Black Stone Minerals, L.P. Reports Third Quarter Results
Highlights
- Total mineral and royalty production for the third quarter of 2020 equaled 31.1 MBoe/d, a decrease of 8.6% over the prior quarter; total production, including working interest volumes, was 37.9 MBoe/d for the quarter.
-
Net income and Adjusted EBITDA for the quarter totaled
$23.7 million and$65.5 million , respectively. -
Distributable cash flow was
$58.8 million for the third quarter, resulting in distribution coverage for all units of 1.9x based on the announced cash distribution of$0.15 per unit. -
Completed the previously-announced asset sales in
July 2020 for total cash proceeds of$150 million ; recognized a gain of$24.0 million associated with the sales. -
Total debt at the end of the third quarter was
$147 million ; total debt to trailing twelve-month Adjusted EBITDA was 0.5x at quarter-end. As ofOctober 30, 2020 , total debt had been reduced to$124 million . -
Announced distribution of
$0.15 per common unit with respect to the third quarter of 2020.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and Chairman commented, “We continued to focus on our core principles of balance sheet strength and active property management during the third quarter. In light of the challenging environment, we substantially reduced our debt levels during the quarter with proceeds from the recent asset sales and retained free cash flow. We are also taking advantage of the relative strength in natural gas prices to aggressively market our extensive acreage positions across the
Quarterly Financial and Operating Results
Production
Working interest production for the third quarter of 2020 was 6.9 MBoe/d, and represents decreases of 21% and 40%, respectively, from the levels generated in the quarters ended
Total reported production averaged 37.9 MBoe/d (82% mineral and royalty, 73% natural gas) for the third quarter of 2020. Total production was 49.0 MBoe/d and 42.6 MBoe/d for 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 loss on commodity derivative instruments of
Lease bonus and other income was
There was no impairment for the quarters ended
The Company reported net income of
Adjusted EBITDA and Distributable Cash Flow
Adjusted EBITDA for the third quarter of 2020 was
Financial Position and Activities
As of
During the third quarter of 2020, the Company paid down
Black Stone and its lenders are currently finalizing the regularly scheduled Fall borrowing base redetermination under the credit facility. The Company expects the borrowing base to be reduced to
During the third quarter of 2020, the Company made no repurchases of units under the Board-approved
Third Quarter 2020 Distributions
As previously announced, the Board approved a cash distribution of
Activity Update
Rig Activity
As of
Shelby Trough Update
On
Black Stone continues to evaluate alternatives to encourage further development activity in the Shelby Trough in
Update to Hedge Position
Black Stone has commodity derivative contracts in place covering portions of its anticipated production for 2020 and 2021. The Company's hedge position as of
Oil Hedge Position |
||||||||||
|
Oil Swap |
Oil Swap Price |
|
Oil Costless
|
Collar Floor |
Collar Ceiling |
||||
|
MBbl |
$/Bbl |
|
MBbl |
$/Bbl |
$/Bbl |
||||
3Q20 |
210 |
|
|
70 |
|
|
||||
4Q20 |
630 |
|
|
210 |
|
|
||||
1Q21 |
480 |
|
|
|
|
|
||||
2Q21 |
480 |
|
|
|
|
|
||||
3Q21 |
480 |
|
|
|
|
|
||||
4Q21 |
480 |
|
|
|
|
|
||||
Natural Gas Hedge Position |
||||||||||
|
Gas Swap |
Gas Swap Price |
||||||||
|
BBtu |
$/MMbtu |
||||||||
4Q20 |
10,120 |
|
||||||||
1Q21 |
9,900 |
|
||||||||
2Q21 |
10,010 |
|
||||||||
3Q21 |
10,120 |
|
||||||||
4Q21 |
10,120 |
|
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 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.
|
||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||
(Unaudited) |
||||||||||||||||
(In thousands, except per unit amounts) |
||||||||||||||||
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
|
|
|
|
|
|
|
|
|||||||||
REVENUE |
|
|
|
|
|
|
|
|||||||||
Oil and condensate sales |
$ |
34,335 |
|
|
$ |
68,255 |
|
|
$ |
111,845 |
|
|
$ |
200,031 |
|
|
Natural gas and natural gas liquids sales |
29,107 |
|
|
41,340 |
|
|
96,060 |
|
|
156,622 |
|
|||||
Lease bonus and other income |
1,386 |
|
|
3,484 |
|
|
7,669 |
|
|
15,846 |
|
|||||
Revenue from contracts with customers |
64,828 |
|
|
113,079 |
|
|
215,574 |
|
|
372,499 |
|
|||||
Gain (loss) on commodity derivative instruments |
(21,086) |
|
|
24,290 |
|
|
49,751 |
|
|
12,294 |
|
|||||
TOTAL REVENUE |
43,742 |
|
|
137,369 |
|
|
265,325 |
|
|
384,793 |
|
|||||
OPERATING (INCOME) EXPENSE |
|
|
|
|
|
|
|
|||||||||
Lease operating expense |
3,160 |
|
|
4,356 |
|
|
10,280 |
|
|
13,497 |
|
|||||
Production costs and ad valorem taxes |
9,905 |
|
|
15,877 |
|
|
31,836 |
|
|
44,919 |
|
|||||
Exploration expense |
4 |
|
|
64 |
|
|
28 |
|
|
372 |
|
|||||
Depreciation, depletion, and amortization |
19,823 |
|
|
27,375 |
|
|
62,198 |
|
|
84,933 |
|
|||||
Impairment of oil and natural gas properties |
— |
|
|
— |
|
|
51,031 |
|
|
— |
|
|||||
General and administrative |
9,381 |
|
|
14,189 |
|
|
32,738 |
|
|
49,750 |
|
|||||
Accretion of asset retirement obligations |
286 |
|
|
275 |
|
|
836 |
|
|
829 |
|
|||||
(Gain) loss on sale of assets, net |
(24,045) |
|
|
— |
|
|
(24,045) |
|
|
— |
|
|||||
TOTAL OPERATING EXPENSE |
18,514 |
|
|
62,136 |
|
|
164,902 |
|
|
194,300 |
|
|||||
INCOME (LOSS) FROM OPERATIONS |
25,228 |
|
|
75,233 |
|
|
100,423 |
|
|
190,493 |
|
|||||
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|||||||||
Interest and investment income |
1 |
|
|
44 |
|
|
35 |
|
|
137 |
|
|||||
Interest expense |
(1,664) |
|
|
(5,395) |
|
|
(9,055) |
|
|
(16,572) |
|
|||||
Other income (expense) |
168 |
|
|
365 |
|
|
71 |
|
|
293 |
|
|||||
TOTAL OTHER EXPENSE |
(1,495) |
|
|
(4,986) |
|
|
(8,949) |
|
|
(16,142) |
|
|||||
NET INCOME (LOSS) |
23,733 |
|
|
70,247 |
|
|
91,474 |
|
|
174,351 |
|
|||||
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 |
$ |
18,483 |
|
|
$ |
64,997 |
|
|
$ |
75,724 |
|
|
$ |
158,601 |
|
|
ALLOCATION OF NET INCOME (LOSS): |
|
|
|
|
|
|
|
|||||||||
General partner interest |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Common units |
18,483 |
|
|
64,997 |
|
|
75,724 |
|
|
134,608 |
|
|||||
Subordinated units |
— |
|
|
— |
|
|
— |
|
|
23,993 |
|
|||||
|
$ |
18,483 |
|
|
$ |
64,997 |
|
|
$ |
75,724 |
|
|
$ |
158,601 |
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT: |
|
|
|
|
|
|
|
|||||||||
Per common unit (basic) |
$ |
0.09 |
|
|
$ |
0.32 |
|
|
$ |
0.37 |
|
|
$ |
0.87 |
|
|
Weighted average common units outstanding (basic) |
206,732 |
|
|
205,957 |
|
|
206,690 |
|
|
155,513 |
|
|||||
Per subordinated unit (basic) |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.48 |
|
|
Weighted average subordinated units outstanding (basic) |
— |
|
|
— |
|
|
— |
|
|
50,458 |
|
|||||
Per common unit (diluted) |
$ |
0.09 |
|
|
$ |
0.32 |
|
|
$ |
0.37 |
|
|
$ |
0.87 |
|
|
Weighted average common units outstanding (diluted) |
206,732 |
|
|
205,957 |
|
|
206,690 |
|
|
155,513 |
|
|||||
Per subordinated unit (diluted) |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.48 |
|
|
Weighted average subordinated units outstanding (diluted) |
— |
|
|
— |
|
|
— |
|
|
50,458 |
|
The following table shows the Company’s production, revenues, pricing, and expenses for the periods presented:
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(Unaudited)
|
||||||||||||||
Production: |
|
|
|
|
|
|
|
|
||||||||
Oil and condensate (MBbls) |
|
953 |
|
|
1,207 |
|
|
2,980 |
|
|
3,631 |
|
||||
Natural gas (MMcf)1 |
|
15,220 |
|
|
19,816 |
|
|
51,922 |
|
|
59,025 |
|
||||
Equivalents (MBoe) |
|
3,490 |
|
|
4,510 |
|
|
11,634 |
|
|
13,469 |
|
||||
Equivalents/day (MBoe) |
|
37.9 |
|
|
49.0 |
|
|
42.5 |
|
|
49.3 |
|
||||
Realized prices, without derivatives: |
|
|
|
|
|
|
|
|
||||||||
Oil and condensate ($/Bbl) |
|
$ |
36.03 |
|
|
$ |
56.55 |
|
|
$ |
37.53 |
|
|
$ |
55.09 |
|
Natural gas ($/Mcf)1 |
|
1.91 |
|
|
2.09 |
|
|
1.85 |
|
|
2.65 |
|
||||
Equivalents ($/Boe) |
|
$ |
18.18 |
|
|
$ |
24.30 |
|
|
$ |
17.87 |
|
|
$ |
26.48 |
|
Revenue: |
|
|
|
|
|
|
|
|
||||||||
Oil and condensate sales |
|
$ |
34,335 |
|
|
$ |
68,255 |
|
|
$ |
111,845 |
|
|
$ |
200,031 |
|
Natural gas and natural gas liquids sales1 |
|
29,107 |
|
|
41,340 |
|
|
96,060 |
|
|
156,622 |
|
||||
Lease bonus and other income |
|
1,386 |
|
|
3,484 |
|
|
7,669 |
|
|
15,846 |
|
||||
Revenue from contracts with customers |
|
64,828 |
|
|
113,079 |
|
|
215,574 |
|
|
372,499 |
|
||||
Gain (loss) on commodity derivative instruments |
|
(21,086) |
|
|
24,290 |
|
|
49,751 |
|
|
12,294 |
|
||||
Total revenue |
|
$ |
43,742 |
|
|
$ |
137,369 |
|
|
$ |
265,325 |
|
|
$ |
384,793 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
Lease operating expense |
|
$ |
3,160 |
|
|
$ |
4,356 |
|
|
$ |
10,280 |
|
|
$ |
13,497 |
|
Production costs and ad valorem taxes |
|
9,905 |
|
|
15,877 |
|
|
31,836 |
|
|
44,919 |
|
||||
Exploration expense |
|
4 |
|
|
64 |
|
|
28 |
|
|
372 |
|
||||
Depreciation, depletion, and amortization |
|
19,823 |
|
|
27,375 |
|
|
62,198 |
|
|
84,933 |
|
||||
Impairment of oil and natural gas properties |
|
— |
|
|
— |
|
|
51,031 |
|
|
— |
|
||||
General and administrative |
|
9,381 |
|
|
14,189 |
|
|
32,738 |
|
|
49,750 |
|
||||
Other expense: |
|
|
|
|
|
|
|
|
||||||||
Interest expense |
|
1,664 |
|
|
5,395 |
|
|
9,055 |
|
|
16,572 |
|
||||
Per Boe: |
|
|
|
|
|
|
|
|
||||||||
Lease operating expense (per working interest Boe) |
|
$ |
4.99 |
|
|
$ |
4.11 |
|
|
$ |
4.38 |
|
|
$ |
3.98 |
|
Production costs and ad valorem taxes |
|
2.84 |
|
|
3.52 |
|
|
2.74 |
|
|
3.33 |
|
||||
Depreciation, depletion, and amortization |
|
5.68 |
|
|
6.07 |
|
|
5.35 |
|
|
6.31 |
|
||||
General and administrative |
|
2.69 |
|
|
3.15 |
|
|
2.81 |
|
|
3.69 |
|
1 |
As a mineral-and-royalty-interest owner, |
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, non-cash equity-based compensation, and gains and losses on sales of assets. 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. Gains and losses on sales of assets were previously included in Adjusted EBITDA and excluded from Distributable cash flows. Black Stone believes this change to remove gains and losses on sales of assets from the definition of Adjusted EBITDA more closely conforms with peer company practice.
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 |
||||||||||||
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
(Unaudited)
|
||||||||||||||
Net income (loss) |
|
$ |
23,733 |
|
|
$ |
70,247 |
|
|
$ |
91,474 |
|
|
$ |
174,351 |
|
Adjustments to reconcile to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
||||||||
Depreciation, depletion, and amortization |
|
19,823 |
|
|
27,375 |
|
|
62,198 |
|
|
84,933 |
|
||||
Impairment of oil and natural gas properties |
|
— |
|
|
— |
|
|
51,031 |
|
|
— |
|
||||
Interest expense |
|
1,664 |
|
|
5,395 |
|
|
9,055 |
|
|
16,572 |
|
||||
Income tax expense (benefit) |
|
(155) |
|
|
(353) |
|
|
7 |
|
|
(187) |
|
||||
Accretion of asset retirement obligations |
|
286 |
|
|
275 |
|
|
836 |
|
|
829 |
|
||||
Equity–based compensation |
|
1,825 |
|
|
3,867 |
|
|
1,405 |
|
|
16,906 |
|
||||
Unrealized (gain) loss on commodity derivative instruments |
|
42,374 |
|
|
(10,644) |
|
|
17,043 |
|
|
6,026 |
|
||||
(Gain) loss on sale of assets, net |
|
(24,045) |
|
|
— |
|
|
(24,045) |
|
|
— |
|
||||
Adjusted EBITDA |
|
65,505 |
|
|
96,162 |
|
|
209,004 |
|
|
299,430 |
|
||||
Adjustments to reconcile to Distributable cash flow: |
|
|
|
|
|
|
|
|
||||||||
Change in deferred revenue |
|
(6) |
|
|
37 |
|
|
(315) |
|
|
27 |
|
||||
Cash interest expense |
|
(1,401) |
|
|
(5,132) |
|
|
(8,273) |
|
|
(15,793) |
|
||||
Estimated replacement capital expenditures1 |
|
— |
|
|
— |
|
|
— |
|
|
(2,750) |
|
||||
Preferred unit distributions |
|
(5,250) |
|
|
(5,250) |
|
|
(15,750) |
|
|
(15,750) |
|
||||
Restructuring charges |
|
— |
|
|
— |
|
|
4,815 |
|
|
— |
|
||||
Distributable cash flow |
|
$ |
58,848 |
|
|
$ |
85,817 |
|
|
$ |
189,481 |
|
|
$ |
265,164 |
|
|
|
|
|
|
|
|
|
|
||||||||
Total units outstanding2 |
|
206,749 |
|
|
205,960 |
|
|
|
|
|
||||||
Distributable cash flow per unit |
|
$ |
0.285 |
|
|
$ |
0.417 |
|
|
|
|
|
1 |
The board established a replacement capital expenditure estimate of |
|
2 |
The distribution attributable to the three months ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20201102005927/en/
President and Chief Financial Officer
Director, Finance and Investor Relations
Telephone: (713) 445-3200
investorrelations@blackstoneminerals.com
Source: