BSM - Earnings call transcript Q3 2018 | Black Stone Minerals, L.P.

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Black Stone Minerals Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Brent Collins, Vice President of Investor Relations. Sir, you may begin.

Brent Collins

Thank you, Demetrius. and online, for Third for Earnings Call. everyone, by us, Quarter to Conference or phone Black morning thank joining you either XXXX Good Stone Minerals our recorded was which yesterday afternoon. be Today's earnings issued and is with the being available call on website, along release will

our Before I'd performance. that and expectations assumptions advise our future like results you be risks we will actual plans, we forward-looking about statements maturely in cause results our statements differ start, These may involve or making expressed during our to from that this to call regarding statements. forward-looking the implied

Counsel. evaluating Business now of Senior press Jeff For Dorn, information Tom. Geology; General XX-Q, filed be may described Vice risks, Vice turn Brock Holbrook on that which about morning non-GAAP our to Tom these release and which and you this the earnings refer useful and CFO; Vice company our release, blackstoneminerals.com. the and cautionary directly comparable in over certain are later metrics on call can believe statements President Development; I'll of be Senior officials to Senior GAAP section and our press are President these the the Chairman to Engineering Carter, are of Wood, website a most at our discussion call other forward-looking our President President in Morris, CEO; and about and Putman, to Steve found The Reconciliation from We will the financial should performance. measure we of non-GAAP yesterday refer factor today. measures information of risk measures those in

Thomas Carter

production record in quarter. of and record had quarterly of set last another which XX.X number Oil oil third just respectively, per gas higher of production a X% day, solid our was quarter-over-quarter. XXXX. and quarter Black grew X%, the a equivalent than new new set and quarterly X% previous set Stone barrels Morning. quarter of We records

new quarterly equivalent in grow Importantly, volumes to royalty oil XX.X our the of continue day record quarter, a quarter. barrels setting of during the per

grown on It year, which are focus and our into and the Our demonstrate our royalty royalty to executing acreage over a how shows our additions are we that our mineral acreage. our 'XX higher. on the plan quality translating in lot business. production has royalty activity well seen also We've volumes of that's meaningful well of on driving last XX%

XXX on and our includes acreage, a we've mid-October, the lot see of operating Midland of we Delaware Basin. our permitting And rigs which As rigs across in XX acreage.

So to we that is seeing production respect we're believe going momentum to the continue. with royalty

$XX.X essentially production as in interest healthy a $XXX.X Chalk in the were record trend on bonus and ago. at volumes the basis with a well backdrop. flow quarter, the million cash volumes leasing favorable both activity third the adjusted quarter, for and We driven $XXX.X million, year at distributable some in for set flat Our Louisiana, driven both new as records largely Haynesville. by grew but came the and working which quarterly respectively, sequential Lease are in EBITDA a pricing million Austin Midcontinent by in

negotiated was with in the period. was there the from on during of acquisitions quarter Midland quarter $XX the most year competitive A&D successfully very a we've an closing Basin, be perspective, continue third Permian our to acquiring active on The do year. of a perspective, number this The of for able to assets. acquisitions from transactions partnership we but million basis is Majority been the where an that

the disclosed which had in to we the acquisitions, $XX a release tested delineate XX, million included closed Texas, the September private over million to million East press into of Texas hard XXXX, where In of consortium East on interest our We in this also PepperJack significant further we $XXX In Texas. program continue prospect. the of in in and ended quarter. this X Permian operators approximately inventory our high add $XX to we yesterday, agreement that on have for Lower with acreage, an East getting Wilcox. entered area we We worked months,

the As a log well Those resulted up efforts the delineation area hope during in what - most quarter aware, followed we'd of in that for. in first we you the quarter, with the and and are drilled test second a with well.

It's be here but some have influence into our the fully PepperJack, of commitment. completion discussed with well. schedule. A now the to a the majority number unusual provides which the from boat Third-party evaluate would of as is will the a current PJ and what at a shoot well drilling respects XD a the costs mirror great agreement be, a development well XX% that owner seismic makes ability royalty distributions in with for successful, Stone owner recovered as - done at believe that peers. X Black to to we Stone of the number The the capital second X partners. be it business closely be can different to we development cost directly MQD we the area in meaningful the project able by example acreage being quarter would the interest a On many our for able for how carried A will and all exceed participate moving steer of drilling more We of our with performance call, a working our of be as help goal ultimate PepperJack Black

is to flow of right performance attributable distribution the of units. to $X.XX Based over these reflect subordinated operational In distribution was Black at distributable that coverage comparing don't increase These us unit dislocation peers Given last the our which place demonstrated year. value a the distribution of that we X.X for a buy maintaining common our that and allow for prior units. of that, again, to is yield, program us of in strong distribution to turn yield us and and Jeff. simply trading the opportunistically a price times. response business, will and in we the Stone means the closing increased per we've on own repurchase over the I'll measure represents unit see, sense distribution With X.X% valuations XX% variable that XX.X%. to cash to over third make to while the a quarter, performance put us have, don't That last quarter call to the the

