~~23%, or ~~$0.6~~$1.3 million, compared to the three months ended ~~September 30, 2019.~~March 31, 2021. The increase in natural gas revenues was primarily attributable to the ~~26%~~22% increase in realized natural gas prices to ~~$2.02~~$4.58 per Mcf attributable to Winter Storm Uri, resulting in an increase in revenues of ~~$0.5~~$1.2 million. Additionally, production volumes increased by 3% to 14,905 Mcf/d, resulting in a $0.1 million increase in natural gas revenues. The increase in natural gas production volumes for the period was primarily attributable to ongoing drilling and completion activity on our properties in the Permian Basin.

NGL revenues for the three months ended ~~September~~June 30, ~~2020 increased 84%~~2021 decreased 9%, or ~~$1.0~~$0.4 million, compared to the three months ended ~~September 30, 2019.~~March 31, 2021. The ~~increase~~decrease in NGL revenues was primarily attributable to the ~~56% increase~~8% decrease in NGL volumes to 1,872 barrels per day, resulting in an increase in revenues of $0.7 million. The increase in NGL production volumes was largely attributable to the ongoing drilling and completion activity on our properties in the Permian and Anadarko Basins. In addition,realized NGL prices ~~increased 17%~~ to ~~$12.84~~$23.77 per barrel, resulting in ~~an increase~~a decrease in NGL revenues of $0.3 million.

Lease Bonus and Other Revenues

When we lease our minerals, we generally receive an upfront cash payment, or a lease bonus. The ~~increase~~$0.8 million decrease in revenues from lease bonus payments for the three months ended ~~September~~June 30, ~~2020~~2021 is primarily attributable to the ~~increase~~$1.3 million decrease in leasing activity in the Permian Basin, partially offset by the ~~decrease~~$0.5 million increase in leasing activity in ~~the Anadarko and~~ DJ ~~Basins.~~basin. Other revenues include payments for right-of-way and surface damages and were not a significant portion of the overall amount.

Operating Expenses

Gathering, transportation and marketing expenses ("GTM") ~~expenses~~. For the three months ended ~~September~~June 30, ~~2020,~~2021, GTM expenses ~~increased 53%, or $0.6 million,~~decreased 8% compared to the three months ended ~~September 30, 2019,~~March 31, 2021, primarily due to an overall 10% decrease in GTM rate to $1.95 per Boe for the ~~increase in Permian Basin production volumes.~~three months ended June 30, 2021 compared to $2.16 per Boe for the three months ended March 31, 2021.

Severance and ad valorem taxes. For the three months ended ~~September~~June 30, ~~2020,~~2021, severance and ad valorem taxes increased 1%25%, or ~~$16,000,~~$0.5 million, over the three months ended ~~September 30, 2019,~~March 31, 2021, primarily due to the ~~19%~~ increase in ~~production volumes offset~~mineral and royalty revenues which was driven by ~~a decrease~~an increase in realized commodity prices of ~~25%~~13%.

~~Table of Contents~~

Depreciation, depletion and amortization. DD&A expense ~~increased 40%~~decreased 3%, or ~~$3.4~~$0.3 million, for the three months ended ~~September~~June 30, ~~2020~~2021 as compared to the three months ended ~~September 30, 2019. Higher~~March 31, 2021. A lower depletion rate decreased our depletion expense by $0.5 million. This was partially offset by slightly higher production volumes, which increased our depletion expense by ~~$1.6 million and a higher depletion rate increased our depletion expense by $1.8~~$0.2 million. The depletion rate was ~~$13.58~~$11.03 per Boe and ~~$11.49~~$11.58 per Boe for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~the three months ended March 31, 2021, respectively. The ~~increase~~decrease in the depletion rate was primarily a result of ~~recent acquisition efforts focused on largely de-risked acreage with~~ an increased likelihood of near-term production and development, as well as reclassification of proved undeveloped reserves to probable and possible reserves due to changes in the development timing largely in the Anadarko Basin. We adjust our depletion rates quarterly based upon the quarter-end internally generated reserve reports.

~~Impairment of oil and gas properties.~~ ~~At September 30, 2020, the net capitalized costs~~8% increase of our oil and gas properties exceeded the full cost ceiling limitation primarily due to the decline in oil and gas prices. As a result, we recorded an $18.9 million impairment of our oil and gas properties, nettotal proved reserves for the three months ended ~~September~~June 30, 2020. In determining the full cost ceiling impairment at September 30, 2020, we estimated the PV-10 of our total proved oil and natural gas reserves using the SEC oil price and the SEC gas price of $43.55 per Bbl and $1.98 per MMbtu, respectively, which is a decrease of 25% and 32%, respectively, from the September 30, 2019 SEC oil price and SEC gas price of $57.97 per Bbl and $2.91 per MMbtu, respectively. No impairment charge was recorded for2021 compared to the three months ended ~~September 30, 2019.~~March 31, 2021 as a result of higher SEC pricing.

General and administrative and share-based compensation. General and administrative expense (before share-based compensation) ~~decreased 4%, or $0.1 million,~~was unchanged for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to the three months ended ~~September 30, 2019 which included $0.3 million in incremental legal, professional, audit, and tax fees as a result~~March 31, 2021.

Table of ~~the Company's September 2020 Secondary Offering.~~Contents

Share-based compensation expense for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~$1.9~~$2.6 million, net of ~~$0.8~~$0.6 million of share-based compensation cost capitalized to unevaluated property and $1.3 million of share-based compensation cost capitalized to evaluated property. Share-based compensation expense for the three months ended March 31, 2021 was $2.3 million, net of $0.9 million of share-based compensation cost capitalized to unevaluated property and $0.7 million of share-based compensation cost capitalized to evaluated property. ~~Share-based~~The sequential increase in share-based compensation expense ~~for~~of $0.3 million was primarily due to additional grants of PSUs that were granted during the three months ended ~~September~~June 30, ~~2019 was $1.7 million, net of $1.4 million of share-based compensation cost capitalized to unevaluated property.~~2021. See table below for additional details.


	Three Months Ended
(In thousands)	June 30, 2021		March 31, 2021		Variance
Incentive Units	$	178	$	178	$	—
RSAs	163		134		29
RSUs	2,534		2,542		(8)
PSUs	1,534		1,079		455
Capitalized share-based compensation	(1,854)		(1,633)		(221)
Total share-based compensation expense	$	2,555	$	2,300	$	255

Interest expense, net. Interest expense, net increased $0.1 million for the three months ended ~~September~~June 30, ~~2020~~2021 compared to the three months ended ~~September 30, 2019,~~March 31, 2021, primarily due to anthe sequential increase of our weighted average debt outstanding from $23.9 million to $37.8 million as shown in ~~loan commitment fees.~~the table below.

~~Gain on derivative instruments, net~~. Brigham Minerals had oil derivative contracts in place which expired as of December 31, 2019. For the three months ended September 30, 2019, the Company recognized a net gain on oil derivative instruments of $0.1 million. See "Note 6—Derivative Instruments" to the condensed consolidated and combined financial statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion.


	Three Months Ended
(In thousands, except for interest rate)	June 30, 2021			March 31, 2021			Variance

Interest expense - revolving credit facility	$	190		$	113		$	77
Commitment fees	127			104			23
Amortization of loan closing costs	82			58			24
Interest income	(12)			(8)			(4)
Total interest expense, net	$	387		$	267		$	120

Total weighted average interest rate	1.98		%	1.90		%

Total weighted average debt balance	$	37,802		$	23,911

3530

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~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020

The following table provides the components of our revenues and expenses for the periods indicated, as well as each period’s respective average prices and production volumes:


		Nine Months Ended September 30,									Six Months Ended June 30,
(Dollars in thousands, except for realized prices and unit expenses)	(Dollars in thousands, except for realized prices and unit expenses)	2020		2019		Variance				(Dollars in thousands, except for realized prices and unit expenses)	2021		2020		Variance
Production:	Production:									Production:
Oil (MBbls)	Oil (MBbls)	1,378		1,001		377		38	%	Oil (MBbls)	834		921		(87)		(9)	%
Natural gas (MMcf)	Natural gas (MMcf)	4,358		3,269		1,089		33	%	Natural gas (MMcf)	2,916		2,986		(70)		(2)	%
NGLs (MBbls)	NGLs (MBbls)	505		274		231		84	%	NGLs (MBbls)	301		333		(32)		(10)	%
Equivalents (MBoe)	Equivalents (MBoe)	2,609		1,820		789		43	%	Equivalents (MBoe)	1,621		1,752		(131)		(7)	%
Equivalents per day (Boe/d)	Equivalents per day (Boe/d)	9,524		6,668		2,856		43	%	Equivalents per day (Boe/d)	8,959		9,628		(669)		(7)	%
Revenues:	Revenues:									Revenues:
Oil sales	Oil sales	$	49,941	$	53,514	$	(3,573)	(7)	%	Oil sales	$	49,542	$	33,353	$	16,189	49	%
Natural gas sales	Natural gas sales	7,115		7,028		87		1	%	Natural gas sales	12,141		4,346		7,795		179	%
NGL sales	NGL sales	5,429		4,232		1,197		28	%	NGL sales	7,498		3,218		4,280		133	%
Total mineral and royalty revenue	Total mineral and royalty revenue	$	62,485	$	64,774	$	(2,289)	(4)	%	Total mineral and royalty revenue	$	69,181	$	40,917	$	28,264	69	%
Lease bonus and other revenue	Lease bonus and other revenue	5,478		3,127		2,351		75	%	Lease bonus and other revenue	2,403		3,968		(1,565)		(39)	%
Total revenues	Total revenues	$	67,963	$	67,901	$	62	0	%	Total revenues	$	71,584	$	44,885	$	26,699	59	%
Realized prices, without derivatives:
Realized prices										Realized prices
Oil ($/Bbl)	Oil ($/Bbl)	$	36.25	$	53.45	$	(17.20)	(32)	%	Oil ($/Bbl)	$	59.39	$	36.20	$	23.19	64	%
Natural gas ($/Mcf)	Natural gas ($/Mcf)	1.63		2.15		(0.52)		(24)	%	Natural gas ($/Mcf)	4.16		1.46		2.70		185	%
NGLs ($/Bbl)	NGLs ($/Bbl)	10.74		15.43		(4.69)		(30)	%	NGLs ($/Bbl)	24.88		9.66		15.22		158	%
Equivalents ($/Boe)	Equivalents ($/Boe)	$	23.95	$	35.58	$	(11.63)	(33)	%	Equivalents ($/Boe)	$	42.66	$	23.35	$	19.31	83	%
Realized prices, with derivatives:
Oil ($/Bbl) (1)		$	36.25	$	53.80	$	(17.55)	(33)	%
Equivalents ($/Boe) (1)		$	23.95	$	35.78	$	(11.83)	(33)	%
Operating expenses:	Operating expenses:									Operating expenses:
Gathering, transportation and marketing	Gathering, transportation and marketing	$	5,106	$	3,750	$	1,356	36	%	Gathering, transportation and marketing	$	3,326	$	3,404	$	(78)	(2)	%
Severance and ad valorem taxes	Severance and ad valorem taxes	4,179		4,206		(27)		(1)	%	Severance and ad valorem taxes	4,133		2,786		1,347		48	%
Depreciation, depletion, and amortization	Depreciation, depletion, and amortization	35,827		20,310		15,517		76	%	Depreciation, depletion, and amortization	18,447		24,026		(5,579)		(23)	%
Impairment of oil and gas properties		18,905		—		18,905		***

