BSM - Earnings call transcript Q2 2019 | Black Stone Minerals, L.P.

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Operator

Good morning, ladies and gentlemen, and welcome to the Q2 2019 Black Stone Minerals L.P. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

to conference like host to now Mr. would turn over the your I President Investor Collins, of Brent Vice Relations.

Brent Collins

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

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

risks, the Risk the be which of refer on filed should statements forward-looking later discussion XX-Q cautionary about section press a release yesterday to our today. will of our For these from information Factor and you

are that at yesterday refer to the comparable may We other from those GAAP in measures non-GAAP are be our measure release Reconciliation on information most found described believe certain evaluating press earnings to directly metrics and can financial website measures our performance. these of about which we our useful non-GAAP in blackstoneminerals.com.

the and and Jeff General and Business on Development; Engineering Morris, Senior this Wood officials Brock Dorn, of call Carter, Vice Putman, CEO; Tom Geology; of President Company Vice Vice President morning Counsel. Holbrook Chairman and are Senior and CFO; Steve Senior President President

Tom. call to over now the turn I'll

Tom Carter

performance all of operational results morning announced joining our for second Thanks asset XXXX us quarter across and financial base. Brent. today. our for strong you reflects and which we Good the thank Yesterday,

in production XX,XXX time volumes. and day over quarter's mineral crossed the increase royalty driven history, Boe reported first per by over production first the XX% total the Our in our for to

per day quarter, XX,XXX XX,XXX to of day per range to strength Boe from this record respectively. approximately X% XXX,XXX full Boe we're a guidance of production XXXX by Boe XXX,XXX the increasing to On year Boe

the drilling had asset second in of the somewhat a third on operating At a XXX third quarter, the rest the end total months. number which the is our total of Basin, and to a our Basin Midland have quarter across remaining operating base. been be recent in we the third the following first count of end Delaware rig acreage That that of were which the from the those down of shouldn't who in surprising rigs

a and of solid bit, number to quarter a well the respect While rigs we on was down did us with have additions running permits added.

In quarter, the our with wells outside contributed another X.XX largest The meet of we that Haynesville, Delaware XXXX, plays. two X.X; year. top added remaining During our a added and wells; being on we're Midland four two contributor Bakken, wells across Eagle level net added on activity this was our net the XX of the acreage net wells we Ford net pace to again and acreage.

XXX of horizontal In and horizontal saw Midland total coming the our Basins with across Ford, those Eagle on during XXX of added terms XXX acreage we quarter in in activity, Bakken, Delaware and Haynesville. permits permitting permits

in million generated quarter flow $X.XX $XX Stone cash unit. per the second distributable of Black of

were This $X.XX done in purchased roughly $XX at We are that the a million of acquisitions repurchase $XX coverage that and maintaining X.X million to as well $X our million which excess times coverage in quarter distribution in during period. as cash. distribution per unit share funded about equates retained

we incremental practice think equity the sense some business lot Our in current allows issuances to a the us coverage help makes avoiding extensive environment. debt and maintaining do it distribution of of that improve things or while

challenges Shelby to that Trough. say in are $X.XX call markets on the strained, NM, included. Before dipping today. to many the you Shelby gas Trough best the gas this country below With about economics call of plays I want of prices well the I'm natural the natural natural are gas over couple the aware confident that across things Jeff, exist turning of a listening of even

As they we and press they that and the play. noted the capacity in incremental activity yesterday, our BP and our two gathering in XX of operators approximately slowing that on in have pause uncompleted they area. months would wells will XTO, understand existing the focus area recently the drilling communicated release In treating for in as we XTO await drilled completing -- some are case

production project think we complete is to XXX MMcf they per about as those day next drilled XTO Brent per Gross over operates wells Miller, MMcf it will increase and at the uncompleted currently year. from the day XXX

year-end day. As per them a XXX covered for volumes around made our decision a to they our acreage agreement small with and focus relatively MMcf will is of development be the have BP, on by that production their portion at gross expectation

key BP continuous One our agreement is through only acreage they of hold the that, with aspects of drilling.

