FLMN - Earnings call transcript Q3 2020

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

Operator

Good day, ladies and gentlemen, and welcome to your Falcon Minerals Third Quarter Earnings Call. All lines have been placed in the listen-only mode and the floor will be open for your questions and comments following the presentation.

As a reminder, today's call is being recorded [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host, CFO, Bryan Gunderson. Sir, the floor is yours.

Bryan Gunderson

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

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

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

Lastly, investor that, December call weeks, and conferences Energy on to Capital on the Virtual Daniel? XX, All X. Stephen's through Executive and Chief in several the Daniel Virtual November Sector One virtual attending the his XXXX Officer, coming the remarks. including Conference the I'll XXXX President will turn for X With be company over Conference Falcon's Herz,

Daniel Herz

value quarter, then you value I to quote from give It take report last Quarter well. Financial would heard morning, my like philosopher, to nice speak as I your have everyone in the will and shareholders trading a XXXX address Plato, to different everyone. But Chief fulsome a Bryan, Good is disconnect Great for the "Be will avenues as Falcon And been unique Call. following first, in our maximize you what is you Officer, of these Thank we questions. evaluation all offer we Thanks, on joining fighting hard our announced financial substantial times, just for Now remarks. we Minerals working see equity kind, you Earnings you Bryan. are battle." meet from, we Athenian a to to our a you. price. who today's hope Third

We is and to discuss don't explored I to you as have thoroughly Falcon I have a progress, as review. made back our imperative we give significant sure make to forward as fully coming line we to look believe specific X.X it completed options. to we time have soon all plan

is in. is will review that that believe the allows what best Falcon coming value important the exists the we to drive flexibility that our us in review and position our how important, Falcon believe at While we more choosing our is expectations great the is performed, quarters strategic This way shareholders. now has strength back proposition business over to you, the value long-term Minerals. equity I tremendous

second $XX.X million third Falcon quarter, of Our end of during million is times balance the of net down second with and $XX.X X strong the free of and generated quarter the $XX third debt share at from approximately per quarter net beginning the quarter, to improve, $X.XX of cash XXXX. more continues million flow the of the sheet XXXX. than debt at

come. dividend XXXX. quarter ratio dividend This $X.XX further third last dividend the payout per quarter of growth night, XX%. approximately the second be above will hear, is you of XXX% the for as during will or announced of a annualized. This we dividend a paid increase of an represents think And such, As $X.XXX to we substantial there share

acreage position. underlying across Now activity Falcon's to the

substantial zero our which return, free to position, of generate, As development allows the capital us a associated in reminder, have expenditures we cash with flow.

barrels X,XXX second of produced This third or the of over was quarter increase per oil the per we day a XXXX. equivalent During day. modest BOE quarter,

net in only came increase that Importantly, was believe, as of at though were that had second wells modest back oil curtailed and all the September, of during online production good for the back period. turned of even the quarter. existed the by news the line higher quarter been during The and occurred Very with barrels curtailed online curtailment to driven our of then all. this prices the wells third We wells X.XX are throughout producing increase the in us during end selling are benefit, substantially quarter.

our expected While has the to on consistent the importance, X.XX discussed, that Hooks continued had has and the consistent to what line-of-sight is wells came third of wells net best grown with to three quarter This shared in the since our year. this discussions results our last further is X.XX the just our the quarterly That Hooks recently up. unit economic position pacing activity fact with demonstrates increase that are we on limited X-well which which as the pick wells in highest earlier Karnes Ford pad, Shale. Ranch activity wells Eagle activity past pad expectations similar online, and begun XX% previously Trough and turned acreage and wells X Hooks our produces months the of had an earnings Of which Ranch call represents ago. permitted increase represents net includes wells,

our operators turn X quarter, including ConocoPhillips, have to the EOG wells increase to rigs begun continued wells Furthermore, complete ducts. averaged and permitted During running to that our are crews across our major continuing the operators, frac and deploying. into third position, they

be provides over been that wells in are have turned completed line to wells and turned waiting producing. a X.XX These waiting in line net be have now we and completed. quarters drilled such, begin been as are As wells or and three visibility in net and the are confidence to that those next have strong either X.XX production

