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Black Stone Minerals, L.P. Reports Third Quarter Results

November 4, 2019

HOUSTON--(BUSINESS WIRE)--Nov 4, 2019--

Black Stone Minerals, L.P. (NYSE: BSM) (“Black Stone Minerals,” “Black Stone,” or “the Company”) today announces its financial and operating results for the third quarter of 2019.

Highlights

Management Commentary

Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and Chairman, commented, “The trend of strong royalty production growth continues to drive our business forward. Despite headwinds from weaker commodity pricing, Black Stone maintained its distribution at an annualized $1.48 per unit and utilized excess distribution coverage to reduce debt by over $20 million in the quarter. We continue to see strong permitting activity and well additions across our acreage, and we are on pace this year to exceed the almost 1,500 new wells added in 2018. Our solid balance sheet and large, diverse set of assets position us well to succeed in this challenging market.”

Quarterly Financial and Operating Results

Production

Black Stone reported average total production of 49.0 MBoe/d (76% mineral and royalty, 73% natural gas) for the third quarter of 2019. Total production was 48.3 MBoe/d and 52.2 MBoe/d for the quarters ended September 30, 2018 and June 30, 2019, respectively.

Royalty production was 37.5 MBoe/d (68% natural gas) for the third quarter. This is a sequential decline of 6% from the record 39.7 MBoe/d reported in the second quarter of 2019. Royalty production grew by 14% over the 32.9 MBoe/d for the corresponding period of 2018.

Consistent with the Company’s decision to farm out its working-interest participation to third-party capital providers, working-interest production continued to decline in the third quarter of 2019 to 11.5 MBoe/d (90% natural gas). This represents declines of 7% and 25%, respectively, from the second quarter of 2019 and the third quarter of 2018.

Realized Prices, Revenues, and Net Income

Black Stone’s average realized price per Boe, excluding the effect of derivative settlements, was $24.30 for the quarter ended September 30, 2019. This represents a 10% decrease from the preceding quarter and reflects lower absolute commodity prices as well as the negative effect of lower NGL prices on the Company’s realized natural gas price. Realized prices in the third quarter of 2019 were 26% lower than the $32.81 per Boe reported for the quarter ended September 30, 2018.

Black Stone reported oil and gas revenues of $109.6 million (62% oil and condensate, 38% natural gas and natural gas liquids) for the third quarter of 2019, a decrease from $127.7 million in the second quarter of 2019. The sequential decrease in oil and gas revenue was a result of lower production volumes and prices during the quarter. Oil and gas revenue in the third quarter of 2018 was $145.8 million.

The Company recognized a net gain on commodity derivative instruments of $24.3 million in the third quarter of 2019, composed of a $13.6 million realized gain and a $10.6 million unrealized gain that reflects the change in value of the Company’s derivative positions during the quarter. Black Stone reported a net gain of $29.2 million and a net loss of $18.5 million on commodity derivative instruments for the quarters ended June 30, 2019 and September 30, 2018, respectively.

Black Stone recognized $3.5 million in lease bonus and other income in the third quarter of 2019, led by leasing activity focused on acreage in the Bakken and the Permian. The Company reported $6.7 million and $12.4 million in lease bonus and other income for the second quarter of 2019 and third quarter of 2018, respectively.

The Company reported net income of $70.2 million, which includes the non-cash derivative gain described above, for the quarter ended September 30, 2019, compared to net income of $95.1 million in the preceding quarter. Net income for the third quarter of 2018 was $60.8 million.

Adjusted EBITDA and Distributable Cash Flow

Black Stone reported Adjusted EBITDA of $96.2 million for the third quarter of 2019, compared to $108.3 million in the second quarter of 2019 and $114.2 million for the corresponding quarter in 2018. Distributable cash flow for the third quarter of 2019 was $85.8 million, a decrease from $98.0 million and $100.8 million reported in the second quarter of 2019 and third quarter of 2018, respectively.

FinancialPosition and Activities

As of September 30, 2019, the Company had $2.0 million in cash and $413.0 million outstanding under its credit facility.

Subsequent to quarter-end, Black Stone’s borrowing base was decreased by $25 million to $650 million as part of its regularly scheduled borrowing base redetermination. The decrease in the borrowing base reflects a lower commodity price environment, particularly for natural gas, being factored into underwriting assumptions by lenders across the industry.

