Black Stone Minerals, L.P. Reports Third Quarter Results
Highlights
- Reported production of 49.0 MBoe/d for the third quarter of 2019, driven by a 14% year-over-year increase in royalty production.
-
Reported oil and natural gas revenues of
$109.6 million , lease bonus and other income of$3.5 million , and net income of$70.2 million for the quarter. -
Generated Adjusted EBITDA for the third quarter of
$96.2 million . -
Reported Distributable cash flow of
$85.8 million , resulting in distribution coverage for all common units of 1.1x at the previously announced distribution attributable to the third quarter of$0.37 per unit or$1.48 annualized.
Management Commentary
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
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
Black Stone reported oil and gas revenues of
The Company recognized a net gain on commodity derivative instruments of
Black Stone recognized
The Company reported net income of
Adjusted EBITDA and Distributable Cash Flow
Black Stone reported Adjusted EBITDA of
Financial Position and Activities
As of
Subsequent to quarter-end, Black Stone's borrowing base was decreased by
As of
During the third quarter of 2019, the Company made no repurchases of units under the Board-approved
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
|
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
Acquisitions
Black Stone acquired
Distributions
As previously reported, the Board of Directors of the general partner has approved cash distributions attributable to the third quarter of 2019 of
Activity Update
Well Additions
For the quarter ended
Shelby Trough Update
As anticipated, drilling activity has slowed on Black Stone's Shelby Trough acreage in
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,
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 Company’s ability to execute its business strategies;
- the volatility of realized oil and natural gas prices;
- the level of production on the Company’s properties;
- regional supply and demand factors, delays, or interruptions of production;
- the Company’s ability to replace its oil and natural gas reserves; and
- the Company’s ability to identify, complete, and integrate acquisitions.
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
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. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per unit amounts) |
||||||||||||
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
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
|
|
Nine Months Ended
|
||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||
|
|
|
|
|
|
|
|
|
||||
|
|
(Unaudited)
|
||||||||||
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 sales1 |
|
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
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
|
|
Nine Months Ended
|
||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
(Unaudited)
|
||||||||||||
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 expenditures1 |
|
— |
|
(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 outstanding2 |
|
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/
Source:
Black Stone Minerals, L.P.
Brent Collins
Vice President, Investor Relations
Telephone: (713) 445-3200
investorrelations@blackstoneminerals.com