BSM - Earnings call transcript Q2 2020 | Black Stone Minerals, L.P.

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Operator

Good morning. My name is Sia and I will be the conference operator today. At this time, I would like welcome everyone to the second quarter 2020 Black Stone Minerals earnings conference. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank I to time, to the turn At Kiefer, would of over Evan Investor conference this like Relations. Please go ahead.

Evan Kiefer

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

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

are For the of described may believe will press press Risk from those other directly certain our on yesterday, about performance. can blackstoneminerals.com. to and Reconciliation metrics GAAP financial we to which earnings the our that in you most cautionary in measures refer non-GAAP should evaluating from measures comparable XX-Q information Factors yesterday non-GAAP a these refer our found be these information in measure useful our are our today. We of which release website statements at the filed later and of release forward-looking discussion to risks, section be about we

over Garrett call of Tom. Wood, President Steve No the Vice Gremillion, on company Putman, Tom Jeff Officer, and the would President General turn Engineering. me Joining Financial CEO, the Director Counsel call I and Chairman Chief to are Carter, from and and Senior

Tom Carter

while hope today. start taking such the I to joining that difficult morning and to part level, the prices at we Black to your virus. thank healthy of reduced this impacts want are lower we our commodity again for everyone responded has producer the employees to Good to I very ensure we perform our well as to at efforts this do spread with aggressive reduced existing and and capital grapple outstanding as through markets. internal by for activity steps lower manage and drive our been credit a limit also costs, constrained call saying, acreage. we with once Evan. our busy of continuing doing and families new Thanks period. on want to We a and debt you all call high our thank necessary on activity actions the intensified the quarter to Stone It us significantly

first and of Before permitting rigs. operating down at getting our at review goals, to from of from XXX acreage, XX end this on across the added X.X X.X we from our Midland wells environment quarter. quarter will on the acreage to in of terms rigs last where Not had last We some of total net quickly time compared from decrease new these acreage, seen pronounced down in quarter, the last well specific second taken a XX% quarter, of of second right X.X wells end net added basins facing now. quarter surprisingly, our in the the I and active about the are the XX% adds the year. decrease into activity, a drilling have most XX in and we XX% Broadly was in operating steps the we quarter the pursuit during quarter. Delaware last we Permian, second the At

early Delaware distributions the reduced East expenses, or quarter steps of the proceeds G&A sheet us two some responding That retained call Shelby the of in first rig our and the end in in restarting sale activity the we the in reduction balance On expected Permian. of cash, of offset We brought those production to industry attributable to the play is Trough steps Texas. our new well reduce Bossier announced and declines. enabled success over in and and Midland this discussed May, in in initial we together June, in closed transactions with Both downturn, from net decrease last those on $XXX in with As In majority operations, area. debt the packages year. meaningful in second to to Haynesville built initial asset additions, $XXX the of the free quarter million flow our the our cash our of XX% to in cash further by total and million. from development the including our July strengthen of

outstanding July down as XX Our debt $XXX to was of million.

equity engineering in them well well activity of the While Trough. it's we Energy are made development arrangement be challenging spud with more Aethon to many development planned of In major under new this linings development plan a find is October. them a a Against Energy the the devoted May, backdrop, been in silver research that considerable for expect for prices lately, calling agreement and side the Trough. the already we several strip Shelby above covering for as proceeding and have partner the geology firms we Aethon for to its progress area. area western That resources XXXX. in of natural gas our in gas one program prices land, excited signed with important to is outlook Shelby as has first significant to the and constructive we

to in the of incentivize full by that uncompleted to DUCs sales made expected work with the We quarter in turn to respect sales online were Augustine and end County. year XX but These were XXXX XX are eastern We to of coming to during to and able late to spud side this XXXX. play XXXX. the San quarter wells XTO drilled progress with or of with Energy the also complete the begin later turn the first have them

beyond Board cash is our balance even strip. some potential and distributions quarter quarter balances over activity number we gas our work that our investors debt in to levels rest We by expect the but have decision expectations of development in unitholders. as start ability our strong as it forward DUCs the will areas. goal more to prices forward, call through to of we if prudent lower retain the indicated those time, play. around a to pleased of XTO are I absolute strength future of these and long payout that, year take to the start a but that on Directors to return can process I with in the reward Trough flow. contract optimistic felt made higher our get done, going And more are continue the We flow debt completing increasing of comfortable provide and move deals and steps of $X.XX the per sheet with the and believe focused a drilling balance, with to revised very with side to cash development we Shelby particularly Those to With our important activity return progress term the eastern for production am Overall, we to ratio. difficult Jeff. turn very appear ability operators guidance. something a other last unit to second cash reducing for to continue our The made We on reduce