As of November 1, 2019, the Company had $380.0 million outstanding under the credit facility and $3.1 million in cash, providing over $270 million in available liquidity. Black Stone Minerals is in compliance with all financial covenants associated with its credit facility.

During the third quarter of 2019, the Company made no repurchases of units under the Board-approved $75 million unit repurchase program and issued no units under its at-the-market offering program.

Hedge Position

Black Stone has commodity derivative contracts in place covering portions of its anticipated production for the remainder of 2019 and 2020. The Company’s current hedge position is summarized in the following tables:

Oil Hedge Position

 

 

 

 

 

 

 

Oil Swap

Oil Swap Price

 

Oil Costless
Collars

Collar Floor

Collar Ceiling

 

MBbl

$/Bbl

 

MBbl

$/Bbl

$/Bbl

4Q19

936

$58.50

 

60

$65.00

$74.00

1Q20

510

$57.14

 

210

$56.43

$67.14

2Q20

510

$57.14

 

210

$56.43

$67.14

3Q20

510

$57.14

 

210

$56.43

$67.14

4Q20

510

$57.14

 

210

$56.43

$67.14

Natural Gas Hedge Position

 

 

 

Gas Swap

Gas Swap Price

 

MMcf

$/Mcf

4Q19

14,640

$2.96

1Q20

10,010

$2.69

2Q20

10,010

$2.69

3Q20

10,120

$2.69

4Q20

10,120

$2.69

More detailed information about the Company’s existing hedging program can be found in the Quarterly Report on Form 10-Q for the third quarter of 2019, which is expected to be filed on or around November 5, 2019.

Acquisitions

Black Stone acquired $2.3 million of properties in East Texas during the third quarter of 2019, all of which were purchased with cash. Through September 30, 2019, the Company has completed $43.9 million in acquisitions in 2019.

Distributions

As previously reported, the Board of Directors of the general partner has approved cash distributions attributable to the third quarter of 2019 of $0.37 per common unit. This represents a quarterly distribution coverage ratio of approximately 1.1x. Distributions will be payable on November 21, 2019 to unitholders of record on November 14, 2019.

Activity Update

Well Additions

For the quarter ended September 30, 2019, Black Stone added 382 gross wells. On a net basis, 4.8 wells were added during the quarter with additions in the Permian (1.7), Haynesville (0.9), and Bakken (0.8) plays making up the majority of activity during the quarter. The Company is on track to meet or exceed its 2018 additions of approximately 1,465 gross wells and approximately 21 net wells.

Shelby Trough Update

As anticipated, drilling activity has slowed on Black Stone’s Shelby Trough acreage in East Texas, in part due to the current natural gas price environment. XTO Energy, Inc. has informed the Company that it intends to postpone most of its remaining 2019 drilling and completion activity until 2020 or later. As previously reported, BPX Energy (“BPX”) has significantly reduced current development in the Shelby Trough and has released over 100,000 gross acres. Much of this area has been delineated with seismic activity and through BPX’s drilling to date with successful wells in both the Haynesville and Bossier shales. While a protracted slowdown of activity in the Shelby Trough would reduce production and, in turn, cash available for distribution, the Company intends to place that acreage with another operator or operators in late 2019 or early 2020.

Conference Call

Black Stone Minerals will host a conference call and webcast for investors and analysts to discuss its results for the third quarter of 2019 on Tuesday, November 5, 2019 at 9:00 a.m. Central Time. To listen to the call by phone, participants should dial (877) 447-4732 and use conference code 7374685; callers are advised to dial into the call 10 minutes in advance of the call start time. A live broadcast of the call will also be available at http://investor.blackstoneminerals.com. A recording of the conference call will be available at that site through December 5, 2019.

About Black Stone Minerals, L.P.

Black Stone Minerals is one of the largest owners of oil and natural gas mineral interests in the United States. The Company owns mineral interests and royalty interests in 41 states in the continental United States. The Company expects that its large, diversified asset base and long-lived, non-cost-bearing mineral and royalty interests will result in production and reserve growth, as well as increasing quarterly distributions to its unitholders.

