BSM - Earnings call transcript Q4 2018 | Black Stone Minerals, L.P.

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Operator

Good day, ladies and gentlemen and welcome to the Fourth Quarter 2018 Black Stone Minerals LP Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Brent Collins, Vice President of Investor Relations. Sir, please begin.

Brent Collins

Norma. you, Thank everyone by to fourth you joining call. for and Good or and online either conference earnings phone year Minerals’ for us full morning XXXX thank Black quarter Stone recorded call earnings with was and Today’s which being will available website release, on afternoon. yesterday be issued along our is

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

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

Tom Carter

We off well us royalty a you today. as set production and strong thank a new as quarter. fourth for capped total and morning year record quarterly minerals with Good for a great Stone Black joining production.

the fourth mineral well. third the quarter minerals quarter in grew is compared performing of production royalty X% business Our quite XXXX. to and Quarterly core

on XXXX contribution over incremental on was assets, from the and For royalty production of the mid farmed Shelby year, in strong last more mineral end The investments in by which than decline of out our the successfully from drilling the The ‘XX. largest mineral our direct our the and full of much Haynesville our of to and business activity Even and invest royalty working ‘XX. history, in XXXX, grew performance XX% offset our at impressive existing excluding Trough having ‘XX, acreage. the Noble We grew planned interest that in purchased minerals development we program the from the came royalty capital. mineral ongoing in to XX% interest production ‘XX drilling working benefit our in occurred participation without through significant our program from program. will that

on that by adds. around wells interest our You the the outside growth basis, XX% XX% We reserve had public XX% split plays: interest Eagle fourth Forks we and and of that Haynesville, X% approximately to flow, each a well year, those majority The We cost in Permitting on seen reasonable in our to We our Delaware Delaware distributions coverage and around of in over properties the On maybe over and Ford fourth XX% which X.Xx. of our strong where further well environment from bolstered since of XXXX the Bakken/Three completed can $XXX have X,XXX royalty activity By cash maintaining of the of XXXX minerals And was in challenging the to have the last up to drilled see and while call most amount able surprising posting and our on these XX, prior which company. coverage. those subordinated of year an reserves, XX% this profile us our XX.X the representing from basis. we commodity at challenging year the in strong. of of process. was us basins to though interest common the was quarter, business the were of for permits ratio in being came longer net through with the reserves of to what basins. permits the interest some year. million hold we the an our Shelby Basins, on Trough our a Eagle a the the able proved the all of total by perspective. and we total acreage and our focused retained to year flat to of all to quarter were do on of a successful our The able it a includes well December year. and previous healthy almost Midland both were net no XX% a in in been numbers. activity growth about gross ‘XX, and in contributing on between Despite XX% during both the net performance permits in Midland were in ‘XX acquisitions the replacing for acquisition all continue Even also working outside and grow increased and reserves external Ford quarter course the is broad working percent prior grow additions X% allowed MMBoe resource of our while quarter consistent the finance auction royalty with from position environment, distribution of acquisitions Last unitholders XX% our fourth have an with increase the meaningfully that Shale as bolt-on know our XX% are our volumes in Permian, The acquisitions acreage in acreage remained volumes. of approximately production financing X that approximately Delaware this estimates helped which was Haynesville, as in year acquisitions was of we Haynesville. of new to on Bakken activity last in Midland horizontal is approximately and a filed new a a our ‘XX. strong production expanding production royalty demonstrated program and Royalty a X%

acreage, Midland and January, in acreage XXX XX January. Haynesville. Delaware significantly over end the that of were on and I and on XX drilling Ford increasing saw basins of the count As there our our Eagle also the Bakken rig in mention rigs would operating including we

We producer lot restraint a community. spending to capital by on continue activity our of acreage see greater the of in even environment this

are robust. prospects ahead, Stone Black for Looking

Our strong units position over our of performance a will X have to to X put ratio capital a which several convert mid-May, quarters the the in us last subordinated in expect at where fully we structure. simplify

activity. we growing poised great or assets on continue maintain We that set is to diverse have minerals recent and well-positioned expand are to acquisition and our of organically royalty a

I the We financial call With and the on a have and will are as anyone that, turn a industry Jeff. that over we as mineral time in solid royalty entering really got to is space. management for the footing experienced team interesting

