FLMN - Earnings call transcript Q4 2018

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Operator

Good morning and welcome to the Falcon Minerals Fourth Quarter and Full Year 2018 Earnings Results Call and Webcast. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Brian Begley with Falcon Minerals. Sir, you may begin.

Brian Begley

morning, good and you everyone. Thank joining Thank discuss today's to for fourth you quarter for Falcon's and call results. us full-year XXXX With is call Officer, our on and Financial today Chief Brotman. Executive and Daniel our Jeff Officer, Chief Herz; us President the

-- would I financial and forward-looking during our certain similar to remind and expected words often performance address in conditions its contain future begin, this we everyone contains expects, we'll and call and as before financial anticipates, also or like words Now statements business make statements that such context, forward-looking and phrases.

by address report to We you on report to risks like in which their can Forward-looking Annual in materially are on statements, uncertainties, to also caution to discuss these Form results actual projected nature, statements. differ uncertain subject and forward-looking quarterly are our cause and Form the from that and risks not I XX-Q certain XX-K. those matters the place forward-looking management's date or to to or no that the statements, update made reflect statements statements obligations events. forward-looking undue undertakes events be reliance of of circumstances reflect any our or results which occurrence to to Company may as on analysis of publicly the date The unanticipated reflect forward-looking these publicly hereof. the after revisions only the release hereof

as the earnings Additionally, such provided and we EBITDA measures non-GAAP to to forma we refer in our free reconciliation release, disclosures adjusted our a cash pro in public have flow.

Presentations the Relations supplemental call I'll Daniel Company's his on which be over that, Herz, the can our also of turn Daniel? website provided results, Investor CEO, a and Events to found We to presentation remarks. With the earnings our have for section. the on page

Daniel Herz

oil feet conference in the we thank Thanks, which your place. you the least, quite the XXXX sure the the in Falcon meaningfully oil of XXXX. we its Minerals Minerals stand during a for firm. Falcon we everyone fourth very Lincoln to Brian. and half this XXXX materially saw believe right are launched But Falcon Corporation at President and quarter We saw say uncertainty, energy. the of We you saw then Abraham once fourth put through be in and reflect year of volatility during and stability. of place, which prices then quickly quarter those for the same prices call. year said Falcon rise inherent decline enormous Welcome joining first the increased strengths right period was,

zero developed the approximately that We revenue of X% XXX,XXX from Shale the average core best by gas developed Ford in unit and plus oil some the the of acres business world. capital operators are receives requires in on Eagle that acreage of wells a across with our gross

that revenue all very companies an recog are operating broadly; pricing, in in flow, operating by vast premium quality very -- oil high a world-class business business, enviable meaningful we which model a This generation low shareholders as a is debt. part form assets, majority our and partners, Just which and energy dividend. free cash we declining in minimal revenue driven for costs, businesses environment importantly, even we the means back of cost to hand generate the of substantial low

our share advantage free provided for quarter fourth day, of cash net to additional to were of XXXX. we benefited Officer, Chief minerals. fourth addition the in market Later, $X.XX, provide the share production barrels X,XXX of summary, flow and $X.XX dividend will quarter $XX.X to of we Brotman, our per In generated acquire of upheaval per fourth of which able In of overview financial EBITDA of many quarter, the per these oil a Financial the approximately an during million, core results. in us strengths, Jeff equivalent the take further

Importantly, production year-over-year. grew as on XX% XXXX apples-to-apples full-year basis, XXXX full-year to an compare we

production from development production ConocoPhillips, base of units net -- wells of interest grown our BP's and substantial high in EOG, way the operators' BHP's have a have over our BP/Devon We position. Eagle X,XXX of higher and our by of Ford operated acquisition revenue of through Shale by now primarily

continue in of they with Conoco that the plan XXXX Eagle half We by growth. had their has Ford the the the by second remains Conoco activity resuming year-over-year growth year. see Recent half to committed during to Ford the in operators to robust stated of publicly top to remarks clarity plans. Shale. our management pause Eagle growth first in provide XX% operators senior

is older wells. also well of of to on focused discuss oil refracs enhanced our ConocoPhillips big as BP/Devon publicly position. as beginning development pilots Additionally, also the is recovery