Jeff Wood

portfolio offset the good [indiscernible] such everyone. normally That's and the declines in day in Tom of and second quarter. production benefit production from quarter, for do, quarter previously in BOE we you curtailments checks the received Thank last mineral experienced morning from we large of not generated had X% We We a it the as per quarter, helped total to we volumes. production generated quarter in MBOE and second that owning day the down and production XX.X some royalty normal XX,XXX benefited and from during per accrued. mineral

that the a will in in quarter. as of quarter We lower was coverage $XX.X That's the adjusted moment. slightly flow expect checks from revised million quarters million, $X.XX just the EBITDA X.X per $XX.X guidance we approximately second coming fewer periods here of actually second new rig that the and up the these we for is what into I represents We from counts to for of quarter representing cash Distributable last reported expectation prior reported result that times. unit slightly announced should QX. at benefit the that down discuss in that the lesson in for distributions and incorporated quarter

July at outstanding XX a debt of As great debt beginning strides of this Tom $XXX The in mentioned, year. of made have million of the total reduction outstanding during reducing as our we represents year. the XX%

was base, July liquidity transaction. maintaining a two are We which closing sales in million lowered borrowing cushion slightly to healthy in the to with relative of the conjunction asset $XXX our

more have total production now as release total Midland, oilier shut-ins X% like that the measures earnings and of lowered and We in Bakken. yesterday by the given and been is surprise rig in the for should our count gas. certain of year weighted focused guidance expected XXXX as full much Our update end We did declines of towards approximately $XXX no mix July, the liquidity, This the the approximately of plays the was come production the million. for afternoon. Delaware guidance

the even the times, diverse are royalty decrease the to levels which I that, harder to permitting it's in XX,XXX revised you in in change. large, activity in production and mineral in mid back implies that With even and BOE forecast range. continued rig overall in in of hard We of is rapid per normal all times position and half caution XXXX range, just day want this building of like that reflecting shut-ins production in a

we non-operator. look is changes information limited this And meaningfully will as of if So in now our outlook, anything further a with our updates. best provide as

million the a $XX range revised million our We bonus to guidance to year. for under lowered $XX estimate of the from $XX also original lease of million

willingness seeing way upfront operators' of not through bonus trend continue payments the pay year. We are the to we to and remainder much large ability that or expect in of

The other pretty updates are self-explanatory.

make to and slightly guidance. a any our not slightly production We operating rate ad is metric. given and We revisions there G&A lease lower taxes, cost component to for higher valorem do a fixed that expect

are the charges G&A original in first of tracking I that was We quarter about G&A. million. $XX guidance million through or $XX.X we as year, to the through $XX will G&A ran reduction million to still but of restructuring Total $X of note our in the targets half incur reduce for first did million, reflected that our meet XXXX

continued are working team a there. That's making that smaller as So much our we progress harder. of result

employees to our I so responsible for so recognizing open So remotely. many Sia, in in safe continued initiatives to a accomplishing I adjust want and to questions. will quarter the we the that, call while with doing important for join Tom during working and manner

Operator

[Operator question Instructions]. come And the Stephen Please first with Decker go KeyBanc. ahead. from will

Stephen Decker

shut-ins Hi of a had might guys. Good sense to quarter? to that wanted the level just you the second guys I get morning. in have

Jeff Wood

Well, Jeff. so this is Stephen,

about for in child poster We That's the are the lot Bakken. the quarter. modeling concentrated been XX% that of second a shut-ins in with sort of

the more are We levels come revised that quarter and online our generally this levels, do at around year, of at looking through expect continue those the to then and seeing making assuming through start the year. to come on and they those estimates the but in it's guidance of remainder for in we

Stephen Decker

it. Got

are debt to guys plan of Thanks. get is that have the closer question there amount the cash had out sort Okay. then nice place XXX%? with paydown paying here, a recently, this in you to And of where just you

Jeff Wood

to is the our to investors next world we can going months. XX for weigh Well, the that Look, this do pay may is nice know to all, want return right is way prepared these well. as XX the And Tom how debt. idea are we is the over to of turn at again mentioned down right, balance this what comments, don't with we a levels Jeff. the as this now kind continue We to in trying on in

down are the ratio. that we So to to more and sheet. months had comfortable be the But we prioritize obviously, in felt balance raising going recent with significant pay payout continue we here, cautious the

