Black Stone Minerals, L.P. Reports First Quarter Results
Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone Minerals," "Black
Stone," or "the Partnership") today announces its financial and
operating results for the first quarter of 2019.
Highlights
-
Reported production of 46.8 Mboe/d for the first quarter of 2019.
-
Reported oil and natural gas revenues of $119.3 million, lease bonus
and other income of $5.6 million, and net income of $9.0 million for
the quarter.
-
Generated Adjusted EBITDA of $94.9 million.
-
Reported distributable cash flow of $81.7 million, resulting in
distribution coverage for all common and subordinated units of 1.1x at
the current distribution level.
-
Previously announced distributions to common and subordinated units
attributable to the first quarter of 2019 of $0.37 per unit or $1.48
annualized. Subordinated units will convert into common units on a
one-for-one basis following the payment of the distribution on May 23,
2019.
-
Acquired $20.9 million in mineral and royalty assets in the
Haynesville formation and the Delaware Basin for cash and equity
during the first quarter.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and
Chairman, commented, "Over the last several years, new activity on our
legacy asset base combined with our active acquisition program has
resulted in significant growth in production and cash flows. That growth
has allowed us to provide consistent increases in the cash we return to
our unitholders since our IPO in 2015. With the distribution we will pay
later this month, the subordinated units will convert into common units,
resulting in a simpler capital structure and potentially greater trading
liquidity. The fundamentals of our business remain strong, and we are
well positioned with a strong balance sheet to take advantage of
acquisition opportunities."
Quarterly Financial and Operating Results
Production
Black Stone reported average production of 46.8 MBoe/d (72% mineral and
royalty, 74% natural gas) for the first quarter of 2019. This represents
a 10% increase over average production of 42.4 MBoe/d for the
corresponding period in 2018 and a decrease of 6% from the fourth
quarter of 2018. The majority of the decrease from the prior quarter is
attributable to certain adjustments to year-end receivable balances,
which negatively impacted first quarter reported production by
approximately 2.0 MBoe/d and reduced reported net income for the first
quarter by approximately $5.6 million.
Realized Prices, Revenues, and Net Income
The Partnership’s average realized price per Boe, excluding the effect
of derivative settlements, was $28.34 for the quarter ended March
31, 2019. This represents a 17% decrease from the preceding quarter and
reflects lower commodity prices as well as slightly wider differentials
in the current quarter. Realized prices in the first quarter of 2019
were 14% lower than the $33.10 per Boe reported for the quarter ended
March 31, 2018.
Black Stone reported oil and gas revenues of $119.3 million (48% oil and
condensate, 52% natural gas) for the first quarter of 2019, a decrease
from $155.4 million in the fourth quarter of 2018. This decrease in oil
and gas revenue was driven primarily by lower realized pricing during
the quarter as well as lower reported production volumes. Oil and gas
revenue in the first quarter of 2018 was $126.2 million.
The Partnership recognized a loss on commodity derivative instruments of
$41.2 million in the first quarter of 2019, composed of $1.7 million in
receipts from counterparties for settlements and a $42.9 million
unrealized loss that reflects the change in value of the Partnership’s
derivative positions during the quarter. Black Stone reported a net gain
of $83.0 million and a net loss of $16.3 million on commodity derivative
instruments for the quarters ended December 31, 2018 and March 31, 2018,
respectively.
Black Stone recognized $5.6 million in lease bonus and other income in
the first quarter of 2019, led by leasing activity focused on the Austin
Chalk/Woodbine play. The Partnership reported $7.6 million and $4.6
million in lease bonus and other income for the fourth quarter of 2018
and first quarter of 2018, respectively.
The Partnership reported net income of $9.0 million, which includes the
non-cash derivative loss described above, for the quarter ended March
31, 2019, compared to net income of $164.1 million in the preceding
quarter. Net income for the first quarter of 2018 was $42.0 million.
Adjusted EBITDA and Distributable Cash Flow
Black Stone reported Adjusted EBITDA of $94.9 million for the first
quarter of 2019, compared to $110.0 million in the fourth quarter of
2018 and $95.0 million for the corresponding quarter in 2018.
Distributable cash flow for the first quarter of 2019 was $81.7 million,
a decrease from $96.7 million and $83.4 million in the fourth quarter of
2018 and first quarter of 2018, respectively.
Financial Position and Activities
As of March 31, 2019, the Partnership had $4.2 million in cash and
$435.0 million outstanding under its credit facility.
As of May 3, 2019, the Partnership had $395.0 million outstanding under
the credit facility and $7.8 million in cash, providing over $285
million in available liquidity. Black Stone Minerals is in compliance
with all financial covenants associated with its credit facility.
During the first quarter of 2019, there was no activity under either the
Partnership's at-the-market offering program or the approved common unit
repurchase 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 Partnership's current hedge position is summarized in the
following tables:
|
|
|
|
|
|
|
|
|
|
|
Oil Hedge Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Costless
|
|
|
|
|
|
|
Oil Swap
|
|
Oil Swap Price
|
|
Collars
|
|
Collar Floor
|
|
Collar Ceiling
|
|
|
MBbl
|
|
$/Bbl
|
|
MBbl
|
|
$/Bbl
|
|
$/Bbl
|
2Q19
|
|
855
|
|
$58.72
|
|
60
|
|
$65.00
|
|
$74.00
|
3Q19
|
|
855
|
|
$58.37
|
|
60
|
|
$65.00
|
|
$74.00
|
4Q19
|
|
855
|
|
$58.37
|
|
60
|
|
$65.00
|
|
$74.00
|
1Q20
|
|
270
|
|
$57.87
|
|
210
|
|
$56.43
|
|
$67.14
|
2Q20
|
|
270
|
|
$57.87
|
|
210
|
|
$56.43
|
|
$67.14
|
3Q20
|
|
270
|
|
$57.87
|
|
210
|
|
$56.43
|
|
$67.14
|
4Q20
|
|
270
|
|
$57.87
|
|
210
|
|
$56.43
|
|
$67.14
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Hedge
|
|
|
|
|
Position
|
|
|
|
|
|
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Gas Swap
|
|
Gas Swap
|
|
|
MMcf
|
|
$/Mcf
|
2Q19
|
|
14,520
|
|
$2.96
|
3Q19
|
|
14,640
|
|
$2.96
|
4Q19
|
|
14,640
|
|
$2.96
|
1Q20
|
|
6,370
|
|
$2.72
|
2Q20
|
|
6,370
|
|
$2.72
|
3Q20
|
|
6,440
|
|
$2.72
|
4Q20
|
|
6,440
|
|
$2.72
|
|
|
|
|
|
More detailed information about the Partnership's existing hedging
program can be found in the Quarterly Report on Form 10-Q for the first
quarter of 2019, which is expected to be filed on May 7, 2019.
Acquisitions
Black Stone acquired $20.9 million of properties in the first quarter of
2019. The vast majority of these acquisitions were purchased with cash,
with the balance acquired by issuing equity directly to the seller.
Approximately 60% of the acquisitions made during the quarter related to
further consolidation of positions targeting the Haynesville and Bossier
program in East Texas, with additions in the Delaware Basin comprising
the remainder of the acquisition program for the quarter.
Distributions and Conversion of Subordinated Units
As previously reported, the Board of Directors of the general partner
(the "Board") has approved cash distributions attributable to the first
quarter of 2019 of $0.37 per unit for both common and subordinated
units. This represents a quarterly distribution coverage ratio of
approximately 1.1x for all units. Distributions will be payable on May
23, 2019 to unitholders of record on May 16, 2019. The payment of the
distribution attributable to the first quarter of 2019 will result in
the conversion of the subordinated units into common units on a
one-for-one basis on May 24, 2019. Detail on the conversion process was
provided in the Partnership's April 25, 2019 press release which can be
found in the "Investors" section of Black Stone Minerals' website (www.blackstoneminerals.com).
Conference Call
Black Stone Minerals will host a conference call and webcast for
investors and analysts to discuss its results for the first quarter of
2019 on Tuesday, May 7, 2019 at 9:00 a.m. Central Time. To join the
call, participants should dial (877) 447-4732 and use conference code
8405318. 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 June 6, 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 Partnership owns mineral
interests and royalty interests in 41 states in the continental United
States. The Partnership 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 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, 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 Partnership’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 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.
