BSM - Earnings call transcript Q1 2019 | Black Stone Minerals, L.P.

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Operator

Good morning. At this time I would like to welcome everyone to the Q1 2019 Black Stone Minerals Earnings Conference Call. All lines have been placed on mute, to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. to conference like to now would turn over today’s Mr. I Relations. Vice President Collins, of Brent Investor Please ahead go sir.

Brent Collins

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

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

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

Tom Carter

and additions Ford net you well. came quarter business and of solid had the other joining Eagle remainder X.X and morning us largest had the begin Good our next thank the the and to We of underlying XXXX first is portfolio. in from Stone The Midland, Black half the first performing which well Delaware Minerals roughly were coming quarter Thanks. across assets today. XXXX with for a our from Bakken the Haynesville. contributors

perspective, net course XXXX. quarter wells For X.X averaged the we same the of during in

the and East We by XX in plays. in we and activity what year Shelby perspective, of So rig XX% increase. a at a Bakken, the drilling led the Haynesville, in that partially had the the first that XXX Over of Eagle Concho Delaware of end the Texas Midland saw BP operating total, in half on had our comprising is over on XX first XTO rigs In on we half this of and SCOOP/STACK Texas. both activity Diamondback, was had quarter From a quarter, total our quarter and Ford of of focused with is Cimarex of with that rigs rig Trough XTO, total rigs across of assets about operating operating third of a were in the or bulk those activity. Louisiana; the we Endeavor acreage. Pioneer, Basin operating A and us. XTO, count XX%

work across busy to which on Finally run very our operating adds, acreage well lead translating had private of of are our sources volumes. production Things typically by is those we rigs operators new that base XX areas. into asset outside and

a acquisitions remainder for of acquisition in step we Acquisitions were the do, back I the continue to acquisition take so front, we million big expect quarter that unit subordinated about to position. of On what I are conversion. us in roughly in Trough assets of to the our a the the Shelby quarter from bolt where XX% Texas of and $XX quarter, continue the to East approximately was on purchased look talk The we Delaware the in want Basin. upcoming part opportunities. to

has As legacy at and XXXX our rate the on business in in and weren’t acquisition know, our active activity to since production with IPO distribution our growth IPO, half ability and the our to common ownership in you new with to subordinated combined cash to our provide increasing to demonstrate most new significant of went public. holders. that The distributions continue we the over over increased Since has a will familiar to of compounded our grow turn led very comfort model. investors XX% distribution legacy that allowed time confidence program us we flow mineral-based unit assets at

it making this positive liquidity later for the additional will and common the We will our and our simplify are a subunits to will the a hopefully that capital that will trading one-for-one we on some the and subordination end basis. that units conversion be structure units. provide period month, With distribution will it think convert

future. result us. of Before to turning Jeff, royalty and as business in positioned good growing that and Stone the the feel about think say mineral for the I are is I appreciation very in There leader the Black the in I’ll how opportunities over call a that space, for investment will proven community

the balance are assets I’ll set strong We experienced positioned sheet. have that Jeff. over with of a a management well and and turn call With team financially tremendous

Jeff Wood

bit been context give and a Thanks around impacted accruals. so down for to change just This that. range production reported have of per of want would in while we in per Boe production about Tom. production took day. of We last middle production we’re revenue by first above that’s the that in XX,XXX from Good impact, per of X,XXX quarter against day. the revenue our charge one-time production XX,XXX the reported quarter full slightly certain quarter, a year. range adjustment with color Boe to first high-end a and estimates XX,XXX what I to related total of guidance day, guidance We little morning of quarter full-year And negatively our line Without our the non-recurring everyone. reported was we first Boe a our for the guidance, in

does as middle our Now this fracking volumes interest include any continue capital the decline of Trough related our business. the the Shelby drilling are to the that shut-ins we operations acreage longer during our expectation some as and into no well on part working we’ll year, offset of that guidance investing see expectation as will as

any results. guidance that extent to they’re usual to our with will As we give quarter levels updates our second the needed

changes the to first put lower oil for widened. XXXX XQ and gas in quarter were see we differentials and For any out of Spot prices don’t relative now, to what we in oil for February.