Jeff Wood

and everyone. you thank Okay, morning, good

As mentioned, remarkable capped Tom for quarter the Stone. a off Black year fourth

full a perspective to to some getting I highlight results production for outlook that our ‘XX XX%. detailed in XXXX Before averaged accomplishments Boe levels, just total XXXX our ‘XX, want financial some into per year. XX,XXX increased hard of on of above XXXX quarter which and of guidance got the for that by Compared the XX,XXX Boe few was revised have per for the level for Boe That’s to around we comments day. our XX,XXX of to that Production XXXX was XX% that’s from achieve opportunities. in about interest scale mineral a of a and investing and XXXX. declined working represented year-over-year volumes the that that in driven in our XX% working as volumes even total was Royalty production. by organic and by X% XX% a as decision successful year, about We interest result to up both growth royalty in increase for Filling stop of our of of company production accomplished and over acquisitions. void number day, a

volumes working volumes We shrinking and of interest that royalty growing on and in continue into XXXX expect I a few more this trend to will touch minutes.

and result in production, on was production The the million XXXX combined increased to gas our product environment revenues XXXX in our XX% EBITDA oil distribution the increasing more and commodity constructive Finally, a of for of with as in volumes by rose Permian a available oil million. toward over to That’s total by a $XXX Bakken. increase front, XX% $XXX in more million. resulted big levels. mix Adjusted cash XX% and $XXX in also weighted increase the XXXX

Now, on per fourth focusing Production much a XX,XXX was which the the quarter, very Boe record. the day, story almost quarterly increased new same. production in is

fourth on discussed in subjects of to a these diverse such having a surprises. calls, the before us some As and those we have quarter. We of portfolio pleasant have large lot mineral clearly

we visibility day. well typically and had benefited from revenue additions, production XQ approximately representing are into by periods ‘XX per operator. production production upticks had multiple our suspense we Boe some by releases, paid contributions new until we that meaningful While these also don’t revenue notable of have X,XXX the We

increased natural bonus work-over not posted quarter impact the slightly XX% on and have of barrel we with were something million and of interest. lease in million increase that or fourth realized a prices our per working it’s into We working before able interest our $X.X in a gas bake forecast we activity prices the wells a over on quarter. a in gas basis So is Boe quarter. LOE in revenues or higher due crude to $X.XX $XXX guidance. are which Realized oil prices increase in decrease during million and the for $X.X to hedges the overcoming to XX% up

our last with revenues. XX% quarter Distributable cash were from for third weeks of was $XX.X distribution million, the Distribution X.Xx fell quarter at was our quarter distributable coverage EBITDA of most and historical that’s taxes $XXX fourth it’s quarter, both that increase fourth increase which oil common and per Total to but for a gas from flat and adjusted [Technical for quarter G&A to X% decrease per fourth over over a the our awards. in remained related announced long-term non-cash expense XX% XX% an production XX% unit the to reduction the G&A fourth common flow. subordinated and ‘XX to the the from the of ago, Our we Several $X.XX to Overall, incentive $XX fourth non-cash decreased and quarter represents the quarter line million. and XXXX. million, of of flow distributions of attributable to cash holders, quarter XQ equates in last Difficulty] quarter unit. XXXX cash robust coming

$XXX guidance base. million Tom We We published embedded flow. in or comparable done payout have midpoint even to On our mineral chunk an XX.X%, of of we continue before be of potential our the yield of just our expect our reflects It’s retained causing of to in our mentioning amount we metrics, interest be guidance capital lower stress acquisitions. meaningful consistent acquisitions distributable mentioned the expect current royalty production royalty working include given we before, profile sheet our a as production expense without excessive same a in The benefit very production was attractive our the the associated mid is up the attractive the last DCF as our year their continue not in despite have will deduction guidance interest execute acquisitions the represents is exploration and and of of almost issue increase around is basis, more finance XX% as equivalent year. our which capital said our course an rapid decline very of we the XXXX. and much helped to to the year, expectation peers, time, our who to XXXX with activity. I a we rate up approximately which significant stability believe that of to last asset yield opportunities stressing our total equity. with last that on acquisition full production slightly of that growth a the of one during does us the XXXX really more total G&A. prior from At spent number royalty balance of is that cash no ‘XX, XXX% guidance, of our the over will apples-to-apples X.X% night large the XXXX, consistent to year or the but want that over an working rest lower to worth which total. At not portion and expectation with of XXXX LOE exception to that result The expected at is with by