that with their running The Devon rigs our work BHP. XXXX. reminder, Devon of Through begun to significant assets will delineate come Ford rigs certain of expected Devon, the BP the business Austin and are to Austin rigs by BP work Eagle This with to of BP first has a BP specifically closed to by its the acquisition by in Austin could and encouraged the a development Eagle upside days are months assets ago. from initial this, which in As four shale portfolio in of they BP Eagle Devon partner, acquired quarter second position. post prioritize the its and position would said for yield program the well few we doing Chalk our we on half of end within and just early Ford the their Chalk XXXX BP's a are discussed Chalk joint online already partners. development has More including three of recently venture increase across XXXX. rigs; expect Ford five two in six of and the

highly As a Chalk favorable had EOG from our position. reminder, development Austin across we have

that Devon to business. quite are and us exists for the by our by on We upside encouraged focus immediate the BP that potential and

discussed refraced refracing program discussed our Previously Devon position. XX is our to to enhanced Additionally, with the more way recovery Further, across we've but has Devon add well discussed be per oil day to from potential BOE to wells X,XXX oil another has refracing this a up get approximately initially. with acreage, program. per

We have -- to and what from course operators to both happy We we none all additional spend our the have reminder, no the capital required investments. oil. at of revenue are a of as get portion simply the extract

and directly business from operators this in our public and positions All going the statements forward. well releases of information comes themselves

significant of EOG but development to net seen for growth level issued refracing as other of Hooks as month those of see across those year-over-year growth interest of earnings level base only driven six of net our earlier, units continue half production position. number to us flat the interest been have of base with and and also saw free the good guidance allows given by of revenue line-of-sight a in great factors a which revenue Coupling developed. level our Ranch, provide a including We revenue wells. of activity later this couple and average units production acceleration from cash pads. our our solid developed flow. we we what in of XXXX have to that enhanced have revenue XXXX developed of the We likely interest the you operated to As have the base Chalk, if example production Austin activity expect of BP/Devon, significant This remain clear interest I believe corresponding XX% with mentioned are currently production. first guidance to provides higher all net drilling have the and allow primarily view by should X% potential to A revenue estimate beyond. and we wells model simply And including ago, have we weeks are in high what our several ConocoPhillips, current of results I BP, our and level a future, would was very business of production. growth XXXX in us by for and course oil we the net we this recovery, be is and

XXXX, four believe and their will half on few our BPs the on benefit and this frac to in we Given first beyond. Conoco's delayed the in interest we from the XXXX of BHP; closing being position, our their meaningfully items. in expected half rigs Austin out refracs net of flow be work would I and timing pause and in Over delay production help from to overall the the as of of growth expect that first XXXX, the acquisition name a higher BP X development our wells of Chalk later Devon's BP announced time revenue from growth two pushed acceleration from of Generation cash design, Conoco's

Our forward. growth business as we strong and we meaningful move is expect

plays net I $XX Eagle of by the acquisition, organic Texas the wells acquisition over flow as gross Ford our of are Now and our undeveloped top are XX by expect driven X,XXX has acres acquisitions, Karnes meaningfully core top have do and net net stated Lower the when If strategic million strategic acquisitions, acquired operators it higher. Eastern of likely I'm covered focusing already an report the to With acquisition and $XX.X XX free growth. have that oil we and Basin. when disciplined Shale aggregate for are to will we million. of I would means per drive Ford County developed Most pleased Karnes royalty assets locations. respect we royalty being weighted with previously, would position comes producing notably, price a and share XX we an acquired per the Eagle cash approximately acres value extremely County, XX acres additional asset in ConocoPhillips. currently on remain of that to efforts Permian quarter core targeting This

remain and wells favorable not activity, remains little and refracing, are very any free oil we position our in see production our significant from future appreciation. generate dedicated course sheet. design, see substantial In value having had the X,XXX grow revenue the quarter of Through enhanced impact we drilling this, recovery. Minerals our balance well acquisitions will and Falcon and of make interest base on impact producing completion a late a flow flow to summary, of of XXXX then to developed are cash increased Of and meaningfully pristine positioned higher our improved operators' the as wells we turbulence to of net fourth cash to

the cover call Now I hand Jeff? results. Jeff would Brotman to to over like to financial our

Jeffrey Brotman

income you, quarter $XX.X Falcon's Thank XXXX of million. Daniel. was net fourth

quarter $XX.X operating of period we fourth as The adjusted EBITDA fourth The amount costs approximately transitioned costs. Our the as million, such for from XX% higher externally managed in Minerals up to resulted first quarter G&A costs Falcon which quarter which we from than and full total our was XXXX. did was of being G&A of was forward. internally the to was see managed, going Corporation significantly expect additional incur $XXX,XXX, we

Our pristine. available million liquidity on balance line ended sheet is of fourth consisting balance million our capital absolutely with quarter of $XX working and $X.X of $XX.X cash credit $XXX.X million of and our of the million. We

Our to fourth is partnership earnings the any Also we of our XXst. February that nor you the provision will units our XXrd of $X.XX and tomorrow attributable that prior Up-C consolidated the the of shareholders be our the share own none owns quarter for allocated of to operating August related date of mineral per to all to period on paid to results XX% interests being taxed that on transaction I in dividend amount taxes only income XXXX. non-controlling any interests that our is remind in structure are record approximately of

will turn comments I these the Dan. now back With complete, to call

Daniel Herz

open Keith, why the for don't Jeff. up questions. Thanks, we call

Operator

We'll take with ahead, Capital. open. our your go from [Operator Jeff line question Northland Instructions] Please is Grampp first

Jeffrey Grampp

Thanks Daniel. comments. morning, Good those for all

Daniel Herz

Jeff. morning, Good

Jeffrey Grampp

to of commodity those organic start for volatile and your tape kind last acquisition months. on the sense dynamics the negotiating get pretty to of during first I of how front you a guess hoping Was the just of several kind curious saw

of if odd pullback recent done acquisitions, acquisitions, in kind before, would after say the most of the kind characterize any way of to the those those If during, or of there's were So million will? you you oil? pace $XX of of

Daniel Herz

in a during pullback that's were pullback good question. prices. and the Most Yes, done after oil the

returns we're of we're pricing were we the negotiations -- these looking and that on, all minerals. we and were did opportunities with looking their people selling the specific a we given We that minerals to the committed in were the working their for of So as complete did able -- as or other who with our we our discipline that achieve execute to transactions have to the to the shareholders. volatility not far with portion achieve

Jeffrey Grampp

from about that's seems all. leverage a Alright, really And just perspective not of guess into high guys those really level helpful. on -- at clear talk can that great it something I you kind very you lean want is acquisitions, strategical to very

strategically. leads do the if Just So, successful up brakes interest me gives so that you the the of don't to cover think market what ramp on is in kind that would you really you maybe guess I level Say want about on cover to of up maybe to that wondering say any the or distribution distribution acquisitions guys of and your tap to flexing for were maybe on you acquisitions, leverage heats guys that period? organic kind takes flexing you?

Daniel Herz

I meaningful payout business to and flow XX% free EOG, ratio and from especially these operators; us targeted position them. would generates is know what with developing our expect to We're substantial including across our And as who that cash and are our where are greater base to assets Conoco, assets that's maintain. dedicated and Sure. you a BP;

same going in respect out to cash the our that quantities large XX% generate time sheet. flow we are balance while We with it pay disciplined plus and to remaining out extremely pay at

Jeffrey Grampp

any that or than me of have of those you it. range royalty Understood. And kind is? for it different you the is that average guys that you kind of one disclosed, have line-of-sight longer-term it if average do wells last interest number you what kind in referenced? Is X% On

Daniel Herz

X% we -- our is across think average assume we should that the time I people over that have position.

Operator

ahead, Please question is open. our line go We'll take next from Jiang Suisse. Betty Credit with your

Betty Jiang

and 'XX Dan, Thanks. barrel versus comments barrel just X,XXX day? this of currently production reconcile morning. half half. me trajectory of So, through if X,XXX visibility second type you year could flattish about per production to how the you're should the we about could per that first production guidance Good you the year sort for help about day talk be thinking what then seeing of your

Daniel Herz

weeks or you. tried very -- Thank a good we a I Also we in Betty. our again think few ago made make hope clear the to as I we The question, with release. made clear guidance,

XXXX. their our on course Our operators they growth two, half their have significant business, rigs XXst, October -- ConocoPhillips really portion That's have Number and have with of the they closing with just they're their said into of represents second a delayed activity. of Devon BP up number one. beginning to ramp and

that see speaks from business in about delay for also the on expect interest or course wouldn't wells -- begin revenue Devon of net beyond. year; wells the second really interest and the XXXX impact Jeff's on percentage the I of the to quarter we half first the half year Chalk average pushing to what all activities. higher So, with then the of into first with question in the We've wells. year well impact net first Austin couple the percentage this and talked the second higher from about And and XX of in also, year. an second of that that obviously this so then revenue those of the to half coming pilot Devon from refracing and in of this the we and of half more earlier

reasonable feel combined achieve tried a allowed us to comfortable to put for investors range put us that be is range a guidance able So, we we all to think of forward and to factors those with. that for the forward forward to put range and very

Betty Jiang

Great, thanks.

XQ? a point X,XXX from mean would fairly in higher sort XQ of then guidance of quarter on if could to a lower clarify be level but per or then the So, and in on day, XQ per X,XXX XQ, see barrels the second flattish point. the Would just stepdown point that actually you I based barrels the day in

Daniel Herz

desire this. should the as you I guidance of the very think should think to amount I but -- that half solid we; dividends provide and -- of to this flow I that see nice we it, the what we see exist think say first we but have is mean appropriate see which nice should quarter. extrapolate forward Appreciate six I as even shareholders. But We can a a base point for every of I we on production, production forward very it, can't for of I tried pace cash guidance month we'll continue put finer to roll year, a and

Betty Jiang

then follow-up mentioned. all for my you comments. acquisition Thanks that Great. on outlook was the And those

the candidates Ford? as are you in about a they're said it talk you're and bit acquisition. Permian what seeing future Ford Eagle what Eagle versus seeing You the in you're Can tier and opportunity to relates top Permian the basins for more today

Daniel Herz

position. different it's consistent with relative we what imagine, opportunities Very Eagle in of Gonzales opportunities -- larger what good have the And think -- is Eagle the so which target We Permian minerals best-in-class Karnes Yes. from be by the perspective see more question. market. our say number we disciplined very Ford, the a a to going you a mature DeWitt, a on the very, and trough to a could very market is very area Karnes, strategic in stay and and Ford in would we're -- attractive. defined I see position we within we given would that

who both very There I'd Ford. and equity will put over Delaware. that area opportunities the to especially as positions. Midland the could have targets set within in necessarily team time good of are and given next time month, course our Permian, clear Eagle for being are respect That within not well in to to months. of So, insight us exit the our to area larger look target the been we by at two, think have larger very With say together by have firms opportunity by I packages those as over bode well a of that private we Falcon the say Basin that's three executive

come We will perspective opportunity. a brings value and be seats really so flow with on X,XXX we're cash the is that to opportunities back, and IRRs undeveloped cheering the focus value completed position very I EOG. for plus everybody it's to is because enhancing over disciplined still sitting play said, be of a getting to strategic I'll operators, by out right point Betty, one wells within and that more find more asset any other and great true our opportunistic net that It's within BP/Devon, US area that a top their a hope we'll again capital from and with XXX% With taking a that much perspective Conoco. than opportunity

something we we'll can base lot that very that and fantastic just go a of lot we if that So have growth If a flow of pursue come. is there's cash not, and I good have enhance there it. to business think feel a meaningfully, we can

Betty Jiang

it. Thanks. appreciate Great,

Operator

from Modak take with next Please our Atidrip Citi. We'll is question your go open. ahead, line

Atidrip Modak

you the commence? guys. could Hooks have activity Hey, when Do on on clarity more any Ranch

Daniel Herz

prepared and morning. to that Not discuss today. Good we're share

-- last look term given Hooks Eagle wells, and anybody the fair This it six for optimistic you to favorably XX% Conoco's the within those sits if public Ford. But are for say I Eagle of drilled date year's the can is in think of wells the information, look the Ford. cumulative it's inclined Ranch which wells to at area the the top in up., best best all production remain of development its in the about we near-

XX% lot parent and And of doing analytics, there no so predictive if given their running it's issues sort some you is its undeveloped, and were a of the child with think position. within of waiting room I core probably

I Ranch. remain the we'll see optimistic Hooks So, development that near-term of

Operator

line Please open. ahead, [Operator Instructions] Jeffrey is to with And Tuohy Campbell we'll go next your Brothers. go

Jeffrey Campbell

sell it morning. seems asset an holder recent want It actively was that's that producer mineral to your that I little locations developing. noteworthy would a that Daniel, counterintuitive thought acquisition attracting Good investment. a Conoco's included interest

a color add of be that trying little where this acquisition shorter-term can came repeated about also interests the some and this in you future? how So, strategy development to about something could you into is visibility acquire have

