Black Stone Minerals, L.P. Reports Second Quarter 2017 Results and Declares Increased Cash Distribution on Common and Subordinated Units; Raises Full Year 2017 Production Guidance
Highlights
- Production for the second quarter averaged 37.3 MBoe/d, a 5% increase over the prior quarter.
-
Reported oil and gas revenues of
$87.2 million and lease bonus and other income of$11.4 million for the quarter. -
Generated net income of
$54.2 million and Adjusted EBITDA of$74.7 million . -
Reported distributable cash flow of
$66.3 million and distributable cash flow after net working interest capital expenditures of$51.0 million for the quarter, resulting in distribution coverage for all units of 1.3x and 1.0x, respectively. -
Announced distribution increases of
$0.025 per unit ($0.10 per unit annualized) attributable to the second quarter of 2017 on both common and subordinated units to$0.3125 per common unit and$0.20875 per subordinated unit. - Updated guidance for 2017 that reflects positive operating trends including higher production, increased lease bonus income, and lower lease operating expense.
Management Commentary
Quarterly Financial and Operating Results
Production
Realized Prices, Revenues, and Net Income
The Partnership’s average realized price per Boe, excluding the effect
of derivative settlements, was
Gain on commodity derivative instruments was
Leasing in the Bakken/Three Forks, Permian, and
The Partnership reported net income of
Financial Position
As of
Acquisitions
Black Stone's acquisition activity in the second quarter of 2017 was
focused on the Haynesville/Bossier play in
For the six months ended
Subsequent to quarter end, Black Stone continued to build upon its
Haynesville/Bossier position in
Working Interest Participation
In 2017, the Partnership incurred
Distributions
The Board of Directors of the general partner (the "Board") has approved
cash distributions attributable to the second quarter of 2017 of
In determining the amount of distributions to common and subordinated unitholders, the Board takes into account numerous factors, including the level of distribution coverage. In addition to the industry-accepted method of calculating distribution coverage, the Partnership also evaluates distribution coverage after deducting net working interest capital expenditures with a goal over the long-term of funding working interest capital expenditures with retained cash flow. The quarterly distribution coverage attributable to the second quarter of 2017 for all units was approximately 1.3x before net working interest capital expenditures and approximately 1.0x after net working interest capital expenditures.
Revised 2017 Guidance
The following table provides the assumptions for Black Stone's original and current 2017 guidance:
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Original Guidance |
Revised Guidance |
|||
Average daily production (MBoe/d) | 35 - 37 | 37 - 38 | ||
Percentage oil | ~25% | ~25% | ||
Percentage royalty interest | ~60% | ~60% | ||
Lease bonus and other income ($MM) | $25 - $35 | $30 - $35 | ||
Lease operating expense ($MM) | $18 - $22 | $17 - $20 | ||
Production costs and ad valorem taxes (as % of total pre-derivative O&G revenue) | 13% - 15% | 13% - 15% | ||
Exploration expense ($MM) | $0.5 - $1.5 | $0.5 - $1.5 | ||
G&A - cash ($MM) | $41 - $43 | $41 - $43 | ||
G&A - non-cash ($MM) |
$25 - $27 |
$25 - $27 |
||
G&A - TOTAL ($MM) | $66 - $70 | $66 - $70 | ||
DD&A ($/Boe) | $8.50 - $9.50 | $8.25 - $9.25 | ||
Production
Production guidance for the full year of 2017 is being increased by
approximately 4% at the midpoint of provided guidance ranges, and
reflects the strong performance from the first half of the year combined
with expected moderate quarterly production increases for the remainder
of 2017. The increase comes despite the deferral in completions of
several high interest
Lease Bonus
The guidance range of lease bonus and other income for 2017 is being
increased by
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.
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) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
REVENUE | ||||||||||||||||
Oil and condensate sales | $ | 37,262 | $ | 34,553 | $ | 77,736 | $ | 61,801 | ||||||||
Natural gas and natural gas liquids sales | 49,903 | 21,607 | 97,604 | 46,719 | ||||||||||||
Gain (loss) on commodity derivative instruments | 22,003 | (30,733 | ) | 44,728 | (20,107 | ) | ||||||||||
Lease bonus and other income | 11,356 | 15,142 | 25,038 | 16,537 | ||||||||||||
TOTAL REVENUE | 120,524 | 40,569 | 245,106 | 104,950 | ||||||||||||
OPERATING (INCOME) EXPENSE | ||||||||||||||||
Lease operating expense | 4,148 | 4,283 | 8,337 | 9,172 | ||||||||||||
Production costs and ad valorem taxes | 11,863 | 7,012 | 23,765 | 14,074 | ||||||||||||
Exploration expense | 46 | 629 | 608 | 637 | ||||||||||||
Depreciation, depletion, and amortization | 28,900 | 29,202 | 55,279 | 50,923 | ||||||||||||
Impairment of oil and natural gas properties | — | 679 | — | 6,775 | ||||||||||||
General and administrative | 17,481 | 18,134 | 34,693 | 35,535 | ||||||||||||
Accretion of asset retirement obligations | 253 | 200 | 500 | 474 | ||||||||||||
(Gain) loss on sale of assets, net | (7 | ) | (92 | ) | (931 | ) | (4,772 | ) | ||||||||
TOTAL OPERATING EXPENSE | 62,684 | 60,047 | 122,251 | 112,818 | ||||||||||||
INCOME (LOSS) FROM OPERATIONS | 57,840 | (19,478 | ) | 122,855 | (7,868 | ) | ||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest and investment income | 33 | 38 | 39 | 191 | ||||||||||||
Interest expense | (3,981 | ) | (1,443 | ) | (7,488 | ) | (2,491 | ) | ||||||||
Other income (expense) | 282 | 73 | 351 | 107 | ||||||||||||
TOTAL OTHER EXPENSE | (3,666 | ) | (1,332 | ) | (7,098 | ) | (2,193 | ) | ||||||||
NET INCOME (LOSS) | 54,174 | (20,810 | ) | 115,757 | (10,061 | ) | ||||||||||
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 16 | 9 | 7 | 7 | ||||||||||||
DISTRIBUTIONS ON REDEEMABLE PREFERRED UNITS | (672 | ) | (1,310 | ) | (1,786 | ) | (3,114 | ) | ||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON AND SUBORDINATED UNITS | $ | 53,518 | $ | (22,111 | ) | $ | 113,978 | $ | (13,168 | ) | ||||||
ALLOCATION OF NET INCOME (LOSS): | ||||||||||||||||
General partner interest | $ | — | $ | — | $ | — | $ | — | ||||||||
Common units | 32,100 | (7,445 | ) | 67,617 | 862 | |||||||||||
Subordinated units | 21,418 | (14,666 | ) | 46,361 | (14,030 | ) | ||||||||||
$ | 53,518 | $ | (22,111 | ) | $ | 113,978 | $ | (13,168 | ) | |||||||
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT: | ||||||||||||||||
Per common unit (basic) | $ | 0.33 | $ | (0.08 | ) | $ | 0.69 | $ | 0.01 | |||||||
Weighted average common units outstanding (basic) | 97,990 | 96,356 | 97,448 | 96,418 | ||||||||||||
Per subordinated unit (basic) | $ | 0.22 | $ | (0.15 | ) | $ | 0.49 | $ | (0.15 | ) | ||||||
Weighted average subordinated units outstanding (basic) | 95,388 | 95,189 | 95,269 | 95,092 | ||||||||||||
Per common unit (diluted) | $ | 0.32 | $ | (0.08 | ) | $ | 0.68 | $ | 0.01 | |||||||
Weighted average common units outstanding (diluted) | 99,472 | 96,418 | 98,930 | 96,481 | ||||||||||||
Per subordinated unit (diluted) | $ | 0.22 | $ | (0.15 | ) | $ | 0.49 | $ | (0.15 | ) | ||||||
Weighted average subordinated units outstanding (diluted) | 95,388 | 95,092 | 95,269 | 95,092 | ||||||||||||
DISTRIBUTIONS DECLARED AND PAID: | ||||||||||||||||
Per common unit | $ | 0.2875 | $ | 0.2625 | $ | 0.5750 | $ | 0.5250 | ||||||||
Per subordinated unit | $ | 0.1838 | $ | 0.1838 | $ | 0.3675 | $ | 0.3675 | ||||||||
The following table shows the Partnership’s production, revenues, realized prices, and expenses for the periods presented.
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||
(Unaudited) | ||||||||||||||
(Dollars in thousands, except for realized prices and per Boe data) | ||||||||||||||
Production: | ||||||||||||||
Oil and condensate (MBbls) | 824 | 947 | 1,685 | 1,833 | ||||||||||
Natural gas (MMcf)1 | 15,425 | 11,558 | 29,485 | 22,807 | ||||||||||
Equivalents (MBoe) | 3,395 | 2,873 | 6,599 | 5,634 | ||||||||||
Revenue: | ||||||||||||||
Oil and condensate sales | $ | 37,262 | $ | 34,553 | $ | 77,736 | $ | 61,801 | ||||||
Natural gas and natural gas liquids sales | 49,903 | 21,607 | 97,604 | 46,719 | ||||||||||
Gain (loss) on commodity derivative instruments | 22,003 | (30,733 | ) | 44,728 | (20,107 | ) | ||||||||
Lease bonus and other income | 11,356 | 15,142 | 25,038 | 16,537 | ||||||||||
Total revenue | $ | 120,524 | $ | 40,569 | $ | 245,106 | $ | 104,950 | ||||||
Realized prices: | ||||||||||||||
Oil and condensate ($/Bbl) | $ | 45.22 | $ | 36.49 | $ | 46.13 | $ | 33.72 | ||||||
Natural gas ($/Mcf)1 | 3.24 | 1.87 | 3.31 | 2.05 | ||||||||||
Equivalents ($/Boe) | $ | 25.67 | $ | 19.55 | $ | 26.57 | $ | 19.26 | ||||||
Operating expenses: | ||||||||||||||
Lease operating expense | $ | 4,148 | $ | 4,283 | $ | 8,337 | $ | 9,172 | ||||||
Production costs and ad valorem taxes | 11,863 | 7,012 | 23,765 | 14,074 | ||||||||||
Exploration expense | 46 | 629 | 608 | 637 | ||||||||||
Depreciation, depletion, and amortization | 28,900 | 29,202 | 55,279 | 50,923 | ||||||||||
Impairment of oil and natural gas properties | — | 679 | — | 6,775 | ||||||||||
General and administrative | 17,481 | 18,134 | 34,693 | 35,535 | ||||||||||
Per Boe: | ||||||||||||||
Lease operating expense (per working interest Boe) | $ | 2.83 | $ | 4.67 | $ | 3.00 | $ | 5.01 | ||||||
Production costs and ad valorem taxes | 3.49 | 2.44 | 3.60 | 2.50 | ||||||||||
Depreciation, depletion, and amortization | 8.51 | 10.16 | 8.38 | 9.04 | ||||||||||
General and administrative | 5.15 | 6.31 | 5.26 | 6.31 | ||||||||||
_______________ 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, distributable cash flow, and distributable cash flow after net working interest capital expenditures 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. We define distributable cash flow after net working interest capital expenditures as distributable cash flow less net working interest capital expenditures. Net working interest capital expenditures consists of all capital expenditures related to working interest wells less the recoupment of working interest expenditures under our farmout agreement.
Adjusted EBITDA, distributable cash flow, and distributable cash flow
after net working interest capital expenditures 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, distributable cash flow, and distributable cash flow after net working interest capital expenditures 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, distributable cash flow, and distributable cash flow after net working interest capital expenditures may differ from computations of similarly titled measures of other companies.
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(Unaudited) | ||||||||||||||||
(In thousands) | ||||||||||||||||
Net income (loss) | $ | 54,174 | $ | (20,810 | ) | $ | 115,757 | $ | (10,061 | ) | ||||||
Adjustments to reconcile to Adjusted EBITDA: | ||||||||||||||||
Depreciation, depletion and amortization | 28,900 | 29,202 | 55,279 | 50,923 | ||||||||||||
Interest expense | 3,981 | 1,443 | 7,488 | 2,491 | ||||||||||||
Impairment of oil and natural gas properties | — | 679 | — | 6,775 | ||||||||||||
Accretion of asset retirement obligations | 253 | 200 | 500 | 474 | ||||||||||||
Equity-based compensation2 | 6,278 | 19,239 | 10,939 | 25,139 | ||||||||||||
Unrealized (gain) loss on commodity derivative instruments | (18,921 | ) | 44,070 | (37,368 | ) | 54,025 | ||||||||||
Adjusted EBITDA | 74,665 | 74,023 | 152,595 | 129,766 | ||||||||||||
Adjustments to reconcile to distributable cash flow: | ||||||||||||||||
Change in deferred revenue | (643 | ) | 424 | (969 | ) | 221 | ||||||||||
Cash interest expense | (3,760 | ) | (1,246 | ) | (7,053 | ) | (2,097 | ) | ||||||||
(Gain) loss on sales of assets, net | (7 | ) | (92 | ) | (931 | ) | (4,772 | ) | ||||||||
Estimated replacement capital expenditures1 | (3,250 | ) | (3,750 | ) | (7,000 | ) | (3,750 | ) | ||||||||
Cash paid to noncontrolling interests | (41 | ) | (21 | ) | (66 | ) | (54 | ) | ||||||||
Redeemable preferred unit distributions | (672 | ) | (1,310 | ) | (1,786 | ) | (3,114 | ) | ||||||||
Distributable Cash Flow | 66,292 | 68,028 | 134,790 | 116,200 | ||||||||||||
Net working interest capital expenditures | (15,330 | ) | (11,600 | ) | (32,295 | ) | (36,710 | ) | ||||||||
Distributable cash flow after net working interest capital expenditures | $ | 50,962 | $ | 56,428 | $ | 102,495 | $ | 79,490 | ||||||||
_______________ 1 On August 3, 2016, the Board established a replacement capital expenditure estimate of $15.0 million for the period of April 1, 2016 to March 31, 2017. There was no established estimate of replacement capital expenditures prior to this period. On June 8, 2017, the Board established 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 On April 25, 2016, the Compensation Committee of the Board approved a resolution to change the settlement feature of certain employee long-term incentive compensation plans from cash to equity. As a result of the modification, $10.1 million of cash-settled liabilities were reclassified to equity-settled liabilities during the second quarter of 2016. |
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View source version on businesswire.com: http://www.businesswire.com/news/home/20170807005875/en/
Source:
Black Stone Minerals, L.P.
Brent Collins, 713-445-3200
Vice
President, Investor Relations
investorrelations@blackstoneminerals.com