FLMN - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, welcome to the Falcon Minerals Second Quarter Earnings Conference Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Chief Financial Officer Mr. Bryan Gunderson. Sir, the floor is yours.

Bryan Gunderson

Good morning, everyone, and thank you for joining today's call to discuss Falcon's second quarter 2020 results.

performance would will remind that make expected business, I this that address begin, future we conditions. call, certain financial we like everyone to during our Before financial and forward-looking statements results set or in wide forth SEC made range in by from to and risks statements implied company differ our any may Actual materially achieved uncertainties, those of due forward-looking a the including filings. those reflect caution to these would not analysis place undue the like on hereof. which I reliance forward-looking statements, date to you management's of as also The or company to expressly disclaims any revise obligation update statements. any forward-looking

presentation reconciliations release, the are to includes website. is this Additionally, GAAP in included also our non-GAAP which of these measures comparable directly measures, posted measures earnings our on most

investor the Gleneagles Virtual weeks, Day. the Lastly, over and the Chief I'll Royalty conferences remarks. CEO Executive the Credit his company in Falcon's Suisse, turn Minerals President the the Mineral Simmons Royalty's & Daniel will including for Virtual Virtual Conference, Herz Conference, and the Officer Energy-Power Barclays Investor virtual coming Conference, be to that, & several Daniel? With call attending

Daniel Herz

our give Bryan. Financial just my and thank you Gunderson, Corporation second we who for Officer, Thanks, remarks, the will will quarter financial XXXX then Welcome report heard call. and Bryan the from, Falcon you earnings questions. joining everyone, Minerals Chief following take

quarter the come Falcon's We in sure have better you. then everyone period of strength is hope I'm certainly not all long doing a I XXXX. second is these business be it there of First, through challenging to of a respects. the speak times. to nice way demonstration of many well can short a over

higher Cut curtailed was reduced back production second approximately dividend well quarter-over-quarter months generated the the the quarter, cash positioned in in by extremely positive be second by operators, and flow for by third and prices from XX% substantially that XX%. Falcon of treacherous our come. to that $X.XXX, G&A our online free quarter some Furthermore, that the XX%. is will increased quarter first the voluntarily Falcon than from years coming and Falcon of by cash at existed production should benefit quarter. sold During

oil substantial barrel, of to $XX our the per addition, as volumes portion to growth approximately when cash help first meaningful a flow XXXX, quarter compared which hedged through we rebounded prices the in In provide for second quarter. free should of

for respect future. the Further, Given hedge twice oil prices quarter. our future the realized the to represent with second almost price during

across further wells over Our complete as our months, developing line-of-sight ConocoPhillips permit, position in operators gross providing visibility and I look their long-term XX development brought their all And, and and forward. market, Eagle the discuss the to the position value are these core as Despite long online. over and forward as to quarter-over-quarter, to considering those our such, all XX-year next Board medium for remains wells holders publicly have drill we net term. favorable to increased are continue to reporting and commitment create and our and as wells have short, how options continued reaffirm EOG Ford, by of aspects, undervalued plans. move stock finally, our our the the back management to equity price

Let's now get the into the some specifics of of business.

are We to the DUCs net X.XX months. position three DUCs. us build running are of wells and to X.XX continuing confidence and across nine turned currently rigs position. the operators line. net two wells, these averaged over next in across line-of-sight or in have waiting be second give line-of-sight These XXX specific or our operators wells, our six wells production our rigs our quarter, there gross During running currently Today, to

across at were have back Ranch EOG Hooks been and a May than higher exactly later in few the the three X,XXX just seen or barrels of then reserves and Hooks pleased online sold we Hooks June, for remainder ConocoPhillips is currently brought by in online. averaged of August. production is curtailed ConocoPhillips will pleased during they and volumes, by these to hold a sold benefit been And ConocoPhillips that reflected end of would from I'm This our In running wells, prices oil oil wells. of three Ranch of to than and that us noted where observed a have they months note allows about online be ago. and that day of as being were two rather frac That fact, will curtailed higher stated their XX.X% meaningfully why EOG volumes our per from prices production running back our position, all would the crews. rigs optimistic that and rigs crews wells have report I position July, revenue substantially than negative impacts our have net also to which And, XXXX. our line-of-sight BOE further voluntary interest. running quarter. has prized sooner where all X I'm curtailment. operators - wells Ranch addition has Conoco publicly flush is when our We expect equivalent that May planning second including see curtailments back June. frac no of existed we in during that of to we as development portion XX% one

announced results of than and operators for financial the strength we expect the greater return the top we share, targeted I our Bryan? on of a Finally, turn to in and will over to strong the our walk a the States. quarter. flow activity United returning night the our the With cash current continued commitment a position ratio payout production is core sheet in shale result across our and dividend Bryan call through ratio balance our play of This by XX% that, of per of $X.XX to based last which represents XX%. payout

Bryan Gunderson

Thanks, Daniel.