XXX,XXX a operators. will that market BP As will able interest now acres approximately be release to gross result, in we other to

a has has help lot done significantly been partner a to base. asset de-risk and BP this great

demand. export gas in the We are confident given infrastructure potential, Trough's global and its in growth proximity long-term the LNG Shelby to anticipated

on in here what operators that We Driving team have to do exploit multi-TCF on the to the the that be just is do, acreage we Shelby on Trough. is we potential new focused focusing area core continuing and will now our the activity there. attracting to to

will With I to over that, Jeff. it turn

Jeff Wood

All Tom, you, right. Thank everyone. and morning, good

day, last of over XX.X the increase for quarter. So, that's we reported total Boe per quarter production XX% a second

as to our core was the acreage. XX% specifically from while The production Delaware came interest growth continue our almost results Midland primarily very production decline working planned. from where and up QX, continued Permian, we production strong to across Royalty see

second prices quarter. report wider the oil quarter, in We the see NGLs we fell differentials. Oil sales in prices over prices result as XX% those include a gas but revenues but as of natural our over as Natural on We were the prices don't separately, gas second XX% realized and natural fell part rebounded substantially did hand, other our quarter-over-quarter. NGL well. gas down

Our provided the drop gains quarter. large by had prices. for realized caused quarter forward hedging We for some gas as against unrealized program the of gain curve as million down a the the in $X.X about well hedge protection over moving gas

at to in posted bonus just oil We guidance of but the run and million second from of a bonus QX, million was back will year below moment. quarter. revenue and $XXX approximately our in guidance and $X.X original still gas full rate come Lease lease a up I

our $XXX mentioned million. Tom and the healthy for EBITDA quarter cash for and borrowings. activity distributable cash Overall, quarter, to as additional the adjusted $XX million, quarter was for the flow sufficient without generated repurchase was very We and coverage acquisition fund retained second distribution

of Because we of of million our had end X.X $XXX leverage the our trailing the was overall outstanding that, our debt levels shape. great ratio and leverage quarter, or XX-month to times. At and position liquidity remain debt approximately in EBITDAX

We quarter million to $XXX million quarter-end us of available since liquidity down on We $XX $XXX had at million borrowing over paid end. over based base. our current

to now, number has date. under of revolver liquidity $XXX to million and the So, $XXX increased over is as million balance our

per We've As total for part announced updated day a the guidance of XXXX. by afternoon, guidance production year. earnings the for raised yesterday we XX midpoint to X% full release Boe of

continues expectations. our bonus mentioned trend earlier, below to I lease a original As bit

to before, down part that full be said based the our a difficult the business year-to-date $XX As move to million. a lumpy we've to to little but that's estimate year trend and $XX be this going of can predict, can on we're million

guidance original original lower Our around expect estimates. with both our the costs and of current cash those slightly be expectations G&A in are our and of with we now line DD&A both than exception generally to

strong markets remained and we've very the to financial overall, the expect despite continued capital through solid in year. operational position So see performance choppy

you it to Ashley, that, for the with open questions. turn so, I'll call And to back

Operator

comes Phil Your Instructions] with Howard Stuart question Scotia Weil. [Operator from first

Phil Stuart

Good morning, on Congrats good a guys. quarter.

Tom Carter

morning, Philip. Good

Phil Stuart

development from I commentary I there, Shelby all day. additional main activity particularly XTO. million the about from and their to feet from on increasing a gross really I BPX, XXX a you feet guess cubic guess appreciate talked cubic day XTO million production XXX the Trough on

were to had time expect over ramp? the B, if any a then you curious next numbers ratable ramp Just pretty kind quarters, three or And guys that of a those sure that Is well, in of you make if A, of or line kind wanted significant quarter? correct? four one

Brock Morris

Yeah. Hi, it's Morris. Phil, Brock

there constraint come and or some you a be increase day next the the couple DUCs months. of currently also yeah, the kind XXX we we the time, the that to million six get will coming completing to rate general XXX midstream in lack next three That's treating wells some about to online, number see of be gross gathering same quarters. constraints So, a At of to a completed capacity. is -- expect day as And a of probably they're few that and a resolved nine wells growth of to as the of those We've up kind million were over currently going over got in going mentioned will months. real. production because drilling

Phil Stuart

helpful. Permian And then very Basin. guess pivoting the to I Okay. That's

Just lot curious, permitting. a obviously of and good there activity bit a rig of

grow if six corporate kind Just there? on position kind to that's mineral outlook in maybe your Bakken? the to of fighting your grow over of oil volumes to of months while what kind of some and/or ability enough Ford the Eagle near-term And of declines is curious, production kind nine

Jeff Wood

the the this to be in positioned question. Phil, Basins. Yes, Midland we very think is we well Delaware and Jeff. continue Yes. Appreciate look

continued growth So there. we see to expect

here outperforming mean, and past the say right, yet I positions relatively Ford us. I the As expectations Bakken Bakken at mentioned, mature quarters. the in and our they're least you for are both few Eagle that for the

happens to of last I'd it's carnage the some here overblown been we'll Short over that what Permian the going a the right. the over to answer days, I expect maybe see is tell think we see So bit market few continue you in little forward. growth.