Jeffrey Wood

morning, Okay. good Thank and you, everyone.

quarter. financial the the results covered Tom So highlights our of operational, for

repeat to XXXX that we say proud and really except of not continued going quarter, the performance to that third we're that I'm that the here, certainly, trend. So delivered throughout

BOE meaningful well quarter of our full the increase per ahead year day new was the day. revised quarter. Our We well range in of guidance had per of MBoe production for adds XX.X a XX.X XX.X to for

those had also some We from suspense that release results. production Haynesville in Louisiana aided the

we Our acreage have expect seeing trending activity the up, drilling all given the and new adds that would well Permian. our particularly, been we're in on

those of know quarter-over-quarter. it's not items, repeated but will well much that onetime So adds certainly be how tough to new are

expect quarter, we're So we the of at to the for but high-end to the year. that maintaining come guidance as range, for it now, forward in fourth year full look

conjunction put release issue for XXXX in to As issue our our - initial February. we'll plan that with guidance an usual, in quarter we will fourth earnings out to

in Stone quarter. Our and oil for up Black both in and the third commodity production realized crude widening resulted million despite quarter quarter, prices last and posting gas some prices slightly for levels revenues of were seeing Strong from $XXX oil almost differentials. gas

EBITDA issued awards, in previous revised million production up Noncash financial line realized Our with our of of quarter, years guidance. bit, the almost including IPO. the G&A was up adjusted impacts were long-term ticked around hedge over XX% our awards $XX from ago outperformance $XXX despite a at as several costs million operational LOE and and our incentive losses. the

Given the G&A our on across biggest This unit how has years, of the award noncash been our impact come G&A pushed couple several the we've up performance-based elevated levels far a of is over cycles. bit with component the awards. past

by we a return the schedule we of G&A IPO away made certain million from awards fully We went as quarterly before rate $XX point and more year, normalized the total run what of which should around public talked last distributions. about vest mid-next will annually. on Specifically, moving to view grants minimum we at quarter

excited we for to over that that unit to announce the in up are of 'XX. were week this from third quarter's do how subordination increase is distribution, and levels. all Because X.X greater is to us level, period the and stellar we times Now the per of our give last final while almost the that results distribution an we XX% $X.XX Well, coverage. on annualized increase maintaining which distribution move we able distribution up year the flexibility were last of that quarter for to an quarter, over XX% from might

As That's a program. big as between dislocation our unit our what our response unit Tom repurchase performance board $XX operational the in approved price. million mentioned, we view to and

like little on color a give that. I'd to So more bit

distribution, working ongoing interest the addition cash raising For from flow required years, consistently moving distributable our the to past two in business adjusted all production, we increased EBITDA steadily while CapEx. and away that

total third Now that. daily results to year, volumes we last announced some up Comparing quarter XX%. last around the let the put specific numbers our night are production me of

XX%. up is production royalty Our

is as growth Our our strong adjusted up prospects XX% And is XX%. ever continued up and been. is they've EBITDA our unit per distribution for frankly,

over in We broader as with our to and is You find and real a our even tough think little $X mentioned, unit understand holders, markets. that difficulties that than price MLP the stock time. in the would translate value that for frustrating, yet down energy Tom more by some

program the to that's use Tom additional as as So tool for create that our behind unit rationale holders. we that, a repurchase said, will value and

topics. Okay. happier On to

to facility million, $XX of quarter of borrowings and XX, credit trailing by at $XXX under from almost times. last dropped stands as debt to EBITDA Our the X.X our September now million XX-month end

by our under another borrowing $XXX million, borrowing Our base date, that's $XXX effective increase from base a XX. borrowing million. our of facility On credit the up base of in October liquidity and was approved further previous that the lenders improved

rates the process, grid should our at facility about XX current LIBOR of That As in credit levels. points. us reduction and $X move of save for basis some up offset pricing part debt of our million approved the help will that in year per lenders also the recent the

constructive really group appreciate our their of As we throughout always, redetermination the our support business. latest and bank was very

program. new now As hand. we of in down we to and taking balance million, excess $XXX had buyback means they turn With that, advantage on further into to dislocation base liquidity very opportunities, million the account take I which unit have questions. of as through after acquisition That of mentioned, well to positions $XXX our paid us over as the borrowing last will our Friday, call I arrive. revolver the the price cash Or

Operator

our Kashy [Operator first from Energy. you Simmons And Harrison with Thank comes Instructions] question

You may proceed.

Kashy Harrison

and congratulations Good on morning another solid everyone quarter.

