Black Stone Minerals, L.P. Reports Record Quarterly Results and Declares Increased Cash Distribution on Common and Subordinated Units; Raises Production Guidance for Full Year 2018
Highlights
- Reported total quarterly production of 44.7 Mboe/d, an increase of 5% over the first quarter of 2018. Royalty volumes increased by 9% over first quarter while working interest volumes declined by 2%.
-
Reported oil and gas revenues of
$131.1 million and lease bonus and other income of$11.6 million for the quarter. -
Generated net income of
$28.7 million and Adjusted EBITDA of$100.3 million . - Announced an 8% increase in distributions per common unit for the second quarter.
-
Reported distributable cash flow of
$87.2 million , resulting in distribution coverage for all units of 1.3x on increased distribution level. - Production guidance for 2018 increased to a range of 44.5 to 45.5 MBoe/d, a 7% increase midpoint to midpoint from prior guidance.
-
Acquired
$26.5 million in mineral and royalty assets for cash during the second quarter inPermian Basin andEast Texas , and closed on an approximately$17 million of additional mineral and royalty assets subsequent to quarter end.
Management Commentary
Quarterly Financial and Operating Results
Production
Black Stone reported average production of 44.7 MBoe/d (69% mineral and
royalty, 71% natural gas) for the second quarter of 2018. This
represents an increase of 20% over average production of 37.3 MBoe/d for
the corresponding period in 2017 and is 5% higher than average daily
production in the first quarter of 2018. Oil production for the period
was essentially flat with record levels reported in the first quarter of
2018. Natural gas production increased by 9% from the first quarter of
2018 due in large part to a significant number of
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 new quarterly records as a public company for both
Adjusted EBITDA and distributable cash flow in the second quarter of
2018. Adjusted EBITDA was
FinancialPosition
As of
Hedge Position
Black Stone has commodity derivative contracts in place covering
portions of its anticipated production for the remainder of 2018 as well
as 2019 and 2020. For the balance of 2018, approximately 72% of expected
oil volumes are hedged at prices averaging
Acquisitions
Black Stone acquired
Subsequent to quarter end, Black Stone closed on the acquisition of
approximately
Development Capital Expenditures
The Partnership invested a net total of
Through the first six months of 2018, the Partnership invested a total
of
Given the current farmout agreements in place, the Partnership expects negligible development capital expenditures related to working interest participation for the remainder of 2018.
Distributions
The Board of Directors of the general partner (the "Board") has approved
cash distributions attributable to the second quarter of 2018 of
Revised 2018 Guidance
The following table provides the assumptions for Black Stone's original and current 2018 guidance:
Original Guidance |
Revised Guidance |
|||||||
Average daily production (MBoe/d) | 41 - 43 | 44.5 - 45.5 | ||||||
Percentage natural gas | ~75% | ~71% | ||||||
Percentage royalty interest | ~65% | ~68% | ||||||
Lease bonus and other income ($MM) | $30 - $40 | $30 - $40 | ||||||
Lease operating expense ($MM) | $15 - $19 | $16 - $18 | ||||||
Production costs and ad valorem taxes (as % of total pre-derivative O&G revenue) | 12% - 14% | 11% - 13% | ||||||
Exploration expense ($MM) | $1.5 - $2.5 | $7.5 - $8.5 | ||||||
G&A - cash ($MM) | $45 - $47 | $45 - $47 | ||||||
G&A - non-cash ($MM) | $28 - $30 | $30 - $32 | ||||||
G&A - total ($MM) |
$73 - $77 | $75 - $79 | ||||||
DD&A ($/Boe) | $8.00 - $9.00 | $7.00 - $8.00 | ||||||
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,
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:
- 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. |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(Unaudited) |
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(In thousands, except per unit amounts) |
||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
REVENUE | ||||||||||||||||||||||
Oil and condensate sales | $ | 77,225 | $ | 37,262 | $ | 150,208 | $ | 77,736 | ||||||||||||||
Natural gas and natural gas liquids sales | 53,854 | 49,903 |
|
107,099 |
97,604 | |||||||||||||||||
Lease bonus and other income | 11,577 | 11,356 |
|
16,176 | 25,038 | |||||||||||||||||
Revenue from contracts with customers | 142,656 | 98,521 | 273,483 | 200,378 | ||||||||||||||||||
Gain (loss) on commodity derivative instruments | (33,347 | ) | 22,003 |
|
(49,680 | ) | 44,728 | |||||||||||||||
TOTAL REVENUE | 109,309 | 120,524 | 223,803 | 245,106 | ||||||||||||||||||
OPERATING (INCOME) EXPENSE | ||||||||||||||||||||||
Lease operating expense | 4,290 | 4,148 | 8,538 | 8,337 | ||||||||||||||||||
Production costs and ad valorem taxes | 14,373 | 11,863 | 29,298 | 23,765 | ||||||||||||||||||
Exploration expense | 6,745 | 46 | 6,748 | 608 | ||||||||||||||||||
Depreciation, depletion, and amortization | 30,292 | 28,900 | 58,862 | 55,279 | ||||||||||||||||||
General and administrative | 19,812 | 17,481 | 38,333 | 34,693 | ||||||||||||||||||
Accretion of asset retirement obligations | 273 | 253 | 542 | 500 | ||||||||||||||||||
(Gain) loss on sale of assets, net | — | (7 | ) | (2 | ) | (931 | ) | |||||||||||||||
TOTAL OPERATING EXPENSE | 75,785 | 62,684 | 142,319 | 122,251 | ||||||||||||||||||
INCOME (LOSS) FROM OPERATIONS | 33,524 | 57,840 | 81,484 | 122,855 | ||||||||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||||||||
Interest and investment income | 37 | 33 | 70 | 39 | ||||||||||||||||||
Interest expense | (5,280 | ) | (3,981 | ) | (9,801 | ) | (7,488 | ) | ||||||||||||||
Other income (expense) | 409 | 282 | (1,106 | ) | 351 | |||||||||||||||||
TOTAL OTHER EXPENSE | (4,834 | ) | (3,666 | ) | (10,837 | ) | (7,098 | ) | ||||||||||||||
NET INCOME (LOSS) | 28,690 | 54,174 | 70,647 | 115,757 | ||||||||||||||||||
Net (income) loss attributable to noncontrolling interests | 48 | 16 | 22 | 7 | ||||||||||||||||||
Distributions on Series A redeemable preferred units | — | (672 | ) | (25 | ) | (1,786 | ) | |||||||||||||||
Distributions on Series B cumulative convertible preferred units | (5,250 | ) | — | (10,500 | ) | — | ||||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON AND SUBORDINATED UNITS | $ | 23,488 | $ | 53,518 | $ | 60,144 | $ | 113,978 | ||||||||||||||
ALLOCATION OF NET INCOME (LOSS): | ||||||||||||||||||||||
General partner interest | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Common units | 17,540 | 32,100 | 41,884 | 67,617 | ||||||||||||||||||
Subordinated units | 5,948 | 21,418 | 18,260 | 46,361 | ||||||||||||||||||
$ | 23,488 | $ | 53,518 | $ | 60,144 | $ | 113,978 | |||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT: | ||||||||||||||||||||||
Per common unit (basic) | $ | 0.17 | $ | 0.33 | $ | 0.40 | $ | 0.69 | ||||||||||||||
Weighted average common units outstanding (basic) | 105,250 | 97,990 |
|
103,937 | 97,448 | |||||||||||||||||
Per subordinated unit (basic) | $ | 0.06 | $ | 0.22 | $ | 0.19 | $ | 0.49 | ||||||||||||||
Weighted average subordinated units outstanding (basic) | 96,329 | 95,388 |
|
95,395 | 95,269 | |||||||||||||||||
Per common unit (diluted) | $ | 0.17 | $ | 0.33 | $ | 0.40 | $ | 0.69 | ||||||||||||||
Weighted average common units outstanding (diluted) | 105,250 | 97,990 |
|
103,937 | 97,448 | |||||||||||||||||
Per subordinated unit (diluted) | $ | 0.06 | $ | 0.22 | $ | 0.19 | $ | 0.49 | ||||||||||||||
Weighted average subordinated units outstanding (diluted) | 96,329 | 95,388 |
|
95,395 | 95,269 | |||||||||||||||||
DISTRIBUTIONS DECLARED AND PAID: | ||||||||||||||||||||||
Per common unit | $ | 0.3125 | $ | 0.2875 | $ | 0.6250 | $ | 0.5750 | ||||||||||||||
Per subordinated unit | $ | 0.2087 | $ | 0.1838 | $ | 0.4175 | $ | 0.3675 | ||||||||||||||
The following table shows the Partnership’s production, revenues, realized prices, and expenses for the periods presented.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||
(Unaudited) (Dollars in thousands, except for realized prices and per Boe data) |
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Production: |
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Oil and condensate (MBbls) | 1,183 | 824 | 2,372 | 1,685 | |||||||||||||||||||||
Natural gas (MMcf)1 | 17,311 | 15,425 | 33,052 | 29,485 | |||||||||||||||||||||
Equivalents (MBoe) |
4,068 | 3,395 | 7,881 | 6,599 | |||||||||||||||||||||
Equivalents/day (MBoe) |
44.7 |
37.3 |
43.5 |
36.5 |
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Revenue: | |||||||||||||||||||||||||
Oil and condensate sales | $ | 77,225 | $ | 37,262 | $ | 150,208 | $ | 77,736 | |||||||||||||||||
Natural gas and natural gas liquids sales1 | 53,854 | 49,903 | 107,099 | 97,604 | |||||||||||||||||||||
Lease bonus and other income | 11,577 | 11,356 | 16,176 | 25,038 | |||||||||||||||||||||
Revenue from contracts with customers | 142,656 | 98,521 | 273,483 | 200,378 | |||||||||||||||||||||
Gain (loss) on commodity derivative instruments | (33,347 | ) | 22,003 | (49,680 | ) | 44,728 | |||||||||||||||||||
Total revenue | $ | 109,309 | $ | 120,524 | $ | 223,803 |
$ |
245,106 |
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Realized prices: | |||||||||||||||||||||||||
Oil and condensate ($/Bbl) | $ | 65.28 | $ | 45.22 | $ | 63.33 | $ | 46.13 | |||||||||||||||||
Natural gas ($/Mcf)1 | 3.11 | 3.24 | 3.24 | 3.31 | |||||||||||||||||||||
Equivalents ($/Boe) | $ | 32.22 | $ | 25.67 | $ | 32.65 | $ | 26.57 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||
Lease operating expense | $ | 4,290 | $ | 4,148 | $ | 8,538 | $ | 8,337 | |||||||||||||||||
Production costs and ad valorem taxes | 14,373 | 11,863 | 29,298 | 23,765 | |||||||||||||||||||||
Exploration expense | 6,745 | 46 | 6,748 | 608 | |||||||||||||||||||||
Depreciation, depletion, and amortization | 30,292 | 28,900 | 58,862 | 55,279 | |||||||||||||||||||||
General and administrative | 19,812 | 17,481 | 38,333 | 34,693 | |||||||||||||||||||||
Per Boe: | |||||||||||||||||||||||||
Lease operating expense (per working interest Boe) | $ | 3.45 | $ | 2.83 | $ | 3.42 | $ | 3.00 | |||||||||||||||||
Production costs and ad valorem taxes | 3.53 | 3.49 | 3.72 | 3.60 | |||||||||||||||||||||
Depreciation, depletion, and amortization | 7.45 | 8.51 | 7.47 | 8.38 | |||||||||||||||||||||
General and administrative | 4.87 | 5.15 | 4.86 | 5.26 | |||||||||||||||||||||
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. |
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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 June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||
(Unaudited) (In thousands, except per unit amounts) |
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Net income | $ | 28,690 | $ | 54,174 | $ | 70,647 | $ | 115,757 | ||||||||||||||||||
Adjustments to reconcile to Adjusted EBITDA: | ||||||||||||||||||||||||||
Depreciation, depletion, and amortization | 30,292 | 28,900 | 58,862 | 55,279 | ||||||||||||||||||||||
Interest expense | 5,280 | 3,981 | 9,801 | 7,488 | ||||||||||||||||||||||
Income tax expense | (446 | ) | — | 1,061 | — | |||||||||||||||||||||
Accretion of asset retirement obligations | 273 | 253 | 542 | 500 | ||||||||||||||||||||||
Equity–based compensation | 9,124 | 6,278 | 15,350 | 10,939 | ||||||||||||||||||||||
Unrealized (gain) loss on commodity derivative instruments | 27,057 | (18,921 | ) | 39,015 | (37,368 | ) | ||||||||||||||||||||
Adjusted EBITDA | 100,270 | 74,665 | 195,278 | 152,595 | ||||||||||||||||||||||
Adjustments to reconcile to distributable cash flow: | ||||||||||||||||||||||||||
Deferred revenue | (1 | ) | (643 | ) | 1,302 | (969 | ) | |||||||||||||||||||
Cash interest expense | (4,969 | ) | (3,760 | ) | (9,285 | ) | (7,053 | ) | ||||||||||||||||||
(Gain) loss on sale of assets, net | — | (7 | ) | (2 | ) | (931 | ) | |||||||||||||||||||
Estimated replacement capital expenditures1 | (2,750 | ) | (3,250 | ) | (6,000 | ) | (7,000 | ) | ||||||||||||||||||
Cash paid to noncontrolling interests | (62 | ) | (41 | ) | (114 | ) | (66 | ) | ||||||||||||||||||
Preferred unit distributions | (5,250 | ) | (672 | ) | (10,525 | ) | (1,786 | ) | ||||||||||||||||||
Distributable cash flow | $ | 87,238 | $ | 66,292 | $ | 170,654 | $ | 134,790 | ||||||||||||||||||
Total units outstanding2 |
202,364 |
196,648 | ||||||||||||||||||||||||
Distributable cash flow per unit | $ | 0.431 | $ | 0.337 | ||||||||||||||||||||||
Common unit price as of August 3, 2018 | $ | 17.17 | ||||||||||||||||||||||||
Implied distributable cash flow yield | 10.0 | % | ||||||||||||||||||||||||
1 |
On August 3, 2016, 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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2 |
The distribution attributable to the three months ended June 30, 2018 is estimated using 106,035 common units and 96,329 subordinated units as of August 1, 2018; the exact amount of the distribution attributable to the three months ended June 30, 2018 will be determined based on units outstanding as of the record date of August 16, 2018. Distributions attributable to the three months ended June 30, 2017 were calculated using 101,260 common units and 95,388 subordinated units as of the record date of August 17, 2017. |
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View source version on businesswire.com: https://www.businesswire.com/news/home/20180806005641/en/
Source:
Black Stone Minerals, L.P.
Brent Collins, 713-445-3200
Vice
President, Investor Relations
investorrelations@blackstoneminerals.com