Now remain liquidity great overall position levels turning leverage and to the balance our shape. sheet, in

the on As We end of had of and EBITDAX $XXX had million available end of our outstanding borrowing one-time. based of year, to is at $XXX year trailing $XXX over debt to the base. debt liquidity we million million us almost XX-month our exactly

around in opportunistic paid excess our we past $XXX this Friday, to resulting We of have equity. million. million, the $XXX remain down of liquidity revolver As with

$XX course $XX our the million for and just to directly in sellers ‘XX, million about ATM Over under equity issued over we acquisitions program. of

we part through that total, at of fourth the million of an price ATM the As $X sold of unit. beginning per quarter about $XX.XX the average in

As year an repurchasing our active were price of we under well has approved that $X be existing environment. we to days million at quarter, the program continue operator company positioned in grow the million share we through In the to repurchase in what summary, about acreage last we robust we $XX.XX per a through final of think expect and our of a Board and to unit. acquisition activity are $XX program stock average announced

fully a our to in common provide subordinated the convert has for expect liquidity. units that potential capital of year structure units will simplified this May to result and greater in We to

always, that, with for the As the support we appreciate community. will analyst and we And open call investors Norma, the the questions. of up

Operator

comes James. Koaches [Operator of Our first question Raymond you. from Instructions] Thank Brent

Your line is open.

Brent Koaches

good question. taking Thanks morning. my for Hey,

outspend. focus lot maybe thinking world has what state the kind guys on your their from how Just of comment just for at of E&P on level, in Can operators outlook? affairs kind a – managing recently guess, and E&P down means capital of in that a slowing high been the activity looking of you’re you I

Jeff Wood

frankly, taken Brent, seen Jeff. what’s fringe capital in have I’ll in point start just haven’t see comments. general, with at others if in being and I slowdown is important think this and that In is a more spot. cut this A activity positions we down with of major of when we’re our lot operator happy really right the all four core it’s from that our is away areas, and basins. there

from from to top fortunately, seen we I impact avoid so capital just And of to-date. really want greater And have we’ve that’s impact to is really managed in our to-date. plays, you acreage discipline where operators an be those where not that again, that any think so,

Brent Koaches

areas that of Can the be seismic looking results? Trough maybe you’re just that is detail going I on at, then area. noticed kind us some guys the timing Shelby to to doing a and on Okay, some just be on follow-up, give in you what you the are maybe shoots going

Brock Morris

Morris. Yes, Brock this is

in our programs. interest there, of as XXXX that. operators they in with may considering some in their as program of our area, they seismic participating have we some So, be in we are development And working a expand that both

though. ultimately that Now up a farmed amount relatively this capital small shows spend year. as gets being out, It’s we’ll it that but

Jeff Wood

option a in both because that are in add you future not. from knowledge. when participate the long-term idea gives done, just and when a would your we of better it the we is play I existing – on we or like these land in is to in as look others, whether big of the and going better what’s large shoots that them think Haynesville us standpoint, lands, at plays it better programs a less be investment properties And in blocks that and other the like an of have technical going having than knowledge seismic

Brent Koaches

That’s the it sense. and a congrats on that for me. Well Thanks Thanks. year. Sure. makes great for question taking

Jeff Wood

Brent. you, Thank

Operator

Thank question next Weil. comes of Philip you. Stuart Howard [Operator Our from Instructions] Scotia

open. is line Your

Philip Stuart

Good morning, Congrats quarter. good another on guys.