result prices a our quarter-over-quarter. realized As down about XX% were

million I and the impact does the updated and the cash back will and mentioned an that bonuses $X.XX full first and $X.XX guidance trying in XXXX needed. million quarter for adjusted of a oil was more too quarter bit cash The suggests we’re the want on out for unrealized much year to flow. derivatives upfront EBITDA so deals I million lease impact to that But quarter reading not the since year of into to times. That’s We maximizing receivables development $X.X the on where gas $XXX lease approximately point the was unpredictable and lease to to keep do $XX commitments we’ll revenues our Lease and that amount well or the point. bonus win-win, I possible robust the be the XXXX. the posted over Distributions defined eye turning that but model point or quarter. next bonus lease our including bonus a million out and our well, quarter, of the of the a in of have this operator. caused March impacts quarter traditional positive XXXX, to it to lower versus We that we’ll large first of was so Our lease so you commodity structure move if earlier, crude that’s none million have members. prices more and substantially bonus oil XXst and with Overall, loss as adjustment posted and quarter, at as bonus EBITDA for something that have basis, guidance to $XX we’ve December that see for timing pricing for that all XXst an of forward coverage first unit X.X all at least loss on of million. for distribution curve distributable come under for was flow for looks we’re our just annualized $XX per up to by run from come could moving rebounded of today. adjusted tend rate of a differentials for significantly $XX little under lumpy, somewhat distributable oil

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

number the we under million us time. Friday, revolver based has end quarter, had ratio $XXX the debt then. available down we liquidity since as XX to past million $XXX We on As million liquidity the was of $XXX to million, outstanding had end, debt quarter increased EBITDAX had our this the at And and base. our borrowing X.X so paid balance of $XXX below month to of trailing of of

growing the to the with hitting all will Stone to We that by with garnering point, it’s the to minerals will investor benefit space investment spotlight model. minerals of the see energy the a forefront questions. putting We’ve very the within pretty that come business been increased public And say interests. gratifying a our and lately the of think conference on I Black space hard call repeatedly circuit is As the want over to strengths has sector mineral and attention community. broader I final the turn hear

Operator

first Koaches James. Instructions] from question Raymond of line [Operator Our from Brent the comes

Brent Koaches

for Good taking the morning question. guys. Thanks

happen back been subunits it like think conversion we or do the you But, the coverage and distribution to have of curious policy on with quarter every there how about of – about any there guys the changes kind has discussed forward? going to come Just seems is on kind you coverage question. that inevitably

Jeff Wood

real for is No Jeff. thanks No. Brent, This the there. change question.

for coverage lower acquisition this but Our a funding. the it cash and past, in management to flow thoughts continue quarter has we little sheet balance than value about retaining is see some and been

a stable continue some you’ll I while growing idea think forward. So cash and those distribution, of to retaining The kind items. have for do is see to that us going

Brent Koaches

enough. fair Okay,

seeing on then on acquisitions as year? the million about last outlook the should maybe was talk you year know market, of about and for I maybe Can just of just you expect for what last XXXX this million. this XXXX $XXX – kind your acquisition quarter, sort Just talked $XX field acquisition of your thinking side, year outlook XXXX, in of you’re levels the kind similar about

Holbrook Dorn

that. not QX tighter. they’ve than expected and take I’ll want hitting was other there’s predict, But a manually there’s much feel market as million Holbrook. that we we things and with the to was a a now, Brent, see. buy just put $XXX little as times. And outside is acquisition lumpy up it little bit. is of The this not or as right much years our some feels we’ll can away stride slower like to comfortably kind we’re just like you [indiscernible] sometimes market opened buy

Brent Koaches

of cash Okay. going do bigger target you that going part a think mix? forward to the equity or be for And is those of use acquisitions you the

Holbrook Dorn

success had a a conversation, years. We’ve It’s mix. interested the just equity so lot on the – always past great depends is of part it’s the in the of few in. just using Equity

Jeff Wood

And Jeff. Brent, this is

carry that think the including basis, and face. broaden a defer tax more taking you’ve over and just gain across exposure to the minerals. benefits to continue back become sort of seller more There’s equity common seen recognition to of lot of a a potential I distribution,

continue as going said, that success have there forward. a to would to hope lot seen we we’ve So of and utilize Holbrook

Brent Koaches

thanks guys. me. for it That’s Great,

Jeff Wood

Thanks, Brent.

Operator

question next TJ Schultz comes the Your Markets. of RBC from line Capital from

TJ Schultz

you’d today. you think it Hi, I there. good Jeff, two but morning. as look at nothing I guess said changed guidance a quarter, have questions you really update next

year? the you shift a else impacts look we First schedule of an anything quarter, in were what structural the those bonus just of points in for Shelby when and revenue or at and on then seeing for? do than accrual the ago kind if update area the next the are guidance, be then second, watching anything Thanks. should the different was you’re lease And expecting primary the considered mentioned, focus guidance notably couple we you of months you expect

Jeff Wood

Yes, thanks TJ.

the So was adjustment considered guidance. accrual not in

course make just over the the of little that’s run something So to have year. we’re going to faster a up for to

prepared remarks, to – in a my is insight. as look operators tough of expect Shelby work some know in-fill said was shut-ins sometimes As timing there. perfect I more do some with to what and can included our you couple area Trough this mentioned But as in we this the in of drilling guidance the do

our I TJ second the yes, it’s on that guidance course So mean, we’ll update normal kind of quarter. to look

For pieces of now, big the that I anything. think we’re you’ve bonus on hit are keeping it, eye than probably more lease kind

Tom Carter

this past statements structure to with number less and bonus, our will substantial hard had that loaded more lease transactions toward some is – time that’s And not to add our evolution for but the given that that that we respect just a would income because have fully is I in geared been have drilling. predict. for not of I’d Tom. leasing, been be about it’s yet bonus than it’s just

to really remains And so, mix the we out be to as seen. how continue evolve plays

TJ Schultz

had. That’s sense. makes Okay, guys. all Thanks I

Operator

next from Philip Stuart comes Scotia line the Instructions] of Howard. [Operator question Our for

Philip Stuart

guys. Good morning

little lease think more of one lease you in earlier given is on you’ve leases, while the something months been it development Just to or going talked actual how six talk that a makes give acreage play if underlying more visibility trying to more that’s kind implementing lease bit that and payment development been now. to call, I for strategy, just mean, of I the the that’s time. up leased. that on security bonus have sense a in know last the the on bonus back more strategy have figure I now? if of kind it the to up the bonus out on Can of some the on front-end the being seeing you just kind of plan you’re I you terms is more we’re guess, long or done the giving about that’s out ongoing more new about for something that been it

Tom Carter

Haynesville model. investor This to is have talk Well so called some presentations, and transparency question, business hour that an there. I’ll well in what influence to on economics that. try this of But, it’s the the has are plays. where necessarily economics in also in and it out when as rigs I only or the not navigational could Tom, answer the with to given And Delaware. go I’ll of take the economics our per But control, it the in way, do example well that for for the the put same not we per about

area. to full we time you of full over And cost so where what But to can broad compete say lease larger one part upfront that is adjust say your on for course our a a so that’s the with the of when as capital, from I economics especially is, transactions it. history, where larger, the to and I in would have blocks place or time near of interest opposed over interest smaller

bit structured income favor diminution norm commitment. than sometimes in drilling and seen differently significant in have We bonus industry well commitments that has of a little

Philip Stuart

Okay.

of on calls E&P I know the are money kind guess weighted XQ there I makes on lot schedules seeing then of back-end seems to Is general important bit for guys Permian, what the and invested of most a little things? like weighted. a during over Stone side operators’ completion that, and you more of listening it’s have last from sense. question your the front-end that activity. It guys the years. my becoming more anecdotally think two you are is a next more that more obviously And area you that In Black given amount just

Jeff Wood

of level with the seeing kind of honest throughout activity be you. to year steady We’re a

to is we so goes kind one far been drill move as little whatever a up of we’re on time or full development rigs bit X,XXX on and like or we’ve lumpier going the people to of on As front-end mode where it. But probably lumpier pad have curve. get a XXX, full out fortunate, as hit that stand we feel and just

throughout So and year active both we’re in Delaware expecting a the XXXX. Midland the pretty

Philip Stuart

could, a color joining. this the little the update any But PepperJack? there. all And if call, I’m on earlier in on you the late appreciate on one more touched was sorry if and Okay, I just I

Brock Morris

well Brock tubing. completed a process without in, Sure, weeks Morris. few tubing. has is and The been The this is been the for currently shut has in producing well running of they’re

we’re for critical Fortunately loading. kind it’s of flow making the hydrocarbon a rates anticipated, the more little liquids rates than liquid we below bit

So they’ll tubing this back be the running online by week. of end and the

Philip Stuart

Okay.

on next update there the maybe So next call? earnings be would

Brock Morris

and kind the look see of have Yes, to will that going the to what like. we of should data development is then prospect enough

Philip Stuart

right, Thanks that’s guys. it All for me.

Operator

comes question Energy. Simmons from line of the next Your Harrison Kashy

Kashy Harrison

you and my Good morning everyone for thank taking questions.

over should you on distribution past growth distribution Tom Any thoughts your several be early So growth years. about prepared highlighted the XX% in remarks we conversion? post the how thinking

Jeff Wood

prior I the aim an X% better we and everyday distribution calls Well strive sure I we and this is think have than do think than area future that’s made, have we that growth time But our at outlook better to over stated for X% foreseeable presentations expectation and in an to that. do to certainly that. we that – signaled

Kashy Harrison

years? to capital the over been impact the invested the that’s seem that more competition the several the returns? wondering, to the color was begun – able been ability has set like to you up. as to earn there. I to it beginning alluded Is past activity And impact you’ve get Holbrook, there’s Okay, does great and its opportunity mineral in returns increased just on then heating competition space,

Holbrook Dorn

capital and of have dollars deploying the high The assets our underwriting, buying into short that five answer great coming outperformed is last billions a space. some we’ve quality of despite years really had

And the it what spots see to able far holds, we’ve successfully. So, been us down future fairly our yet. we’ll hasn’t slowed find so but

Tom Carter

I it’s would late since been been having add, the always buying XX’s minerals competitive.