So noticed last night, the prepared in looking raised think and remarks your great as beyond through cash that also in press I the I release on you yield And MQD. it's and the distribution closing said flow you've above XX%. that the distributable was I that highlighted you it's

Given bringing X.X near-term market that ratio in further thoughts times distribution down are flow valuing dividend from cash on is X.X yields seems increases was through versus on in level? just companies to I coverage your the wondering yields, the actual what distributable the times it your

Thomas Carter

direction it answer I'll a also of at Tom. under to level. that in quickly, that be it and X.X would the to formation there's being I is And higher. maybe than consideration This to rather our that. that consideration something our add think, the that moving question but more in And we looking of ratio still and policy closely I - forward a future. reaching pretty the answer we are times lot around given that look board coverage is consensus is at that, could

Kashy Harrison

touch I gap in probably imagine it Got all I specifically know policy policy. on But by the the been tax think something of you. to in just was that debating just marketplace is cautious And heavy have big seriously with this but then how uncertainty now, you future tax current you versus to before you're the How a to contemplate I wondering, of this given would tax that me. MLPs, more you I Corps be again. much before valuation C witness disconnect for quick tired would more around structure? appealing? valuation starts become change have follow-up on, to that tax and bill just just you have a that wanted and

Jeffrey Wood

Kashy, done well this to is an It's route. go it's at pretty always Jeff. Corp you're go the you've impossible once basically I'll to said take that aware, that. the What that. C easy we've is to first stab MLP back as

warranted. that of So going we've data it's we've some as reliable series had tough think just we on caution in what's peers seen the And points, converted. two a here to that So have right? is market, frankly, get

equity very was capital and One an in some and of those or that we of depth show markets what would - offering price that peers of successful depth showed in terms did didn't offering think, panacea maybe Corp C consider that. we did attractive peer, another a that in didn't pricing

that know We the before, corporate as conversion. able side, certainly if full to now, liquidity would and we've of a acquisition we talked hit, what as been did fund we've So got to pretty we about good tax now. fund on right take we've that, want a we

of could the So the do hard where the with positively some get some something board best staying speak depth But structural mitigate after to really pretty hopefully value we tax looking and unit we're If seen always capital just this market and of to fixes that in there that we terms at was on holders in served But the we impact conversion haven't we for date, with yet. said, cetera, do that benefits it. markets is that. have the of just our et looking determined a of to format.

Kashy Harrison

my a luck have good question. for just day. Got And taking it. for the Thanks for me. That's

Operator

our from James. question Brent comes And with Raymond Koaches next

proceed. may You

Brent Koaches

Congrats guys. morning another quarter. on your strong Good

that deal together? if elect per Can acreage, that And of wells kind develop bit the specifics as Just arrangement. prospect partners maybe the that year wondering kind of as a more the PepperJack then share just and about many you time entail maybe far would on how came some little what's color to period? how

Thomas Carter

It's take Augustine from It not was hole, the County, XD. using PepperJack another structure donut projects, we're Tom. of I'll with lot Well, we industry, plays Large shot was a a project taken where there plays, get but County. were XD happened. that that with where things in projects play on out an The have come at in capital various basically Wilcox. that. PepperJack lot did we doing had that San is to of because this BP of and a gotten by our minerals incubated and development plays Angelina a we're sequence what there, moving, conventional of it. areas with. deal to is of that in XD but acute comfortable manner in and have in project area is versus resource favorable a like wouldn't that own have on There in them a the including what a very we structure just XTO focus no industry once then to doing

drill three looked tested of there, heads us the that completed, And well could it. worked, well. a a we developing to could then the election the Once paid that's us we in we a looked shot of standpoint. survey from short fee. have have period that the substantial prize test acreage, where the will two we And in logged, After tested, faults looks a very up. the come zone will is pay once have to they well we sold similar have to and pretty They're up-dip drilled if perspective this to period already our the to Gilly, XXX% on and is option or these program going point on in carried have take three to the anywhere of to of not the a in. is three for a five of very What wells make per project or going at a blocks the field be up six time more an was size is the encountered we from development happened get that that partners short So blocks industry cost to to well to one called - that shoot whether in optioned ourselves. has elect reimbursed - elected attractive in it, survey log. And the XD it to one will purpose derisk is there They And an our see a year commence that given zones the the blocks. from some similar on neighborhood continuous the blocks logging other of what's of in minerals.

So an XX volume additive from now. source potentially at being XX looking that months we're to

And some of high that side on color liquids so got I an a looks hope that potential with like. gives and This it's what area lot you some it. is with

very be attractive. production things it's And continue to to hope our basically running. stage exploration kind to of be of the we potential right could to add it years doing these So now, It's more often the in but still come. in to

Brent Koaches

for it's It going anther it and look Thanks for to sounds a color. company. forward quarter That's be like for pretty to meaningful me. the the Great. XQ. deal Congrats

Operator

comes question Howard Stifel. you next Sir, from may our And proceed. Tim with

Timothy Howard

taking for thanks my Hi, question.

it XQ. of but of what's XQ missed and kind any just thought items is were expected your in decline I there I as to there there an back remarks the seems in guidance, by production And Going Q-over-Q increase? like of onetime slightly, the prepared drivers kind maintaining

thought that, please? frame if So of you could kind just around my

Jeffrey Wood

Tim. Yes,

quarter third part is things. have the that were of Jeff. a and remarks. lot couple the did in We well prepared So of this - of adds a there new There was

our a lot we're difficult know to a seeing of drilling seeing of permits, lot it's on really acreage. Now we're

well our surprising trending of up, are not us new adds that's that it's to timing. but some So

going So quarter. to exactly it's benefited numbers come those the but exactly know kind of third quarter-over-quarter tough that us in to how are out

have of a release completion moving away ticked of timing. the it's we're business. over You little farm-outs, That's noticed the sense been a Ultimately, interest from a that just few long quarters. did talked may past from the up the production bit as for time, from our working what we've about largely area

interest our will time. production decline over So working

that in we're we - certainly guidance. chose again, prepared it to bit - change feel was we didn't in quarter-over-quarter. to that to as now, a on we potential the we going comfortable remarks, come of little there's leave again, given, just So guidance perfect to extent think high-end there be was. the to and visibility of where Certainly, well this it the We adds those new it's chose at just have tough

Timothy Howard

Thank very the driver like X.X policy. there's XX% taking then the wondering to was what coverage? Got that Was was maybe discussion analysis of And sounds Q-over-Q or shifting it, that's growth? kind helpful. a I lower. you. of of it the maintaining It times distribution

So what XX% just of And going forward? it think kind the about how - we growth? guided should to

Jeffrey Wood

there's to We either. yet really high a we right the the have the pretty in that We've has frees didn't wrong. capital for it annualized $X.XX funds and a just historically. coverage, right to acquisition been was pay running think well we Tim, board, discussion rate, that down that. or It long debt. Yes, there. go was balancing maintaining just benefit us that It think enables very business so frankly, answer And with performed We like don't just to raise markets. up

increase between significant our So holders. we to coverage a - a of unit bringing was some bit balancing plus what distribution think this is little maintaining

longer-term and But good over able that a times a that just X.X see I was thought attractive time, frankly, such it you'll quarter to coverage kind what both, is was were do that rate. towards we we migrate X.X we'll times, pretty think of answer.

Timothy Howard

shares? distribution And program you How those great. repurchase then now. of think just I of growth, that's capital buckets? Yes, more on do about each broadly How place with think guys about the repurchase should guess Excellent. acquisitions, we allocation in

Jeffrey Wood

Yes.

this there. So year. million the I'll liquidity sensitive to We've balance stock sheet. got both really about tell over you optionality. in the good liquidity acquisitions we're our We're buyback to still really on liquidity, opportunities seeing the that our out date price just the of is and $XXX

this careful So be we're attractive going At we're is an time, same the repurchase telling investors price. around to entry this program.

plan that as see from putting to us dislocation on remarks, in But to repurchase buy That's to prepared and this dips. interesting, This right? kind to factors on that it's a to what continue mentioned what any continuing to prices it's just perspective, consider the have But of buy over XX.X%, us DCF at chance aggregate We're Tom it good do. to We you We're here in see ability picture So does, not the into we're that a be gives right, of when And gives intend this when think we capital. put you get larger a at arsenal. just buy have strict the we're allocating yield parameters his acreages. attractive opportunistic we to opportunities. mineral. really point.

Timothy Howard

in And curve? just seem just but hedge It of where policy. there's the wondering the depressed one XXXX doesn't gas perfect don't there's given of post natural on to that quarter, add maybe kind like additional anything evolving, at policy size? is I and Makes yet me, the you - for sense. how last then are kind wondering hedging just your

Jeffrey Wood

Yes.

on we we gas. colors to So look put for for XXXX. at And continue oil some

around We typically XX to time haven't forward. X looking for done XX start that months than We yet, hedge to that normal but this pretty to - more us that's range. that's be our year in

as and been tough. gas has backwardated So you know,

next the bit hesitant a months. So looking put we've to hard be we'll those that here But at been few it's on. little in something

Timothy Howard

for Got it. the detail. Thanks

Operator

Instructions] [Operator

Thomas Carter

there you next you we'll we thank in and questions, day, aren't for to more the calling quarter. If any Okay. talk

Black Stone Minerals (BSM) 11 Nov 182018 Q3 Earnings call transcript