General and administrative (before share-based compensation)	General and administrative (before share-based compensation)	10,870		8,547		2,323		27	%	General and administrative (before share-based compensation)	6,284		7,664		(1,380)		(18)	%
Total operating expenses (before share-based compensation)	Total operating expenses (before share-based compensation)	$	74,887	$	36,813	$	38,074	103	%	Total operating expenses (before share-based compensation)	$	32,190	$	37,880	$	(5,690)	(15)	%
Share-based compensation	Share-based compensation	5,692		8,232		(2,540)		(31)	%	Share-based compensation	4,855		3,736		1,119		30	%
Total operating expenses	Total operating expenses	$	80,579	$	45,045	$	35,534	79	%	Total operating expenses	$	37,045	$	41,616	$	(4,571)	(11)	%
Other expenses:	Other expenses:									Other expenses:
Interest expense, net	Interest expense, net	$	695	$	5,160	$	(4,465)	(87)	%	Interest expense, net	$	654	$	577	$	77	13	%
Loss on extinguishment of debt		—		6,933		(6,933)		(100)	%
Loss on derivative instruments, net		—		521		(521)		(100)	%

Total other expenses	Total other expenses	$	695	$	12,614	$	(11,919)	(94)	%	Total other expenses	$	654	$	577	$	77	13	%

~~(1)~~Hedged prices reflect the effect of our commodity derivative transactions on our average sales prices. Our calculation of such effects include realized gains and losses on cash settlements for commodity derivatives, which we do not designate for hedge accounting.

*** A percentage calculation is not meaningful due to change in signs, zero-value denominator.


	Six Months Ended June 30,
Unit Expenses ($/Boe)	2021		2020		Variance
Gathering, transportation and marketing	$	2.05	$	1.94	$	0.11	6	%
Severance and ad valorem taxes	2.55		1.59		0.96		60	%
Depreciation, depletion and amortization	11.38		13.71		(2.33)		(17)	%
General and administrative (before share-based compensation)	3.87		4.37		(0.50)		(11)	%
General and administrative, share-based compensation	2.99		2.13		0.86		40	%
Interest expense, net	0.40		0.33		0.07		21	%

3631

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Nine Months Ended September 30,
Unit Expenses ($/Boe) 2020 2019 Variance
Gathering, transportation and marketing $ 1.96 $ 2.06 $ (0.10) (5) %
Severance and ad valorem taxes 1.60 2.31 (0.71) (31) %
Depreciation, depletion and amortization 13.73 11.16 2.57 23 %
General and administrative (before share-based compensation) 4.17 4.69 (0.52) (11) %
General and administrative, share-based compensation 2.18 4.52 (2.34) (52) %
Interest expense, net 0.27 2.83 (2.56) (90) %

Revenues

Total revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 increased ~~$0.1~~59%, or $26.7 million, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The increase was attributable to a ~~$2.4~~$28.3 million increase in mineral and royalty revenues offset by a $1.6 million decrease in lease bonus and other revenues ~~offset by a $2.3 million decrease in mineral and royalty revenues~~ during the period. The ~~decrease~~increase in mineral and royalty revenue was primarily attributable to ~~a 33% decrease~~the 83% increase in realized commodity prices, resulting in ~~a decrease~~an increase in royalty revenues of ~~$30.4~~$31.3 million. This was partially offset by a ~~43% increase~~7% decrease in production volumes to ~~9,524~~8,959 Boe/d, ~~and a corresponding increase~~resulting in an decrease in revenues of ~~$28.1 million~~$3.0 million. The decrease in production volumes was primarily due to the ~~increased~~reduction in drilling activity which started during the second quarter of 2020 associated with COVID-19 and ~~completion activity on our mineral and royalty interests in~~ the ~~Permian Basin. In particular,~~OPEC + production ~~volumes in the Permian Basin for the nine months ended September 30, 2020 were up 84%, compared to the nine months ended September 30, 2019.~~dispute as well as Winter Storm Uri's February 2021 production curtailments.

Oil revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020 decreased 7%~~2021 increased 49%, or ~~$3.6~~$16.2 million, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease~~increase in oil revenues was ~~primarily~~ attributable to ~~a 32% decrease~~the 64% increase in realized oil prices to ~~$36.25~~$59.39 per barrel, resulting in ~~a decrease~~an increase in revenues of ~~$23.7~~$19.3 million. This was partially offset by ~~an increase~~a 9% decrease in oil production volumes ~~of 38%~~ to ~~5,029~~4,609 barrels per day, resulting in a ~~$20.1~~$3.1 million ~~increase~~decrease in oil revenues. The increase in oil production volumes for the period was primarily attributable to increased drilling and completion activity on our properties in the Permian Basin. In particular, oil production volumes in the Permian Basin for the nine months ended September 30, 2020 were up 82% compared to the nine months ended September 30, 2019.

Natural gas revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 increased 1%179%, or ~~$0.1~~$7.8 million, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The increase in natural gas revenues was ~~primarily~~ attributable to ~~a 33%~~the 185% increase in realized natural gas prices to $4.16 per Mcf, resulting in an increase in revenues of $7.9 million. This was partially offset by the 2% decrease in natural gas production volumes to ~~15,904~~16,110 Mcf/d, resulting in a ~~$2.3~~$0.1 million ~~increase~~decrease in natural gas revenues. The increase in natural gas production volumes for the period was primarily attributable to increased drilling and completion activity on our properties in the Permian Basin. This was offset by a 24% decrease in realized natural gas prices to $1.63 per Mcf, resulting in a decrease in revenues of $2.2 million.

NGL revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 increased ~~28%~~133%, or ~~$1.2~~$4.3 million, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The increase in NGL ~~production volumes increased 84%~~revenues was attributable to ~~1,844 barrels~~the 158% increase in NGL prices to $24.88 per ~~day,~~barrel, resulting in an increase in NGL revenues of ~~$3.6~~$4.6 million. ~~The increase in NGL production volumes was largely attributable to the increase in drilling and completion activity on our properties in the Permian Basin.~~ This was partially offset by ~~a 30%~~the 10% decrease in ~~realized~~ NGL ~~prices~~volumes to ~~$10.74~~1,665 barrels per ~~barrel,~~day, resulting in a decrease in revenues of ~~$2.4 million in NGL revenues.~~

$0.3 million.

Lease Bonus and Other Revenues

When we lease our minerals, we generally receive an upfront cash payment, or a lease bonus. The ~~increase~~decrease in revenues from lease bonus payments for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 is primarily attributable to the ~~increase~~$2.0 million decrease in leasing activity in the Permian ~~Basin.~~Basin partially offset by the $0.5 million increase in leasing activity in DJ basin. Other revenues include payments for right-of-way and surface damages and were not a significant portion of the overall amount.

Operating Expenses

Gathering, transportation and marketing expenses. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, GTM ~~expense increased 36%, or $1.4 million~~expenses decreased 2% compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020 primarily due to ~~higher~~the 7% decrease in production volumes.

~~Table of Contents~~

Severance and ad valorem taxes. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, severance and ad valorem taxes ~~decreased 1%,~~increased 48% compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019, consistent with~~2020, due to the ~~relatively flat~~69% increase in mineral and royalty revenues ~~over the periods.~~which was primarily due to an increase in realized commodity prices of 83%, partially offset by a 7% decrease in production volumes.

Depreciation, depletion and amortization. DD&A expense ~~increased 76%~~decreased 23%, or ~~$15.5~~$5.6 million, for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. Higher~~2020. A lower depletion rate decreased our depletion expense by $3.3 million and lower production volumes ~~increased~~also decreased our ~~DD&A~~depletion expense by ~~$8.6 million and a higher depletion rate increased our DD&A expense by $6.5~~$1.7 million. The depletion rate was ~~$13.40~~$11.30 per Boe and ~~$10.91~~$13.31 per Boe for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~increase~~decrease in the depletion rate was primarily a result of ~~recent acquisition efforts focused on largely de-risked acreage with an increased likelihood~~the impairment charge of ~~near-term production and development, as well as reclassification of proved undeveloped reserves to probable and possible reserves due to changes~~$79.6 million for the year ended December 31, 2020, resulting in lower depletable cost (or amortizable base) in the ~~development timing largely in~~calculation of the ~~Anadarko Basin. We adjust our~~ depletion ~~rates quarterly based upon the quarter-end internally generated reserve reports.~~

~~Impairment of oil and gas properties.~~ At September 30, 2020, the net capitalized costs of our oil and gas properties exceeded the full cost ceiling limitation primarily due to the decline in oil and gas prices. As a result, we recorded an $18.9 million impairment of our oil and gas properties, netrate for the ~~nine~~six months ended ~~September~~June 30, 2020. In determining the full cost ceiling impairment at September 30, 2020, we estimated the PV-10 of our total proved oil and natural gas reserves using the SEC oil price and SEC gas price of $43.55 per Bbl and $1.98 per MMbtu, respectively, a decrease of 25% and 32%, respectively, from the September 30, 2019 SEC oil price and SEC gas price of $57.97 per Bbl and $2.91 per MMbtu, respectively. No impairment charge was recorded for the nine months ended September 30, 2019 .2021.

General and administrative and share-based ~~compensation~~compensation. . General and administrative ~~expenses~~expense (before share-based compensation) ~~increased 27%~~decreased 18%, or ~~$2.3~~$1.4 million, for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019. Increases to G&A expenses are~~2020 as a result ~~of: (i) $1.0 million incremental D&O insurance expense~~of the Company's ongoing efforts to reduce its overall general and ~~Board of Directors fees; (ii) $0.7~~administrative expenses and the $0.5 million in incremental legal, professional, audit, and tax fees ~~as a result of~~attributable to the Company's June ~~and September~~ 2020 Secondary Offerings; (iii) $0.3 million in incremental fees associated with our first proxy filing and various stock exchange fees that were not incurred during the nine months ended September 30, 2019 ; and (iv) $0.3 million of additional rent, payroll, legal, audit, and other services.Offering.