$X.XX idea the I a think that be level. sustainable is this that that should of

like to course, of until But of think much we certainty that variable are investor distribution, to are Now, this environment. we that's sort would as in just meaningful stability around group. we we not provide our and

that rollover over debt some don't declines So would does time. that get some intention that's the a XXX% that that certainly to bit require the probably and idea the some I payout would share because I ratio given in ratio. expected we up know may I it and be. hedges, production creeps flow comfortable can payout cash retaining of or still like But from that down or we repurchases whatever increasing you the that see acquisitions road be or repayment think

Stephen Decker

Okay. Great. I time. the appreciate

Jeff Wood

Steve. you Thank

Operator

next question come The go Please Brian with Downey will from Citigroup. ahead.

Brian Downey

volumes be trending to next benefits decline. get sense seen I for that the recent question. given to your Trough Hi. taking continues that hope in activity volumes out trying guess, should you incentive is given the a development natural Good the well. mainly agreements recapped, you gas morning. Shelby you could discuss where directionally of impact see laid there? Thanks interest the But next everyone and I year? Working the can year, better other

Jeff Wood

that it's and question. then capital decline. Aethon gas, up moment. out you far just again offsetting Trough Working will ramp in further we the which just right. will look to get that be at production going volumes, Obviously, be course because of to will royalty as up booked as far declines continue the Yes. if Brian, these the volumes, interest frankly haven't over for Look, to we is are look a XXXX. be volumes at and offsetting since decline, exclusively certainly forward into are XXXX mineral Jeff. but XXXX. tough program haven't at the as guidance little, thanks to almost we It's under new XXXX. business generally But Shelby going any This that put The we step

gas going lot of trying It's have to activity we going XXXX. just things question later not So sort here, depend we to to of look of to other fully level a are general as Brian, skirt whether are that on we starting grow XXXX, more in as of the your as decline get lot or positive on into but a plays arresting we going the of really across into too to gas. reaches

Tom Carter

would Jeff, only just Shelby not are I add working Trough. that the we

expect hard the Louisiana other growing move through as we some of does on working we these also it of every production We growth well. are it are and spooled some once get as but production and time. have And projects in are working also can on plays our take eventually we Haynesville, cycle. working but very hope up and But we we we this expectation

Brian Downey

of Great. from acreage? operator any commentary recently, Obviously you are what think these to gas two attitudes agreements you compared but quarter on additional comments last towards on sort seeing

Tom Carter

got I guess on of operators kind yet. industry is with ways gas the a I uncertainty of there gas to I still on would now. say comfortable activity but more Certainly, lot think is a that right has quite any getting go

still I think LNG a most people are think off. exports ways

a for good gas. cautious about see do expect. being we And we so of term too I long we out very are getting what far front But in think outlook

Brian Downey

it. appreciate I Great.

Operator

go Markets. The from will come TJ Capital RBC next ahead. Please with Schultz question

TJ Schultz

XX that Is morning. the DUCs, in it with to Trough development the discussions Augustine? the Good the gas deals price you mentioned specific is are of any why time notable And is looking Outside does but pursuing Hi. there is there Shelby for Angelina County, taking moves in move able reason you take it are you that and Eastern forward producer Or in forward? time. it completing plans? a more just San those

Tom Carter

quick reach part with we in operators bringing the in in existing And in a contractual additional that. the mostly to are we the begin there, point out develop relations of want currently on about with we our to operators has can a where there. give our don't to operators the event create pace would I It Eastern that do look out answer our to the try to at are to at contract play. going

working that about that some pretty So just to say with and things we hope too it say have that to regenerate area before are as we definitive long. specific do has contracts and will I well hard to to

TJ Schultz

with you you reach other Okay. reach other operators, to operators? where can When point the do

Tom Carter

Well, it's this month. basically

TJ Schultz

Okay. Understood.

that it the a just Just factor payout but you thinking think know ratio? lastly is M&A, acquisitions? really. more Thanks. in the of you say, about I context view Or per the is the there down M&A generally M&A there move your a how maybe does distribution se, payout the in are ratio big on periods market are they financing activity where in play I again. of not kind into, market? just How variable

Jeff Wood

that's Jeff. TJ, a point. great Look, is Yes. this

to the about and really of will mean, turbulence us, as put the other on. Board out I the that and for investors the now. first it's as get once think that's play, to Shelby have of a that to or new But right. don't to get cash period with It's it's new Chalk sheet through we right. the I asset right have greater of trying you stream balance flows think focused cash that pay are really get front to is hard you s we of really we for, something then we our that it's Trough, then sufficient don't base, we whether this part the existing returning payment on acquisition can extent much can an a basically

assets and capital and an The loosens more focused to that's becomes on are make market right what are certainly those I think retained So then things. up discuss. balance it's more for we and supplement will sheet to are But that little flow, of care I cash little sure then we banking program we two the ratio something a current taking really little and world maintaining really more really a brighten think available a with we and starts M&A focused the that's payout bit on. active now, right

TJ Schultz

Jeff. Thanks right. All

Operator

Energy. next will from come The question go Hammond with Simmons ahead. Pearce Please

Pearce Hammond

and morning. for questions Thanks my good taking Yes.

question is, what on Jeff, hedging? First are latest your thoughts

Jeff Wood

Pearce. morning Good

as know, this just significant would earlier improved continue adding improve. year. put they a will you levels to little continue of So, Obviously we and a will to opportunistic round I in for say, we have hope hedges pretty XXXX around levels. be

get end So our hedges. some XXXX initial as systematically do closer potentially will of course look we to some the to towards look then that as the build I the and at we year year, hedge over we portfolio always adding think of the point,

going continue about this quarter very be to very, throughout are a served we programmatic So of It well to in protection this. lot us hedges. with

so goes think of of and we about level I trying all made around continue certainty And the going are visibility philosophy into I distribution. that provide it just to that a comment and kind decent just corporate earlier to

Pearce Hammond

Great. on low, and right this a at then payout but shape? is level to follow-up an you are balance to balance support when to is earlier going the asking to balance on better feel made just is sheet you. a higher just absolute similar sheet the pertaining looking am like debt? was congratulations more at the the the what of but Where leverage you sheet. this now ratio with metrics at I What you is someone There earlier? sheet And Thank touches to of level think understand in the first we my success hey, all you define, are the on good have is balance question looking

Jeff Wood

And at with welcome will start I Yes. is right. of looked then is have to historically Pearce, number things, we anyone in. this Look, a chime that. Jeff.

borrowings to a of to of debt base cushion ratio leverage And look debt absolute continue as our we of then So for those pay the well borrowing it's outstanding to it's all things. between and trailing at and EBITDA. we lot level, attention degree

that market would banking I say where got really their times you that a have dramatically. is what I pulling in in like pretty think this is corporate talons

don't be is for today there to you for you So tomorrow. a is lender that know you there if going

years. group years a bank and have has got great We us been with that for

feel very a with difficult it's that time. just So I But group. changing comfortable and

layer on all of the think now just conservatism. things right of perspective with I is those an So added

are levels. lot cushion including advance because So to a of sort be and base again can time. think determined rate absolute of a existing by think over what's We lot we the base, borrowing that you the things, willing to that the about banks debt about again give can borrowing what change

as I just we board. up. more are we point our being are. leverage the think times right X.X rough how to attitude things specific our going just continue environment is is that I going we there back have and prioritize to generally the to target can you now man, ratio, to monitor times It's continue going says, across conservative some So are sheet, soon to to given on the hit balance don't as to open just

Pearce Hammond

the Well, sense. Thanks much that makes so answer, helpful Jeff. for

Jeff Wood

Pearce. Thanks

Operator

question will Derek Stifel. from The next go with Whitfield Please come ahead.

Derek Whitfield

on Trough guidance all. this in I Shelby for activity forward morning commend offering driving to certainly your Good across guys your want you environment in position. success and challenging

the For curtailments day Could QX? possibly my I per quantify on first you to Bakken approximate in question, for barrels your the follow-up on wanted curtailments.

Tom Carter

don't Well, the two even, of if maybe head. with that We can can Derek, have I on that. follow-up top just you give could seconds. you me we my Or off

Derek Whitfield

needed. if follow-up, can We

Jeff Wood

it. the Bakken I to just trying XX% and find know that is

Tom Carter

Yes.

if know MBOE you think I to X.X probably a day. Derek, that's X.X that would look, think I you the in

what kind meant probably of estimate of for shut-ins the Bakken. So just those

Derek Whitfield

that. Perfect. that direction that as taken exposure meaningful said, have understand bonus question convert Haynesville lease appreciate guys regarding unleased outside I And that in your With gas to basins of you guidance. could bullish my in speak could have environment? the then gas a second more the and you certainly you potential

Jeff Wood

I mean the do comment. mentioned gas. tremendous have work we focused Sure. wants who This we is are Tom trying there. Jeff and Chalk acreage see else we to the and on will got to that

Chalk have of and Louisiana. acres We hundreds thousands the Texas of across got in

in the before. of nice was modern, East that the to very, nice talked completion There first Texas one performing techniques So we Chalk. well. be It a very And continues very really side using of the have company modern Chalk. on a a the that is area that's of drilled

you, to by early. And just lease that could well to and so know, right it's bonus. What I But tough partner operators one in available. that, are obviously more of times into but be now found now your in a say capital I maybe translate have is times you tell we encouraged with we it's is it's than you successful like that don't to very be this very how really good where more need do

rather less development revenues a maybe in what upfront large especially So found will areas a exchange acreage as royalties or program. in identified producers, ways partner be contiguous we to with would them in work more to bonuses. you successful, hey, than let lease we where position, us through and we a with through have such say lessen Ultimately, to truly we forgo for bonuses is see

meaningful. plan So we can in even more that that times positions be development sometimes really make where more have and frankly often where trade-off large we and more like this often

So, that's your got question. around circuitous

bonus. probably I see really spots think pop more would we of bit up our it is resurgence as and gas that see focus prices on lease lease than up, royalty in a some do mineral is a on tick bonus. But volumes you where

Derek Whitfield

Very all. sense. helpful makes That

Operator

next Please with ahead. The is Phil go from question Stuart Scotiabank.

Phil Stuart

Or were is that biggest you kind around am the the Shelby kind just my typically of is just play curious held helped gas exhibit declines the within it than Good was improve expecting. bit that some little morning Trough this the there I were? natural contribution months? guys. kind first first the lower of number? guess wells drivers another we the was production from It for of morning. I I XX better taking what XQ. that over question the up that gas appreciate portfolio to of XX Or in maybe comments a

Jeff Wood

is a morning. In of specifically, that's Good I owning biggest probably the a contributor This giant Louisiana our what bit. a we volumes the than say acreage, Haynesville we exceeding more would in expectations just I portfolio That Jeff. that expecting saw is second spike gas little of guess our of single bit quarter was volumes. Phil. part a Hi right. such to were

other get that that you portends I You don't this to Louisiana Haynesville was going specifically something forward. hope come a starts in a to least that more from go would gas in are which you Louisiana others. saw more constructive And that that anything fin and just than at broadly back as hope the just time know environment shark we second we bit have in a as activity than quarter, seen. Haynesville. We it to

Phil Stuart

follow-up, is that to Okay. Great. XX that royalty get DUCs I the the I that. just wanted deal agreement they all to The then clarify guess a case? XTO on clarification relief. the Is compete for DUCs. have And XX my to the just

Jeff Wood

That's correct.

XX but complete to So DUCs. quarter not just they those for end need by to sales turn the of first the year of next

Phil Stuart

XQ that. on the assuming XQ take DUCs XX that I plus Okay. starting those XXXX one those are to turned If we line hold more sight think trying will that as kind you maybe enough do XQ to DUCs follow-up the XXXX Trough be just XXXX, to Great. you flat that guess have on point, And the in quick think that of XX Shelby on of then sales I of you an to kind XQ completed, production do basis. of XXXX? that will asset be Aethon think wells level am

Jeff Wood

just to on me on are timeframe. it's unfortunately, to for tough Yes. a I hope be But XXXX to guidance position to to be now going comment normal think just our honest. that, right we give in have Phil, we would

Phil Stuart

Okay.

guys. Sounds good. I appreciate time the

Jeff Wood

Thanks Phil.

Tom Carter

hope additional XXXX. is, on in And play. that The comment side make drilling to would the Eastern of one we we trying I are spending going a effort of the done get in lot

Operator

[Operator Instructions].

at the further for would I questions. conference to And no any comments. to this closing are back Okay. over time, Tom Carter like there turn

Tom Carter

us and next you and quarter much. joining Well, Thank look everyone. luck good you we today with to speaking to all so thank for forward you

Operator

Ladies and today's conference gentlemen, thank you call. for participating in

You may disconnect. now

Black Stone Minerals (BSM) 4 Aug 202020 Q2 Earnings call transcript