Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone Minerals,"
"Black Stone," or "the Company") today announces its financial and
operating results for the third quarter of 2019.
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
Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive
Officer and Chairman, commented, "The trend of strong royalty
production growth continues to drive our business forward. Despite
headwinds from weaker commodity pricing, Black Stone maintained its
distribution at an annualized $1.48 per unit and utilized excess
distribution coverage to reduce debt by over $20 million in the
quarter. We continue to see strong permitting activity and well
additions across our acreage, and we are on pace this year to
exceed the almost 1,500 new wells added in 2018. Our solid balance
sheet and large, diverse set of assets position us well to succeed
in this challenging market."
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 September 30, 2018 and June 30, 2019,
respectively.
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 $24.30 for the quarter ended
September 30, 2019. This represents a 10% decrease from the
preceding quarter and reflects lower absolute commodity prices as
well as the negative effect of lower NGL prices on the Company's
realized natural gas price. Realized prices in the third quarter of
2019 were 26% lower than the $32.81 per Boe reported for the
quarter ended September 30, 2018.
Black Stone reported oil and gas revenues of $109.6 million (62%
oil and condensate, 38% natural gas and natural gas liquids) for
the third quarter of 2019, a decrease from $127.7 million in the
second quarter of 2019. The sequential decrease in oil and gas
revenue was a result of lower production volumes and prices during
the quarter. Oil and gas revenue in the third quarter of 2018 was
$145.8 million.
The Company recognized a net gain on commodity derivative
instruments of $24.3 million in the third quarter of 2019, composed
of a $13.6 million realized gain and a $10.6 million unrealized
gain that reflects the change in value of the Company’s derivative
positions during the quarter. Black Stone reported a net gain of
$29.2 million and a net loss of $18.5 million on commodity
derivative instruments for the quarters ended June 30, 2019 and
September 30, 2018, respectively.
Black Stone recognized $3.5 million in lease bonus and other
income in the third quarter of 2019, led by leasing activity
focused on acreage in the Bakken and the Permian. The Company
reported $6.7 million and $12.4 million in lease bonus and other
income for the second quarter of 2019 and third quarter of 2018,
respectively.
The Company reported net income of $70.2 million, which includes
the non-cash derivative gain described above, for the quarter ended
September 30, 2019, compared to net income of $95.1 million in the
preceding quarter. Net income for the third quarter of 2018 was
$60.8 million.
Adjusted EBITDA and Distributable Cash Flow
Black Stone reported Adjusted EBITDA of $96.2 million for the
third quarter of 2019, compared to $108.3 million in the second
quarter of 2019 and $114.2 million for the corresponding quarter in
2018. Distributable cash flow for the third quarter of 2019 was
$85.8 million, a decrease from $98.0 million and $100.8 million
reported in the second quarter of 2019 and third quarter of 2018,
respectively.
Financial Position and Activities
As of September 30, 2019, the Company had $2.0 million in cash
and $413.0 million outstanding under its credit facility.
Subsequent to quarter-end, Black Stone's borrowing base was
decreased by $25 million to $650 million as part of its regularly
scheduled borrowing base redetermination. The decrease in the
borrowing base reflects a lower commodity price environment,
particularly for natural gas, being factored into underwriting
assumptions by lenders across the industry.
As of November 1, 2019, the Company had $380.0 million
outstanding under the credit facility and $3.1 million in cash,
providing over $270 million in available liquidity. Black Stone
Minerals is in compliance with all financial covenants associated
with its credit facility.
During the third quarter of 2019, the Company made no
repurchases of units under the Board-approved $75 million unit
repurchase program and issued no units under its at-the-market
offering program.
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 Collars
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
November 5, 2019.
Acquisitions
Black Stone acquired $2.3 million of properties in East Texas
during the third quarter of 2019, all of which were purchased with
cash. Through September 30, 2019, the Company has completed $43.9
million in acquisitions in 2019.
Distributions
As previously reported, the Board of Directors of the general
partner has approved cash distributions attributable to the third
quarter of 2019 of $0.37 per common unit. This represents a
quarterly distribution coverage ratio of approximately 1.1x.
Distributions will be payable on November 21, 2019 to unitholders
of record on November 14, 2019.
Activity Update
Well Additions
For the quarter ended September 30, 2019, Black Stone added 382
gross wells. On a net basis, 4.8 wells were added during the
quarter with additions in the Permian (1.7), Haynesville (0.9), and
Bakken (0.8) plays making up the majority of activity during the
quarter. The Company is on track to meet or exceed its 2018
additions of approximately 1,465 gross wells and approximately 21
net wells.
Shelby Trough Update
As anticipated, drilling activity has slowed on Black Stone's
Shelby Trough acreage in East Texas, in part due to the current
natural gas price environment. XTO Energy, Inc. has informed the
Company that it intends to postpone most of its remaining 2019
drilling and completion activity until 2020 or later. As previously
reported, BPX Energy ("BPX") has significantly reduced current
development in the Shelby Trough and has released over 100,000
gross acres. Much of this area has been delineated with seismic
activity and through BPX's drilling to date with successful wells
in both the Haynesville and Bossier shales. While a protracted
slowdown of activity in the Shelby Trough would reduce production
and, in turn, cash available for distribution, the Company intends
to place that acreage with another operator or operators in late
2019 or early 2020.
Conference Call
Black Stone Minerals will host a conference call and webcast for
investors and analysts to discuss its results for the third quarter
of 2019 on Tuesday, November 5, 2019 at 9:00 a.m. Central Time. To
listen to the call by phone, participants should dial (877)
447-4732 and use conference code 7374685; callers are advised to
dial into the call 10 minutes in advance of the call start time. A
live broadcast of the call will also be available at http://investor.blackstoneminerals.com. A
recording of the conference call will be available at that site
through December 5, 2019.
About Black Stone Minerals, L.P.
Black Stone Minerals is one of the largest owners of oil and
natural gas mineral interests in the United States. The Company
owns mineral interests and royalty interests in 41 states in the
continental United States. The Company expects that its large,
diversified asset base and long-lived, non-cost-bearing mineral and
royalty interests will result in production and reserve growth, as
well as increasing quarterly distributions to its unitholders.
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, Black Stone Minerals undertakes no obligation, and
does not intend, to update these forward-looking statements to
reflect events or circumstances occurring after this news release.
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
news release. All forward-looking statements are qualified in their
entirety by these cautionary statements. These forward-looking
statements involve risks and uncertainties, many of which are
beyond the control of Black Stone Minerals, which may cause the
Company’s actual results to differ materially from those implied or
expressed by the forward-looking statements.
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 Securities and Exchange Commission,
which are available on its corporate website.
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 United States trade or
business. Accordingly, Black Stone Minerals’ distributions to
non-U.S. investors are subject to federal income tax withholding at
the highest marginal rate, currently 37.0% for individuals.
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 following table shows the Company’s production, revenues,
pricing, and expenses for the periods presented:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
(Unaudited) (Dollars in
thousands, except for realized prices and per Boe data)
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 the United States as measures of the Company's
financial performance.
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
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
(Unaudited) (In
thousands, except per unit amounts)
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/
Black Stone Minerals, L.P. Brent Collins Vice President,
Investor Relations Telephone: (713) 445-3200
investorrelations@blackstoneminerals.com
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