Share-based compensation expense for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~$5.7~~$4.9 million, net of ~~$2.6~~$1.5 million of share-based compensation cost capitalized to unevaluated property and ~~$1.9~~$2.0 million of share-based compensation cost capitalized to evaluated property. Share-based compensation expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$8.2~~$3.7 million , net of ~~$2.4~~$1.8 million of share-based compensation cost capitalized to unevaluated ~~property. At IPO, we recognized a cumulative effect adjustment of $2.0~~property and $1.2 million of share-based compensation cost ~~related~~

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capitalized to ~~the Incentive Units, pertaining~~evaluated property. The increase in share-based compensation expense of $1.1 million was primarily due to ~~the period from the grant date through the IPO. Additionally, in April~~additional grants of ~~2019, in connection with the IPO, we adopted the Brigham Minerals, Inc. 2019 Long Term Incentive Plan ("LTIP") and granted RSAs,~~ RSUs and PSUs ~~to our employees and executives. Certain of~~that were granted during the ~~RSAs vested immediately and we recognized $3.2 million of~~six months ended June 30, 2021. See table below for further details.


	Six Months Ended June 30,
(In thousands)	2021		2020		Variance
Incentive Units	$	356	$	356	$	—
RSAs (1)	297		891		(594)
RSUs	5,076		3,434		1,642
PSUs	2,613		2,054		559
Capitalized share-based compensation	(3,487)		(2,998)		(489)
Total share-based compensation expense	$	4,855	$	3,737	$	1,118

(1)During the three months ended June 30, 2020, share-based compensation cost ~~related to~~included $0.5 million associated with the ~~RSAs. Also, subsequent to the IPO and prior to September 30, 2019, we recognized an additional $5.4 million~~accelerated vesting of share-based compensation cost related to the Incentive Units and the awards granted under the LTIP. No share-based compensation expenses were recognized prior to the IPO because the IPO was not considered probable. See "Note 11—Share-Based Compensation" to the condensed consolidated and combined financial statements of Brigham Minerals included elsewhere30,174 RSAs for certain employees who retired in ~~this Quarterly Report for further discussion.~~February 2020.

Interest expense, net. Interest expense, ~~decreased $4.5~~net increased $0.1 million for the ~~nine~~three months ended ~~September~~June 30, ~~2020~~2021 compared to the ~~nine~~three months ended ~~September~~June 30, 2019, primarily due to due to a decrease in interest expense of $5.2 million related to our Owl Rock credit facility that was fully repaid in May 2019 using a portion of the proceeds from the IPO. This was partially offset by a decrease in interest income of $0.5 million due to lower average bank balance on our interest bearing bank account. In addition, we wrote off debt issuance cost of $0.3 million during the nine months ended September 30, 2020 as a result of the reduction of the borrowing base on our revolving credit facility from $180 million to $135 million that occurred in May 2020. See ~~"Note 8—Long-Term Debt" to the condensed consolidated and combined financial statements of Brigham Minerals included elsewhere in this Quarterly Report~~table below for further details.

~~Loss on extinguishment of debt.~~ As a result of the full repayment of the outstanding balance of the Owl Rock credit facility of $200.0 million in May 2019, we recognized a loss on extinguishment of debt of approximately $6.9 million for the nine months ended September 30, 2019. The loss on extinguishment of debt consisted of a $4.0 million write-off of capitalized debt issuance costs, a $2.1 million prepayment fee and legal fees of $0.8 million. See "Note 8—Long-Term Debt" to the condensed consolidated and combined financial statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion of these transactions.

~~Loss on derivative instruments, net.~~ Brigham Minerals had oil derivative contracts in place which expired on December 31, 2019. For the nine months ended September 30, 2019, we recognized a net loss on derivative instruments of $0.5 million. See

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~~"Note 6—Derivative Instruments" to the condensed consolidated and combined financial statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion.~~


	Six Months Ended June 30,
(In thousands, except for interest rate)	2021			2020			Variance

Interest expense - revolving credit facility	$	302		$	—		$	302
Commitment fees	231			352			(121)
Amortization of loan closing costs	141			488			(347)
Interest income	(20)			(263)			243
Total interest expense, net	$	654		$	577		$	77

Total weighted average interest rate	1.95		%	—		%

Total weighted average debt balance	$	30,895		$	—

Factors Affecting the Comparability of Our Results of Operations ~~to the Historical Results of Operations of Our Predecessor~~

Our future results of operations may not be comparable to the historical results of operations ~~of our predecessor~~ for the periods presented, primarily for the reasons described below.

Corporate ~~Reorganization and~~ Transactions

The historical unaudited condensed consolidated and combined financial statements included in this Quarterly Report for periods on or before April 23, 2019 are based on the financial statements of our predecessor and Brigham Minerals prior to our corporate reorganization consummated in connection with our IPO. As a result, such historical condensed consolidated and combined financial data may not give you an accurate indication of what our actual results would have been if the corporate reorganization had been completed at the beginning of the periods presented or of what our future results of operations are likely to be.

Brigham Minerals acquired an indirect interest in Brigham Resources on July 16, 2018 in a series of restructuring transactions pursuant to which certain entities affiliated with Warburg Pincus LLC ("Warburg Pincus") contributed all of their respective interests in the entities through which they held interests in Brigham Resources to Brigham Minerals in exchange for all of the outstanding shares of common stock of Brigham Minerals (the “July 2018 restructuring”). As a result of such restructuring transactions, Brigham Minerals became wholly owned by an entity affiliated with Warburg Pincus, and Brigham Minerals indirectly owned a 16.5% membership interest in Brigham Resources. The remaining outstanding membership interests of Brigham Resources remained with the Original Owners.

On November 20, 2018, Brigham Resources underwent a second series of restructuring transactions that are collectively referred to in this Quarterly Report as the “November 2018 Restructuring.” In connection with the November 2018 Restructuring, Brigham Resources became a wholly owned subsidiary of Brigham LLC. In April 2019, Brigham Minerals completed the IPO of 16,675,000 shares of Class A common stock at a price to the public of $18.00 per share. As a result of the IPO, Brigham Minerals became a holding company whose sole material asset consisted of a 43.3% interest in Brigham LLC, which wholly owns Brigham Resources. Brigham Resources continues to wholly own the Minerals Subsidiaries, which own all of Brigham Resources’ operating assets. In connection with the IPO, Brigham Minerals became the sole managing member of Brigham LLC and is responsible for all operational, management and administrative decisions relating to Brigham LLC’s business and consolidates the financial results of Brigham LLC and its wholly-owned subsidiary, Brigham Resources.

On June 12, 2020, Brigham Minerals completed an offering of 6,600,000 shares of its Class A common stock (the "June 2020 Secondary Offering"), all of which were sold by certain shareholders of the Company (the “June 2020 Selling Shareholders”), and 4,872,669 of which represented shares issued upon redemption of an equivalent number of the June 2020 Selling Shareholders’ Brigham LLC Units (together with a corresponding number of shares of Class B common stock in Brigham Minerals), at a price to the public of $13.75 per share. Brigham Minerals did not sell any shares of its common stock in the June 2020 Secondary Offering and did not receive any proceeds pursuant to the June 2020 Secondary Offering.

On September 15, 2020, Brigham Minerals completed an offering of 5,021,140 shares of its Class A common stock, including 654,931 shares issued pursuant to the option granted to the underwriter to purchase additional shares to cover over-allotments (the "September 2020 Secondary Offering"), all of which were sold by certain shareholders of the Company (the "September 2020 Selling Shareholders"), and 3,062,011 of which represented shares issued upon redemption of an equivalent number of the September 2020 Selling Shareholders’ Brigham LLC Units (together with a corresponding number of shares of Class B common stock in Brigham Minerals), at a price to the public of $8.20 per share. Brigham Minerals did not sell any shares of its Class A common stock in the September 2020 Secondary Offering and did not receive any proceeds pursuant to the September 2020 Secondary Offering. In addition, in connection with the September 2020 Secondary Offering, Brigham Minerals repurchased 436,630 shares of its Class A common stock from the September 2020 Selling Shareholders in a privately negotiated transaction at a price equal to the price per share at which the underwriter purchased shares from the September 2020 Selling

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Shareholders in the September 2020 Secondary Offering (and Brigham LLC redeemed a corresponding number of Brigham LLC Units held by Brigham Minerals).

~~Following the completion~~

As of ~~the September 2020 Secondary Offering and as of September~~June 30, 2020, Brigham Minerals owned a ~~76.7%~~69.1% interest in Brigham LLC and the ~~Original Owners~~Brigham LLC Unit Holders owned ~~23.3%~~30.9% of the outstanding voting stock of Brigham Minerals. Certain other entities affiliated with Warburg Pincus LLC, Yorktown Partners LLC and Pine Brook Road Advisors, LP, which are a subset of the Company's Brigham LLC Unit Holders, collectively owned 27.5% of the outstanding voting stock of Brigham Minerals as of June 30, 2020.

As of June 30, 2021, Brigham Minerals owned a 79.5% interest in Brigham LLC and the Brigham LLC Unit Holders owned 20.5% of the outstanding voting stock of Brigham Minerals. Certain other entities affiliated with Yorktown Partners LLC and Pine Brook Road Advisors, LP, which are a subset of the Company's ~~Original Owners,~~Brigham LLC Unit Holders, collectively owned ~~17.0%~~16.9% of the outstanding voting stock of Brigham Minerals as of ~~September~~June 30, ~~2020.~~2021.

The ~~corporate reorganization that was completed contemporaneously with the closing of the IPO provided a mechanism by which the~~change in ownership interest in Brigham LLC Units to be allocated amongst the Original Owners, including the holders of our management incentive units, was determined. As a result of the IPO, the satisfaction of all conditions relating to the vesting of certain management incentive units held in Brigham Equity Holdings, LLC by our management and employees became probable. Accordingly, at the IPO, we recognized a cumulative effect adjustment to share-based compensation cost of approximately $2.0 million pertaining to the period from the grant date through the IPO date, related to the estimated fair value of the Incentive Units at grant, all of which was non-cash. No share-based compensation expenses were recognized prior to the IPO because the IPO was not considered probable. During the nine months ended SeptemberJune 30, 2020 ~~we recognized $5.7 million~~to June 30, 2021 impacts the attribution of net income between Brigham Minerals' shareholders and Brigham LLC Unit Holders. As of February 19, 2021 and thereafter, Brigham LLC Unit Holders' interest is classified as non-controlling interest in ~~non-cash, share-based compensation expense related to~~ the ~~Incentive Units, RSAs, RSUs, and PSUs, net~~condensed consolidated balance sheets of ~~capitalized share-based cost of $4.6 million.~~

~~Public Company Expenses~~

As a result of the IPO, we incur direct, incremental G&A expenses as a result of being a publicly traded company, including, but not limited to, costs associated with hiring new personnel, implementation of compensation programs that are competitive with our public company peer group, including share-based compensation, preparing annual and quarterly reports to stockholders, tax return preparation, independent and internal auditor fees, investor relations activities, capital markets activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. These direct, incremental G&A expenses are not included in our results of operations prior to the IPO.