come to -- during course, expect Of still net permitted, leaves wells XXXX X.XX also that online us 'XX. already which the are we that

repeat me that. Let

are expect the X.XX to we wells XX just online which next will XXXX. already wells wells online leaves come nearly line-of-sight also during still that additional that the during course, we X.XX line-of-sight come that the context, into this within To Of our over approximately net XX online turned months put us permitted, the XXXX. be have net that if no XXX% will months, of net approximately operators twice permitting. on wells wells Historically, have have added, come from with our

believe free to in flow cash in is assume provide should XXXX. has But exactly dividends course, most be importantly, conservative an publicly line This exception our end year. given to ways. maybe, Of XXXX the we these next is of plans, wells stated what and turned been will the operators by it over production, meaningful growth many

oil provide XXXX cash While formal simpler, of estimated guidance, in production we an Inclusive historical BOE we're activity we flow and potential to we strip average cash growth for in production levels. are to XX% flow XXXX return approximately That's us upside pricing. levels XX% a cash even prices not per decade. There's effort math current which modest providing assumptions we would day, a these the generate make of again, beyond level. of the free decade beyond well. This we look substantial greater obviously approximately per $X.XX conservatism free than for available Furthermore, assume represent activity our share. as to should further stable If yield for it flow our flow rise, free a conservative reduction the cash levels, XXXX, at as we And of that historic see higher a yield yield hedges, would of be out the purposes, modestly levels, still assumptions. and a have if than noted XX%.

that This past strategic asset our time run driven on to cash to our include to all substantial walk current our to I and able not is call With strategy third we potential have could the to in All results time, in conclusion, the quarter, make of assets of a I'm position Shale. Eagle A fortunate is the based further we of the growth with the that, over be with head fruitful. Ford I'm and and to confident financial return as turn that the be drive into this companies proven trajectory we returns In why over acquisitions solely the in has take are does we satisfied choosing in core by providing business very the well-positioned the upside. at base Bryan? pleased our of core and third ability the shareholders, through quarter. flow grow Bryan direction. uniquely of organically, to will XXXX. our

Bryan Gunderson

Thanks, Daniel.

Mcf, barrel. per recognized during $XX.XX revenue our the realized third $X.X the We our per XXXX. from per realizations $X.X net $XX.XX natural quarter was instruments oil gas generated price quarter during Average during commodity million the million for for NGL a realized third price derivative period. loss averaged in $X.XX Falcon's assets was barrel. Our royalty and

hedged June during company's associated million. available the natural for cash in operating XXXX investor third in and was a and volumes presentation During of XXXX. crude Total in laid in hedging volumes the Falcon's the the addition initiated third swaps into All use place quarters quarter and XXXX first in the and of is cost gas extending volumes gas of to all the quarter the of for the September program quarter, costless hedged for put volumes Falcon pricing Exact on fourth were Natural collars. through the hedges XXXX. website. fourth first are that out of are Falcon quarter beginning oil that $X.X

resulting reported for the of transportation quarter. barrel breakdown, for higher the a excludes at expense stock was reflects approximately the third quarter million, in decrease quarter, This quarter in were end and a the million $X.X EBITDA the basis credit $X.X At increase million the and largely approximately ad second interests. quarter EBITDA approximately of third XXXX. and in This $X.X end ratio a dollar quarter. period. second a to inclusive the million million was of on $X.X income, $X.X the barrel. Adjusted debt third that $X.X facility increase noncash due G&A compensation million the a of oil reported on prices expenses compared third expense which $X.XX million expense Falcon revolving of represents $X.XX cash in $XX X.XXx. non-controlling was $X.X the net valorem net basis compared $X.X stand-alone LTM million expense the the end and hand, per on prior at net million reported third million a of third of is an taxes quarter Falcon XX% of were prices. quarter. from represents to on quarter. barrel outstanding recognized the from second million for or average approximately $X.X had in Marketing to quarter, quarter we The per Falcon's the million XXXX. the increase attributable Cash of its was to net for the Looking $X.X realized quarter, income $X.X at debt which the the Cash per realized G&A to $XX.X a production million increase

expense expense deferred amounts related tax income Our to incurred Falcon to up and Royal the the This assets as for step tax quarter the Similar current to the GAAP is XXXX. Resources quarters, in taxes tax basis tax no mostly asset, of in quarter. of taxable is an the million the with that our last income part the of the benefit cash related estimated company for due loss attributable third to of income acquired X to XXXX. had $X.X transaction period no a utilization primarily the the quarter company incurred

of stepped a this we cash benefit the perspective expect to up future. foreseeable from basis, result for a As tax

shareholders as earnings our during XX% ordinary As previous of therefore, Class rather than I and XXXX reduction classified represent non-dividend calls, A paid a dividends were basis on mentioned income. distributions, to of

fully a when As investor's generally dividend will approximately XX, of record of will inclusive taxes. of time reflects was shareholders The basis cash as define forma This reduction The cash period. payout quarter a for capital basis pro dividends their income tax per distributions or free the shares. as free share pro flow. of Pro a declared cash forma A payable during the XX% an is is in Falcon forma November pro ratio of reduced treated will when payment of December in third a recovered. are share increase shares. This the less decrease to of non-dividend shareholder flow free capital cash X, XXXX shareholders' distributions shareholders' of reduction shareholders until reminder, basis loss forma gain Falcon share. substantially as interests, interest dividend flow expects all $X.XX to adjusted on common the per XXXX. be $X.XXX as per Class shareholders' paid common classified result XXXX. XXXX to $X.XXX noncontrolling and basis expense nontaxable the tax non-dividend dividend treatment We that EBITDA Yesterday, sells

of cash income flow Daniel. third the the cash estimate will free XXXX forma over taxes. for that, turn forma quarter did call Our I back pro include Daniel? now an not for pro of to amount With

Daniel Herz

taxes. for questions? on the some Melinda, Bryan. why we call Thanks, news open up the Great don't

Operator

[Operator Instructions] take from Lee Family And question we'll first Omega Cooperman our with Office.

Lee Cooperman

just curious, create what are the you you mentioned Can elaborate release value I'm different shareholders. the, at different to for looking in the you that considerations alternatives pursuing?

Daniel Herz

to Nice talk to you. Lee. Thanks,

options we're your let all to the all and and or your perspective hearing And all be question, to views will to you what that answer those of the looking options. result forward whatever back Looking point. have soon the knowledge a your that are another X.X looking market, may we with what at is. We'll on But includes. and options. to as assume at we view, of we experience be And at Falcon as election full review

Operator

the to line with Grampp Northland. go we Jeff Next, of

Jeff Grampp

curious, more a you rig count. first have guys off, I was if

average think where a headed what counts of the into for guys insight for X we I recent the line of move the kind as was might more 'XX? said quarter? you based of tally guys you rig quarter, sight do that that's of And but go kind have kind any infer on fourth the in

Daniel Herz

EOG Ford begin EOG. rig total, X And crews X another category. and frac taking currently in position in our those are wells rigs saw, been into that from XXXX. up X to X X We're again, play, activity, Devon We've the their rigs they're running varying ConocoPhillips. and right? to going that you early completion the Conoco between across the permitted in there's in DUC said So Eagle then has I'm from running sure is

And seen, we've have have we net on our so strong relationships that partners, into our interest very in a wells obviously, on line activities, land producer of waiting our especially the high based an sight completed. revenue That been increase And pads. means on great completion connection. department's with already our

and So activity throughout in ramping we this and in really next wells XXXX. quarter line, turning see into really year

Jeff Grampp

for ratios, obviously, scaling to certainly some yours purposes, sheet, to peers on you there trying looking the for follow-up, my seen And we've no of requirement balance at address in merits some that fund just could acquisitions back the shape. for payout wondering cash retain other that guys a your But stock, whether buyback, seems you obviously good I the could to a sense. in disconnect that so anything, discuss imagine make big of be if -- or

payout? might So view just high how wondering, a you of from merits the level,

Daniel Herz

soon at determined Yes. the category you best I as appreciate options, that We're path to forward the we as review. going to all I'm coming strategic forward. question, options put looking that Jeff. to all and look into our back of have

Operator

Simmons Hammond Please of go go we Pearce to the Energy. with Next, line ahead.

Pearce Hammond

sure you wells I have now, BOE average free that flow share. year understand, roughly based upon then said that that at $X.XX per think a and next cash 'XX, right you a line-of-sight look making about day so could you just you that Daniel, as X,XXX of you the

correct? cash So Is flow XX%. free of that that a equates yield to

Daniel Herz

would, $X.XX X,XXX that line-of-sight just It throughout at of I online the And average right. exactly pricing. the that's flow per coming only X.XX strip day BOE includes wells and Yeah, line-of-sight again, cash XXXX. wells, restate free

mean of line. permit over line-of-sight months. XX historically, XXX last under historically, next the -- line-of-sight been within of, importance I critical in entire and say years, the wells, turned think, I over I when days has to XX group from And wells So this that,

history; to stated So extend the than discussion important based a what's if our gets we assumption reasonable and that get b, on you with out, producer our activity, XX X,XXX a, believe to it per months, producers we We partners assumption history, that's the their we take that which that, that based BOE BOE publicly day to say, to direct have assuming is probably average. more and months we're per and embedded that's day. what that, within on XX discussions that X,XXX very

that little we through Now course, caveat of that the further, bit a ramping to see year.

below number, in the the year be So of in production the the X,XXX the would X,XXX the part beginning of and later above part year.

Pearce Hammond

company to just not talked holds back shareholders look level, feel that the like, just do inventory, high trying then have And you you've the is people the decade but very of said need you XX% when going it what cash peak confident you company, felt the free yield. into company, X.X simply within of you've flow more small and our had sort valuation? to think Is at level is size to a or the discussions like you at what but

just do companies? to are maybe So what That think the Falcon high puts depress and takes mineral it? of kind other level, relative around you

Daniel Herz

I bit free back flow. the of And world-class the asset strong with operators. that think go think base is, cash returning of the of balance sheet. we I We're free we fact a We're flow matter year. have have we there's, a a can cash through little generating the history world-class

companies, growth. our have my think defined long. a very plus half ground leave Market in for on experience the And the doesn't We public money I with Mr. dozen sitting

And through is that I a then in well there is, for the year, at dividend, think, extremely step XX% money yield, which period XX% That's trajectory flow to to make so flow in and from free opportunity cash happens our current next defined. our really think a an generation. be levels. now that I And cash right investors upward of lot

for investors. that think there's I exists an So immediate opportunity

a through I the, tax make want as look depressed money. And catalyst been, perspective. have or for the of and in And definitely the we outside years I especially standpoint, have the is But a year-end I think energy that as does feels with think, losses. their wreckage small-cap the place at our set great that There's energy who which heads price, way who Market is the great stock or We're win, Mr. tax hated. our energy over of can shareholder I had a has hated we illiquidity is opportunity scenario think volume me, up taking think month are I money, in efficient. obviously, sit last think to all weighed. which from investors, pretty for from great excuse price And weighs selling Falcon what's and some is so, we in to a a we is make certainly like it great tails in win go. those any you

in And think who money lot for time make I and today. pretty so come want exciting a a it's to of in those Falcon

Operator

Derrick go the with we of line to Next, Stifel. Whitfield

Derrick Whitfield

for the of consolidation offer to the you of sector. Perhaps you, potential E&P record seen could the light M&A wanted on the sector? ask within views I merits across activity Daniel. In we've your if minerals

Daniel Herz

But the within equity As others, we've, billions there's about minerals as in think, in offices. private held well heard firms for as held I creation of dollars as think there's meant to I result a in you've not And opportunity of talked from over And as be space. places that. I think where you family value past, the the will see an long term. consolidation they're of

Derrick Whitfield

trends offer on XXXX? And impact follow-up, could Marcellus seeing you're that Marcellus. increasingly you natural the the for could financials backdrop, gas just of In I'll your my over the constructive activity shift light color any in as to

