FLMN - Earnings call transcript Q2 2021

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Operator

Good day, ladies and gentlemen, and welcome to the Falcon Minerals Q2 2021 Earnings Call. All lines have been placed in the listen-only mode and the floor will be open for questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Matt Ockwood. Sir, the floor is yours.

Matt Ockwood

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

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

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

at call company President Chief meetings Barclays With remarks. his be Executive I conference. Bryan throughout presenting turn hosting Conference the X Falcon's the Lastly, Power the CEO Energy investor now will Gunderson for that, over on September to will the and and Officer, and Bryan?

Bryan Gunderson

we questions those and speak the Downs. my line. by will After heard take joining Thanks, to Matt, today and appointed just Officer, Minerals Mike recently second Falcon from from; then line. and everybody XXXX good on remarks, quarter you call. appreciate those Matt Chief morning Falcon's the joined Falcon's to Chief I earnings Officer, Operating who I'm on financials, the Matt will Ockwood, Financial

Falcon's shareholders, to is with I to Matt will key are we welcome of is working other path enjoy community final excited confident to the stakeholders, him our on that Matt a addition as have do. as like I'd team, That the forward and research and and him First, equity I'm Falcon part terrific board. a Ockwood. much

a to stock take I'd are. moment take where to we of Next, like

as time meetings our and had Officer, I opportunity in my with During Financial world-class to Falcon's shareholder hundreds participate Chief base. of discussions the

I CFO, yet of and in in best-in-class Falcon potential meetings were with discussions to opportunity who hundreds had participate shareholders As invested the also not Minerals.

go. to CFO, addition study in with and Falcon a our hundreds have I've these Board equity aggregate unwavering on analysts Over conversations, And we My with now CEO, are world-class in SEC as detail. view. vision Eagle where committed base asset these In Team Falcon's my Ford who begins where and are Shale. of individually both filings we should had calls, the conversations, the and and recognition that view the executing Falcon years Management and of for Directors contributed more as in releases, two-plus this research cover conversations to to we

provided the the the diverse. as specific the a view in within when a and are and in are meaningfully developed can from an assets portion focus results X scale, well influenced in Eagle operators these share and and Tier also on in among contours compete existing position engine high a revenue breakevens Addressing comes the Falcon it of Ford wells Karnes decade truth for diversity plus. assets States high some and time Trough as articulated as oil my developed a operators' enhanced cash for by contours tailwind interest Falcon for by portion best U.S. the Our of our developed My per being this more material to associated are for -- will vision free and premier our reflects can Tier instances, plans. top-tier crosswind and of strong best is net gas is serves that as been certain the serve that assets belief locations company largely Falcon existing a would are known. we as is core, Falcon's My serve core included that X from will Basin. benefit lowest add well to grow larger being contour, the NRI not be portfolio. and and Permian the flows these are in over development serve rock our that operators to as The a assets and the capital the Falcon's and locations pass-through assets from cash These an This basis. the efficient in is world. CEO. have are Falcon's of with United in have these among lay flow

to quarter Now on the results. second XXXX

quarter above BOE primarily the wells levels way to business increase the with high day, X,XXX contributed with $X.XXX. expected by dividend above one-time delivered ago. which increase highlighting results XXXX the We we payout the the associated associated The XX% as first ratio, transition. production production XX% with the NRI a performed. levels. the of The XX% it excluding mentioned trajectory in which allowed $X.XX, a second being in quarter quarter, This quarter wells that transition turned free an quarter. share, free early the are costs Reported per represents late the production direct of a cash daily These the represents one-time quarter-over-quarter, line in per outlined production quarter in and items increase which line Falcon meaningful from I first are driven directly was the Falcon executive generating in the in the The flow to pleased executive first growth represents excluding moments tailwind of generated with cash us of assets call. would, and in first delivered we was quarter flow second declare

quarter. the quarter The XX% increase dividend meaningful of a reflects second compared also when first to

flow strong seen year. we've quarter the the shareholders are in during during second our the cash business by first the backdrop generated benefiting We and of in half the commodity way the from which immediately are excited the

second quarter annualized XX% which a backdrop. in from We dividend an to yield on environment directly where attractive presents -- a is for dividend closing XX and concerns investors -- constructive $X.XX, inflation payout believe The based this X.X%. treasury yield abound to macro translates to high an XX-year price. very basis represents which continue yesterday's on allows the Falcon's and investors benefit under market the we ratio

million pricing. LTM X.XX EBITDA a net Falcon's further under our we as see times. and that to decreased on The Looking leverage. ratio conservative close to at revolver debt We we balance to current the balance approach have by sheet, XXXX $X commodity decreased tightening out quarter-over-quarter

anticipate flow levels being be expect cash environment, quarter. and healthy in able per to Looking of to free free into fourth remain ahead, the $X.XX on the flow share third to share balance we for the cash going we year. per between we current maintain pricing the similar the Based $X.XX anticipate and quarter,

