Black Stone Minerals, L.P. Reports First Quarter Results
Highlights
- Total mineral and royalty production for the first quarter of 2020 equaled 36.7 MBoe/d, an increase of 4.5% over the prior quarter; total production, including working interest volumes, were 46.9 MBoe/d for the quarter.
-
Net income and Adjusted EBITDA for the quarter totaled
$76.1 million and$71.1 million , respectively. -
Distributable cash flow was
$66.2 million for the first quarter, resulting in distribution coverage for all units of 4.0x based on the announced cash distribution of$0.08 per unit. -
General and administrative expenses totaled
$11.9 million , including$4.8 million of restructuring charges recorded in the first quarter related to staff reductions. Management expects full-year G&A expense to be at or below its guidance range of$39 million to$43 million , excluding the restructuring charge. -
Total debt at the end of the first quarter was
$388 million ; total debt to trailing twelve-month Adjusted EBITDA was 1.0x at quarter-end. As ofMay 1, 2020 , total debt had been reduced to$352 million . - Successfully transitioned all work flows to a remote work environment as part of the Company’s response to the COVID-19 pandemic.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and Chairman commented, “Over the past several months, we have taken a number of decisive steps to protect our free cash flows and our balance sheet in a very difficult environment. We are seeing the cash savings from our cost reduction measures and continue to benefit from our extensive hedge portfolio. By retaining a higher percentage of our cash flows during this challenging time, we expect to meaningfully reduce our outstanding borrowings as we strive to understand the longer-term implications for the global economy from unprecedented events. When that picture is more clear and should circumstances merit, we look to make more robust distributions.
“Our balanced product mix is adding stability to our cash flows as well.”
“Finally, I would like to express my sincere thanks to our employees, who safely and effectively transitioned to a remote work environment and have continued to excel in carrying out their responsibilities,” stated
Company Response to COVID-19 Pandemic
The COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. The pandemic has also negatively impacted the oil and natural gas business environment and has significantly reduced demand for and prices of oil, natural gas and natural gas liquids. In light of the challenging business environment and uncertainty caused by the pandemic, the Board of Directors of the Company’s general partner (the “Board”) approved a reduction in the quarterly distribution for the first quarter of 2020 to increase the amount of retained free cash flow for debt reduction and balance sheet protection. To protect the health and well-being of the Company’s workforce in the wake of COVID-19, Black Stone has implemented remote work arrangements for all of its employees. The Company does not expect these arrangements to impact its ability to maintain operations. The Company will continue to prioritize the health and safety of its workforce when employees return to the office through frequent cleaning of common spaces, appropriate social distancing measures, and other best practices as recommended by state and local officials.
Quarterly Financial and Operating Results
Production
Mineral and royalty volume was 36.7 MBoe/d (68% natural gas) for the first quarter of 2020, compared to 33.5 MBoe/d for the comparable period in 2019. Royalty production for the fourth quarter of 2019 was 35.1 MBoe/d.
Working interest production for the first quarter of 2020 was 10.2 MBoe/d, and represents decreases of 8% and 23%, respectively, from the levels generated in the quarters ended
Realized Prices, Revenues, and Net Income
The Company’s average realized price per Boe, excluding the effect of derivative settlements, was
Black Stone reported oil and gas revenue of
The Company reported a gain on commodity derivative instruments of
Lease bonus and other income was
Management identified
The Company reported net income of
Adjusted EBITDA and Distributable Cash Flow
Adjusted EBITDA for the first quarter of 2020 was
Financial Position and Activities
As of
Subsequent to quarter-end, Black Stone's borrowing base was decreased to
As of
During the first quarter of 2020, the Company made no repurchases of units under the Board-approved
First Quarter 2020 Distributions
As previously announced, the Board approved a cash distribution of
Withdrawal of 2020 Production and Distribution Guidance
Given the broad uncertainty in the energy industry caused by the COVID-19 pandemic, and in particular the upstream sector’s evolving view on the extent to which development activity will be scaled-back and existing production may be shut-in, Black Stone is withdrawing the 2020 production and distribution guidance it originally issued on
Update to Hedge Position
Black Stone has commodity derivative contracts in place covering portions of its anticipated production for 2020 and 2021, including derivative contracts put in place after the end of the first quarter. The Company's hedge position as of
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Oil Hedge Position |
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Oil Swap |
Oil Swap Price |
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Oil Costless Collars |
Collar Floor |
Collar Ceiling |
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MBbl |
$/Bbl |
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MBbl |
$/Bbl |
$/Bbl |
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1Q20 |
210 |
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70 |
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2Q20 |
630 |
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210 |
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3Q20 |
630 |
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210 |
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4Q20 |
630 |
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210 |
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1Q21 |
480 |
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2Q21 |
480 |
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3Q21 |
480 |
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4Q21 |
480 |
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Natural Gas Hedge
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Gas Swap |
Gas Swap Price |
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BBtu |
$/MMbtu |
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2Q20 |
10,010 |
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3Q20 |
10,120 |
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4Q20 |
10,120 |
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1Q21 |
7,200 |
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2Q21 |
7,280 |
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3Q21 |
7,360 |
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4Q21 |
7,360 |
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More detailed information about the Company's existing hedging program can be found in the Quarterly Report on Form 10-Q for the first quarter of 2020, which is expected to be filed on or around
Conference Call
About
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,
- the Company’s ability to execute its business strategies;