~~Income Taxes~~

Brigham Minerals is subject to U.S. federal and state income taxes as a corporation. Our predecessor was treated as a flow-through entity, and is currently treated as a disregarded entity, for U.S. federal income tax purposes and, as such, is generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to its taxable income is passed through to its members, including Brigham Minerals. ~~Accordingly, the financial data of our predecessor contains no provision~~See "Note 9—Temporary equity and Non-controlling interest" for ~~U.S. federal income taxes or income taxes in any state or locality (other than franchise tax in the State of Texas).~~

further details.

Capital Requirements and Sources of Liquidity

Prior to our IPO, our primary sources of liquidity were capital contributions from our Original Owners, borrowings under our debt arrangements and cash flows from operations. Subsequent to our IPO, ourOur current primary sources of liquidity are cash flows from operations, asset sales, borrowings under our revolving credit facility and proceeds from any primary issuances of equity securities.Future sources of liquidity may also include other credit facilities we may enter into in the future and additional issuances of debt or equity securities. As a result of the COVID-19 pandemic and the decline in commodities prices in 2020, coupled with many of our operators announcing significant reductions in projected capital expenditures ~~for the remainder of 2020~~in 2021 and beyond, our revenues and cash flows from operations have been and ~~will~~may continue to be negatively impacted ~~for the remainder of 2020~~ and we may not have access to capital markets on terms favorable to us or at all.

Our primary uses of capital are for the payment of dividends to our ~~stockholders~~shareholders and for investing in our business, specifically the acquisition of additional mineral and royalty interests. In connection with the ongoing COVID-19 pandemic and the announced reductions in projected capital expenditures by our operators, our cash flows from operations have been and ~~will~~may continue to be negatively impacted, and as a result, the dividend amount we are able to pay our ~~stockholders~~shareholders has been and may also continue to be negatively impacted.

As a mineral and royalty interest owner, we incur the initial cost to acquire our interests, but thereafter do not incur any development capital expenditures or lease operating expenses, which are entirely borne by the operator. As a result, the vast majority of our capital expenditures are related to our acquisition of additional mineral and royalty interests. The amount and allocation of future acquisition-related capital expenditures will depend upon a number of factors, including the number and size of acquisition opportunities, our cash flows from operations, investing and financing activities and our ability to assimilate acquisitions. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, we ~~incurred~~deployed approximately ~~$50.7~~$39.8 million for acquisition-related

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capital expenditures, inclusive of a ~~$4.6~~$3.5 million capitalized share-based compensation cost. We periodically assess changes in current and projected free cash flows, acquisition and divestiture activities, debt requirements and other factors to determine the effects on our liquidity. ~~In connection with~~Based upon our current oil, natural gas and NGL price expectations for the previously mentioned COVID-19 pandemic, we have experienced and expect a near-term reduced level of potential acquisition opportunities, which will delay our ability to execute on our growth strategy. Given that our capital allocation is within our control,year ended December 31, 2021, we believe that ~~the liquidity provided by~~ our retained cash flow from operations, lease bonus, portfolio optimization activities and additional borrowings under our revolving credit facility will provide us with sufficient ~~capital~~liquidity to execute our current strategy. However, our ability to generate cash is subject to a number of factors, many of which are beyond our control, including commodity prices, weather and general economic, financial, competitive, legislative, regulatory and other factors. If we require additional capital for acquisitions or other reasons, we may seek such capital through additional borrowings, joint venture partnerships, asset sales, offerings of equity and debt securities or other means. If we are unable to obtain funds when needed or on acceptable terms, we may not be able to complete acquisitions that may be favorable to us.

As of ~~September~~June 30, ~~2020,~~2021, our liquidity was as follows:


	(In millions)
Cash and cash equivalents	$~~8.2~~	6.4
Revolving credit facility availability	$~~130.0~~	92.0
Total Liquidity	$~~138.2~~	98.4

~~Associated with~~

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On July 7, 2021, the ~~Company's~~ borrowing base ~~redetermination that is expected~~and elected commitments on our revolving credit facility were increased from $135.0 million to ~~be finalized~~$165.0 million. Pro-forma for the increase in ~~late November 2020,~~ the ~~administrative agent has recommended a reaffirmation of the Company's~~ borrowing base, ~~at $135.0 million.~~the Company would have had total liquidity of $128.4 million as of June 30, 2021. See "Note 14—Subsequent Events" to the condensed consolidated financial statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion.

Working Capital

Our working capital, which we define as current assets minus current liabilities, totaled ~~$23.2~~$27.0 million at ~~September~~June 30, ~~2020,~~2021, as compared to ~~$71.6~~$22.6 million at December 31, ~~2019.~~2020. Our collection of receivables has historically been timely, and losses associated with uncollectible receivables have historically not been significant.

When new wells are turned to sales, our collection of receivables has lagged approximately six months from initial production as operators complete the division order process, at which point we are paid in arrears and then kept current. Our cash and cash equivalents balance totaled ~~$8.2~~$6.4 million and ~~$51.1~~$9.1 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The decrease in cash and cash equivalents was primarily due to acquisitions made and payment of dividends to our ~~stockholders~~shareholders during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. See "Note 4—~~Acquisitions and Divestitures"~~Acquisitions" to the condensed consolidated ~~and combined~~ financial statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion. We expect that our cash flows from operations and additional borrowings under our revolving credit facility will be sufficient to fund our working capital needs. We expect that the pace of our operators’ drilling and completion of our undeveloped locations, production volumes, commodity prices and differentials to WTI and Henry Hub prices for our oil, natural gas and NGL production will be the largest variables affecting our working capital.

Dividends

The following table sets forth information with respect to cash dividends declared by our Board of Directors during the six months ended June 30, 2021:


Declaration Date	Record Date	Payment Date	Dividend Amount		Dividends paid (in thousands) (1)
February 19, 2021	March 19, 2021	March 26, 2021	$	0.26	$	11,336
May 4, 2021	May 21, 2021	May 28, 2021	$	0.32	$	14,201

(1) Dividends paid to holders of Class A common stock.

On August 3, 2021, the Board of Directors of Brigham Minerals declared a dividend of $0.35 per share of Class A common stock payable on August 27, 2021, to shareholders of record at the close of business on August 20, 2021. See "Note 14—Subsequent Events" to the condensed consolidated financial statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion.

The decision to pay any future dividends is solely within the discretion of, and subject to approval by, our Board of Directors. Our Board of Directors’ determination with respect to any such dividends, including the record date, the payment date and the actual amount of the dividend, will depend upon our results of operations, financial condition, capital requirements, contractual restrictions, restrictions imposed by applicable law and other factors that the Board of Directors deems relevant at the time of such determination.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Nine Months Ended September 30,
(In thousands) 2020 2019
Net cash provided by operating activities $ 53,732 $ 46,525
Net cash used in investing activities (1) (44,771) (179,883)
Net cash (used in) provided by financing activities (51,574) 127,188

(1) The net cash used in investing activities for the nine months ended September 30, 2019 was adjusted as a result of our adoption of ASU 2016-18, Statement of Cash Flow. See "Note 2—Summary of Significant Accounting Policies—Restricted Cash" to the condensed consolidated and combined financials statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion.


	Six Months Ended June 30,
(In thousands)	2021		2020
Net cash provided by operating activities	$	45,131	$	38,617
Net cash used in investing activities	(36,358)		(27,476)
Net cash used in financing activities	(11,503)		(45,809)

Analysis of Cash Flow Changes ~~Between~~For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020

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Net cash provided by operating activities

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Net cash provided by operating activities is primarily affected by production volumes, the prices of oil, natural gas, and NGLs, lease bonus and other ~~revenue~~revenues and changes in working capital. The increase in net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 is primarily due to ~~a 43%~~the 83% increase in ~~production volumes and higher lease bonus and other revenues~~realized commodity prices during the six months ended June 30, 2021, partially offset by the ~~33%~~7% decrease in ~~realized prices during the nine months ended September 30, 2020~~production volumes and the increases in operating expenses during such period discussed above.

Net cash used in investing activities

Net cash used in investing activities is primarily comprised of acquisitions of mineral and royalty interests, net of dispositions. For the ~~nine~~six months ended ~~September~~June 30, 2021, our net cash used in investing activities was primarily a result of acquisitions of mineral and royalty interests totaling $36.3 million. For the six months ended June 30, 2020, our net cash used in investing activities was primarily a result of acquisitions of mineral and royalty interests ~~totaling $46.0~~of $28.8 million, partially offset by sales of mineral and royalty interests totaling $1.6 million. ~~For the nine months ended September 30, 2019, our net~~The increase in cash used in investing activities for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was primarily a result of ~~acquisitions~~overall market improvements due to gradual lifting of ~~mineral and royalty interests of $181.5 million, offset by sales of mineral and royalty interests totaling $2.0 million. The decrease in investing activities for~~COVID-19 restrictions during the ~~nine~~six months ended ~~September~~June 30, ~~2020 compared to the nine months ended September 30, 2019 was primarily a result of the~~2021. Overall market challenges associated with the COVID-19 pandemic and the decrease in oil ~~prices.~~prices during the second quarter of 2020 resulted in a decrease in investing activities for the six months ended June 30, 2020. See "Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Market Environment and COVID-19” for further discussion.

Net cash used in financing activities

Net cash used in financing activities for the ~~nine~~six months ended ~~September~~June 30, 2021 was primarily due to the dividends paid to holders of our Class A common stock of $25.5 million, distributions to holders of non-controlling interest of $7.8 million, partial repayment of our revolving credit facility of $4.0 million and payment of employee tax withholding for settlement of equity compensation awards of $1.1 million. This was partially offset by borrowings under our revolving credit facility of $27.0 million. Net cash used in financing activities for the six months ended June 30, 2020 was primarily due to the dividends paid to holders of our Class A common stock of $31.3 million, distributions to holders of temporary equity of $21.5 million, and the repurchase of shares of our Class A common stock from the September 2020 Selling Shareholders for an aggregate purchase price of approximately $3.5 million. This was partially offset by borrowings under our revolving credit facility of $5.0 million. Net cash provided by financing activities for the nine months ended September 30, 2019 was primarily related to $277.1 million in net proceeds received from the Offering and borrowings under our Owl Rock credit facility and our revolving credit facility of $25.0 million and $45.0 million, respectively. This was partially offset by $200.0 million used to fully repay borrowings under our Owl Rock credit facility, dividends paid to holders of our Class A common stock of $7.2$25.8 million and distributions to holders of temporary equity of ~~$9.4~~$19.8 million.