Jeff Wood

– Jeff, there’s over five out point four or three, past This So, Kash, money been would that’s the into come just I would private equity a space I point the years. is influx of tremendous

competition So deals. here for a this think really that All I we said, been has number we’ve made Holbrook the mean a attractive of while. as during time

Kashy Harrison

that it helpful. highlighted Got question. than you that that Louisiana? And maybe another counties press then you, was And Was Holbrook, that one if that’s was nuance now more and The what Chalk Texas? Austin release, the for referencing? in wasn’t Texas, then

Holbrook Dorn

is Texas. running from country. own this probably. of We there, That’s in was in pressure ton County, field XX you in which the which to Anadarko Ohio, Brooklyn all-chalk with Old where all Texas is to East was Tyler line Louisiana guess a from field as timber back XX-ish That can belt through the minerals getting chalk state in Texas,

Marathon’s have fairway. Louisiana there as of off, tremendous a play to we in then chalk exposure surrounding but only have the that chalk Equinor over position, But permitted TMS exposure well part north will is not So of up a And well, EOG second the fairway. where significant throughout amount that that there if then of take continues in also we just well. pilot offsetting

for So doesn’t it play, if and we’re should we be big beneficiaries. a cheerleader the work

Kashy Harrison

to over a activity to years much going year just then year sense you to for how next of trying that following very anyone evolve how the how this I curious, get of a have a with about mentioned Trough, you exciting, do was we’ll they’re with on the maybe just get just visibility thinking final many operators of time? That just in the how for call. giving calls. Shelby or sounds the on months one or visibility respect sense up you, something to not on And they’re be other is earlier you just Shelby

Tom Carter

take are Trough, I’ll at is Shelby well This and count shot all that. Tom, around operators well contracts with calibrated are our In incentives a the counts. our there

of as very long I will properties our have structure. about as we are what the the visibility their economics think operators viable do capital to good

XXX think answer less good to many way the we in that XXX, that, think is, the drilled than than can the going view how stay think more, as question you XXX is things very to next Greater I five have range to wells I to be over a years, down. gas slow will if out So there.

Kashy Harrison

it. That’s I very like helpful.

go Sorry, ahead.

Tom Carter

return, our to are compete good rig incented we well rate on out all there of Within capital count. very of operators for and solid our

Kashy Harrison

That’s Thank the and me of very it good have you. That’s for day. a rest helpful.

Operator

Your next from question comes from Howard Stifel. Tim

Tim Howard

Hi, thanks my for taking question.

to how has missed over XQ between the then I also discuss And this, count Where how last six seen maybe breakdown subtractions? that’s and additions or changed the how since companies could if talk operator you Sorry Thanks. public the update? but months? the you’ve evolved could private rig and is you and XX

Holbrook Dorn

count me. really Operator, don’t Permian, if public versus private where and I you Haynesville, really front that’s expecting in I me. the we’re depends last Louisiana dominated XXXX. the really Trough. public dominated XXXX activity of with our the way, assets expecting activity don’t but in companies. This Holbrook by we’re very a Permian can you’re throughout by tell familiar today rig increases have I in equity space. know my you private, is excuse versus also numbers the And increased to Haynesville backed it for Shelby is are quarter gone the on in just

who’s assets. that’s most activity Louisiana so And driving Haynesville our on

that’s – be to that more driving once Eagle operators private BP Trough, into dominated most activity. say more XTO. play. companies the Shelby and primary get Ford that you little kind really and public would to the then And outside, lastly you’re then world, is public. we public are by in dominating and operators, private bit And core the a force just see two But of I your the Exxon the of going more is resource conventional Bakken a still for Within part. guys have plays the of mix going

Jeff Wood

And this is Jeff. Tim,

everything quarter-over-quarter we of plays a in just of active all major kind – sort were rigs very number and of we had had a of increases just resource bit across rigs quarter-over-quarter slightly. decrease we So slightly on of our active else. overall up And on

So the it’s majority capital. you sort plays of to major continue of would expect, draw what the resource

of And on of four so others. the in decline Permian, we Ford of bit little Bakken Eagle plays those and Haynesville, saw active increases and rigs major a in each a

Tim Howard

you. That’s Thank helpful.

Operator

[Operator Instructions]

Tom Carter

for end Okay. in next And I guess of your that’s and the talking in to always forward and dialing interest with you Black call the our quarter. as Q&A. thank we we to you look Stone

Operator

this concludes conference. And today’s

may You now disconnect.

Black Stone Minerals (BSM) 7 May 192019 Q1 Earnings call transcript