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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2019
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period _______________ to _______________
Commission File Number: 001-37362
| | |
| Black Stone Minerals, L.P. |
| (Exact name of registrant as specified in its charter) |
| | | | | | | | | | | |
| Delaware | | | 47-1846692 |
(State or other jurisdiction of
incorporation or organization) | | | (I.R.S. Employer
Identification No.) |
| | | | |
| 1001 Fannin Street, Suite 2020 | | | 77002 |
| Houston, | Texas | | |
| (Address of principal executive offices) | | | (Zip code) |
| | | | | |
| (713) | 445-3200 |
| (Registrant’s telephone number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Units Representing Limited Partner Interests | | BSM | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | ☒ | | | Accelerated filer | ☐ | |
| Non-accelerated filer | ☐ | (Do not check if a smaller reporting company) | | Smaller reporting company | ☐ | |
| | | | | Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of October 30, 2019, there were 205,959,790 common units and 14,711,219 Series B cumulative convertible preferred units of the registrant outstanding.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
| | | | | | | | | | | |
| | September 30, 2019 | | December 31, 2018 |
| ASSETS | | | |
| CURRENT ASSETS | | | |
| Cash and cash equivalents | $ | 1,966 | | | $ | 5,414 | |
| Accounts receivable | 84,842 | | | 113,148 | |
| Commodity derivative assets | 33,054 | | | 37,970 | |
| Prepaid expenses and other current assets | 1,472 | | | 1,001 | |
| TOTAL CURRENT ASSETS | 121,334 | | | 157,533 | |
| PROPERTY AND EQUIPMENT | | | |
Oil and natural gas properties, at cost, using the successful efforts method of accounting, includes unproved properties of $1,091,660 and $1,063,883 at September 30, 2019 and December 31, 2018, respectively | 3,403,485 | | | 3,441,188 | |
| Accumulated depreciation, depletion, amortization, and impairment | (1,948,866) | | | (1,865,692) | |
| Oil and natural gas properties, net | 1,454,619 | | | 1,575,496 | |
Other property and equipment, net of accumulated depreciation of $11,450 and $11,048 at September 30, 2019 and December 31, 2018, respectively | 2,435 | | | 385 | |
| NET PROPERTY AND EQUIPMENT | 1,457,054 | | | 1,575,881 | |
| DEFERRED CHARGES AND OTHER LONG-TERM ASSETS | 17,425 | | | 16,710 | |
| TOTAL ASSETS | $ | 1,595,813 | | | $ | 1,750,124 | |
| LIABILITIES, MEZZANINE EQUITY, AND EQUITY | | | |
| CURRENT LIABILITIES | | | |
| Accounts payable | $ | 4,574 | | | $ | 4,149 | |
| Accrued liabilities | 17,384 | | | 60,089 | |
| Other current liabilities | 1,058 | | | 528 | |
| TOTAL CURRENT LIABILITIES | 23,016 | | | 64,766 | |
| LONG–TERM LIABILITIES | | | |
| Credit facility | 413,000 | | | 410,000 | |
| Accrued incentive compensation | 1,750 | | | 1,813 | |
| Commodity derivative liabilities | — | | | — | |
| Asset retirement obligations | 15,584 | | | 14,948 | |
| Other long-term liabilities | 6,781 | | | 55,973 | |
| TOTAL LIABILITIES | 460,131 | | | 547,500 | |
| COMMITMENTS AND CONTINGENCIES (Note 8) | | | |
| MEZZANINE EQUITY | | | |
Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at September 30, 2019 and December 31, 2018 | 298,361 | | | 298,361 | |
| EQUITY | | | |
| Partners' equity – general partner interest | — | | | — | |
Partners' equity – common units, 205,952 and 108,363 units outstanding at September 30, 2019 and December 31, 2018, respectively | 837,321 | | | 714,823 | |
Partners' equity – subordinated units, zero and 96,329 units outstanding at September 30, 2019 and December 31, 2018, respectively | — | | | 189,440 | |
| TOTAL EQUITY | 837,321 | | | 904,263 | |
| TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ | 1,595,813 | | | $ | 1,750,124 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per unit amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, | | | | Nine Months Ended
September 30, | | |
| | 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 accompanying notes are an integral part of these unaudited consolidated financial statements.
BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common
units | | Subordinated units | | Partners' equity — common units | | Partners' equity — subordinated units | | Total equity |
| BALANCE AT DECEMBER 31, 2018 | 108,363 | | | 96,329 | | | $ | 714,823 | | | $ | 189,440 | | | $ | 904,263 | |
| Repurchases of common and subordinated units | (588) | | | — | | | (10,110) | | | — | | | (10,110) | |
| Issuance of common units, net of offering costs | — | | | — | | | (43) | | | — | | | (43) | |
| Issuance of common units for property acquisitions | 57 | | | — | | | 943 | | | — | | | 943 | |
| Restricted units granted, net of forfeitures | 1,545 | | | — | | | — | | | — | | | — | |
| Equity–based compensation | — | | | — | | | 13,669 | | | — | | | 13,669 | |
| Distributions | — | | | — | | | (40,275) | | | (35,642) | | | (75,917) | |
| Charges to partners' equity for accrued distribution equivalent rights | — | | | — | | | (1,044) | | | — | | | (1,044) | |
| Distributions on Series B cumulative convertible preferred units | — | | | — | | | (5,250) | | | — | | | (5,250) | |
| Net income (loss) | — | | | — | | | 7,155 | | | 1,862 | | | 9,017 | |
| BALANCE AT MARCH 31, 2019 | 109,377 | | | 96,329 | | | $ | 679,868 | | | $ | 155,660 | | | $ | 835,528 | |
| Conversion of subordinated units | 96,329 | | | (96,329) | | | 142,149 | | | (142,149) | | | — | |
| Repurchases of common and subordinated units | (377) | | | — | | | (6,164) | | | — | | | (6,164) | |
| | | | | | | | | |
| | | | | | | | | |
| Restricted units granted, net of forfeitures | 627 | | | — | | | — | | | — | | | — | |
| Equity–based compensation | — | | | — | | | 3,332 | | | — | | | 3,332 | |
| Distributions | — | | | — | | | (40,471) | | | (35,642) | | | (76,113) | |
| Charges to partners' equity for accrued distribution equivalent rights | — | | | — | | | (766) | | | — | | | (766) | |
| Distributions on Series B cumulative convertible preferred units | — | | | — | | | (5,250) | | | — | | | (5,250) | |
| Net income (loss) | — | | | — | | | 72,956 | | | 22,131 | | | 95,087 | |
| BALANCE AT JUNE 30, 2019 | 205,956 | | | — | | | $ | 845,654 | | | $ | — | | | $ | 845,654 | |
| | | | | | | | | |
| | | | | | | | | |
| Restricted units granted, net of forfeitures | (4) | | | — | | | — | | | — | | | — | |
| Equity–based compensation | — | | | — | | | 3,385 | | | — | | | 3,385 | |
| Distributions | — | | | — | | | (76,204) | | | — | | | (76,204) | |
| Charges to partners' equity for accrued distribution equivalent rights | — | | | — | | | (511) | | | — | | | (511) | |
| Distributions on Series B cumulative convertible preferred units | — | | | — | | | (5,250) | | | — | | | (5,250) | |
| Net income (loss) | — | | | — | | | 70,247 | | | — | | | 70,247 | |
| BALANCE AT SEPTEMBER 30, 2019 | 205,952 | | | — | | | $ | 837,321 | | | $ | — | | | $ | 837,321 | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common units | | Subordinated units | | Partners' equity — common units | | Partners' equity — subordinated units | | Non-Controlling Interests | | Total equity |
| BALANCE AT DECEMBER 31, 2017 | 103,456 | | | 95,388 | | | $ | 603,116 | | | $ | 164,138 | | | $ | 867 | | | $ | 768,121 | |
| Conversion of Series A redeemable preferred units | 736 | | | 964 | | | 10,498 | | | 13,750 | | | — | | | 24,248 | |
| Repurchases of common and subordinated units | (451) | | | (23) | | | (8,099) | | | (342) | | | — | | | (8,441) | |
| Issuance of common units, net of offering costs | 8 | | | — | | | 138 | | | — | | | — | | | 138 | |
| | | | | | | | | | | |
| Restricted units granted, net of forfeitures | 1,177 | | | — | | | — | | | — | | | — | | | — | |
Equity–based compensation1 | — | | | — | | | 18,075 | | | 219 | | | — | | | 18,294 | |
| Distributions | — | | | — | | | (32,581) | | | (19,912) | | | (52) | | | (52,545) | |
| Charges to partners' equity for accrued distribution equivalent rights | — | | | — | | | (661) | | | — | | | — | | | (661) | |
| Distributions on Series A redeemable preferred units | — | | | — | | | (13) | | | (12) | | | — | | | (25) | |
| Distributions on Series B cumulative convertible preferred units | — | | | — | | | (5,250) | | | — | | | — | | | (5,250) | |
| Net income (loss) | — | | | — | | | 29,592 | | | 12,338 | | | 27 | | | 41,957 | |
| BALANCE AT MARCH 31, 2018 | 104,926 | | | 96,329 | | | $ | 614,815 | | | $ | 170,179 | | | $ | 842 | | | $ | 785,836 | |
| Repurchases of common and subordinated units | (35) | | | — | | | (630) | | | — | | | — | | | (630) | |
| Issuance of common units, net of offering costs | 509 | | | — | | | 8,929 | | | — | | | — | | | 8,929 | |
| | | | | | | | | | | |
| Restricted units granted, net of forfeitures | 94 | | | — | | | — | | | — | | | — | | | — | |
Equity–based compensation1 | — | | | — | | | 8,521 | | | — | | | — | | | 8,521 | |
| Distributions | — | | | — | | | (33,011) | | | (20,109) | | | (62) | | | (53,182) | |
| Charges to partners' equity for accrued distribution equivalent rights | — | | | — | | | (643) | | | — | | | — | | | (643) | |
| Distributions on Series B cumulative convertible preferred units | — | | | — | | | (5,250) | | | — | | | — | | | (5,250) | |
| Net income (loss) | — | | | — | | | 22,798 | | | 5,941 | | | (49) | | | 28,690 | |
| BALANCE AT JUNE 30, 2018 | 105,494 | | | 96,329 | | | $ | 615,529 | | | $ | 156,011 | | | $ | 731 | | | $ | 772,271 | |
| Issuance of common units, net of offering costs | 1,604 | | | — | | | 29,302 | | | — | | | — | | | 29,302 | |
| Issuance of common units for property acquisitions | 1,227 | | | — | | | 22,530 | | | — | | | — | | | 22,530 | |
| Restricted units granted, net of forfeitures | 5 | | | — | | | — | | | — | | | — | | | — | |
Equity–based compensation1 | — | | | — | | | 8,991 | | | — | | | — | | | 8,991 | |
| Distributions | — | | | — | | | (36,052) | | | (32,511) | | | (47) | | | (68,610) | |
| Charges to partners' equity for accrued distribution equivalent rights | — | | | — | | | (1,061) | | | — | | | — | | | (1,061) | |
| Distributions on Series B cumulative convertible preferred units | — | | | — | | | (5,250) | | | — | | | — | | | (5,250) | |
| Net income (loss) | — | | | — | | | 34,410 | | | 26,342 | | | 23 | | | 60,775 | |
| BALANCE AT SEPTEMBER 30, 2018 | 108,330 | | | 96,329 | | | $ | 668,399 | | | $ | 149,842 | | | $ | 707 | | | $ | 818,948 | |
1 The change in Partners' equity for equity-based compensation during the nine-month period ended September 30, 2018 was incorrectly allocated between Partners' equity - common units and Partners' equity - subordinated units in the Partnership's prior reports. The Partnership concluded that this error was not material to any of the prior reporting periods. As such, the revision for this correction has been made to the prior periods presented.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| | 2019 | | 2018 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income (loss) | $ | 174,351 | | | $ | 131,422 | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | |
| Depreciation, depletion, and amortization | 84,933 | | | 88,135 | |
| Accretion of asset retirement obligations | 829 | | | 820 | |
| Amortization of deferred charges | 779 | | | 653 | |
| (Gain) loss on commodity derivative instruments | (12,294) | | | 68,194 | |
| Net cash (paid) received on settlement of commodity derivative instruments | 18,320 | | | (20,461) | |
| Equity-based compensation | 16,906 | | | 24,947 | |
| Exploratory dry hole expense | 3 | | | 6,784 | |
| Deferred rent | — | | | 802 | |
| (Gain) loss on sale of assets, net | — | | | (2) | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable | 28,454 | | | (29,989) | |
| Prepaid expenses and other current assets | (471) | | | 7 | |
| Accounts payable, accrued liabilities, and other | (5,172) | | | 18,515 | |
| Settlement of asset retirement obligations | (328) | | | (108) | |
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 306,310 | | | 289,719 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Acquisitions of oil and natural gas properties | (42,969) | | | (106,390) | |
| Additions to oil and natural gas properties | (63,606) | | | (119,676) | |
| Additions to oil and natural gas properties leasehold costs | (933) | | | (4,639) | |
| Purchases of other property and equipment | (2,452) | | | (15) | |
| Proceeds from the sale of oil and natural gas properties | 550 | | | 8,390 | |
| Proceeds from farmouts of oil and natural gas properties | 60,577 | | | 78,605 | |
| NET CASH USED IN INVESTING ACTIVITIES | (48,833) | | | (143,725) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from issuance of common units, net of offering costs | (43) | | | 38,369 | |
| Distributions to common and subordinated unitholders | (228,234) | | | (174,348) | |
| Distributions to Series A redeemable preferred unitholders | — | | | (690) | |
| Distributions to Series B cumulative convertible preferred unitholders | (15,750) | | | (12,425) | |
| Distributions to noncontrolling interests | — | | | (161) | |
| Distribution equivalents paid | (2,982) | | | — | |
| Redemptions of Series A redeemable preferred units | — | | | (2,115) | |
| Repurchases of common and subordinated units | (16,916) | | | (9,071) | |
| Borrowings under credit facility | 252,500 | | | 264,500 | |
| Repayments under credit facility | (249,500) | | | (250,500) | |
| Debt issuance costs and other | — | | | (754) | |
| NET CASH USED IN FINANCING ACTIVITIES | (260,925) | | | (147,195) | |
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