XX% As implies generated third we we quarter, free yield. our look for XX% at approximately and flow cash flow this expectations free cash forward to 'XX in an that the QX

ConocoPhillips. about like I operated a our which would moment position, speak Now by Hooks to to take is Ranch

South. are are the which well the the permitted Hamilton six wells lease. to XXXX. unit, discussed, known Ranch the because we lease production they from of extends into of the have Trust quarter Hooks drilled sharing in And sharing to permanent previously our as The B North Hooks wells in As the the ConocoPhillips wells Ranch sits third lateral six interest

Trust during Our -- that quarter XXXX. in the XXXX quarter from dispute the expectation in was over location between these and the yet the pad this first turned the B would unit. the quarter surface the stems not owner first drilled been operator drilled. be of surface The regarding have line a turned of the in line the in The on and wells the wells during XXXX pad delay and fourth development use Hamilton

rock area. Therefore, this specific unlikely in Hooks and is turned review oil that of frustrating, optimistic conviction have of uncommon dispute soon the is the production kind our the United shareholders conviction The and position Ranch are in a is not Falcon these nearing informed gas from of that -- the deployed that by and permits of judgment records we public in high be developed pad a matter the the it's view While we wells confident resolution. high industry, the among resolution quality the States, the in are and a will best developed. This while Once capital that this resolved reached, is recent favor and ConocoPhillips level in as XXXX. operator. is will of and significant disputes as be in benefit are will line we have

we terms will Hooks the existing Hamilton In Hooks anticipate of the in investors of XXXX. turned Hamilton will when be wells benefit that line see the during permits,

for M&A consider side, substantially would to Moving is what the the months. transactions, than last over has more it the XX been active market strategic we level

scale Given out this business consistent laid us earlier. diversify an environment to things could and backdrop, that the allow see I the we with opportunity-rich

While governs approach thing the all environment our is opportunity-rich, one above else.

The the existing remaining Matt to call I'll free We turn is share to CFO, the we the committed per thorough opportunities Falcon grow that, our manage are flow we enhancing team Matt? With on portfolio business. as on disciplined laser-focused to basis. a and cash Ockwood. as consider now and over

Matt Ockwood

be to part of Thank Falcon you, and I'm excited the a Bryan. honored team.

Turning support along wells, gross two turning in the seen We quarter. net X.XX assets pads, the is we advantage second Since second second during revenue by revenue our our the key of derivative cash results, during increase of net aligns XXXX. quarter The May to revenue include taking generated line in second These wells The seeing consistent quarter million which turned operators. turned our third quarter, operators growth wells line quarter $XX.X DUCs have from with of with during completing the in high and from first during XXXX, the that NRI oil from in production the recognized royalty call end activity the were with the expectations which X.XX a period. quarter and driven production into instruments quarter. first and was second quarter $X.X the wells, and prices. high in approximately million loss during our are the will line pads commodity in we totaled during XX

oil production in this first rigs quarter ConocoPhillips maintain they has now Eagle this to Current stated expect to by for three Ford $XX.XX frac half of quarter that per week increased and fourth production the price which realizations per four of MCF, XX% ConocoPhillips cumulatively the Eagle should contribute per second realized during the their $X.XX remainder The Falcon's levels. was exceeding quarter quarter first during XXXX. and year, crews since average in Ford the for is the the the second our of for XXXX barrel. $XX.XX barrel. year and was in natural the of Eagle NGL net XX% averaged production call XXXX. to ConocoPhillips grown late from compared Ford price Specifically, permitting realized gas

did new enter quarter, not into second Falcon the any instruments. derivative During commodity

Associated and was $X.XX second million. quarter expenses XXXX $X.X the expense the in to the hedge incurred approximately the after Falcon's for transportation investor the for Cash pricing which adjusting the of per all for were production of $X.X approximately on related approximately laid million during the from million is volumes transition. and quarter quarter of costs figure website. XXXX. or quarter. $X.X barrel $X.XX out executive quarter equivalent second Cash were slightly million available this $X.X Marketing $X.X barrel, company's valorem in first the per are is G&A which Ad operating taxes for expenses comprised million presentation, for down remaining

$X.X cash which expenses unvested million excluding the the quarter, compensation XXXX. non-cash attributable an shares in as increase largely The At its in executive million resulting outstanding includes as period million of quarter, transition. of associated period. $X.X was of forfeitures for Second of was approximately G&A the pricing. approximately stock-based $XX.X average the second credit quarter, due well million. production the reversal day increase with income increase quarter second stock-based non-cash during quarter non-cash stock-based $XX.X reflects million cash to and increase XXX expenses an end debt primarily The represents income revolving of million $X transition BOE realized had million, from reported in first oil of of with XX% the in Falcon of facility Adjusted a volumes hand, net on on associated the $XX.X EBITDA recognized also $X.X the first a the one-time prior per compared to to executive

