Black Stone Minerals, L.P. Reports Record Quarterly Results and Declares Cash Distribution on Common and Subordinated Units
Highlights
- Partnership reports quarterly production of 42.4 Mboe/d, an increase of 11% over the fourth quarter of 2017.
-
Reported oil and gas revenues of
$126.2 million and lease bonus and other income of$4.6 million for the quarter. -
Generated net income of
$42.0 million and Adjusted EBITDA of$95.0 million . -
Reported distributable cash flow of
$83.4 million , resulting in distribution coverage for all units of 1.6x. -
Acquired
$32.2 million in mineral and royalty assets for cash during the quarter, led by a sizeable acquisition in theMidland Basin . -
After quarter-end, borrowing base increased to
$600 million from$550 million .
Management Commentary
Quarterly Financial and Operating Results
Production
Black Stone reported average production of 42.4 MBoe/d (67% mineral and royalty, 69% natural gas) for the first quarter of 2018. This represents an increase of 19% over average production of 35.6 MBoe/d for the corresponding period in 2017 and is 11% higher than average daily production in the fourth quarter of 2017. Production for the period benefited from a particularly strong contribution from the Bakken/Three Forks program, where the Partnership is seeing increased industry activity over the last year.
Realized Prices, Revenues, and Net Income
The Partnership’s average realized price per Boe, excluding the effect
of derivative settlements, was
Black Stone reported oil and gas revenues of
The Partnership recognized a loss on commodity derivative instruments of
Black Stone recognized
The Partnership reported net income of
Adjusted EBITDA and Distributable Cash Flow
Black Stone reported Adjusted EBITDA of
Financial Position
As of
Hedge Position
Black Stone has commodity derivative contracts in place covering
significant portions of its anticipated production for the remainder of
2018 and 2019. For the balance of 2018, approximately 83% of expected
oil volumes are hedged at prices averaging
Acquisitions
Black Stone acquired
Working Interest Capital Expenditures
The Partnership invested a net total of
The Partnership expects net working interest capital expenditures to
total
Distributions
The Board of Directors of the general partner (the "Board") has approved
cash distributions attributable to the first quarter of 2018 of
2018 Outlook
Black Stone generally reviews its guidance on a semi-annual basis unless circumstances suggest there has been a material change that warrants updating information for the investment community. The following items have changed since the original budget was announced and should be noted for financial modeling purposes:
-
DD&A - Black Stone is reducing its 2018 DD&A per BOE guidance to
$7.50 -$8.50 per Boe, down from$8.00 - $9.00 per Boe. The change is primarily a result of higher proved reserves at year-end 2017 compared to what had been assumed for budgeting purposes. -
Maintenance Capital - OnApril 27, 2018 , the Board of Directors approved a replacement capital expenditure estimate of$11.0 million for the period fromApril 1, 2018 toMarch 31, 2019 . The decrease from the prior twelve-month estimate of$13.0 million reflects the decline of working interest as a driver of reserve replacement for the Partnership going forward.
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 Partnership
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 Partnership’s ability to execute its business strategies;
- the volatility of realized oil and natural gas prices;
- the level of production on the Partnership’s properties;
- regional supply and demand factors, delays, or interruptions of production;
- the Partnership’s ability to replace its oil and natural gas reserves; and
- the Partnership’s ability to identify, complete, and integrate acquisitions.
For an important discussion of risks and uncertainties that may impact
our operations, see our annual and quarterly filings with the
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
BLACK STONE MINERALS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per unit amounts) |
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Three Months Ended |
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2018 | 2017 | |||||||
REVENUE | ||||||||
Oil and condensate sales | $ | 72,983 | $ | 40,474 | ||||
Natural gas and natural gas liquids sales | 53,245 | 47,701 | ||||||
Lease bonus and other income | 4,599 | 13,682 | ||||||
Revenue from contracts with customers | 130,827 | 101,857 | ||||||
Gain (loss) on commodity derivative instruments | (16,333 | ) | 22,725 | |||||
TOTAL REVENUE | 114,494 | 124,582 | ||||||
OPERATING (INCOME) EXPENSE | ||||||||
Lease operating expense | 4,248 | 4,189 | ||||||
Production costs and ad valorem taxes | 14,925 | 11,902 | ||||||
Exploration expense | 3 | 562 | ||||||
Depreciation, depletion, and amortization | 28,570 | 26,379 | ||||||
General and administrative | 18,521 | 17,212 | ||||||
Accretion of asset retirement obligations | 269 | 247 | ||||||
(Gain) loss on sale of assets, net | (2 | ) | (924 | ) | ||||
TOTAL OPERATING EXPENSE | 66,534 | 59,567 | ||||||
INCOME (LOSS) FROM OPERATIONS | 47,960 | 65,015 | ||||||
OTHER INCOME (EXPENSE) | ||||||||
Interest and investment income | 33 | 6 | ||||||
Interest expense | (4,521 | ) | (3,507 | ) | ||||
Other income (expense) | (1,515 | ) | 69 | |||||
TOTAL OTHER EXPENSE |
(6,003 | ) | (3,432 | ) | ||||
NET INCOME (LOSS) | 41,957 | 61,583 | ||||||
Net (income) loss attributable to noncontrolling interests | (27 | ) | (9 | ) | ||||
Distributions on Series A redeemable preferred units | (25 | ) | (1,114 | ) | ||||
Distributions on Series B cumulative convertible preferred units | (5,250 | ) | — | |||||
NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON AND SUBORDINATED UNITS | $ | 36,655 | $ | 60,460 | ||||
ALLOCATION OF NET INCOME (LOSS): | ||||||||
General partner interest | $ | — | $ | — | ||||
Common units | 24,329 | 35,517 | ||||||
Subordinated units | 12,326 | 24,943 | ||||||
$ | 36,655 | $ | 60,460 | |||||
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT: | ||||||||
Per common unit (basic) | $ | 0.23 | $ | 0.37 | ||||
Weighted average common units outstanding (basic) | 103,774 | 96,901 | ||||||
Per subordinated unit (basic) | $ | 0.13 | $ | 0.26 | ||||
Weighted average subordinated units outstanding (basic) | 95,395 | 95,149 | ||||||
Per common unit (diluted) | $ | 0.23 | $ | 0.37 | ||||
Weighted average common units outstanding (diluted) | 103,774 | 97,590 | ||||||
Per subordinated unit (diluted) | $ | 0.13 | $ | 0.26 | ||||
Weighted average subordinated units outstanding (diluted) | 95,395 | 95,149 | ||||||
DISTRIBUTIONS DECLARED AND PAID: | ||||||||
Per common unit | $ | 0.3125 | $ | 0.2875 | ||||
Per subordinated unit | $ | 0.2088 | $ | 0.1838 | ||||
The following table shows the Partnership’s production, revenues, realized prices, and expenses for the periods presented.
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(Unaudited) |
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Production: | |||||||
Oil and condensate (MBbls) | 1,190 | 861 | |||||
Natural gas (MMcf)1 |
15,742 | 14,060 | |||||
Equivalents (MBoe) | 3,814 | 3,204 | |||||
Revenue: | |||||||
Oil and condensate sales | $ | 72,983 | $ | 40,474 | |||
Natural gas and natural gas liquids sales1 |
53,245 | 47,701 | |||||
Lease bonus and other income | 4,599 | 13,682 | |||||
Revenue from contracts with customers | 130,827 | 101,857 | |||||
Gain (loss) on commodity derivative instruments | (16,333 | ) | 22,725 | ||||
Total revenue | $ | 114,494 | $ | 124,582 | |||
Realized prices: | |||||||
Oil and condensate ($/Bbl) | $ | 61.33 | $ | 47.01 | |||
Natural gas ($/Mcf)1 | 3.38 | 3.39 | |||||
Equivalents ($/Boe) | $ | 33.10 | $ | 27.52 | |||
Operating expenses: | |||||||
Lease operating expense | $ | 4,248 | $ | 4,189 | |||
Production costs and ad valorem taxes | 14,925 | 11,902 | |||||
Exploration expense | 3 | 562 | |||||
Depreciation, depletion, and amortization | 28,570 | 26,379 | |||||
General and administrative | 18,521 | 17,212 | |||||
Per Boe: | |||||||
Lease operating expense (per working interest Boe) | $ | 3.38 | $ | 3.19 | |||
Production costs and ad valorem taxes | 3.91 | 3.71 | |||||
Depreciation, depletion, and amortization | 7.49 | 8.23 | |||||
General and administrative | 4.86 | 5.37 | |||||
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 Partnership 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 our 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 our management and external users of our financial statements such as investors, research analysts, and others, to assess the financial performance of our assets and our ability to sustain distributions over the long term without regard to financing methods, capital structure, or historical cost basis.
We define 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. We define distributable cash flow as Adjusted EBITDA plus or minus amounts for certain non-cash operating activities, estimated replacement capital expenditures, 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
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. Our computation of Adjusted EBITDA and distributable cash flow may differ from computations of similarly titled measures of other companies.
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Net income | $ | 41,957 | $ | 61,583 | ||||
Adjustments to reconcile to Adjusted EBITDA: | ||||||||
Depreciation, depletion and amortization | 28,570 | 26,379 | ||||||
Interest expense | 4,521 | 3,507 | ||||||
Income tax expense | 1,507 | — | ||||||
Accretion of asset retirement obligations | 269 | 247 | ||||||
Equity–based compensation | 6,226 | 4,661 | ||||||
Unrealized (gain) loss on commodity derivative instruments | 11,958 | (18,447 | ) | |||||
Adjusted EBITDA | 95,008 | 77,930 | ||||||
Adjustments to reconcile to distributable cash flow: | ||||||||
Deferred revenue | 1,303 | (325 | ) | |||||
Cash interest expense | (4,316 | ) | (3,292 | ) | ||||
(Gain) loss on sale of assets, net | (2 | ) | (924 | ) | ||||
Estimated replacement capital expenditures1 | (3,250 | ) | (3,750 | ) | ||||
Cash paid to noncontrolling interests | (52 | ) | (25 | ) | ||||
Preferred unit distributions | (5,275 | ) | (1,114 | ) | ||||
Distributable cash flow | $ | 83,416 | $ | 68,500 | ||||
1 | On August 3, 2016, the Board of Directors of our general partner (the “Board”) approved a replacement capital expenditure estimate of $15.0 million for the period of April 1, 2016 to March 31, 2017. 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. | |
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Source:
Black Stone Minerals, L.P.
Brent Collins, 713-445-3200
Vice
President, Investor Relations
investorrelations@blackstoneminerals.com