Daniel Herz

change always no I And hopefully of, the we've gross our said recover acres gas to And people. a ever, that there's they there's net-net constant acres, periods have We're a dead, course, described gas a and as approximately. great XX,XXX rigs there's And hope of was feeling of we life. But I gas. option the I've thought great any amount may running and viewed on and of Plato are is any always things a, of our when acreage But just upside of natural always we assuming change. And uplift Marcellus line-of-sight lo across been for we're we have but Plato some above in we've we X,XXX option described, that unit numbers behold, talked call We So And it. know position around anything, where have nice prices any just that's and position. gas. call us. that's for assuming gas wells what about, not not satisfying. our upside pretty $X have two I beyond a quoted

Operator

comment the from line or question comes Citigroup. with of next Brian Our Downey

Brian Downey

specifically, On any thinking Ranch XXXX? highlighted the and conversations you that permit historical those Hooks about Ranch, activity Have operator are timing based is in around or you ranges? you line-of-sight wells lines connection that of how point, this the the recent Hooks property at estimate timing had with that turn during on

Daniel Herz

nice thanks, follow question. So Brian, as talking up, your to financial you. a have you'll Maybe

So here. our answer get an course, operators. in can But Bryan dialogue have regular of we, with

we mentioned, know, great partners, you run an great it as our policy not to front absolute I've our As operators. make

those And the will so likelihood, course, a have in timing understanding to will net strong X,XXX on fourth quarter wells. of BOE, and assumes, occur. a numbers, the in turn of for it, view all on second think be, timing year. call year pretty That, average as in quarter, when next late I for that line next The do early we half third X.XX

number us the lot I and that per throughout of So day built conservatism that gives think BOE comfort XXXX. with average XXXX a into

Brian Downey

around you're actually, going particular going And or a that? how there Is for percentage target to about price target forth I that are You Bryan. to approach forward? in now hedging so gas. then going or Any level and natural you're oil strategy started change more a How follow-up I recently, hedging did your thinking you hedge there? thinking have

Bryan Gunderson

it. No, And a appreciate to I good talk question. it's good to you.

in that in those XQ on defensive we crude nature given had hedges, obviously, we pricing. the in June, volatility put really So seen in

up is, was $X, on that gas obviously, crude So edge saw is defensive above gas The the pop Daniel mentioned, which measure attractive as side. pretty a we pricing. really

where we right hedged current the to feel continue We monitor -- add juncture. feel -- about but anything comfortable. no need we to we're at pretty there's it, So a are feel going we to and don't else good now. And

Brian Downey

was be systematic? opportunistic more I to than to rather ask, going so that going is

Bryan Gunderson

we're No. evaluating and to the to continue going and continuing I mean watch market.

I we obligations no think have to hedge.

And it be always looking market-dependent going so… so at we're on to basis a

Daniel Herz

depths to think rebound a felt right Brian, quarter just is add after satisfying about pretty -- of hedges put think the to to the on to able -- on and $XX-plus April I plus fourth Yes, market to way first We in that. for saw $XX it. quarter. in and the on be opportunistic the oil disparate put belt at the oil to side, barrel place

to pretty in gas side, gas the felt type lock satisfying $X On prices.

we certainly also on operating business. got lumped basis, really expenses we've a well sheet. out into because we there's off. review If fulsome rolling our need are mean, our a of We I good historically, to X.X. and this we'll good good Falcon cash per-barrel take And don't them balance we have good kind so flow, So hedge. like a strategic prices, feel

phase. we'll payout lay next the hedging So it's ratio a back of really come of factors number yes. that market with the to There's out conceivable way, inclusive that and to

think we it how that's So today. of

Operator

concludes question-and-answer back closing to turn Ladies and gentlemen, Daniel remarks. session. Herz this We our for

Daniel Herz

to to the be Stay soon. safe. joining call. Great. earnings Please forward Thanks, you Melinda, well. look you for thank speaking all We and

Operator

We thank for conclude your you teleconference. does This today's you. Thank participation.

Have disconnect may at You day. time. lines a your great this

Sitio Royalties (STR) 7 Nov 202020 Q3 Earnings call transcript