~~Our Owl Rock Credit Facility~~

On July 27, 2018, we entered into a credit agreement with Owl Rock Capital Corporation, as administrative agent and collateral agent (our "Owl Rock credit facility"). Our Owl Rock credit facility was subject to customary fees, guarantees of subsidiaries, restrictions and covenants, including certain restricted payments, and was collateralized by certain of our royalty and mineral properties.

Our Owl Rock credit facility provided for a $125.0 million initial term loan and a $75.0 million delayed draw term loan (“DDTL”). Also, a $10.0 million revolving credit facility was available for general corporate purposes, which was undrawn as of May 7, 2019. In addition, as of May 7, 2019, we had $200.0 million of term loans and DDTL borrowings outstanding under our Owl Rock credit facility. We used a portion of the proceeds from the IPO to fully repay the outstanding borrowings under the term loan portion and DDTL portion of our Owl Rock credit facility and terminated the Owl Rock credit facility on May 7, 2019. Our Owl Rock credit facility bore interest at a rate per annum equal to, at our option, (a) the base rate plus 4.50%, or (b) the adjusted LIBOR rate for such interest period (subject to a 1.00% floor) plus 5.50%. Our Owl Rock credit facility required us to maintain compliance with customary financial and collateral coverage ratios. See "Note 8—Long-Term Debt" to the condensed consolidated and combined financial statements of Brigham Minerals contained elsewhere in this Quarterly Report for further discussion.

Revolving Credit Facility

On May 16, 2019, Brigham Resources entered into a credit agreement with Wells Fargo Bank, N.A., as administrative agent (the "Administrative Agent") for the various lenders from time to time party thereto, providing for a revolving credit facility (our “revolving credit facility”). Our revolving credit facility is guaranteed by Brigham Resources’ domestic subsidiaries and is collateralized by a lien on substantial portion of Brigham Resources and its domestic subsidiaries’ assets, including substantial portion of their respective royalty and mineral properties.

Availability under our revolving credit facility is governed by a borrowing base, which is subject to redetermination semi-annually in May and November of each year. In addition, lenders holding two-thirds of the aggregate commitments may request one additional redetermination each year. Brigham Resources can also request one additional redetermination each year, and such

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other redeterminations as appropriate when significant acquisition opportunities arise. The borrowing base is subject to further adjustments for asset dispositions, material title deficiencies, certain terminations of hedge agreements and issuances of permitted additional indebtedness. Increases to the borrowing base require unanimous approval of the lenders, while decreases only require approval of lenders holding two-thirds of the aggregate commitments at such time. The weighted average interest rate for the three and six months ended ~~September~~June 30, ~~2020 is 1.9%.~~2021 was 1.98% and 1.95%, respectively. As of ~~September~~June 30, ~~2020,~~2021, the elected borrowing base on our revolving credit facility was $135.0 million, with outstanding borrowings of ~~$5.0~~$43.0 million, resulting in ~~$130.0~~$92.0 million ~~availability~~available for future borrowings. Associated with the Company's borrowing base redetermination that is expected to be finalized in late November 2020, the administrative agent has recommended a reaffirmation of the Company's borrowing base at $135.0 million.

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On July 7, 2021, the borrowing base and elected commitments on our revolving credit facility were increased from $135.0 million to $165.0 million. Pro-forma for the increase in the borrowing base, the Company would have had total liquidity of $128.4 million as of June 30, 2021. See "Note 14—Subsequent Events" to the condensed consolidated financial statements of Brigham Minerals included elsewhere in this Quarterly Report for further discussion.

Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any material off-balance sheet arrangements.

Contractual Obligations

A summary of our contractual obligations as of ~~September~~June 30, ~~2020,~~2021, is provided in the following table.


		By Year:															By Year:
(In thousands)	(In thousands)	2020		2021		2022		2023		2024		Thereafter		Total		(In thousands)	2021		2022		2023		2024		2025		Thereafter		Total
Long-term debt obligations (1) (2)	Long-term debt obligations (1) (2)	$	—	$	—	$	—	$	—	$	5,000	$	—	$	5,000	Long-term debt obligations (1) (2)	$	—	$	—	$	—	$	43,000	$	—	$	—	$	43,000
Office lease	Office lease	321		1,345		1,419		1,498		1,581		4,445		10,609		Office lease	640		1,310		1,347		1,384		1,419		2,251		8,351
Total	Total	$	321	$	1,345	$	1,419	$	1,498	$	6,581	$	4,445	$	15,609	Total	$	640	$	1,310	$	1,347	$	44,384	$	1,419	$	2,251	$	51,351

(1) As of ~~September~~June 30, ~~2020,~~2021, we had ~~$5.0~~$43.0 million outstanding under our revolving credit facility and ~~$130.0~~$92.0 million of additional borrowing capacity. Associated with the Company's borrowing base redetermination that is expected to be finalized in late November 2020, the administrative agent has recommended a reaffirmation of the Company's borrowing base at $135.0 million.

(2) Does not include future unutilized fees, amortization of deferred financing costs, interest expense or other fees related to our revolving credit facility because we cannot determine with accuracy the timing of future loan advances, repayments or future interest rates to be charged.

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2020, we did not have any material off-balance sheet arrangements.~~

Critical Accounting Policies and Related Estimates

As of ~~September~~June 30, ~~2020,~~2021, there have been no material changes to our critical accounting policies and related estimates previously disclosed in our Annual Report. See "Note 2—Summary of Significant Accounting Policies."

Item 3. — Quantitative and Qualitative Disclosures about Market Risk

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We are exposed to market risk, including the effects of adverse changes in commodity prices and interest rates as described below. The primary objective of the following information is to provide quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in oil, natural gas and NGL prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk sensitive instruments were entered into for purposes other than speculative trading.

Commodity Price Risk

Our major market risk exposure is in the pricing that our operators receive for the oil, natural gas and NGLs produced from our properties. Realized prices are primarily driven by the prevailing global prices for oil and prices for natural gas and NGLs in the United States. Pricing for oil, natural gas and NGLs has been volatile and unpredictable for several years, and we expect this volatility to continue in the future. During the past five years, the posted price for WTI has ranged from a historic, record low ~~negative~~ price of ~~$(36.98)~~negative $36.98 per barrel in April 2020 to a high of $77.41 per barrel in June 2018, and as of ~~September~~June 30, ~~2020,~~2021, the posted price for oil was ~~$40.05~~$73.52 per barrel. NGL prices generally correlate to the price of oil, and accordingly prices for these products have likewise ~~declined~~fluctuated and are likely to continue following that market. Prices for domestic natural gas have also fluctuated

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significantly over the last several years. During the past five years, the Henry Hub spot market price for natural gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of ~~$6.24~~$23.86 per MMBtu in ~~January 2018,~~February 2021, and as of ~~September~~June 30, ~~2020,~~2021, the Henry Hub spot market price of natural gas was ~~$1.66~~$3.79 per MMBtu. The prices our operators receive for the oil, natural gas and NGLs produced from our properties depend on numerous factors beyond their and our control, some of which are ~~discussed~~previously disclosed under "Risk Factors" in ~~this Quarterly Report under “Item 1A—Risk Factors—Risks Related to Our Business—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. The significant drop in the price of oil in 2020 has adversely affected, and any further decline in commodity prices in the future may adversely affect, our business, financial condition or results of operations.”Annual Report.

A $1.00 per barrel change in our realized oil price would have resulted in a ~~$1.4~~$0.8 million change in our oil revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. A $0.10 per Mcf change in our realized natural gas price would have resulted in a ~~$0.4~~$0.3 million change in our natural gas revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. A $1.00 per barrel change in NGL prices would have resulted in a ~~$0.5~~$0.3 million change in our NGL revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Total revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was comprised of ~~74%~~69% from oil sales, ~~10%~~17% from natural gas sales, and 8%11% from NGL sales.

We may enter into derivative instruments, such as collars, swaps and basis swaps, to partially mitigate the impact of commodity price volatility. These hedging instruments allow us to reduce, but not eliminate, the potential effects of the variability in cash flow from operations due to fluctuations in oil, natural gas and NGL prices and provide increased certainty of cash flows for our debt service requirements. However, these instruments provide only partial price protection against declines in oil, natural gas and NGL prices and may partially limit our potential gains from future increases in prices. Our revolving credit facility allows us to hedge up to 85% of our reasonably anticipated projected production from our proved reserves of oil and natural gas, calculated separately, for up to 60 months in the future.

We had no oil or gas derivatives contracts in place ~~as of September 30, 2020 and~~since December 31, 2019.

Counterparty and Customer Credit Risk

When we enter into them, our derivative contracts expose us to credit risk in the event of nonperformance by counterparties. While we do not require counterparties to our derivative contracts to post collateral if they are a party to our revolving credit facility, we do evaluate the credit standing of such counterparties as we deem appropriate.

Our principal exposures to credit risk are through receivables generated by the production activities of our operators. The inability or failure of our significant operators to meet their obligations to us or their insolvency or liquidation may adversely affect our financial results. See "Item 1A—Risk Factors—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."

Interest Rate Risk

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Our revolving credit facility bears interest at a rate per annum equal to, at our option, the adjusted base rate or the adjusted LIBOR rate plus an applicable margin. The applicable margin is based on utilization of our revolving credit facility and ranges from (a) in the case of adjusted base rate loans, 0.750% to 1.750% and (b) in the case of adjusted LIBOR rate ~~loans,1.750%~~loans, 1.750% to 2.750%. Brigham Resources may elect an interest period of one, two, three, six, or if available to all lenders, twelve months, for adjusted LIBOR rate loans. Interest on adjusted base rate loans is payable quarterly in arrears, and interest on adjusted LIBOR rate loans is payable in arrears at the end of each interest period, but no less frequently than quarterly. A commitment fee is payable quarterly in arrears on the daily undrawn available commitments under our revolving credit facility in an amount ranging from 0.375% to 0.500% based on utilization of our revolving credit facility. Our revolving credit facility is subject to other customary fee, interest and expense reimbursement provisions. The weighted average interest rate for the three and six months ended June 30, 2021 was 1.98% and 1.95%, respectively. As of ~~September~~June 30, ~~2020,~~2021, the elected borrowing base on our revolving credit facility was $135.0 million, with outstanding borrowings of ~~$5.0~~$43.0 million, resulting in ~~$130.0~~$92.0 million ~~availability~~available for future borrowings. A 1-percentage-point increase in our interest rate would have increased our interest expense by $0.1 million for the three months ended June 30, 2021.