Daniel Herz

about tell question the think -- Thank how we and and I you us, know others this the day and of you for we predict factor extremely leading strategy, development our I all to data in our our important effectively in those the and permitted, development forecasting. day the how can course how context can foresee And will acquisition who give color acquire ability of discussed the best analytics I predictive organic to activity about a because you acquire will in Jeff, minerals well as our I think And we last analytics know, if business buy is will likelihood the think activity on we minerals is minerals. how a call. we is that's before

And developing. a lot we spend of so, something time that's

are We we within an and dedicated what looked class for in best minerals, within sectors continue acquisitions excited investing. being organization able and that use to and being That's have about. whole at really it within those as really the best-in-class use best refine acquisition energy, extremely data business develop like. to -- to and I'm and And

Jeffrey Campbell

Thank I you. the color. Great, appreciate

Daniel Herz

you. Thank

Operator

take our open. And line ahead, Capital. SG next question Please Evans we'll go your is from Jon with

Jon Evans

I us jumped that was last a won't and of of Can you give understand better? just little But big the costs quarter SG&A and be know there bit pretty in a you because were sequentially happening just stub? color help cost could it kind XXXX there us

Daniel Herz

in going to supplement. Jeff ask to Sure. to And he jump if has anything I'm

to related the operator business transition about Jeff So as around quarter the of third-party of for said, transaction. as well from closing our the were the had first, as the we $XXX,XXX that

one. number that's So,

million transition been excluding million. have around those costs And $X.X so would that $X.X

per anything? year you provided I half more that was which the expense. BOE of $X.XX would appropriate your modeling, would for think more to I to and lead add we guidance the you Jeff, of G&A first $X.XX relevant the to

Jeffrey Brotman

No.

what costs give to of bit to little those question a more the just were. granularity Just

to Minerals on the internally, were As had fees, people, also termination paying we up December we that; to built to Falcon agreement had at able pay XXth. we order Riverbend same the staff be and hiring start a and in of we manage their time, things to like headhunter until services

was repeated. So, will a that not be duplication there

Jon Evans

go Got it, it can back up, kind you half start if I be so I -- doesn't markets And distribution these on have the that production assume SG&A mean in you where could much accelerate? production point get how to that and just ramp have maybe the the would starts that understand all you does the by to make up, to big of leverage is the could a we ramp, go think of if lot move to what because you really have side; leverage. helpful positives really and should Conoco move happen that starts to I

Daniel Herz

That's exactly right.

lean can of built one characterize as entire would what as It have staff the a is out I imagine. staff. We

position I who dedicated have growing professionals say this would We to each the are best in business.

we production and to if one going then you is the see staff should down I cost, so first the see you can BOE flat infer In to and basically of see total that half able look As number type dollar I be forward. BOE G&A per guidance that for think -- need the full what you grow our per year hold go that meaningfully. and no at our grows, would we no I production business think need And grow from

side we we more that all incredibly low people runs make company who course if a than substantial costs acquisitions cash grow higher. of But less engineering keep add this we accounting with made to few have to really strategic those might sure or the meaningfully, hard people a drive today on XX working is are and Now flow side. and

Jon Evans

then And question. last the just Great.

equity it from them would that looking you're looking someone averse? or more debt is potentially One you to holders. instead to Do averse deal, used of competitors, do of bring mineral bigger do lot that or see you public public equity debt standpoint equity to you're are take or like primarily transactions and if other your pretty because the making your a the a you they've giving something markets to sounds

Daniel Herz

I that our an is there's would lot of deeper in the case question to drives only really opportunity we have share The a in is a cash there share be and willing flow equity. the who would think can overall our see like one company to give people which and and of the higher. I per which meaningfully is value equity up that

both interested in equity; So there who enhances that the to I the investors, to existing that. public very having we be know are mineral value as as owners really well meaningfully but equity would our that have people, find opportunity do

Operator

floor it have Daniel return the no And I'll further closing Herz does we appear questions, to for remarks.

Daniel Herz

Thank to Great. next quarter you today's Thank you if speaking forward all sooner. look not for you. joining fourth We quarter call. to earnings

Operator

will quarter great earnings conference Please your full-year And fourth disconnect and at this time. line call. Mineral's day. a Falcon conclude today's this XXXX Have

Sitio Royalties (STR) 27 Feb 192018 Q4 Earnings call transcript