FLMN - Earnings call transcript Q1 2021

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Operator

Good day, ladies and gentlemen and welcome to your Falcon Minerals Q1 2021 Earnings Call. [Operator Instructions] At this time, it is my pleasure to turn the floor over to Bryan Gunderson to give the cautionary remarks. Sir, the floor is yours.

Bryan Gunderson

Good morning, everyone and thank you for joining today’s call to discuss Falcon’s first quarter 2021 results.

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

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

Virtual will Falcon’s several XX his on weeks, Daniel? May Daniel & President that, With Lastly, to be the now May the Global Herz, Officer, Virtual for in Utilities investor and coming the company the XX. Citi’s Energy Conference XXXX call will attending over Gas I and virtual UBS on conferences turn remarks. Executive Global Conference Chief including & Oil

Daniel Herz

joining call. Thanks, Minerals’ Bryan. Good Falcon XXXX quarter first morning, everyone. Thank you for earnings

rest Financial the report heard my for favorable Following Then and first the as our questions. we will on line Chief our then XXXX. and second will Gunderson, well give have will Officer, Officer, many quarter as quarter to Bryan Operating the specifics just will Chief related that wells discuss turned you the the recent in financial Mike who of impact from, remarks, the take your Downs,

the takes Queen’s the same I in quarter When Red last warning Alice do “it remember, quoted the may can to running Carroll’s all you Looking-Glass. in to As she place. said, you keep Lewis Through

the we approximately flow million getting happy and twice Minerals satisfying. quite at else, pleased I adjusted I Falcon as really in report somewhere now of Falcon XX%. to and quarter running want cash growth generated to of least $X.X somewhere. say XXXX to If you Well, must we get am run fast first of fact twice are that fast.” EBITDA was am you as are at free

storm growth course, this flow Of cash winter reflects impact of in Texas. the the

the growth has would relative us to dividend seen just without fourth more basis storm, cash and flow on our to annualized results. XX% or an increase $X.XX getting even XXXX for of $X.XX This quarter So allowed have to the we we favorable started are the in year.

we first will will quarter, the net see Mike during As full from in during detail, benefit had line which turned we X.XX second the the wells quarter.

approximately booing Further XX%. free we per XXXX significant $X.XX our of and the line-of-sight flow twice cash be approximately with on of to these should an a flow quarter implying to as of basis outlook level the our stock benefit the wells even wells a cash levels being approximately activity. additional flow that higher expect X,XXX than were free or fourth we wells of terms, With to our speak for coupled no would our the cash plus level quarter. annualized during allow $X and are $X.XX quarter with line from of of Those second XXXX. at free online second the day simple This impact weather, full expect when us production prices, cash In flow over approximately at share. to XX% equivalent to today continue turned oil in traded above XX% is higher levels, quarter yield quarter first flow commodity per the production for the current being increase free cash operator barrels see of

free us production of throughout commodity confidence the With line-of-sight, production environment This attractive already the the growth price and cash continuing rise activity for current of our benefit half wells second the in very whole continued see flow year. and over in year. gives such XXX this gross rise in we expecting to

given Additionally, expenditures. of on the XXXX. is, all about excited And wells, benefit prospects with for getting line-of-sight we this dollar already spending course, capital a the are of our robust us not

benefits BP-Devon, development plans. best-in-class EOG who operators, Falcon ConocoPhillips, looks long-term such multiyear prosecuting and As as are certainly bright. from The always, future

plans. more for Falcon cash that very minerals while going be becoming as the that with aware, have returning remains dynamic But return development investors to to exists options even of U.S. likely X plays Now have foundational potential value substantial core flow remain Karnes spent States. the share multiples assets more top part long-term the time, our would business, world-class trading core a static. cash the grow is long business. a diversified base, are opportunity fully of discount flow thoroughly if and larger, the the to are currently has prosecuting considering Trough and better completed in we base the many in that first we operators last is price. in that the significant Having proposition of clear you various United we the the which vehicle with best-in-class Falcon of not us static, Ford are the of in recognize months in value the the asset we our at. work, close Eagle a and remaining of the dissecting asset Even current to best We of we it including in to Minerals the generate to our the core

actively re-engaged game such, ground our acquiring As minerals. have are for top-tier and acquisitions we

the for and you can the are very and that to do am today as about Falcon, of tell, Of also remain be We end Falcon Xx that shareholders. to us below win, investors. In debt-to-EBITDA I XXXX quarter shareholders discriminating balance think assets be committed can want are at exists only we is that where as headed the by a Knowing anything investment drive hope tails. to allows we for that expect acquiring without where where to can we in I year. we course, you coin we at whether sheet well are Falcon our or prices value enthusiastic scenario acquire the well and really in Xx we and its approaching I in the heads conclusion, and tell, opportunity second

base drive We in have cash and our year. production, free that clearly dividends defined will flow business growth throughout the

In addition, we opportunities per further increase will value growing base to share asset take appropriate. advantage our of through when

quarter to XXXX. Now, who the growth I greater over get will in Downs, will call the Mike? further about detail turn into and Mike

Mike Downs

you our call time join today. Thanks, taking Daniel. Thank for to

This we are we our during about During second enter our fourth quarter. seeing exactly growth quarter XXXX to operator strong the is production the what as line-of-sight. call, expressed excitement increased we related activity earnings and

impacted was to Eagle of production compared second X% fourth Our production for where to Uri, year the quarter. quarter see timing first the expectation growth the the we flat from the first at significant and of storm approximately our connections. beginning by expected production winter Ford to to This the well with quarter due quarter aligns which the

period quarter quarter. This the the ramp these during to connections production Ford. the production. and second throughout outlook by during the as from wells driven were is Eagle we of will second X.XX connections drive production the of half happening the of growth of wells related well X.XX production There following. first to quarter occurred turned a continues is latter which These majority with The quarter the quarter in the full in line see

their waiting forward have that line-of-sight connection turned Eagle the of and connection. Looking Ford net gross the that this over three DUCs total remainder the majority assume next XXX first waiting X.XX In wells on line over the expect will are wells X.XX our of to in be Included be quarters to internal the wells and approximately wells be we quarters. of year, this means we net in XXXX. or To the in two forecasting, our DUCs we connected net X.XX clear, inventory. are

connections, compared permits, currently activity quarter by these trough timing to second this to the to compared XXXX. we conservative XX% approach amount end with than turn Using in running XXXX. first XX% production well approximately the the along account to of from historical in anticipated the a into assume assume average completion be XX% For will permits to well more connected doesn’t in our Marcellus line permit of of and And quarter. results from growth take doubling modest of the new crew assumptions, our a

for with very rig the your CFO, big other Thank in I also by Trough call are are currently additional the operators. our pleased running Karnes there Bryan running you activity to rigs today. will pass the time We X an rigs where X Gunderson. the by XX now with

Bryan Gunderson

Thanks Mike.

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

During through Falcon into quarter all on that the million. pricing presentation for volumes hedged are operating crude the and swaps ‘XX. company’s for the out ‘XX is were XXXX first laid for QX QX Falcon’s investor costs $X.X first entered quarter, the cash associated Hedges available website. in Total

G&A the from $X.X barrel for barrel, the approximately was expense $X.XX On of the expenses taxes valorem $X.X fourth Marketing for the and ad XXXX. million or and tax the quarter for down were approximately million first Cash were side, production quarter per $X.X quarter. transportation million in per quarter. $X.XX

$X.X This million of G&A back stock $XX.X XXXX. is in million of of was of EBITDA a for of on debt the On First quarter associated had $X.X quarter. loss fourth Falcon and the inclusive of second quarter below Xx expense fourth million. the X.XXx. $X.X realized increase EBITDA with hand, $X.X revaluation oil first million tax compared a for primarily the net the the its $X.X $X.X compensation for recognized on the inclusive net expense as no the represents We quarter amounts quarter income basis EBITDA of a to average quarter quarter off as basis step-up the assets XXXX $XX.X the incurred quarter ratio in on million from first non-cash loss to expense, debt-to-LTM Falcon’s end stand-alone approximately reported of the in million net trend liability. rolls the leverage attributable million income company fourth asset. end $X.X net at the related attributable million end reported is will a mostly interests. resulting to warrant quarter. the increase increase cash of the million an first and due Falcon’s Falcon’s of tax is credit was first that Falcon At mid-XXXX of the XX% the and quarter. company’s a in taxes a quarter tax This non-controlling of the the to ratio calculation. Royal cash cash approximately utilization of million Adjusted excludes of Falcon transaction of in the from net $X.X income, anticipate was incurred loss to $X.X to related debt-to-LTM no quarter, million The with reported period $X.X first deferred as GAAP tax of million prices the The that XXXX. the income first facility our a largely acquired benefit period. part Resources revolving outstanding net current

expects to for result stepped-up the XXXX. treatment basis paid shareholders Class result non-dividend the perspective the to As as will at the of A basis, expect least that benefit we generally during XX% of This shares. will Falcon of be classified a dividends tax in a tax reduction from foreseeable common to in XXXX shareholders’ future. nontaxable a distributions cash

payable taxes. shareholders’ shareholders loss distributions shares. capital June first This dividend time sell shareholder the a of May will As fully a XXXX. XX, recovered. dividend free cash cash forma a their reflects flow May gain approximately ratio of basis Falcon was of when $X.XX free On pro $X.XXX X, EBITDA non-dividend This until capital forma a investor’s on decrease cash forma adjusted as cash free result, $X.XX dividend payment basis income is are record reduced per Pro per XX% of for forma share the of interests flow inclusive of and quarter reduction basis X, declared share. or of XXXX, The We when shareholders an pro non-controlling share to quarter. as tax treated flow. is XXXX payout interest common the as increase expense per less define pro

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

Daniel Herz

I questions. Thanks, for ready Bryan. Karen, think we’re

Operator

ahead. question [Operator Office. our Thank Please take Family will with Cooperman Omega first We go Instructions] from Lee you.

Lee Cooperman

Good the we The to focus very read all morning you and the regarding undervalued have wanted comment that just strategic review. was thank in information. asset. you for I said I on what a way

remain about your run acquired You But right you’re to you’re acquisitions presented Is intelligent if show. said? have or selling. to accretive to own say do. that what than flexible acquiring And be now, to if trying want came to something likely you kind more of themselves, –

Daniel Herz

Thanks, Lee. Good morning.

Lee Cooperman

Good morning.

Daniel Herz

generally well think would I adjust that’s I very except that. said

the to forward bring maximize value. way We and are constantly value looking for

right other contrary would to opportunities that eliminate opportunities that. certainly So doesn’t see acquire, now, we that but be to

Lee Cooperman

for much your Good you information. luck. Thank very

Daniel Herz

Lee. Thanks,

Operator

ahead. go our We Capital Kyle next with Please Securities. will question from take May One

Kyle May

morning, good Hey, guys.

Daniel Herz

Kyle. Hi,

Kyle May

on question. the color the up the appreciate I strategic previous following review and Daniel, on

what Just doing to Falcon wondering can on and diversified? elaborate is become if larger you more

Daniel Herz

Yes.

So, Nice to you. good to talk Kyle. morning,

As core on we’re owning true say we’ve core the basins quarter of reengaged I the back modestly, staying to But coming top an are with starting look I we to of would but our with ground top And game actively next principles I forward remarks, update. in buying. ground my mentioned core our operators.

Kyle May

it. Got

it And conservative. day be your to around that’s that outlook Okay, was that BOE was helpful. case. comments today, And on last X,XXX year based I per for full quarter, the prior the seems believe mentioned still production

year? how bit an seeing up if maybe shape the us wondering on more you Just for granular a give can production update little you’re

Daniel Herz

Yes.

very couple of it’s ago a similar months discussed. to we think as I

wells, really, we’re negative to – of next I additional There came batch NRI the March, the we wells ago quarter storm. with a production peak the so the that January, ones is completed of what and talking get with the in of in online first without of with line the think are is online then going were We even came line. months the on benefit then couple the effect waiting lower And the to production wells and that’s right of other the the about in plus and NRI high winter full all in And on DUCs number the the turned of have that storms. significant permit. second quarter. impact and that be of

year, good trajectory through see second X,XXX-plus the of and very BOE we that really we feel upward half day. the So an about per

Kyle May

morning. taking for Thanks questions Understood. the this

Daniel Herz

Thanks, Kyle.

Operator

Derrick will with Whitfield Please our Stifel. take ahead. We question from go next

Derrick Whitfield

Thank front. a you good morning and all. Congrats on strong

Daniel Herz

Thanks, Derrick.

Derrick Whitfield

could Picking up industry activity on some outlook XXXX around the your last question, current line-of-sight on I wanted to broad ask and based if place you your parameters activity?

Daniel Herz

for Thanks, a here. really I really are given With about our lot over on that to is activity, – top significant on say, in alluding what XXXX, excited bodes skis with of the plans operators a multiyear don’t others. that our so That’s seeing, development plus well and of you’re we’re already getting get, three what main place. going operators – is I permits very strong I’d pretty a which really our want We said, Derrick. prosecuting see that their much XXXX to think we’re what’s

that, will I hold for beyond we now. So think

Derrick Whitfield

fair. just you upward that you Completely an your the level, fair the because our view maintaining a a that in Is things seemingly part maintain operators look And share. side. your dig core bit from that of bias activity assessment? when XX-rig last the count, there’re to at our And that we to maybe at permanent in assuming market see on is same comment

Daniel Herz

and our we see partners. operator full from great are. course, with sometimes attributable definitely to grateful And what were general it just plans their openness benefit are is team for their with the really We that. plans yes, really relationships specific to we And also Falcon Yes. of very – and

much we So very are seeing that.

a we like we don’t going We’re what – We publicly, our get hearing towards front saying operators it. do and not in where but of are to there. are have – bias XXXX we’re headed the and to positive what strong really

Derrick Whitfield

Very guys. time helpful. Thanks your for

Daniel Herz

Derrick. Thanks,

Operator

Pearce We will Energy. Hammond go question take our next ahead. from Please Simmons with

Pearce Hammond

my questions. and Good for taking morning thanks

and for be deck Ford still upper that some And said QX Is to at up Eagle ‘XX. turned to have year – and there? two four the that in expected Ford feel impact of Just wells what earlier the this in do the see are question I’ve on and more Eagle you confident latest? lower Hooks specifically, following a next What’s there? looked that of you questions slide going Derrick’s line Ranch, or you for production year? is your

Daniel Herz

good partially remain fourth quarter very We think feel the then be into that question. early quarter. coming and do the and in Good I Yes. online XXXX. about fourth helping development really Hooks confident benefiting will

Pearce Hammond

And successful the divest whatever make you career. go with at and very proceeds, game been longer then Marcellus, here then it ahead ground dry that asset Marcellus have this Daniel, those in obviously, add powder? curious are, to to does they in you’ve plan? sense the your and But that the Marcellus what’s Just to your Falcon term use

Daniel Herz

certainly hands, very We redeploying that’s constantly think might in something I that that considered else’s don’t plans and of of that’s continue better have doing do we’ve make currently to insightful our we any or we work to someone an the and think capable type be we’re more thought. that, and to that. be sure but it valuable might are is asset I maximizing consider. returns that And

Pearce Hammond

you. Thank

Daniel Herz

Thank you.

Operator

Credit Please take question our ahead. Suisse. go from will Baker next Chris with We

Chris Baker

guys. morning, Hey, good

Solid update.

we are think different forward? on highlight the process learnings you about of strategic that that going hoping from the sort for approach as key Just bit to take review, of a maybe angle there might us a

Daniel Herz

Chris. Good question, Yes.

have management, Board. respect is number – great a to think I the team takeaway one with think we I the the

deep real of diving really value business a aspect And of standpoint. our a existing We in have think from our production, every really lot into the is what spent and that future for confidence that we prospects who takeaway the have and business. level our of the means time our I and production people

that us to for I so But think And higher trade marketplace is about. to undervalued what should we my what it said is we’re value, at price, cash tangible a means in hand remarks reality, and lot of theoretically, the us I think means of which nice it in that to public think of And our as multiples share is multiples over to going we’re generate current the back. a in likely coming and we’re that and years. going flow hopefully many I

nothing being in a – very could doing base So the we the have time, recognized great same a valued good more that it a diversified operator also minerals dilute highly very be marketplace. we But is we larger, base have. more At not asset will the be could outcome. public business, that great the much and

have really the we that in the a think potential best best best-in-class be core of to operators. in we So the basins the best with a basins

is, so going opportunity all we’ve basins, an And we that have the have where operators. core relearned over as But better we top number we’ve asset very essence of years. what a also we top we’re substantially shareholders, larger grow to diversified, well I become staying true world-class do to and base trade while core our more I one, think, to, and as learned think coming the of

Chris Baker

curious A&D out to right of is see just a you Great. out your restarting debt the game, put That’s where comprehensive morning. and I follow-up, a get the of you was there think as post program? a Kimball about inventory strategic there number thoughts, as review just sort then update inventory if helpful. sort ground this on And

Daniel Herz

inventory. our this Kimball’s tier top wells inventory Yes. work, months have been But have year, per locations. we if an under XXX of – on so from have plus we reviewed release. and dovetails work not X perspective on XX that’s the And just I laser-focused years gross you of assume gross X,XXX

of at inventory. If XX that’s XXX, you gross years are

years inventory fair of a Trough. that’s it, think Karnes That’s core at to I to core, all XX way life. look XX

I it area gets believe that’s And mean, United in energy because good to the perspective, drill in so economic from world as our oil most States. as for the our is I the area,

Chris Baker

thanks. Great,

Daniel Herz

Thanks, Chris.

Operator

there appear this time. Herz no Mr. And questions to at be further

Daniel Herz

very look all speaking the for Well, forward soon. thank you joining We Great. to very call. you again much to

Operator

conclude teleconference. does Ladies thank and gentlemen, your for this We you again today’s participation.

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

Sitio Royalties (STR) 9 May 212021 Q1 Earnings call transcript