Our quarter for barrel. royalty was second revenue per averaged during oil million natural realizations realized $X.XX per per gas barrel. during price assets generated $X.X the $X.XX Mcf was net period. Falcon's $XX.XX realized NGL for in the our and price Average

investor barrel. costs on period. and XX, at cash As hedging beginning is a hedged program Falcon for approximately Daniel initiated out were are $XX quarter were mentioned, the the crude for available pricing volumes the XXXX, company's Falcons that the the XXXX of quarter website. per volumes during into operating first third in in Total All million laid quarter, extending volumes presentation of on June and $X XXXX. Exact

to component on or production per million the XXXX. were reflects barrel production which per taxes million decrease an the the expense resulting $X.X $X.X we first reported and was from dollar expense increase a million for ad prices. $X.X second Marketing the from This quarter, basis the the quarter. Cash lower Looking million pieces, realized the G&A $X.XX expense quarter to in approximately valorem is barrel. quarter, approximately This was $X.XX compared at represents prior for per barrel of that the quarter. for a point lower taxes and $X.X transportation due expense

reported decrease result compared stock to compensation period. As interests. $X.X XX% XXXX. was represents measures of The average for standalone the on in Falcon $X.X was cutting of largely of non-controlling a approximately and XX% approximately second excludes in $XX.X a a decrease loss recognized non-cash $X the price, a decrease that a first of March inclusive Adjusted million net $X.X Cash from attributable second million of million, loss reported decrease G&A first a million the the $X.X and this basis to production. and million which quarter as in expense Daniel Falcon adopted net the mentioned, decrease quarter cost XX% quarter in in XXXX. of EBITDA XXXX quarter a of represents million the realized

tax Due the period part Our attributable that GAAP increased is current as million mostly expense, no of of tax the incurred facility, $X.X debt-to-LTM $XX.X is Falcon's the increased approximately million related end net tax to to cash income a revolving million second EBITDA to - $X.X X.XX resulting quarter. acquired second outstanding incurring This stepped-up benefit in cash the the income company the the credit step-up to quarter, Resources the in basis was net incurred tax and XXXX. XXXX. in cash of of quarter, basis taxable of net our assets of debt to had no of At on the income for second to for at assets, of during times. quarter primarily company's we benefit our loss which the Falcon incurring due operating the assets. quarter end the expect transaction benefit the and foreseeable its perspective with $XX.X tax the of The loss second on Royal deferred our in company from taxes a as hand, to future. amounts ratio related million Falcon end the the the a quarter

ordinary XXXX was non-dividend shareholders sell to increase common to As XXXX quarter first received a a XXXX. shares, investors' the to call, reduction greater Falcon's recovered. classified part will than represent The A their Class XX% is treated dividends the of shareholders' reduction basis paid basis with capital Resources shareholders the call, XXXX and quarter shareholders of were treatment interest XX% tax XXXX I as the bases and This shareholders' dividends A the the distributions, mentioned, or the than therefore classified Class on Royal fourth as as distributions Falcon of decrease in in be paid during tax of mineral gain basis in that generally loss transaction common shareholders reduction of until Non-dividend capital as distributions expects nontaxable result are will shares. that that XXXX. basis such reduced income. time the will when rather fully during of non-dividend

of $X.XX cash flow. pro-forma for declared of cash taxes. quarter of is on per as flow As the Daniel interest cash interest XXXX adjusted non-controlling pro-forma X, was per record per share. This XX% period. to EBITDA, less XXXX. The cash $X.XX share a free free share dividend ratio reflects free Falcon yesterday XX, and payable shareholders Pro-forma dividend of a income define dividend mentioned, $X.XX inclusive payout pro-forma We September flow to expense August of payment as second approximately

production of quarter quarter for flow amount the in Our decrease to from Daniel. resulting XXXX back second the due transaction turn now cash decrease basis Royal utilization did realized call and over not XXXX. the will the did prices, estimated as assets in the for of in I the cash to average an Falcon taxable mentioned income pro-forma With that free stepped-up include income from a have previously, tax benefit not taxes. a pro-forma second

Daniel Herz

questions? for up Thanks Well call Bryan. Jess, open why don't we done. the

Operator

We'll with [Operator Downey first Sure. go to Instructions] Brian Citigroup.

Brian Downey

Good for a if Ranch. my morning could starting and questions. well I production the as July a how you at see second about your the given taking rate of I'm for you're there? quarter run guess, sense you to however off, thinking give production, volumes return curious a maybe now us more curtailments back normal or you're half gentlemen. impacting level thanks that year, Hooks Hope the particularly than normalized rate

Daniel Herz

stronger But, look a flattish in we're my May at strong remainder third a our think course, out a second second we're for really to at timing trying of trough, then, And XX% So, can conservative with the and And depending fourth Ranch. line-of-sight set extremely the to and quarter. of look hopefully then respect quarter and certainly have extrapolate the wells optimism a a June of well as we with and case, and I take very XXXX line quarter impact you for the quarter, additional look I are any operators. the taking by development we year. for mean, in near-term Hooks and during turned curtailment the at up on

Brian Downey

are there it last cadence wells come I Got question as from the lines, specifically, those then completion of curious what line-of-sight along a currently and DUC price sense on waiting has where quarter. quarter? completion we've perspective I'm your a if bulk to very in your similar point bucket But more your asked given on admittedly the changed vantage from commodity at from all, last mentioned, you the with

Daniel Herz

they shift half to has because pace quarter last think and we respect has turned completions, to not forward then, changed, bringing XXX year, expect release. were in to of this ConocoPhillips it running they where had benefit That think one tonight second certainly But, they EOG, gross XX. in think it's the call. two In on on our is year. it's our and we'll but a I just changed, wells. to this on line more earnings the is has crews indicated of to - where first compared wells when is I Eagle hear continued I course, And Ford the indicated with

vast So they XXX, with them occur half. as majority that left of would second the said, the which in

we're third as stable first completion up turned quarter really and be Brian. hopefully you be the to for the up fourth in think the what We've and the half of nice seen on US the category will energy quarter with back well. remain should across coming line I set And volumes bulk XXXX. rest of and of sets a the line-of-sight our position as with mentioned Thanks buoying to level very our waiting a at So, activity provide a certainly compared online that curtailed waiting space. in us strong

Brian Downey

I Great, appreciate.

Daniel Herz

Brian. Thanks

Operator

TJ at RBC. to next go Schultz We'll

TJ Schultz

good Hi, morning.

your about Board long type to to to and to Thanks. market out all in valuation of on you and put provide? more just what some term anything a there? monetize you can comment to you there your First options trading. the or that can of that on some comment that there anything But marker short is Is expand? read management there into is feel the specific specifically where related stock I evaluate thinking would know you're the be like do intent assets

Daniel Herz

to that we do holders Yes, to to our are and where we're are really to we're in value medium undervalued speculate look looking one equity we as at - the I we should the at end think I term. every don't on drive and short, metric. want everything going long meaningfully up believe across

equity can going to on as think back not the to will that speculate call value the up. and to we really short, of we options lot So, drive in do where long holders a our this have But end medium I'm term. I

TJ Schultz

Okay, understood.

This that how longer There's lot payout playing have the And payout about in ratio. are Just now absolute from any think was of the strategy and XQ. levels? you dollars in you how about on hedging that role But change ratio. the impact thinking not a payout term? you is

Daniel Herz

the stayed X its payout payout been as far business since as almost goal XX% - returns now, plus flow to So shareholders, ago ratio has and cash inception years setup to a our we'd at that our ratio. free

has the acting and free cash many TJ, thesis. And that the think that market others, you - nearly that is to is for free write back certainly - certainly to should been our all thesis. it that's we value So the our holders. market in what It and acting we see flow, Certainly, our or and equity flow we the analyst cash hand back looking generate all we reports.

hedges, the And We to the so brink. with hedges respect the opportunistic. were saw

commodity higher, prices and we'll fourth the quarter benefit more. and of resulting and from to production, models cash we hedged It April if sure business substantially flow us, third and the felt all And by seemed good positions that are just and the levels, as the flow the fact line-of-sight I'm in I all rebounded for It what well models first March the are quarter we'll on prices a $XX. should attractive to have growth, cash will while have think portion reasonable un-hedged we the way our the brink benefiting when of really show, higher of even remaining of production. meaningful and well which other's market XXXX. protect - grow free energy in oil and as your at

TJ Schultz

you. Got it, thank

Daniel Herz

TJ. Thanks

Operator

move Fitzpatrick to We'll SunTrust. at Instructions] Welles [Operator next

Welles Fitzpatrick

morning. good Hey,

Bryan Gunderson

Hey, Welles.

Daniel Herz

Welles. Hey,

Welles Fitzpatrick

and, to kind the Have Conoco you - anytime of calls because recently? haven't remarks of butt prepared of bidding you competition of area? seen that Trough, kind a know guess, recently have done stability Have your I lot acquisitions where in the backyard it's Karnes I of people seen it in trying your whole you out kind you seen rigs seen put, you guys come anyone Karnes? guys into neighborhood? of keeping you trying and they're more relative the into pretty Have But The to hit positive.

Daniel Herz

far are, owner certainly Ford mineral Karnes but Trough. as the obviously, by biggest far in in the the - footprint public, Eagle the core We as of biggest

We organic is are and the effort. that acquisition have a on world-class ground

think, also strategic a a strong not I matter very miss have, We we effort acquisition deals have We do no where motto. what.

everything to we are we And have moved on is that's But seen that the have those No, our we in so, are to where we question that while I'd what the and bowl we there are with, based and bowl Karnes advantage frustration see on. that equity of as part that answer execute assets. us. have ground that can and directly, coming in, on going your and as our that. And, deals attractive we trading, others aren't of have like cautious medium-sized small with our would on buying extremely opportunities the take we call attractive far what relationships is Trough, forward to been presence

rates. an shareholders other more hand, of any anybody, What we value been is help I who see need the ours. at equity to On us there opportunities increase to of and don't our great because we acquire are value, for our blame shareholders more or extremely supporters attractive

the we're our at when hand, a other On at again, substantial value. trading look discount we

when third on we're going any at that share So, hard party assets at look basis. of area value and is present we very buying in out trading conceive the to per a

how the some are those we're of insights at thinking things the moment. about kind into of So

Welles Fitzpatrick

you those of and debt. say bit bolt-ons the to to being? makes of for little Okay. the time just I so aren't kind off do I'm throw frustrating. table sure on that sense, smaller a That's guys and needless mean, No, it's willing

Daniel Herz

enamored generally. - businesses. off amazing E&P E&P the the better I don't Nothing overly is think with have hope midstream with frustrated, And times with understand than Ford and market seen have table. enamored CapEx zero I'm I base. and This or energy I it's as base We we targets a CapEx, I no core BP-Devon, on I've public don't expectations EOG appreciative are with there's know cetera. investors asset because that run we substantially we're a price businesses and this little through a a - this of by Eagle mineral E&P is XXXX, seven And is an not I call I sound and Hooks core even an see a asset higher multiples on line-of-sight is we probably ConocoPhillips, I where similar this not business, expectations and move analyst businesses. and trading where move business our at for And think driven it, Ranch as et and XXXX. will for we analyst development, based think

I diamonds energy there's sift here to great for So the in wreckage want of the a through think situation sand. space who investors really those and the find undervalued equity the

Welles Fitzpatrick

I there like of those post as back came a sense. just brought And makes then this, kind if look last a on back on? performance above on I the the do - you Hooks one were curve? could Can bit those Ranch into have of had wells mean, any just what Okay, little data sneak you pop the to one after talk those curtailment? maybe curtailment. Have

Daniel Herz

of Production has great They've have been top They're do had ConocoPhillips's been I form. the that of where great of be wells. in in top the wells way, at portfolio. have don't ConocoPhillips on Sure. in data to said at. partners, even any echo would ahead ahead I We quartile is Hooks those comments. and come The wells top wells. or docile. in producers. want And those simply their they great comments online have their been in But shut shape or Ranch the

Welles Fitzpatrick

Thank you so much.

Daniel Herz

Thanks Welles.

Operator

at [Operator Instructions] Pearce Simmons We'll Hammond next go Energy.

Pearce Hammond

as call thanks to to want understand options Good to far. and my level evaluating you the and helpful to it holders. color very so all Daniel, questions equity real taking totally increase keep value for morning high it pertains on

do you and to back you're How hiring analysts then think from this time you what investment bank? going? curious process report would an as thinking timeframe, a And will process to Just is you when investors? consider

Daniel Herz

last the with start I'll question. Well,

interactions always offices, we're from to breadth we course, of advice the cetera. et and banks, investment Of parties, and equity talking their with lots knowledge family different their holders, of value to

or oh, been to come and available, need every acquisitions, peers as option or they to ratio, or, they'll to really well, vision about, or ratio, on back going hold with pursue payout increase to we've that. off to the less to oh, acquisitions, our far As this reduce going market run and for going timing, I've market. we're the want and they're they're strategic competitors going ground debt, they're talk then We consider their the their wants payout considering. heard,

trading today we'll our are. of really that our assets our cash to gap analysis. from I'll for Falcon now. coming this want the I is What - massive the standpoint call this value be this and something I back listening and is, a can Is over few this will the headed call that in I for call result. you as what what vision where do which is proposition the do and that months transcript, And an look business we're who exists and we're on - This our and every business those read X.X. a the flow vision free we're think specific strategic this X.X, Falcon so massively to in. not opportunity really come at, market And we're starting. What holders do something way equity from is lucky between that is, say standpoint, undervalued? So is everybody value hope will what value couple can can we're standpoint, eliminate along that back are the the where is to we to where as of to with or isn't we that a What NAV want very expect I for with I

Pearce Hammond

helpful. of very a then the Bryan, did Daniel, some in turning job to you And downside. layering good hedges to all protect that's

what your we to on hedging XXXX beyond? thoughts Just and peer as are curious out latest start to

Bryan Gunderson

Yeah. the for Pearce. Thanks question,

I that the other point. not incremental you've for any hedges think QX, this and it the in seen QX layering call. at mentioned the anticipating than that Daniel earlier - in We're on hedges QX

Pearce Hammond

very you much. thank Okay,

Daniel Herz

Pearce. Thanks

Operator

next Capital We'll at to Kyle One. go May

Kyle May

Hey, guys. good morning

Bryan Gunderson

Hey, Kyle.

Kyle May

I want to about on your follow-up one of comments Hooks Ranch.

You've later. sooner expectation rather of mentioned than an activity

First, can of timing you of us a that give any could sense around And if you then gives you thoughts us what give second, inclination? that?

Daniel Herz

Sure. Thanks near-term for Ranch the Conoco everybody permitting optimistic to about question, said Kyle. market Good that but morning. development last I property. same Hooks for you to call of will remind prior their our the words pad tread I I'm very and carefully, on Hooks Ranch the the

dedicated they're plan, into looks has development Ford. said more And Hooks I that publicly their as stick and XX-year don't that let that their And what an annual plans. of They property. see want I XX-year us development. a laid really manufacturing what But they near type cadence and ahead and optimism certainly we'll get as what across they're with I am of Eagle develop to publicly means term things is have they plan are will. - Conoco out think as and for that moving our And like optimistic Conoco so, the for to. probably Ranch I'll in that we mode

Kyle May

stock company. as the had the to that there's opportunities And view, that given you like undervalued it attractive. circumstances - up it, one your and out mentioned, understand seems for Got is for M&A there's the levering thanks adverse that you're seem more I there me, in and

to purchases? wondering there's, things Just you do that other could could other M&A for you if that pull levers use or

Daniel Herz

I there's really management don't team is part last our to deal the as We've is that is over of ways as the a itself, that's to present mean, strategic seen Falcon, always - real have have acquisitions so up where ability not one before. it possible. present that. do to doesn't of to we're creative right certainly it's and advantages world's have Sure, make how and I an And, leverage equity I to And dilute with respect guess, of levering think sure itself, But advantage at thinking or But capital in the move. about people holders, I that historically point lots around demonstrated we said, always your advantage options and to our by those the thinking that opportunities. bit deal snake around the access greatest take With would then to have given of XX years, uniquely leverage thing don't to take bad would acquisition to - been currently cautious leverage. mean opportunities. allows a valuable world's I address trading. the of that you we've leverage, greatest necessarily leverage if I'm that's

Kyle May

Got it, thanks for that Daniel, I appreciate.

Daniel Herz

Thanks Kyle.

Operator

any would conference back comments. closing the like to additional or And with to for management I other questions holding, turn no

Daniel Herz

the for over Jess. the Bryan, We're speak and you excited thank back forward to and look this to weeks and can Bye-bye. X.X. respect business, you, you, coming We months. you Falcon updating quarterly listening hear, thank thank you to soon Great, call. with you and about as all coming to to excited

Operator

conclude call. Ladies participation. your that thank today's We and for will gentlemen, you

this and disconnect time, at have You great a may day.

Sitio Royalties (STR) 9 Aug 202020 Q2 Earnings call transcript