Forward-Looking Statements

This news release includes forward-looking statements. All statements, other than statements of historical facts, included in this news release that address activities, events, or developments that the Company expects, believes, or anticipates will or may occur in the future are forward-looking statements. Terminology such as “will,” “may,” “should,” “expect,” “anticipate,” “plan,” “project,” “intend,” “estimate,” “believe,” “target,” “continue,” “potential,” the negative of such terms, or other comparable terminology often identify forward-looking statements. Except as required by law, Black Stone Minerals undertakes no obligation, and does not intend, to update these forward-looking statements to reflect events or circumstances occurring after this news release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. All forward-looking statements are qualified in their entirety by these cautionary statements. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of Black Stone Minerals, which may cause the Company’s actual results to differ materially from those implied or expressed by the forward-looking statements.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

For an important discussion of risks and uncertainties that may impact Black Stone’s operations, see the Company’s annual and quarterly filings with the Securities and Exchange Commission, which are available on its corporate website.

Information for Non-U.S. Investors

This press release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Although a portion of Black Stone Minerals’ income may not be effectively connected income and may be subject to alternative withholding procedures, brokers and nominees should treat 100% of Black Stone Minerals’ distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, Black Stone Minerals’ distributions to non-U.S. investors are subject to federal income tax withholding at the highest marginal rate, currently 37.0% for individuals.

BLACK STONE MINERALS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per unit amounts)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

Oil and condensate sales

 

$

68,255

 

$

82,712

 

$

200,031

 

$

232,920

Natural gas and natural gas liquids sales

 

41,340

 

63,080

 

156,622

 

170,179

Lease bonus and other income

 

3,484

 

12,440

 

15,846

 

28,616

Revenue from contracts with customers

 

113,079

 

158,232

 

372,499

 

431,715

Gain (loss) on commodity derivative instruments

 

24,290

 

(18,514)

 

12,294

 

(68,194)

TOTAL REVENUE

 

137,369

 

139,718

 

384,793

 

363,521

OPERATING (INCOME) EXPENSE

 

 

 

 

 

 

 

 

Lease operating expense

 

4,356

 

4,229

 

13,497

 

12,767

Production costs and ad valorem taxes

 

15,877

 

17,641

 

44,919

 

46,939

Exploration expense

 

64

 

34

 

372

 

6,782

Depreciation, depletion, and amortization

 

27,375

 

29,273

 

84,933

 

88,135

General and administrative

 

14,189

 

22,083

 

49,750

 

60,416

Accretion of asset retirement obligations

 

275

 

278

 

829

 

820

(Gain) loss on sale of assets, net

 

 

 

 

(2)

TOTAL OPERATING EXPENSE

 

62,136

 

73,538

 

194,300

 

215,857

INCOME (LOSS) FROM OPERATIONS

 

75,233

 

66,180

 

190,493

 

147,664

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Interest and investment income

 

44

 

53

 

137

 

123

Interest expense

 

(5,395)

 

(5,518)

 

(16,572)

 

(15,319)

Other income (expense)

 

365

 

60

 

293

 

(1,046)

TOTAL OTHER EXPENSE

 

(4,986)

 

(5,405)

 

(16,142)

 

(16,242)

NET INCOME (LOSS)

 

70,247

 

60,775

 

174,351

 

131,422

Net (income) loss attributable to noncontrolling interests

 

 

(22)

 

 

(1)

Distributions on Series A redeemable preferred units

 

 

 

 

(25)

Distributions on Series B cumulative convertible preferred units

 

(5,250)

 

(5,250)

 

(15,750)

 

(15,750)

NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON AND SUBORDINATED UNITS

 

$

64,997

 

$

55,503

 

$

158,601

 

$

115,646

ALLOCATION OF NET INCOME (LOSS):

 

 

 

 

 

 

 

 

General partner interest

 

$

 

$

 

$

 

$

Common units

 

64,997

 

29,188

 

134,608

 

71,037

Subordinated units

 

 

26,315

 

23,993

 

44,609

 

 

$

64,997

 

$

55,503

 

$

158,601

 

$

115,646

NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT:

 

 

 

 

 

 

 

 

Per common unit (basic)

 

$

0.32

 

$

0.27

 

$

0.87

 

$

0.67

Weighted average common units outstanding (basic)

 

205,957

 

106,706

 

155,513

 

105,254

Per subordinated unit (basic)

 

$

 

$

0.27

 

$

0.48

 

$

0.46

Weighted average subordinated units outstanding (basic)

 

 

96,329

 

50,458

 

96,021

Per common unit (diluted)

 

$

0.32

 

$

0.27

 

$

0.87

 

$

0.67

Weighted average common units outstanding (diluted)

 

205,957

 

106,706

 

155,513

 

105,254

Per subordinated unit (diluted)

 

$

 

$

0.27

 

$

0.48

 

$

0.46

Weighted average subordinated units outstanding (diluted)

 

 

96,329

 

50,458

 

96,021

The following table shows the Company’s production, revenues, pricing, and expenses for the periods presented:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)
(Dollars in thousands, except for realized prices and per Boe data)

Production:

 

 

 

 

 

 

 

 

Oil and condensate (MBbls)

 

1,207

 

1,251

 

3,631

 

3,623

Natural gas (MMcf) 1

 

19,816

 

19,153

 

59,025

 

52,205

Equivalents (MBoe)

 

4,510

 

4,443

 

13,469

 

12,324

Equivalents/day (MBoe)

 

49.0

 

48.3

 

49.3

 

45.1

Realized prices, without derivatives:

 

 

 

 

 

 

 

 

Oil and condensate ($/Bbl)

 

$

56.55

 

$

66.12

 

$

55.09

 

$

64.29

Natural gas ($/Mcf) 1

 

2.09

 

3.29

 

2.65

 

3.26

Equivalents ($/Boe)

 

$

24.30

 

$

32.81

 

$

26.48

 

$

32.71

Revenue:

 

 

 

 

 

 

 

 

Oil and condensate sales

 

$

68,255

 

$

82,712

 

$

200,031

 

$

232,920

Natural gas and natural gas liquids sales 1

 

41,340

 

63,080

 

156,622

 

170,179

Lease bonus and other income

 

3,484

 

12,440

 

15,846

 

28,616

Revenue from contracts with customers

 

113,079

 

158,232

 

372,499

 

431,715

Gain (loss) on commodity derivative instruments

 

24,290

 

(18,514)

 

12,294

 

(68,194)

Total revenue

 

$

137,369

 

$

139,718

 

$

384,793

 

$

363,521

Operating expenses:

 

 

 

 

 

 

 

 

Lease operating expense

 

$

4,356

 

$

4,229

 

$

13,497

 

$

12,767

Production costs and ad valorem taxes

 

15,877

 

17,641

 

44,919

 

46,939

Exploration expense

 

64

 

34

 

372

 

6,782

Depreciation, depletion, and amortization

 

27,375

 

29,273

 

84,933

 

88,135

General and administrative

 

14,189

 

22,083

 

49,750

 

60,416

Per Boe:

 

 

 

 

 

 

 

 

Lease operating expense (per working interest Boe)

 

$

4.10

 

$

2.99

 

$

3.98

 

$

3.27

Production costs and ad valorem taxes

 

3.52

 

3.97

 

3.34

 

3.81

Depreciation, depletion, and amortization

 

6.07

 

6.59

 

6.31

 

7.15

General and administrative

 

3.15

 

4.97

 

3.69

 

4.90

1

As a mineral-and-royalty-interest owner, Black Stone Minerals is often provided insufficient and inconsistent data on natural gas liquid ("NGL") volumes by its operators. As a result, the Company is unable to reliably determine the total volumes of NGLs associated with the production of natural gas on its acreage. Accordingly, no NGL volumes are included in reported production; however, revenue attributable to NGLs is included in natural gas revenue and the calculation of realized prices for natural gas.

Non-GAAP Financial Measures

Adjusted EBITDA and Distributable cash flow are supplemental non-GAAP financial measures used by Black Stone’s management and external users of the Company’s financial statements such as investors, research analysts, and others, to assess the financial performance of its assets and its ability to sustain distributions over the long term without regard to financing methods, capital structure, or historical cost basis.