This tax is $X.X due part mostly transaction to quarter associated the in interest. of me, is Falcon was of utilization million net for XXXX. $X.X income, with income step-up $X.X second deferred reported million the of net of Falcon the income liability. on and ratio $X.X million quarter basis that quarter acquired expense GAAP As of Falcon's primarily X.XX Falcon step of Bryan of to million end gain quarter basis million assets of of of EBITDA the as second benefit Resources the of the net the second reported debt company's revaluation to income mentioned, Falcon's inclusive non-controlling a tax times. is LTM standalone second net reported as a inclusive the with quarter attributable tax -- asset. warrant of -- a excuse of the non-cash related our to $X.X Royal

We to reduction income the to nontaxable reduce non-dividend than basis This will the more Falcon common the dividends stepped-up shares. for utilize result taxable paid will tax shareholders treatment expect in our a to of A shareholders' foreseeable be expects basis classified distributions. XX% as the during generally future. able XXXX be that Class to to of

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

Our not And flow income cash Bryan? of now the amount quarter did with call cash free over to for estimate the back Bryan. for XXXX second any include that, I'll turn taxes.

Bryan Gunderson

on questions. Thanks, Kat, Matt. begin let's the

Operator

[Operator from open questions. Instructions] you, comes is certainly. floor The Go our now from Whitfield Thank ahead. for And Derrick first Stifel. question

Derrick Whitfield

and good you, morning, Thank all.

Matt Ockwood

Good morning.

Bryan Gunderson

Derrick. morning, Good

Derrick Whitfield

do in on strategy? Perhaps for important your a important? you, wanted how to strategic to you regard effect your diversification diversification and with Bryan, view focus perspective, is I is How plan to

Bryan Gunderson

after appreciate Yes, CFO from asking as pretty and strongly you I I that seat question, years it. a of I in view, difficult the and think I feel scale, it. is point mean, Derrick, about benefit business my two as I that would the mentioned diversification

vehicle asset we to private I In combination think is best that coming, foresee I terms that and attractive of the is where way it in on that held think an attractive see for Falcon are assets execute hands.

that's it so manifesting. see we'd way And the

Derrick Whitfield

-- And Great.

Operator

out the Instructions] dropped you [Operator sorry, I'm of queue.

Bryan Gunderson

line, We'll back the take on you you come when Derrick.

Operator

moment. one he is, Here

Bryan Gunderson

Okay.

Derrick Whitfield

that. sorry about Bryan, Hey,

Bryan Gunderson

good. you're No,

Derrick Whitfield

I parameters follow-up, how outlook. of based possible, you XXXX industry could to around present you on broad if line thinking Hamilton And current what place activity? my with the update, your wanted at activity, question sight about some With Okay. you're know on and ask a

Bryan Gunderson

Yes.

I to a put on brush-strokes little think it's early too broad XXXX.

quite yet. that's on a I'm back think something but on put I'm broad to the to I it November certainly call sure ready come not brush-stroke post with, we'll

Derrick Whitfield

for Thanks Understood. your time, guys.

Operator

comes question from Go Hammond. Pearce ahead. next Our

Pearce Hammond

prepared remarks the about thanks for And helpful the forward. moving strategy

become do Bryan, diverse, time? curious, see Just trending you ratio, given how payout desire the the on that to over more

Bryan Gunderson

cognizant the their the we're throttling to are Good XX-plus the to for thanks question, market -- you. our we've that kind -- mean, clear good of of hear ratios. that been peers percent. fact from back mean with payout hear I on I We're Pearce. really Yes,

we now. watching of we're that at very, ever the throttling closely. time, it's Some message them road something with we're not looking over back Were of ratio, market that our we'd go down it very payout right own clearly but would

Pearce Hammond

follow-up, the in I thoughts instituting dividend, Okay, thank base what's some you, for are then the Falcon? your and variable was that Bryan. on curious were just And my of peers your

Bryan Gunderson

question. noticed. kind path questioned It's through an see remarks, the something of that we it's good we've which about. efficient mean, of get something I something -- we've second, and I of it Falcon laid we seen. obviously Right flows operators. It's I a our prepared in out obviously and this Yes, think commodity prices is cash as It's the

that shareholders. And so full amount we really a want as to our paying as leave out full -- to it

but an keep it. it, not noticed certainly it's we're market on that to on going focused a we're the on eye So narrative we and going in

Pearce Hammond

Okay, Bryan. thank you,

Bryan Gunderson

Pearce. Thanks,

Operator

Citigroup. comes Go from Downey question Brian. Brian next ahead, from our And

Brian Downey

the Hey, good questions. taking morning. for Thanks

Bryan Gunderson

Hey, Brian. Yes.