- the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities and other parties in response to the pandemic;
- the volatility of realized oil and natural gas prices;
- the level of production on the Company’s properties;
- overall supply and demand for oil and natural gas, as well as regional supply and demand factors, delays, or interruptions of production;
- the Company’s ability to replace its oil and natural gas reserves;
- the Company’s ability to identify, complete, and integrate acquisitions;
- general economic, business, or industry conditions;
- competition in the oil and natural gas industry; and
- the level of drilling activity by the Company's operators, particularly in areas such as the Shelby Trough where the Company has concentrated acreage positions.
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per unit amounts) |
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Three Months Ended |
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2020 |
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2019 |
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REVENUE |
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Oil and condensate sales |
|
$ |
52,093 |
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$ |
57,704 |
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Natural gas and natural gas liquids sales |
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36,642 |
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61,640 |
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Lease bonus and other income |
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4,308 |
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5,645 |
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Revenue from contracts with customers |
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93,043 |
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124,989 |
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Gain (loss) on commodity derivative instruments |
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90,011 |
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(41,183 |
) |
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TOTAL REVENUE |
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183,054 |
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83,806 |
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OPERATING (INCOME) EXPENSE |
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Lease operating expense |
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3,827 |
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5,292 |
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Production costs and ad valorem taxes |
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12,376 |
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14,592 |
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Exploration expense |
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1 |
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4 |
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Depreciation, depletion, and amortization |
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23,182 |
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27,833 |
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Impairment of oil and natural gas properties |
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51,031 |
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— |
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General and administrative |
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11,856 |
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21,214 |
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Accretion of asset retirement obligations |
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272 |
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277 |
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TOTAL OPERATING EXPENSE |
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102,545 |
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69,212 |
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INCOME (LOSS) FROM OPERATIONS |
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80,509 |
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14,594 |
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OTHER INCOME (EXPENSE) |
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Interest and investment income |
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31 |
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46 |
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Interest expense |
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(4,427 |
) |
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(5,525 |
) |
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Other income (expense) |
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(1 |
) |
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(98 |
) |
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TOTAL OTHER EXPENSE |
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(4,397 |
) |
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(5,577 |
) |
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NET INCOME (LOSS) |
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76,112 |
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9,017 |
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Distributions on Series B cumulative convertible preferred units |
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(5,250 |
) |
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(5,250 |
) |
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NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON AND SUBORDINATED UNITS |
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$ |
70,862 |
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$ |
3,767 |
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ALLOCATION OF NET INCOME (LOSS): |
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General partner interest |
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$ |
— |
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$ |
— |
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Common units |
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70,862 |
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1,905 |
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Subordinated units |
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— |
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1,862 |
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$ |
70,862 |
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$ |
3,767 |
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NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT: |
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Per common unit (basic) |
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$ |
0.34 |
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$ |
0.02 |
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Weighted average common units outstanding (basic) |
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206,631 |
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109,420 |
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Per subordinated unit (basic) |
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$ |
— |
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$ |
0.02 |
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Weighted average subordinated units outstanding (basic) |