The Company defines Adjusted EBITDA as net income (loss) before interest expense, income taxes, and depreciation, depletion, and amortization adjusted for impairment of oil and natural gas properties, accretion of asset retirement obligations, unrealized gains and losses on commodity derivative instruments, and non-cash equity-based compensation. Black Stone defines Distributable cash flow as Adjusted EBITDA plus or minus amounts for certain non-cash operating activities, estimated replacement capital expenditures during the subordination period, cash interest expense, and distributions to noncontrolling interests and preferred unitholders.

Adjusted EBITDA and Distributable cash flow should not be considered an alternative to, or more meaningful than, net income (loss), income (loss) from operations, cash flows from operating activities, or any other measure of financial performance presented in accordance with generally accepted accounting principles (“GAAP”) in the United States as measures of the Company’s financial performance.

Adjusted EBITDA and Distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income (loss), the most directly comparable GAAP financial measure. The Company’s computation of Adjusted EBITDA and Distributable cash flow may differ from computations of similarly titled measures of other companies.

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)
(In thousands, except per unit amounts)

Net income (loss)

 

$

70,247

 

$

60,775

 

$

174,351

 

$

131,422

Adjustments to reconcile to Adjusted EBITDA:

 

 

 

 

 

 

 

 

Depreciation, depletion, and amortization

 

27,375

 

29,273

 

84,933

 

88,135

Interest expense

 

5,395

 

5,518

 

16,572

 

15,319

Income tax expense (benefit)

 

(353)

 

(2)

 

(187)

 

1,059

Accretion of asset retirement obligations

 

275

 

278

 

829

 

820

Equity–based compensation

 

3,867

 

9,596

 

16,906

 

24,947

Unrealized (gain) loss on commodity derivative instruments

 

(10,644)

 

8,718

 

6,026

 

47,733

Adjusted EBITDA

 

96,162

 

114,156

 

299,430

 

309,435

Adjustments to reconcile to Distributable cash flow:

 

 

 

 

 

 

 

 

Change in deferred revenue

 

37

 

(1)

 

27

 

1,300

Cash interest expense

 

(5,132)

 

(5,287)

 

(15,793)

 

(14,571)

(Gain) loss on sale of assets, net

 

 

 

 

(2)

Estimated replacement capital expenditures 1

 

 

(2,750)

 

(2,750)

 

(8,750)

Cash paid to noncontrolling interests

 

 

(47)

 

 

(161)

Preferred unit distributions

 

(5,250)

 

(5,250)

 

(15,750)

 

(15,775)

Distributable cash flow

 

$

85,817

 

$

100,821

 

$

265,164

 

$

271,476

 

 

 

 

 

 

 

 

 

Total units outstanding 2

 

205,960

 

204,794

 

 

 

 

Distributable cash flow per unit

 

$

0.417

 

$

0.492

 

 

 

 

Common unit price as of November 1, 2019 and November 2, 2018, respectively

 

$

13.08

 

$

16.88

 

 

 

 

Implied Distributable cash flow yield

12.8%

11.7%

 

1

On June 8, 2017, the Board approved a replacement capital expenditure estimate of $13.0 million for the period of April 1, 2017 to March 31, 2018. On April 27, 2018, the Board approved a replacement capital expenditure estimate of $11.0 million for the period of April 1, 2018 to March 31, 2019. Due to the expiration of the subordination period, no replacement capital expenditure estimate will be established for periods subsequent to March 31, 2019.
 

2

The distribution attributable to the three months ended September 30, 2019 is estimated using 205,959,790 common units as of October 30, 2019; the exact amount of the distribution attributable to the three months ended September 30, 2019 will be determined based on units outstanding as of the record date of November 14, 2019. Distributions attributable to the three months ended September 30, 2018 were calculated using 108,465,215 common units and 96,328,836 subordinated units as of the record date of November 14, 2018.

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191104005999/en/

CONTACT: Black Stone Minerals, L.P.

Brent Collins

Vice President, Investor Relations

Telephone: (713) 445-3200

investorrelations@blackstoneminerals.com

KEYWORD: TEXAS UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: ENERGY NATURAL RESOURCES MINING/MINERALS OIL/GAS

SOURCE: Black Stone Minerals, L.P.

Copyright Business Wire 2019.

PUB: 11/04/2019 04:35 PM/DISC: 11/04/2019 04:35 PM

http://www.businesswire.com/news/home/20191104005999/en