Brian Downey

kind question, that see foresee you, for do game over at I the scale -- how strategic towards following the time over achieving needle opportunities Maybe potentially A&D or or to guess, juncture? ground of the your of up need you more move -- something this a currently queue chunky do the

Bryan Gunderson

-- a it's I'm I the and ground But than -- think like, that on side, that we -- the as to our type The on less side, see really I a do be that us that ground one-off side. stringent I I'm good come are think, Yes, focused at that's really, of a that larger game those really are on meet this game really, we juncture. like more thing them. across mean, question. going for we on criteria it desks things the

ideas. to focus on I to going in be those willing think think mind we're my chunkier is -- the really I

Brian Downey

added something you or Great. the quarter, thinking look price? And the do where on systematically hedging around thinking you guess, doesn't deck, as give commodity to given the going to could continue Matt, appear update about the exposure forward? quick Is an are a how then you're upside going about sits, -- going the from to that any front, at you're hedges hedging in sheet I maybe one the on -- you it for to leave you're balance exposure slide us

Matt Ockwood

the question. appreciate Yes,

think obviously there, the looking the at there's can about couple ways and winter and I gas that a attractive. side opportunities break thinking We're of apart, that's crude side. $X gas we near

We anything haven't yet. done

opportunity long-term we winter at side. gas do if I think really might think would we there's look anything sell don't I gas, some natural on the an that. to

haven't hedges. side, crude the on On -- layered new haven't any had

under trend one a We place that mentioned there to this year. lower You balance will good a being sheet times is for think be. consideration us

keeping on eye we're moment. at we're happy an where always but it, So with sit we the

Bryan Gunderson

I'll add really but and when just I gas, mean, now. there, it the Yes, crude you where see interesting. be there's is the focused mean, we there. your articulated just eye on think we're Matt $X I side, something keep to I and might not opportunistic Obviously, on, it's gas well. side again, right

Brian Downey

Okay, appreciate comments. the

Matt Ockwood

Sure. Brian. Good you, to to talk

Operator

Stephens. And Go live. our comes from you're Alley, next ahead. from Ryan question Alley

You're on mute.

to Let's the go next question.

question Go from Next Jon Capital. ahead, SG is Evans from Jon.

Jon Evans

Bryan, about, Ford, that pretty positive of they seeing you mention but ramped about can talk any rights anything you talked and going that in didn't XX% deck guess, two Are they're to Hey, the were them, in mineral Eagle know you a the they your I about that Devon their Devon's you has? like -- if pieces I rigs. bit sequentially, don't little volumes run on slide

Bryan Gunderson

Mike one. to this I'm talk narrate actually going the get you. Yes, good Appreciate to on Downs Jon, question. it's to to

So Mike, ahead. go

Mike Downs

those did outlook. well position. we XX some mentioned, of They number first Jon, from to talked positive the as news production during their half turned the the QX, BP/Devon their XX% from rig to a saw from increase when in wells we in wells you. QX as see significant they good standpoint our as of JV you Hey, Devon's Yes, of about to talk and year like

So to going again of think And the other two crews confirmed be thing year. that for the running they the rig two was positive. rigs I that they're or remainder

news. all think very I So it's positive

Jon Evans

their more quarter, see the call late those production you came that And that So pretty in in QX? will the sense flush on is from of fair? that is

Mike Downs

also we line would some on I number came associated QX we QX where of into and sort them significant Devon. the of see mean, in some that late, of with of of came is so wells end some QX, saw of wells into a but

Jon Evans

kind my little on because Okay. question, And have follow-up of coming Hub? your just then you And realization talk at where basis is bit about you the guidance off natural a Ford Eagle Henry can gas? what

Mike Downs

mean, because know Yes. wish this I it I I take looking at Matt, you closely. really you were

Matt Ockwood

Hub. generally, we Yes, trend Henry pretty to tight

Mike Downs

mean, Jon, and the over to tight an gas Henry Eagle It's number time. I trend the generally Ford of Appalachia aggregate pretty number. gas Hub we

reported like something a we what is blended so basis. And

Jon Evans

Okay, great.

Mike Downs

result. So modest Jon, appreciate we see a Hey, it.

Operator

turn questions. you. time, further closing it this Thank And at I'd like to for management back any have no to we remarks.

Bryan Gunderson

it, Kat, on everybody appreciate appreciate line. the

on months XQ to over talking forward Thanks, Looking coming to and everybody everybody. the the call.

Operator

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

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

Sitio Royalties (STR) 8 Aug 212021 Q2 Earnings call transcript