Jeff Wood

morning. Good you. Thank

Philip Stuart

I expecting I see mineral comments volumes the at the – – appreciate royalty and if your I was year-over-year, you’re growth, obviously, ‘XX kind that curious production seeing just how on the and midpoint like mineral are of guys E&P throughout kind wondering royalty it guess activity trending with you full-year point in XX% on are acreage, ‘XX you guidance. XXXX, XQ line the looks of of the I’m midpoint

royalty the you’ll in production of you’re if of kind that holding any there year of kind that noticeable kind steady just if and mineral seeing curious trends So, production? throughout see are the or

Jeff Wood

Yes, Phil, think XQ. – just mean, what those on no, this things a to I we’re relevant few I appreciate maybe especially I is Jeff. comments. guidance,

in mentioned my I that in for production we As happens and all had suspense some the operators held some that time remarks, had reasons. various

sort had of up of by that don’t per overall and lot probably a bumped operator just BOE in our release get so until of day paid suspense have XQ the we the that so about visibility we And fourth an to we by total. large quarter abnormally X,XXX production that

So, the royalty mentioned, as XX% about over you we’re to overall volumes increase year. expecting

working than growth that own guidance we’ve flat originally off we of – is a which One, turned it’s interest spigot then, production volumes. of course, to all fact I of ‘XX. a is fully our we ‘XX royalty the the And relatively we’ve Somewhat, great victim of our success bit that just in acceleration faster seen been had a capital anticipated, look, news. think on

design. our I something midpoint a in that’s volumes, XX% working overall decline the of at So, our think like by we’re XX%, fighting again, guidance interest

through for that, relatively consistent, is in I overall, in just growth a year increase and big course that of would working the decline interest the the royalty interest decline what that volumes, that it’s to fortunate makes on pretty again, working But, planned it is, think feel pretty fighting up we volumes. royalty side. So, fully

Philip Stuart

color should acreage more there, the appreciate of commodity highlights is growth on of at mean, to quality X.X potential on decrease guess, the grow one any lot distribution for I the increase coverage analysis. about growth of that mineral looking the royalty and kind I kind underlying of forward, kind times a makes we about sensitivities sense. certainly I running could distribution of as guess, the I given how we production ratio different ability there. distribution the going future think me, still obviously, think or the growth price scenarios? governor

Tom Carter

is at shot also take this question Yes, that guidance and in Tom. XX% in cash a I’ll the working and decline context looking that. decline of putting volumes, but that significant with flow with associated is forward And the growth in royalty that. again, in significant interest projected a CapEx a once distributable a

a coverage, We to coverage a rate this ranging coverage a like variable which as baseline other grows, ability see our are it distribute be might from versus a relatively we and do to would continue bit problem to to with cetera, we of that in years. on of bit you in a to there’s and high quite okay, our coverage, I around transition X% and coverage consistent distribution. fixed no space a here is which long kind see on our extreme, discussion variable have runway. et distributions of a but comments contracting distributions not over the if to the – tell and X% fully respect cycle thoughts little we coming in been growth With cetera, et us,

be a see of not on coverage have be. also than I’m just to current to we and of ratio but the we it. energy higher companies right we is are think wants kind for one anybody variable where mind yet a I would in E&P basis, the preference. markets and more what them environment, that not where And not is are bias saying quarter-to-quarter that that’s capital We – the a other, that’s want to a our

And our more on still range, little our of through And to flow in generated that’s – having a in acquisitive. the X% but of share the so ratio pretty is we maybe, bit coverage yield use context be to higher which a internally robust. continue price cash

a So, I go I and time. than but variable to at towards mean, fully not lower, have coverage distribution we’re like hope question. that we we bias also in over growing answers a higher hurry that our all

Philip Stuart

especially, know, sense, makes Yes, with. that of the the that commodity guys. all I volatile I we’re dealing I time all That’s ton a environment think me. appreciate given from

Jeff Wood

Philip. Thanks,

Operator

this for in at Carter closing And no to time, Instructions] Mr. comments. for like over turn queue call [Operator the other I’d the to you. questions. back Tom have I Thank callers

Tom Carter

for Well, forward again look XXXX. we thank you next the to we Thank all quarter. with joining today about at you again we’re and excited speaking And you.

Operator

thank gentlemen, today’s and in you for Ladies participation your conference.

wonderful a You disconnect. may day. Everyone have

Brent Collins	Vice President, Investor Relations
Tom Carter	Chairman and Chief Executive Officer
Jeff Wood	President and Chief Financial Officer
Holbrook Dorn	Senior Vice President, Business Development
Brock Morris	Senior Vice President, Engineering and Geology
Steve Putman	Senior Vice President and General Counsel
Brent Koaches	Raymond James
Philip Stuart	Scotia Howard Weil

Black Stone Minerals (BSM) 26 Feb 192018 Q4 Earnings call transcript