announcement the assumed that looking with anything they Permian in that And in the above at of we're did our when things acquisition assumptions testing is of there Delaware the would Concho's further say, I'll well of testing have some we like some acreage.

don't overall production going volumes forward. we think of that in Permian condemns the Delaware terms So or certainly that the

include beginning our expect to and So see will come updated we'll growth thoughts production on that But anyway, going of XXXX of the year with certainly that out we obviously, oil continued at forward. Permian. guidance out for

Phil Stuart

guess realizations, of I gross relative if And oil for to question the kind of oil then potentially pick are out Just guess up bit haul pipes expecting great. couple quick me. the online Coast? WTI in little of Gulf piggyback away one to really, the more modeling down as I some On are come you able long the take in a all of Okay, the curious off of to to Permian? all quarters next the the on operators' Permian side oil you realizations

Jeff Wood

I tell maybe avoid of Phil the that's over the to that's pipeline past Yes, little mean, our a specific but it can say that which you see because transportation the us, Jeff. have as quarter for this results we differentials to perfect always tough operators with specifically can is agreements, several visibility differentials. to financial quarters that due What don't widened our again is our have dedicated of oil primarily some that Permian. in I this have

benefit that quarters. that, should up us those and the fact when constraints that would Permian few given expect seen widening we differentials the just free to given some pipeline I would just shrink TI. past over the stand benefit That we've So

Phil Stuart

sense. Make guys. Appreciate time. Okay, the

Jeff Wood

Phil. Thanks,

Operator

Your with Energy. Simmons question Pearce Hammond comes next from

Pearce Hammond

QX. morning you Good and acquisition the to solid on question first My announced. congrats a pertains

what's off specifically? acquired one, look I'm acquisitions or And like you then tight? So $XX just You on secondarily, can in the Permian curious properties? you million a does number little? it And right what QX. still that the about the it what roughly cooled that tell acquiring us Is now of added Basin acreage Has properties the pretty like? market in

Holbrook Dorn

volatile. is Holbrook. been somewhat The market Pearce, this has

oil seeing real got mid- you this prices come think to feel some about earlier where a to Delaware I still to I acre Midland in at was oil the have markets capital metric tightened Basin. then in moving basins. continues than royalty and lot Delaware bit as summer, seems when high-XXs, going to back both up and little then a And of you're bit the nervous footing again. people a price think start found And little higher the the Midland a

Pearce Hammond

far then Delaware as Okay, great. were Midland And your evenly they to split? specific more versus acquisitions as the the or weighted

Tom Carter

returns the by or probably our for select basins think in XX% dollars and been that but the spent are we have We opportunities. reward happened frankly and just risk really Delaware this wasn't we're like so what agnostic Permian both year, of best we design. It

Pearce Hammond

the my Phil's Thanks for then XTO from Trough. is production the commentary And Great. from picking BPX. both on up on follow-up question helpful Shelby earlier gross just on the and

cubic you I'm what look XXX kind QX Trough? just gas to million your XTO day is percent net or NRI of the within feet at of that of down reported If get to BPX a sort that of some roughly which volumes, you trying Shelby gross from number volume number? and

Jeff Wood

Yeah, this are operators. are operators – two those our mean the Jeff. Trough is Pearce the I mean, I two Shelby in

volumes and BPX. So Trough XTO virtually XXX% of our are Shelby

Pearce Hammond

perfect. right, Okay, okay. for you. Thank it All And that's me.

Jeff Wood

Pearce. you, Thank

Operator

from Howard question next [Operator Instructions] And Tim Stifel. with comes your

Tim Howard

Thanks for my question. Hi. taking

it, I you're how Shelby growth comments? into outlook Trough the release So anyway any thinking production you're just you the preliminary about given provide to in what XXXX? but you and trying know understand Can

Jeff Wood

Sure, a to start and then want weigh bit. may little to going Tom Tim. I'm in

haven't pretty XX we strong tell I'll for is to and they months. Trough XX-plus for very obviously that to on stay out tend then XXXX. about guidance So, the strong, wells come you put What they Shelby

with then to do BP that continue expect their drilling is, in cessation continue beyond. nothing lot that So, it wouldn't if activity to a until that – cessation the Laceyville And know complete and One activity we activity going is just pretty really of rollover a maybe XTO else. you were in call volumes of to really points XXXX even that. We some couple of what don't will meaningful see more in happen, and area. we full a DUCs to to a

us. a is acreage really And that this position then landowner area large unique is a think such single by second, look a controlled we majority over play delineated contiguous resource

about the in So stack pretty excited we're a getting there. way, out

gas is long-term challenges but comments this a there's of it's going don't Tom, tomorrow that this price as a there's Stone. mentioned, going to know the have if meaningful to couple and you there. a or – environment, road Now perpetuity in is we Black be that base And whether years we in own down to contributor to be going I resource be additional

Tom Carter

think And underscore and probably won't a I it you've traditional there. Well, that is sums would I we have couple But would just oil large – there. gas things very that making said. a up. We position I leases of be

being XXXX, next over LNG it's build for has in the outlook. years. its well-identified putting be operators the will of for next times if commit built years it there outlook there. you relatively general seen capital continue along will And We and appropriate a at is years, this in The gas over in will or macro infrastructure Coast activity hands three Gulf positive out look got and that XX-plus the over zenith of the the out to industry to develop it locations XX at two

we determined. into full-blown how be back or – So a is cycle yet drilling gets to fast slow this

slow some we're may that prudently and prices royalty and to ones. going could near-term something, the will it are perpetuity, resource but Does we will if three, next testing market i.e. royalty the to the year may mean, we it And capital. right have long-term rates be very extent or time lower to the well time. cycles we have over higher affect high developed We in two in this gas over economics it lower But own or confident get that vary on not. in very that in

say. it's So to a early little

Tim Howard

thoughts but not gas maybe have us today, provide with operators is helpful. I'm BP released or on but the had kind very you can natural understanding producers when I any the conversations that. appreciate re-leasing initial process? that I just on update sure that then just That's mean, acreage, And challenging macro you of

Tom Carter

couple a Well, comments. of

four of conversations to have years rather And of We actual to a to this had us. inventory back are BP second we on there's activity to Yes, of termination year. going XX-plus attraction is with happened business have come abruptly of their an this acreage that's others. on at area. gas quarter that this I in yes, anybody – are with year, indications then of, is to and the five wells blocks And obviously XX Economics important the said, as everybody. in over respect

we whether driven operator be that's going wells So, ramp of the a XX I own expectations. wells, the years by next our and up two three or or think year to over to couple

But this of depths. in outstanding. deeper is reservoir well the the as quality thing intermediate delineated has depths The as been the thoroughly both

good and getting on challenging pretty those As over costs are always, industry our handle a time. of a drilling does job

And -- before this reboot early months. give we're we have area, in working while you much can just the and really innings clarity XX so, keep we'll a on it it's to to working next

Tim Howard

Appreciate stress it that just given Are ago? or decreasing from there's commentary. activity, M&A months maybe down being And company of level. or deals overrides then happening conversations those the royalty upstream just of pivoting industry at sold seems to like kind six increasing more

Holbrook Dorn

is This Holbrook.

really at that We been all other up-tick those front. to and an they’ve additional There there Washington mad Range Appalachia. market to seen sold their have override -- it, across in been companies have a but there are been southwest of And an public that or have in a be not couple with acreage a County hasn't structures, honest on few rush looked that recently they announced players. you.

Tim Howard

-- then, given the it. environment. strategy gas low update hedging you XXXX us into could And help the Got us on

into year-end XXXX, as I how of and gas about just hedges into that up get ticked are you but year? next kind think we for thinking

Jeff Wood

a of that with XX% typically We're so certainly basis. Look, Jeff. difficult, in not about hedged been is XXXX we're prices. done pretty that ugly, to gas Count available has volumes our We've happy right? oil. we this pretty try position. be XXXX just regular Tim, on at for on speculate We it's for hedge Yeah. been least to that

But them again, little lock when are it in. they this tougher to makes a low,

behind gas price for XXXX a at that's So, driven. normally where we're probably point, we little been be would this and just

continue are where gas be opportunistic today. So around we look we will from hedges to to

Tim Howard

then forward And thinking you going of BSM Got it. given an update one, program. the are on How just about is kind that this buyback with trading…. where last

Jeff Wood

appreciate I the question. Yeah,

$X program. that repurchase And under quarters about tend get authorized million of million because the of over assume. that windows $XX got program. to couple we've shares date We've three is past only repurchased So, would to part tight, worth I just

that speak us with allow a look outside of see these and But We'll Board program to a and the maybe in when to buy windows. may that under think XXbX-X restart even think act at continue to program good upon trading levels, we pretty this it's parameters would certain quarter. I that us you we're put investment

Tim Howard

the for Thanks details.

Tom Carter

Thanks, Tim.

Operator

[Operator Instructions]

Tom Carter

don't you all we have we thank joining If quarter. next look you for with very us we Okay. more much to and forward speaking any questions, today,

Operator

today's your this Thank wonderful Ladies and concludes and day. for gentlemen, a participation conference. have you

all You disconnect. may

Black Stone Minerals (BSM) 6 Aug 192019 Q2 Earnings call transcript