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— |
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96,329 |
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Per common unit (diluted) |
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$ |
0.34 |
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$ |
0.02 |
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Weighted average common units outstanding (diluted) |
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206,631 |
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|
110,035 |
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Per subordinated unit (diluted) |
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$ |
— |
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$ |
0.02 |
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Weighted average subordinated units outstanding (diluted) |
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— |
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96,329 |
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The following table shows the Company’s production, revenues, pricing, and expenses for the periods presented: |
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Three Months Ended |
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2020 |
2019 |
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(Unaudited)
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Production: |
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Oil and condensate (MBbls) |
1,163 |
1,108 |
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Natural gas (MMcf)1 |
18,612 |
18,615 |
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Equivalents (MBoe) |
4,265 |
4,211 |
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Equivalents/day (MBoe) |
46.9 |
46.8 |
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Realized prices, without derivatives: |
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Oil and condensate ($/Bbl) |
$ |
44.79 |
$ |
52.08 |
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Natural gas ($/Mcf)1 |
1.97 |
3.31 |
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Equivalents ($/Boe) |
$ |
20.81 |
$ |
28.34 |
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Revenue: |
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Oil and condensate sales |
$ |
52,093 |
$ |
57,704 |
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Natural gas and natural gas liquids sales1 |
36,642 |
61,640 |
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Lease bonus and other income |
4,308 |
5,645 |
|
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Revenue from contracts with customers |
93,043 |
124,989 |
|
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Gain (loss) on commodity derivative instruments |
90,011 |
(41,183 |
) |
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Total revenue |
$ |
183,054 |
$ |
83,806 |
|
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Operating expenses: |
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|
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Lease operating expense |
$ |
3,827 |
$ |
5,292 |
|
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Production costs and ad valorem taxes |
12,376 |
14,592 |
|
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Exploration expense |
1 |
4 |
|
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Depreciation, depletion, and amortization |
23,182 |
27,833 |
|
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Impairment of oil and natural gas properties |
51,031 |
— |
|||||
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General and administrative |
11,856 |
21,214 |
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Other expense: |
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Interest expense |
4,427 |
5,525 |
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Per Boe: |
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Lease operating expense (per working interest Boe) |
$ |
4.12 |
$ |
4.41 |
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Production costs and ad valorem taxes |
2.90 |
3.47 |
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Depreciation, depletion, and amortization |
5.44 |
6.61 |
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General and administrative |
2.78 |
5.04 |
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1 |
As a mineral-and-royalty-interest owner, |
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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, distributions to preferred unitholders, and restructuring changes.
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
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.
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Three Months Ended |
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2020 |
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2019 |
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(Unaudited)
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Net income (loss) |
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$ |
76,112 |
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$ |
9,017 |
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Adjustments to reconcile to Adjusted EBITDA: |
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|
|
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Depreciation, depletion, and amortization |
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23,182 |
|
|
27,833 |
|
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Impairment of oil and natural gas properties |
|
51,031 |
|
|
— |
|||
|
Interest expense |
|
4,427 |
|
|
5,525 |
|
||
|
Income tax expense (benefit) |
|
36 |
|
|
131 |
|
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Accretion of asset retirement obligations |
|
272 |
|
|
277 |
|
||
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Equity–based compensation |
|
(2,894 |
) |
|
9,223 |
|
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Unrealized (gain) loss on commodity derivative instruments |
|
(81,057 |
) |
|
42,926 |
|
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Adjusted EBITDA |
|
71,109 |
|
|
94,932 |
|
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Adjustments to reconcile to Distributable cash flow: |
|
|
|
|
||||
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Change in deferred revenue |
|
(302 |
) |
|
(304 |
) |
||
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Cash interest expense |
|
(4,168 |
) |
|
(5,269 |
) |
||
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Estimated replacement capital expenditures1 |
|
— |
|
(2,750 |
) |
|||
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Preferred unit distributions |
|
(5,250 |
) |
|
(5,250 |
) |
||
|
Restructuring charges |
|
4,815 |
|
|
— |
|||
|
Distributable cash flow |
|
$ |
66,204 |
|
|
$ |
81,359 |
|
|
|
|
|
|
|
||||
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Total units outstanding2 |
|
206,709 |
|
|
205,712 |
|
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|
Distributable cash flow per unit |
|
$ |
0.320 |
|
|
$ |
0.395 |
|
|
1 |
The board established a replacement capital expenditure estimate of |
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2 |
The distribution attributable to the three months ended |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20200504005787/en/
President and Chief Financial Officer
Telephone: (713) 445-3200
investorrelations@blackstoneminerals.com
Source: