BSM - Earnings call transcript Q4 2019 | Black Stone Minerals, L.P.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2019 Black Stone Minerals, L.P. Earnings Conference Call. [Operator Instructions] Now I’d like to turn it over to Mr. Brent Collins, Investor Relations.

You may begin your conference, sir.

Brent Collins

John. 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 the with which and Today’s release, being will available website, earnings afternoon. on yesterday issued be was along our is

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

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

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

On call Steve Dorn, and Brock this Putman. Wood, Tom morning Morris Jeff the Carter, Holbrook are

call the Tom. turn now to I’ll over

Tom Carter

and on Thanks, snapshot of beginning a going and Brent. speaking industry say quite XXXX. the a morning of the must gas is beginning oil the from XXXX to to about XXXX, by rapid recapping call all in Good this I’m the begin beginning morning. you of to XXXX which of the I change

we here go. So

XX isn’t in the given wells for year. but throughout little It’s year but had company XXXX busy XX.X occurred activity with bit wells the net surprising activity it in we a standpoint, that – XXXX, an From slowdown year. that it’s the the industry was shy of a the adding

We in net attention XXXX in to where from X.X five compared continued the XXXX. added program wells in Midland/Delaware are industry Permian, we’ve the the in benefiting

Trough-dominated X.X declining than Haynesville in previously to the program, rapidly of in response XXXX. for higher discussed the in first the X.X added half year, wells net gas Shelby the Trough the the weighted we in to which prices. activity Shelby year is natural slowed during saw We added how We’ve was and sure,

anyone completion in the XXXX. So shock back in it half that the wouldn’t slowed the Haynesville of

to continued and wells Bakken/Three We net X.X Ford added X.X well adds in respectively. XXXX see in Forks the and Eagle with

which there in operating of higher of is the the At despite end to resource programs quarter, negative gas in on even activity shale the profile acreage, active of count we of outside of rigs the two-thirds our plays. surrounding a rigs rig XX the XX% big plays, had approximately Interestingly, continues drilling fourth outside industry total and were those oil drilling today, the tells our Midland/Delaware. sentiment be you the that

fourth quarter. quarter, of saw those permits terms Approximately, X% Black saw in permits during the Stone we which of were acreage Midland/Delaware. permitting half In our in were XXXX. the That’s roughly acreage basically XXX more on with and activity, over X,XXX XXXX, the added its horizontal added in flat on third is permits than

selective we this the $XX year. did acquisitions. in look about of most on at a first the and half terms in I On acquisition become we was done last have which much of front, million of what our of talked we acquisitions call, quarterly in XXXX, the about little more

excess while cash we in flow. debt cautious. being a with our prioritize mode, We’re will bit paying more down we’re And the

we’re and very that because, folks long-term are into for maintaining it deals challenging trying ongoing are in that looking negotiating to things right of discussions Trough, a balance come play that a It’s important currently Shelby now. very with those lower to natural are regarding the willing development is And play typically, put commitments in to transactions future. difficult the optionality be time royalties, time asset. gas into In to activity with

We where almost efforts we net resource remain bringing are hopeful that mineral to natural our area we Tcf gas. estimate to will a with XX,XXX over owner dominant minerals the in back result base of X development in capital that contain the

have the see XXXX or where we interest Chalk activity signs of We Jeff our have would with the very mineral drilling where in that Trough are a some recovery. only price Shelby in of it’s interest stages, and discussions We should we also Austin will seeing early renewed results in extensive areas the own the position our of East concentrated there. I spurred that grow Texas in life Chalk around play, some producers’ to any positive guidance don’t new in positions, say, acreage But encouraging degree cover moment. think recent

a From a are financial perspective, good we in pretty shape.

million stands in ratio debt-to-EBITDA sheet focus and borrowings resulted from of by Xx. as Our down current is which strength at very balance healthy $XX our outstanding on of million midyear over year-end, a $XXX

Rig So to Stone’s most and while tough dropped moderated as business are trying cash now operators in fundamentally since solid, live industry Black a of has by have have that within XXXX, to count environment. we’re activity. XX% flow we is their acknowledge the end

below make for have contract below this start as to all foreseeable month forward the hard $X.XX has We’re had the backdrop, the some in the gas some February, made and since tough, With future. natural of well choices. – the $X for year a stays strip prop been we

If very decrease previously persist, for total per cash as to outstanding we meaningful return fourth flow. reduce owners. while our during the year balances the management, the This of further We XXXX. and good even target retained path history to reported, to to share through us share, to borrowings conservative this allow believe current we distribution quarter attributable made our historic we of First, balance unitholders, should of conditions $X payout preserving distributions – know importance sheet to we a our $X.XX per a the decision to expect coverage. we the though had

of that approximately difficult is Holbrook on really will our for Brent we compensation our by decision to significantly change. other reducing done they’ve friends. difficult we to to through talk be many part the the for and about executive G&A It’s night, Brock incredibly employees I’d organization affected. been of as years colleagues this the who’ve tough organization impact what today In with are and because thank XX%. it how affected reducing headcount on this and particular, an lowering call and like as It’s announced last in who well Second, folks costs those all by – this for our

to Jeff. With that, I’ll turn the call over

Jeff Wood

I’m for going to morning, our cover everyone. bit our Okay. a quickly open more little then XXXX on and guidance sheet, for the Thank Good just questions. up balance you, call we’ll give Tom. color

As mentioned, off current the we’re despite in XXXX. Tom coming solid another of headwinds, some year

$XXX EBITDA Our we for the of royalty volumes adjusted XXXX from year. were generated million and up XX%

to on producer does look day. we’ve expect on It we feedback, areas of or acquisitions XXXX, include from on. year don’t real permits Chalk, data other may activity but during got we have a make clear have on BOE the where XX,XXX we known sight As we from view like a a XX,XXX per contributions that on potential, and which to yet. not good volumes of any royalty that our We base line

Our slightly and reported we royalty ahead for of from XXXX. what volume estimate represents volumes a X% XXXX decline

was that Bakken Eagle decrease in main see activity positions, the of contributor most the may relatively is we expect some where declines that in driven our and Ford in time. but and spike mature XXXX over Haynesville volumes saw a growing XXXX activity XX% by our We royalty huge that reduced by to we in

With gas LNG the prices, play of the the decline we given seen economics of especially we’ve in resource producers some it and competes believe Gulf The markets. there in remains, the best export proximity industrial the pause of our Coast gas larger and activity. with base country, course,

continue to cash So our it that driver all is But now. an right important of flows. area long-term to plays, be is gas like challenged going

XX% business We we in design That working in year. volumes is last XXXX. investing that stopped to part by to XXXX expect relative about in the of by interest as intentionally decline

that, of increase royalty our almost of volumes result in volumes XXXX. to expect a As total production we all to XX%

line XXXX. a exception and for notable our other generally components in we expenses. The what of general administrative XXXX of with experienced course, with our of That’s, are guidance

oil facing and a number gas fronts pressure is on industry The of right now.

is distribution E&P One company to of our great we control minerals there’s operating levers we and the the this. that in incur growth capital buy We undeveloped at volume areas, is downside sector cost being the or the deals we don’t with and the only like down operators. The try a about things can creative weigh levels. acreage through times right that promote to can our so pull many

is pull internal to lever The costs. we have other that our G&A around

taken profile in probably big, cost discussed release face Tom in really our E&P you more our spending. earnings we’ve decisive As frankly, and, steps constrained painful saw gas and as natural to yesterday, weak prices reduce and of the

$XX guidance in is G&A the Our midpoint our XXXX. total for G&A from At that range million XX% is to a for of year. $XX XXXX the total million reduction

We non-cash each for costs and expect over XXXX. to G&A reduce both cash by million $XX

and that bonuses; talked to We and reductions executive grants, expect onetime about the count lower incur mentioned, Tom long-term share $X which areas salaries connected these a will headcount limit primary about. Tom the lower million. are reductions reduction of executive do that As to contributing dilution; charge with incentive

in recorded be first charge. of make want reflect clear the does guidance nonrecurring that XXXX. to to not range going quarter that’s think G&A that for I I the

balance the million of $XX Finally, distribution Tom mentioned our focus on quarter coverage cash flow. fourth We X.Xx in had sheet. that translated almost retained on the

$XXX $XXX distribution to And Our XXXX Xx amount that to million was yesterday. total was our debt the debt paying at prior year-end or EBITDA. million down

throughout maintain XXXX, markets enhance efforts when coverage should to continue flexibilities our our healthy to reduction rebound. overall expect and financial debt ratios these further We which

for I we’ll up questions. the With call that, John, think open

Operator

a Derrick we [Operator Stifel. Instructions] have So Whitfield question from from

open. is line Your

Derrick Whitfield

Sure. morning, Thanks. all. Good

Tom Carter

Good morning, Derrick.