Item 4. — Controls and Procedures

~~Internal Controls Over Financial Reporting~~

~~Upon becoming a public company, we became required to comply with the SEC’s rules implementing Section 302 and Section 404~~Evaluation of the Sarbanes-Oxley Act, which requires our management to certify financial and other information in our quarterly and annual reports, and, beginning with the year following the first fiscal year for which we are required to file an annual report with the SEC, provide an annual management report on the effectiveness of our internal control over financial reporting. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 beginning with our first annual report subsequent to our ceasing to be an “emerging growth company” within the meaning of Section 2(a)(19) of the Securities Act.

Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”), our principal executive officer, and our Chief Financial Officer (“CFO”), our principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September~~June 30, ~~2020.~~2021. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and

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CFO as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective at ~~September~~June 30, ~~2020.~~2021.

~~Change~~Changes in Internal ~~Controls Over~~Control over Financial Reporting.

There ~~was~~ have been no ~~change~~changes in our internal control over financial reporting ~~identified~~(identified in connection with the evaluation required by ~~Rule~~Rules 13a-15(d) and 15d-15(d) of the Exchange ~~Act~~Act) that occurred during the ~~period covered by this Quarterly Report on Form 10-Q~~second quarter of 2021 that ~~has~~have materially affected or isare reasonably likely to materially affect our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that some of our employees are working remotely in compliance with the current Texas requirements due to the COVID-19 pandemic. We are continually monitoring and assessing the effects of the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

PART II — OTHER INFORMATION

Item 1. — Legal Proceedings

Due to the nature of our business, we are, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities. In the opinion of our management, none of the pending litigation, disputes or claims against us, if decided adversely, will have a material adverse effect on our financial condition, cash flows or results of operations.

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Item 1A. — Risk Factors

Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our Class A common stock are described ~~below and also~~ under the caption “Risk Factors” in our Annual Report. ~~Except for the additional risk factors and updates set forth below, there~~There have been no material changes in our risk factors from those previously disclosed under “Risk Factors” in our Annual Report.

The widespread outbreak of an illness, pandemic (like COVID-19) or any other public health crisis may have material adverse effects on our business, financial position, results of operations and/or cash flows
.

We face risks related to the outbreak of illnesses, pandemics and other public health crises that are outside of our control, and could significantly disrupt our operations and adversely affect our financial condition.For example, the continuing global spread of a novel strain of coronavirus (SARS-Cov-2), which causes COVID-19, has caused a disruption to the oil and natural gas industry and to our business. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, reduced global demand for oil and gas, and created significant volatility and disruption of financial and commodity markets. Furthermore, the COVID-19 pandemic has affected our operations by (i) rendering our personnel unable to access company facilities for an extended period of time, (ii) contributing to a steep decline in commodities prices in 2020, which has reduced activity by our operators and the amounts of royalty payments we receive, (iii) causing some of the Company’s operators to shut in and curtail production from wells on the Company’s properties, (iv) limiting our access to the capital markets on terms favorable to us and adversely affected our capital resources and (v) reducing the level of potential acquisition opportunities we have been able to identify, limiting our ability to execute on our growth strategy of acquiring additional mineral and royalty interests. Additionally, the steps taken by national, state and local governments to curb the spread of the COVID-19 pandemic, including stay-at-home orders, quarantines, travel restrictions and business shutdowns, and the implications on our operators’ workforce of a COVID-19 infection, have limited our operators’ ability to maintain production from our properties. Such orders and the other impacts of the COVID-19 pandemic may have limited the ability of our operators to access our properties and maintain their existing production and development activities, and any similar or more restrictive measures taken in the future could have similar effects.

While our business and operations have experienced certain effects of the COVID-19 pandemic as described above, the full extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, is uncertain and depends on various factors, including the demand for oil and natural gas (including the impact that reductions in travel, manufacturing and consumer product demand have had and will have on the demand for commodities), the availability of personnel, equipment and services critical to operating production activities by our operators and the impact of potential governmental restrictions on travel, transportation and operations. The degree to which the COVID-19 pandemic or any other public health crisis adversely impacts our operations, financial results and dividend policy will also depend on future developments, which are highly uncertain and cannot be predicted. These developments include, but are not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, its impact on the economy and market conditions, and how quickly and to what extent normal economic and operating conditions can resume. Therefore, while we expect this matter will continue to disrupt our operations in some way, the degree of the adverse financial impact cannot be reasonably estimated at this time.

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. The significant drop in the price of oil in the first half of 2020 has adversely affected, and any further decline in commodity prices in the future may adversely affect, our business, financial condition or results of operations.

Our revenues, operating results, free cash flow and the carrying value of our mineral and royalty interests depend significantly upon the quantities of oil, natural gas and NGLs produced from our properties and the prevailing prices at which such production is sold. Historically, oil, natural gas and NGL prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control, including:

•~~the domestic and foreign supply of and demand for oil, natural gas and NGLs;~~

•~~market expectations about future prices of oil, natural gas and NGLs;~~

•~~the level of global oil, natural gas and NGL exploration and production;~~

•~~the cost of exploring for, developing, producing and delivering oil, natural gas and NGLs;~~

•~~the price and quantity of foreign imports and U.S. exports of oil, natural gas and NGLs;~~

•~~the level of U.S. domestic production;~~

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•~~the availability of storage for hydrocarbons;~~

•~~political and economic conditions in oil producing regions, including the Middle East, Africa, South America and Russia;~~

•the ability of members of the Organization of Petroleum Exporting Countries (“OPEC”) and other countries that produce oil, natural gas and NGLs to agree to and maintain oil price and production controls;

•~~trading in oil, natural gas and NGL derivative contracts;~~

•~~the level of consumer product demand;~~

•~~weather conditions and natural disasters;~~

•~~technological advances affecting energy consumption, energy storage and energy supply;~~

•~~domestic and foreign governmental regulations and taxes;~~

•the continued threat of terrorism and the impact of military and other action, including U.S. military operations in the Middle East and economic sanctions such as those imposed by the U.S. on oil and gas exports from Iran;

•~~global or national health concerns, including health epidemics such as the ongoing COVID-19 pandemic beginning in the first quarter of 2020;~~

•~~the proximity, cost, availability and capacity of oil, natural gas and NGL pipelines and other transportation facilities;~~

•~~the price and availability of alternative fuels; and~~

•~~overall domestic and global economic conditions.~~

These factors and the volatility of the energy markets make it extremely difficult to predict future oil, natural gas and NGL price movements with any certainty. For example, during the past five years, the posted price for West Texas Intermediate (“WTI”) light sweet crude oil has ranged from a historic low negative price of $(36.98) per barrel in April 2020 to a high of $77.41 per barrel in June 2018, and the Henry Hub spot market price of natural gas has ranged from a low of $1.33 per MMBtu in September 2020 to a high of $6.24 per MMBtu in January 2018. Furthermore, in March 2020, Saudi Arabia and Russia failed to agree to and maintain oil price and production controls within OPEC and Russia. Subsequently, Saudi Arabia announced plans to increase production and reduce the prices at which they sell oil. While OPEC+ subsequently agreed to collectively decrease production, these events, combined with the impact of the continued outbreak of the COVID-19 pandemic, have contributed to a significant decrease in prices for oil in the first half of 2020. The effect of these events on the price of oil was further exacerbated by a shortage in available storage for hydrocarbons in the U.S., which caused the prices for oil to further decrease dramatically in April 2020. While the prices for oil have begun to stabilize, such prices have remained materially lower than pre-pandemic levels, which has adversely affected the prices at which production from our properties is sold as well as the production activities of operators on our properties and may continue to do so in the future. This, in turn, has and will materially affect the amount of royalty payments that we receive from such operators.

Any further decline in the price of oil, natural gas and NGLs or a prolonged period of low commodity prices will also materially adversely affect our business, financial condition, results of operations and free cash flow.

In addition, the quantities of oil, natural gas and NGLs produced from our properties has a significant impact on our operating results and financial condition. Lower oil, natural gas and NGL prices may reduce the amount of oil, natural gas and NGLs that can be produced economically by our operators, which may reduce our operators’ willingness to develop and/or continue to produce our properties. For example, partially due to the decrease in prices for oil in the first half of 2020, many operators on our properties have announced significant reductions in their estimated capital expenditures for 2020 and beyond. While these lower commodity prices initially resulted in some of the Company's operators shutting in or curtailing production from wells on its properties during the second quarter of 2020, we saw a majority of the Company’s operators resume production for previously curtailed and shut in wells in connection with the improvement of commodity prices in the third quarter 2020. Specifically, operators may abandon any well if they reasonably believe that the well can no longer produce oil, natural gas or NGLs in commercially paying quantities. In addition, as a result of the current oversupply of oil globally and current depressed commodity price environment, there have been some discussions at the national and state levels of imposing additional regulatory limits on production volumes. For example, some state oil and gas commissions, including the Oklahoma Corporation Commission, have imposed or are considering imposing oil and gas production limits. To the extent adopted, such production limits could adversely impact the production attributable to our interests, and it is not clear whether they would result in a stabilization or improvement of commodity prices. Separately, several state oil and gas commissions, including the Oklahoma Corporation Commission and the North Dakota Industrial Commission, have allowed or are considering allowing oil producers to curtail production from or shut-in

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wells to prevent economic waste. Such economic waste determinations could allow producers to maintain leases even if they stop production, which could adversely impact the production attributable to our interests.

The deterioration in commodity prices, decrease in production levels, or further reduction in operator production activities may result in our having to make substantial downward adjustments to our estimated proved, probable or possible reserves. If this occurs or if production estimates change or exploration or development results deteriorate, the full cost method of accounting principles may require us to write down, as a non-cash charge to earnings, the carrying value of our oil and natural gas properties. In addition, the borrowing base under our revolving credit facility is determined based on our estimated reserves, and any negative revisions to our estimated reserves would in turn reduce our borrowing base, reducing the amount available to fund our operations through borrowings under our revolving credit facility.

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 the first half of 2020, many of our operators have announced significant reductions in projected capital expenditures for 2020 and beyond. The number of new wells drilled in many of our focus areas has decreased, and such slower development pace may continue in the future.

Our assets consist of mineral and royalty interests. Because we depend on third-party operators for all of the exploration, development and production on our properties, we have little to no control over the operations related to our properties. For the quarter ended September 30, 2020, we received revenues from over 150 operators with approximately 63% of our royalty revenues coming from the top ten operators on our properties, three of which each accounted for more than 10% of such royalty revenues. The failure of our operators to adequately or efficiently perform operations or an operator’s failure to act in ways that are in our best interests could reduce production and revenues. Furthermore, in response to the significant decrease in prices for oil in the first half of 2020, many of our operators have announced substantial reductions in their estimated capital expenditures, rig count and completion crews for 2020 and beyond. Our operators may further reduce capital expenditures devoted to exploration, development and production on our properties in the future, which could negatively impact revenues we receive. The number of new wells drilled in many of our focus areas has decreased, and such slower development pace may continue in the future, especially as a consequence of the reductions in operators’ capital expenditures. Moreover, over the last year, many of our operators have announced that they plan to drill fewer wells per section than previously anticipated, due in part to greater well-interference between parent and child wells than previously anticipated and an increased focus on overall field economics in a low commodity price environment.

If production on our mineral and royalty interests decreases due to decreased development activities, as a result of the low commodity price environment, limited availability of development capital, production-related difficulties or otherwise, our results of operations may be adversely affected. For example, the amount of royalty payments we have received from our operators recently has decreased and will likely continue to decrease due to the lower prices at which our operators are able to sell production from our properties and reduced production activities by our operators. Further, depressed commodity prices caused some of our operators to voluntarily shut in and curtail production from wells on our properties earlier this year. Although most of these have come back online, an additional or extended period of depressed commodity prices may cause additional operators to take similar action or even to plug and abandon marginal wells that otherwise may have been allowed to continue to produce for a longer period under more favorable pricing conditions, both of which would decrease the amount of royalty payments we receive from our operators. Our operators are often not obligated to undertake any development activities other than those required to maintain their leases on our acreage. In the absence of a specific contractual obligation, any development and production activities will be subject to their reasonable discretion (subject to certain implied obligations to develop imposed by the laws of some states). Our operators could determine to drill and complete fewer wells on our acreage than is currently expected. The success and timing of drilling and development activities on our properties, and whether the operators elect to drill any additional wells on our acreage, depends on a number of factors that are largely outside of our control, including:

•~~the capital costs required for drilling activities by our operators, which could be significantly more than anticipated;~~

•~~the ability of our operators to access capital;~~

•~~prevailing commodity prices;~~

•~~the operators' expected return on investment in wells drilled on our acreage as compared to opportunities in other areas;~~

•~~the availability of suitable drilling equipment, production and transportation infrastructure and qualified operating personnel;~~

•~~the availability of storage for hydrocarbons;~~

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•~~the operators’ expertise, operating efficiency and financial resources;~~

•~~approval of other participants in drilling wells;~~

•~~the selection of technology;~~

•~~the selection of counterparties for the marketing and sale of production; and~~

•~~the rate of production of the reserves.~~

The operators may elect not to undertake development activities, or may undertake these activities in an unanticipated fashion, which may result in significant fluctuations in our results of operations and free cash flow. Sustained reductions in production by the operators on our properties may also adversely affect our results of operations and free cash flow. Additionally, if an operator were to experience financial difficulty, the operator might not be able to pay its royalty payments or continue its operations, which could have a material adverse impact on our cash flows.

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.

A failure on the part of the operators to make royalty payments gives us the right to terminate the lease, repossess the property and enforce payment obligations under the lease. If we repossessed any of our properties, we would seek a replacement operator. However, we might not be able to find a replacement operator and, if we did, we might not be able to enter into a new lease on favorable terms within a reasonable period of time. In addition, the outgoing operator could be subject to a proceeding under Title 11 of the United States Code (the “Bankruptcy Code”), in which case our right to enforce or terminate the lease for any defaults, including non-payment, may be substantially delayed or otherwise impaired. For example, certain of our operators have recently commenced bankruptcy proceeding under the Bankruptcy Code and their future operations and ability to make royalty payments to us may be adversely affected by such proceedings. In general, in a proceeding under the Bankruptcy Code, the bankrupt operator would have a substantial period of time to decide whether to ultimately reject or assume the lease, which could prevent the execution of a new lease or the assignment of the existing lease to another operator. In the event that the operator rejected the lease, our ability to collect amounts owed would be substantially delayed, and our ultimate recovery may be only a fraction of the amount owed or nothing. In addition, if we are able to enter into a new lease with a new operator, the replacement operator may not achieve the same levels of production or sell oil or natural gas at the same price as the operator it replaced. Additionally, in the current low commodity price environment, some operators have attempted to make improper deductions by netting negative gas price realizations against positive oil royalties and other operators may attempt to do so in the future. We have taken action and will continue to take action to protect our rights; however, we cannot predict whether we will ultimately be successful.

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.

The oil and natural gas industry is capital intensive. We make and expect to continue to make substantial capital expenditures in connection with the acquisition of mineral and royalty interests. To date, we have financed capital expenditures primarily with funding from capital contributions, cash generated by operations, proceeds from our IPO and from the December 2019 Offering and borrowings under our debt arrangements.

In the future, we may need capital in excess of the amounts we retain in our business or borrow under our revolving credit facility. The level of borrowing base available under our revolving credit facility is largely based on our estimated reserves and our lenders' price decks and will be reduced to the extent commodity prices decrease or remain depressed. Accordingly, our ability to access capital under our revolving credit facility has been adversely affected by the significant decrease in commodity prices in the first half of 2020. Furthermore, we cannot assure you that we will be able to access other external capital on terms favorable to us or at all. For example, given the recent significant decline in prices for oil and the broader economic turmoil, our ability to secure financing in the capital markets on terms favorable to us has been adversely impacted. If we are unable to fund our capital requirements, we may be unable to complete acquisitions, take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our results of operation and free cash flow.

Most of our operators are also dependent on the availability of external debt and equity financing sources to maintain their drilling programs. If those financing sources are not available to the operators on favorable terms or at all, then we expect the development of our properties to be adversely affected. If the development of our properties is adversely affected, then revenues from our mineral and royalty interests may decline.

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Our estimated reserves are based on many assumptions regarding future commodity prices and expected production from our properties, any of which 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.

Oil, natural gas and NGL reserve engineering is not an exact science and requires subjective estimates of underground accumulations of oil, natural gas and NGLs and assumptions concerning future oil, natural gas and NGL prices, production levels, ultimate recoveries and operating and development costs. As a result, estimated quantities of proved, probable and possible reserves, projections of future production rates and the timing of development expenditures may be incorrect. Our estimates of proved, probable and possible reserves and related valuations as of December 31, 2019 and 2018 were audited by CG&A and our estimates of proved, probable, and possible reserves and related valuations as of December 31, 2017 were prepared by CG&A. CG&A conducted a detailed review of all of our properties for the period covered by its reserve report using information provided by us. Over time, we may make material changes to reserve estimates taking into account the results of actual drilling, testing and production. For example, due to the deterioration in commodity prices in the first half of 2020 as a result of the COVID-19 pandemic and other factors, the commodity price assumptions used to calculate our reserves estimates are likely to decline, which would in turn lower our reserve estimates. See “If oil, natural gas and NGL prices decline significantly, such as in the case of the significant decline in commodity prices in the first half of 2020, we could be required to record impairments of our proved oil, natural gas and NGL properties that would constitute a charge to earnings and reduce our shareholders’ equity.” A substantial portion of our reserve estimates are made without the benefit of a lengthy production history, which are less reliable than estimates based on a lengthy production history. Any significant variance from these assumptions to actual figures could greatly affect our estimates of reserves and future cash generated from operations. Numerous changes over time to the assumptions on which our reserve estimates are based, as described above, often result in the actual quantities of oil, natural gas and NGLs that are ultimately recovered being different from our reserve estimates.

Furthermore, the present value of future net cash flows from our proved reserves is not necessarily the same as the current market value of our estimated reserves. In accordance with rules established by the SEC and the Financial Accounting Standards Board, we base the estimated discounted future net cash flows from our proved reserves on the trailing twelve-month average oil and gas index prices, calculated as the unweighted arithmetic average for the first-day-of-the-month price for each month, and costs in effect on the date of the estimate, holding the prices and costs constant throughout the life of the properties. Actual future prices and costs may differ materially from those used in the present value estimate, and future net present value estimates using then current prices and costs may be significantly less than the current estimate. In addition, the 10% discount factor we use when calculating discounted future net cash flows may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and natural gas industry in general.

If oil, natural gas and NGL prices decline significantly, such as in the case of the significant decline in commodity prices to date in 2020, 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 shareholders’ equity.

Accounting rules require that we review the carrying value of our oil, natural gas and NGL properties for possible impairment at the end of each quarter. Based on specific market factors and circumstances at the time of prospective impairment reviews, and the continuing evaluation of development activities, production data, economics and other factors, we may be required to write down the carrying value of our properties. The net capitalized costs of our proved oil, natural gas and NGL properties are subject to a full cost ceiling limitation for which the costs are not allowed to exceed their related estimated future net revenues discounted at 10%. To the extent capitalized costs of evaluated properties, net of accumulated depreciation, depletion, amortization and impairment, exceed estimated discounted future net revenues of our proved oil, natural gas and NGL reserves, the excess capitalized costs are charged to expense. The risk that we will be required to recognize impairments of our oil, natural gas and NGL properties increases during periods of low commodity prices, such as those experienced to date in 2020. For example, we recognized an impairment charge of $18.9 million to oil and gas properties, net and during the three months ended September 30, 2020. If commodity prices remain depressed, we may be required to record a write off in the fourth quarter of 2020. Please see “Note 3—Oil and Gas Properties” to the condensed consolidated and combined financial statements of Brigham Minerals included elsewhere in this Quarterly Report. In addition, impairments would occur if we were to experience sufficient downward adjustments to our estimated proved reserves or the present value of estimated future net revenues. An impairment recognized in one period may not be reversed in a subsequent period even if higher oil, natural gas and NGL prices increase the cost center ceiling applicable to the subsequent period. If we incur impairment charges in the future, our results of operations for the periods in which such charges are taken may be materially and adversely affected.

A deterioration in general economic, business, political or industry conditions, such as those beginning in the first quarter of 2020, has materially adversely affected, and any further deterioration would materially adversely affect our results of operations, financial condition and free cash flow.

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Recently, concerns over global economic conditions, energy costs, geopolitical issues, the impacts of the COVID-19 pandemic, inflation, the availability and cost of credit and slow economic growth in the United States have contributed to significantly reduced economic activity and diminished expectations for the global economy. Additionally, recent acts of protest and civil unrest have caused economic and political disruption in the United States. Meanwhile, continued hostilities in the Middle East and the occurrence or threat of terrorist attacks in the United States or other countries could adversely affect the economies of the United States and other countries. In addition, global or national health concerns, including the outbreak of pandemic or contagious disease, can negatively impact the global economy and demand for oil, natural gas and NGLs. For instance, the recent COVID-19 pandemic has materially adversely affected our business by, among other things, (i) reducing the demand for oil, natural gas and NGLs because of significantly reduced global and national economic activity, leading to lower prices for oil, natural gas and NGLs, and (ii) impairing the workforce and supply chain of certain of our operators. We cannot accurately predict the duration or magnitude of the effects of the COVID-19 pandemic on our business in the future. Concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices. An oversupply of crude oil in the first half of 2020 has led to a severe decline in worldwide oil prices. If the economic climate in the United States or abroad continues to deteriorate, worldwide demand for petroleum products could further diminish, which could impact the price at which oil, natural gas and NGLs from our properties are sold, affect the ability of our operators to continue operations and ultimately materially adversely impact our results of operations, financial condition and free cash flow.

~~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.~~

Holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law or our certificate of incorporation. As of September 30, 2020, our Sponsors beneficially own, on a combined basis, none of our outstanding shares of Class A common stock and approximately 72.9% of our shares of Class B common stock, representing 17.0% of our combined economic interest and voting power. As a result, on a combined basis, our Sponsors will continue to have significant influence over matters requiring stockholder approval, including the election of directors. This concentration of ownership makes it less likely that any other holder or group of holders of our Class A common stock will be able to affect the way we are managed or the direction of our business. The interests of our Sponsors with respect to matters potentially or actually involving or affecting us, such as future acquisitions, financings and other corporate opportunities and attempts to acquire us, may conflict with the interests of our other stockholders.

Certain of our directors are currently employees of our Sponsors. These directors’ duties as employees of our Sponsors may conflict with their duties as our directors, and the resolution of these conflicts may not always be in our or your best interest. Furthermore, we are party to a stockholders’ agreement with our Sponsors. The stockholders’ agreement provides each of our Sponsors with the right to designate a certain number of nominees to our board of directors so long as such Sponsor and its affiliates collectively beneficially own a specified percentage of the outstanding shares of our Class A common stock and Class B common stock. In addition, the existence of significant stockholders may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of our company. Our Sponsors’ concentration of stock ownership may also adversely affect the trading price of our Class A common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders.

Item 2. — Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table sets forth information with respect to our repurchases of shares of Class A common stock during the three months ended ~~September~~June 30, ~~2020.~~2021.

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet to be purchased under the plans or programs
7/1/2020 - 7/31/2020 — $ — — —
8/1/2020 - 8/31/2020 — $ — — —
9/1/2020 - 9/30/2020 436,630 $ 8.08 — —
Total 436,630 — —


Period	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet to be purchased under the plans or programs
4/1/2021 - 4/30/2021	9,024	$	15.88	—	—
5/1/2021 - 5/31/2021	—	$	—	—	—
6/1/2021 - 6/30/2021	—	$	—	—	—
Total	9,024			—	—

(a) Includes 9,024 shares repurchased from certain employees to satisfy tax withholding obligations that arose upon the lapse of restrictions on share-based awards during the three months ended June 30, 2021.

~~Table of Contents~~

In connection with the September 2020 Secondary Offering, we agreed to repurchase 436,630 shares of our Class A common stock from the September 2020 Selling Shareholders, in a privately negotiated transaction, at a price equal to the price per share at which the underwriter purchased shares of our Class A common Stock from the September 2020 Selling Shareholders in the September 2020 Secondary Offering (and Brigham LLC redeemed a corresponding number of Brigham LLC Units held by Brigham Minerals).

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Item 6. — Exhibits

The exhibits required to be filed by Item 6 are set forth in the Exhibit Index included below.

EXHIBIT INDEX


Exhibit No.						Description
2.1						Master Reorganization Agreement, dated April 17, 2019, by and among Brigham Minerals, Inc. and the other parties named therein . (1)
2.2						Contribution and Distribution Agreement, dated April 23, 2019, by and among Brigham Minerals, Inc. and the parties named therein . (2)
3.1						Amended and Restated Certificate of Incorporation of Brigham Minerals, Inc., filed with the Secretary of State of the State of Delaware on April 23, 2019. (2)
3.2						Amended and Restated Bylaws of Brigham Minerals, Inc., effective April 23, 2019. (2)
10.1						~~Indemnification~~Third Amendment to Credit Agreement, ~~(A. Lance Langford)~~dated as of July 7, 2021, by and among Brigham Resources, LLC, as borrower, the financial institutions party thereto, Wells Fargo Bank, N.A., as administrative agent, and Wells Fargo Securities, LLC as sole lead arranger and sole bookrunner. (3)
31.1*						Certificate of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
31.2*						Certificate of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).
32.1*						Certificate of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
32.2*						Certificate of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
101						The following financial information from this Quarterly Report on Form 10-Q of Brigham Minerals, Inc. for the quarter ended ~~September~~June 30, ~~2020~~2021 is formatted in ~~iXBRL(Inline~~iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated ~~and Combined Statement~~Statements of Operations, (iii) Condensed Consolidated ~~and Combined Statement~~Statements of Changes in ~~Shareholders' and Members'~~ Equity, (iv) Condensed Consolidated ~~and Combined Statement~~Statements of Cash Flows and (v) Notes to the Condensed Consolidated ~~and Combined~~ Financial Statements, tagged as blocks of text.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

________________

* The exhibits marked with the asterisk symbol (*) are filed or furnished with this Quarterly Report on Form 10-Q.

(1) Incorporated by reference to the registrant’s Current Report on Form 8-K, filed on April 22, 2019.

(2) Incorporated by reference to the registrant’s Current Report on Form 8-K, filed on April 29, 2019.

(3) Incorporated by reference to the registrant's Current Report on Form 8-K, filed on ~~August 12, 2020.~~July 9, 2021.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date:	~~November 5, 2020~~August 4, 2021	BRIGHAM MINERALS, INC.

		By:	/s/ Robert M. Roosa
			Robert M. Roosa
			Chief Executive Officer


		By:	/s/ Blake C. Williams
			Blake C. Williams
			Chief Financial Officer

5441


	September 30,		December 31,
(In thousands, except share amounts)	2020		2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	8,182	$	51,133
Restricted cash	338		0
Accounts receivable	19,680		30,291
Prepaid expenses and other	2,464		1,688


Total current assets	30,664		83,112
Oil and gas properties, at cost, using the full cost method of accounting:
Unevaluated property	318,693		291,664
Evaluated property	472,687		449,061
Less accumulated depreciation, depletion, and amortization	(116,532)		(61,103)
Total oil and gas properties, net	674,848		679,622
Other property and equipment	5,435		5,095
Less accumulated depreciation	(4,570)		(3,703)
Other property and equipment, net	865		1,392

Deferred tax asset	16,750		18,823
Other assets, net	825		1,213
Total assets	$	723,952	$	784,162

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	7,423	$	11,533


Total current liabilities	7,423		11,533
Long-term bank debt	5,000		0

Other non-current liabilities	1,813		803

Temporary equity	127,182		454,507
Shareholders' equity:

Preferred stock, $0.01 par value; 50,000,000 authorized; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019	0		0
Class A common stock, $0.01 par value; 400,000,000 authorized, 43,752,493 shares issued and 43,315,863 outstanding at September 30, 2020; 400,000,000 authorized, 34,040,934 issued and outstanding at December 31, 2019	438		340
Class B common stock, $0.01 par value; 150,000,000 authorized, 13,167,687 shares issued and outstanding at September 30, 2020; 150,000,000 authorized, 22,847,045 shares issued and outstanding at December 31, 2019	0		0
Additional paid-in capital	633,634		323,578

Accumulated deficit	(48,011)		(6,599)
Treasury stock, at cost; 436,630 shares at September 30, 2020 and 0 shares at December 31, 2019	(3,527)		0
Total shareholders' equity attributable to Brigham Minerals, Inc.	582,534		317,319


Total liabilities and shareholders' equity	$	723,952	$	784,162


	Members' Contributed Capital		Class A Common Stock			Class B Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Shareholders' and Members' Equity
(In thousands)			Shares	Amount		Shares	Amount
Balance - December 31, 2018	$	208,728	0	$	0	0	$	0	$	(3,057)	$	168,277	$	373,948
Net income attributable to shareholders	—		—	—		—	—		—		534		534
Net income attributable to predecessor	—		—	—		—	—		—		3,502		3,502
Balance - March 31, 2019	$	208,728	0	$	0	0	$	0	$	(3,057)	$	172,313	$	377,984
Net income attributable to shareholders	—		—	—		—	—		—		314		314
Net income attributable to predecessor	—		—	—		—	—		—		1,590		1,590
Balance prior to corporate reorganization and IPO	$	208,728	0	$	0	0	$	0	$	(3,057)	$	174,217	$	379,888
Conversion of PE Units for Class A Common Stock and Class B Common Stock	(208,728)		5,322	53		28,778	—		380,205		(171,530)		0
Issuance of common stock in IPO, net of offering cost	—		16,675	167		—	—		274,746		—		274,913
Deferred tax asset arising from the IPO	—		—	—		—	—		13,664		—		13,664
Reclassification of noncontrolling interests to temporary equity	—		—	—		—	—		(518,000)		—		(518,000)
Share-based compensation	—		—	—		—	—		7,505		—		7,505


Net loss attributable to shareholders	—		—	—		—	—		—		(2,170)		(2,170)
Adjustment of temporary equity to redemption value	—		—	—		—	—		(97,344)		—		(97,344)




Balance - June 30, 2019	$	0	21,997	$	220	28,778	$	0	$	57,719	$	517	$	58,456

Issuance of common stock in IPO, net of offering cost	—		—	—		—	—		(1,465)		—		(1,465)


Share-based compensation	—		—	—		—	—		3,152		—		3,152
Dividends declared	—		—	—		—	—		—		(7,206)		(7,206)
Dividend equivalent rights declared	—		—	—		—	—		—		(402)		(402)
Net income attributable to shareholders	—		—	—		—	—		—		3,146		3,146
Adjustment of temporary equity to redemption value	—		—	—		—	—		3,797		—		3,797




Balance - September 30, 2019	$	0	21,997	$	220	28,778	$	0	$	63,203	$	(3,945)	$	59,478


	Nine Months Ended September 30, 2019
(In thousands)	As reported		As adjusted
Changes in restricted cash held in escrow for acquisitions	$	33	$	0
Net cash used in investing activities	$	(179,850)	$	(179,883)

Decrease in cash, cash equivalents and restricted cash	(6,137)		(6,170)
Cash, cash equivalents and restricted cash, beginning of period	$	31,985	$	32,018


	Incentive Units
	Number of Incentive Units	Grant-date Fair Value
Outstanding—January 1, 2020	212,733	$	10.04
Vested	70,911	$	10.04

Outstanding—September 30, 2020	141,822	$	10.04


	Performance-Based Restricted Stock Units
	Target PSUs	Estimated Earned PSUs	Grant Date Fair Value
Unvested at January 1, 2020	753,546	450,836	$	20.36
Granted	434,265	174,106	$	15.98
Unvested at September 30, 2020	1,187,811	624,942	$	19.14


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet to be purchased under the plans or programs
7/1/2020 - 7/31/2020	—	$	—	—	—
8/1/2020 - 8/31/2020	—	$	—	—	—
9/1/2020 - 9/30/2020	436,630	$	8.08	—	—
Total	436,630			—	—