Derrick Whitfield

assumed your speak could outlook, plan of XXXX addition new net Haynesville? in note production royalty the your amount wells to well the and implied net the you from Regarding

Jeff Wood

can doesn’t, new that any our into think conversations that net net Shelby though you Tom wells assume forecast is I mean Maybe on Derrick, broken we’ve as I we’ve by that. Jeff. not up into Trough, down expected the with ongoing Well, wells for example, area. in guidance got does area, mentioned, specific this don’t we bringing even follow or area. operator the about operators

Haynesville new it’s really we’re in activity XX about. us. year a total There XXXX, for big wells of which talking that was the Haynesville added in Louisiana, the were So

to know given area this that by point. don’t expecting down. certainly I guidance we’re But that So specific at again, come that we’ve

Tom Carter

then won’t at prices – and our means are there decline. and path that know in and Haynesville they we through the a it’s forecast try just incenting pace, a falling from which go be a possibility what cycle there go drilling our and reduced are people Shelby How I’d add there in capitulation just like I’d that, out probability, can eventually operators are about out? de I’m out. been cycles in that, which of that off are upside not more for business to a DUCs suggest gas significant there side a in few quite but few especially drilling but the read going wells gas saying press, quit zero. the drilling. a numbers lot an to drilled rapid rapid that that as Trough of in as And a by playing our quite has the we amount are prices royalties, And down, a could very plays always these there’s get wells financial to still You I and are minimis, in gas you is causes that can the up,

Derrick Whitfield

environment? in tension release sense. value. And acreage it’s to your staying desire present as your specifically, run high has relates market out sub-X it of you That Mcf comments but, market to bit interest it a and speak broadly quality to there earlier a to certainly that perhaps that certainly, in a release sensed makes your acreage on at could motivation the topic, and the I

Tom Carter

a putting distributions. when it quite of Shelby parts a play, it with more towards bit lot to gas our current that leave that talked that upside about they the certain do, thought into thought the primarily and also the do the flow that industry is – level. And and give us XXXX our and – play keep of way. negotiation move markets to hedge will on when back exposure year come if out the to and system Trough we’ve acreage the in this board of I’ll given of some we downside, cash through at in this we We’ve adding on and will is XXXX and to we’re

we’re playing really we’re hedged a manner. – in it So

exposure upside, keep to put but amount going we’re into now. to play of fair a some going to We’re also the acreage

Derrick Whitfield

your helpful. very for Thanks It’s detailed comments.

Operator

from We have Simmons Energy. a Pearce from question Hammond

Your open. line is

Pearce Hammond

provide expect to you the thoughts lower? percentage you finally, the borrowing reductions? over thank at Or leverage I G&A upcoming standpoint by And wanted that and taking distribution looks next can you’re our XX% manage on just added my currently. plan redetermination? then Black the do It the from on during how a them fine question. think given approximately you morning, modeling, drawn like from for the base downturn. Stone drawn Good cut level you stay and understand could year, But the to Jeff, is spring that flexibility facility. level you the And if move general do credit this to

Jeff Wood

the a maintain One, the focus business liquidity metrics. given our how amount number Sure. debt that that matches well, to the time. on. really performing. And Pearce, to is, – we just on way of mentioned, up making relative therefore, we metrics sure the generally, drawn EBITDA there’s got and, a is that we with that’s focus our as drawn other much you we’ve main just borrowings how borrowing is much of base why on debt we metric And

ratio. in have really of X we times, times X.X to kind sub-X.X that of So historically sort run leverage

in continue I think in that – to we range. to would stick there intend

the guy’s of the been sort may absolute entire bankruptcies just certainly, borrowing a more gone, first and especially have we just where that base, think relative bank and where be on little levels. terms impaired but unusual capital, recover to our borrowing industry. there’s borrowings we borrowings cautious on of the prices their in that, ability have of these make actually going lien There’s – the just to pretty market absolute significantly to In not with across pressure a overall E&P in think the lending space banks base, some

this take the So trying to all balance approach sheet. conservative of part this to we’re just is that

have thought us distribution way so meaningful in that levels to a allow pretty will continue can XXXX debt So down. coverage about that levels we move maintain we to

levels spring a or sort of they in when clean step either that more are just going good we and position or acquisition sheet themselves to when market this so comfortable around, And present opportunities with in is having assets debt think those for way. buyback outstanding benefit or a bit compete us it making the turns a a balance very as will a us for put loads to

given what over So much redetermination – difficulties specific stance base, year. a fall taking and maybe it’s but certainly be borrowing could percentage so think of given season the more just spring the not a we conservative sector the this even we’re across some both

Pearce Hammond

you, Thank it. for detailed I appreciate the answer. Jeff,

Operator

James. from Harry Halbach We have Raymond question from a

open. is line Your

Harry Halbach

My thanks Good dividend to is coverage. morning, regards for first and taking in my question questions.

have you times that? X.X anything last is assume would that should been five change there Is what Or Over around going years, coverage. we forward? you that all the think

Jeff Wood

Jeff. Harry, this is

that’s think a where little in that But range We I very X.X really in is to range a I just obviously past down we’re for a levels to think quarter, this little bit push us. times higher general, X.X debt than ran more. that comfortable comfortable.

Harry Halbach

just question of and only in you. expect comments first general declines is be guidance. then kind more terms cadence? or to And in the in production, you the you of next any back the half on the Thank annual Would gave year my the all half moderate those of felt

Jeff Wood

in just over of really at on of investing would getting it more the Harry, continue of that would timing that – part see Well, then Yes. we’re is think since turned I just depends to what business to interest say not volumes working some part our and go, in fall expect the where all DUCs prices anymore. we I commodity off

think during volumes up of trend royalty see production production percentage percent overall those year. total come to the as and So you’d royalty – down a continue I our our

royalty these a a Tom It’s which year. late dip bring this likely to out. that, a absent that stable, for new intention we XXXX up. probably the bit as of to start in, here And said, operator before be new come very are to going some more assuming or those Shelby more is Trough existing going we down are to wells So in volumes play volumes of be certainly just but XXXX

maybe So maybe working as interest royalty slightly well. bit and Certainly, on year. front-weighted during the our volumes a

Harry Halbach

appreciate Great, all really it. questions. thanks. I That answers my

Operator

Tuohy from Next, Jeffrey Campbell we Brothers. have

Jeffrey Campbell

two Good and ask of morning. business. working questions to the I interest just surrounding the wanted

withholding The until first interest the improve? is commodity that the one, or permanent prices temporary wells. the working of broadly, shift that Is is just investment a and

Jeff Wood

That No, I permanent Jeff, mean, a more this is of is Jeff. shift. I say that.

promote in used volumes we’ve past where working really So is or our royalty the volumes. accelerate to

So in promote primarily come that. interest we continue the for would we’ll Trough company, design, that as way we then we XXXX program. again, just most XXXX or out business XXXX, take are we all But promote volumes that’s to where working that an XTO interest If thought business. participated overall volumes those at had working the accelerate interest think and of kickstart out we and royalty declining of royalty a Shelby volumes, why volumes we’d we from as of opportunity where is working hard to a participating standpoint, just a about look side to an alongside which volumes farmed really interest of today example, our in by mentioned. In working to

Jeffrey Campbell

my then follow-up. And Okay.

be answered have other you other selling? consider And you Shelby sell follow-up you stuff the any do than might would might interest think may assets non-working in mentioned earlier, that I think portfolio you Trough in I you that My Shelby. some do fungible it. was, have just

debt cash we reduction So realize sold. flow between a there’s trade-off and

kind your interested premise. thinking in that just I’m of about So a general as

Jeff Wood

we’ve when got sell interest across will individual working a those come Well, routinely in given working several well portfolio, of our we Yes. optionality up. and parts interest opportunities

that’s to wanted clear, So of and Jeff, business. really of scale intention no in make day-to-day continue that have not Trough. just business Shelby a then, I impacts it’s just we part the to happen, the but And will anything selling of

in rights Shelby providers and the on interest to volumes. we sold it exchange meaningful remain overrides we to contributor outside capital Trough long-term very Now and but working bullish be very, our – to back-ends, expect for a

So there’s acreage no that intention to in mineral any sell area.

Jeffrey Campbell

Well.

great. appreciate color that last very I Okay, on point. the Thanks much.

Operator

Phil have we Stuart from Scotiabank. Next,

Phil Stuart

taking very morning, time. Good in talk well are you if the I XXXX. about could little you we Obviously, bit guys. all all wonder Appreciate hedging. a hedged

to trying price obviously, a challenging that Just we’re think, commodity today. dealing environment with very

– So XXXX? of if the just And kind what all a are oil hedge kind Just wondering how certain in for time thoughts hedging there’s trying updated XXXX. of production and of there. about to that you’re looking target a into gas you maybe to get XXXX, percentage by

Jeff Wood

least distribution out know, yet. at trying as haven’t would established just lay the some and such Phil, you run of today Well, positions. a expectations market have we the that these strip. forecast, obviously, we we’re that – that our But to Yes. off been all normally initial It’s forward difficult XXXX done

to normal certainly date. adding not intend XXXX would we’ve point the some been to yes, sort positions more unhedged. been into It’s just how forward we would opportunistically. of weak go been would little than at given hesitant start we XXXX relatively here have prices soon, just So I just for think a – But

Tom Carter

to That’s add get good to to cheek. up I add the sort hedges. one would some prices just is go way in tongue of

Phil Stuart

in Trough, XX-K I you of production just sure It’s the believe, Ford. maybe be file but And could wonder give whenever Eagle then a if by production total will each overall this the out Understood. kind Bakken that, you and I of percentage curious Permian, all of area, area. today, breakdown Haynesville, later I’m Shelby in just

If you have handy? that

Jeff Wood

do Yes, we can that.

was Texas percentage Ford then, at would XX%; about X%. both was the Haynesville/Bossier, a Louisiana X.X%; was small and and Eagle Midland/Delaware XXXX, Bakken For remainder. relatively about around of And about was other XX%, the course, XX%; be X%, the

Phil Stuart

kind this of for time, Permian XXXX maybe all And understood. not within if but of the of that’s guidance? point embedded you see production I’m this the percentage sure total growing year share could directionally to us can company at you where kind in as full all the Right, you a

Jeff Wood

Yes.

expect the have given yet, haven’t of year, We see given to to but double-digit that next growth specifically. that guidance not growth specific Phil, and certainly we likely but Permian out into continue

Phil Stuart

guys. appreciate me. time. the it I All right, for That’s

Operator

we Next, Instructions] Markets. Schultz RBC have [Operator TJ Capital from

TJ Schultz

each gives keep Is to each Some dollar you clarification times there you on quarter you quarter what the the Thanks. X.X handle of shift now coverage? Or in plenty coverage to is times, X.X feel the distribution for that XXXX. level? any manage how distributions payout

Tom Carter

I’d answer that this way.

but we done probably that And as could I shift likely for the meaningful relative for it, comfortable given upside coverage, we dollar than But away would such our I activity historically, think throughout EBITDA adjusted distribution we the budget and a make from think of constant it that would year. negatively pretty affect positively cash flow the hedges. the have that downside have that tend in shield coverage bit a certainly, little target more a was it’s sustainable the it’s or throughout would there set either we distributable unless keep downside the dollar the to year. to that benchmark year nice got

TJ Schultz

Thank great. you. Okay,

Operator

Mr. I don’t to turn time. it have questions to Tom I’d at Carter. like this over

Tom Carter

thanks, All forward we you future. the for all and call the look with speaking right. to Well, Thanks. everybody, more in today, joining

Operator

call. this participating. all And today’s concludes you for conference Thank

You may now disconnect.

Black Stone Minerals (BSM) 25 Feb 202019 Q4 Earnings call transcript