For an important discussion of risks and uncertainties that may impact
our operations, see our annual and quarterly filings with the Securities
and Exchange Commission, which are available on our 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.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands, except per unit amounts)
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
REVENUE
|
|
|
|
|
Oil and condensate sales
|
|
$
|
57,704
|
|
|
$
|
72,983
|
|
Natural gas and natural gas liquids sales
|
|
61,640
|
|
|
53,245
|
|
Lease bonus and other income
|
|
5,645
|
|
|
4,599
|
|
Revenue from contracts with customers
|
|
124,989
|
|
|
130,827
|
|
Gain (loss) on commodity derivative instruments
|
|
(41,183
|
)
|
|
(16,333
|
)
|
TOTAL REVENUE
|
|
83,806
|
|
|
114,494
|
|
OPERATING (INCOME) EXPENSE
|
|
|
|
|
Lease operating expense
|
|
5,292
|
|
|
4,248
|
|
Production costs and ad valorem taxes
|
|
14,592
|
|
|
14,925
|
|
Exploration expense
|
|
4
|
|
|
3
|
|
Depreciation, depletion, and amortization
|
|
27,833
|
|
|
28,570
|
|
General and administrative
|
|
21,214
|
|
|
18,521
|
|
Accretion of asset retirement obligations
|
|
277
|
|
|
269
|
|
(Gain) loss on sale of assets, net
|
|
—
|
|
|
(2
|
)
|
TOTAL OPERATING EXPENSE
|
|
69,212
|
|
|
66,534
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
14,594
|
|
|
47,960
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
Interest and investment income
|
|
46
|
|
|
33
|
|
Interest expense
|
|
(5,525
|
)
|
|
(4,521
|
)
|
Other income (expense)
|
|
(98
|
)
|
|
(1,515
|
)
|
TOTAL OTHER EXPENSE
|
|
(5,577
|
)
|
|
(6,003
|
)
|
NET INCOME (LOSS)
|
|
9,017
|
|
|
41,957
|
|
Net (income) loss attributable to noncontrolling interests
|
|
—
|
|
|
(27
|
)
|
Distributions on Series A redeemable preferred units
|
|
—
|
|
|
(25
|
)
|
Distributions on Series B cumulative convertible preferred units
|
|
(5,250
|
)
|
|
(5,250
|
)
|
NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON AND
SUBORDINATED UNITS
|
|
$
|
3,767
|
|
|
$
|
36,655
|
|
ALLOCATION OF NET INCOME (LOSS):
|
|
|
|
|
General partner interest
|
|
$
|
—
|
|
|
$
|
—
|
|
Common units
|
|
1,905
|
|
|
24,329
|
|
Subordinated units
|
|
1,862
|
|
|
12,326
|
|
|
|
$
|
3,767
|
|
|
$
|
36,655
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND
SUBORDINATED UNIT:
|
|
|
|
|
Per common unit (basic)
|
|
$
|
0.02
|
|
|
$
|
0.23
|
|
Weighted average common units outstanding (basic)
|
|
109,420
|
|
|
103,774
|
|
Per subordinated unit (basic)
|
|
$
|
0.02
|
|
|
$
|
0.13
|
|
Weighted average subordinated units outstanding (basic)
|
|
96,329
|
|
|
95,395
|
|
Per common unit (diluted)
|
|
$
|
0.02
|
|
|
$
|
0.23
|
|
Weighted average common units outstanding (diluted)
|
|
110,035
|
|
|
103,838
|
|
Per subordinated unit (diluted)
|
|
$
|
0.02
|
|
|
$
|
0.13
|
|
Weighted average subordinated units outstanding (diluted)
|
|
96,329
|
|
|
95,395
|
|
|
|
|
|
|
|
|
The following table shows the Partnership’s production, revenues,
pricing, and expenses for the periods presented:
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Dollars in thousands, except for realized prices
and per Boe data)
|
Production:
|
|
|
|
|
Oil and condensate (MBbls)
|
|
1,108
|
|
|
1,190
|
|
Natural gas (MMcf)1
|
|
18,615
|
|
|
15,742
|
|
Equivalents (MBoe)
|
|
4,211
|
|
|
3,814
|
|
Equivalents/day (MBoe)
|
|
46.8
|
|
|
42.4
|
|
Revenue:
|
|
|
|
|
Oil and condensate sales
|
|
$
|
57,704
|
|
|
$
|
72,983
|
|
Natural gas and natural gas liquids sales1
|
|
61,640
|
|
|
53,245
|
|
Lease bonus and other income
|
|
5,645
|
|
|
4,599
|
|
Revenue from contracts with customers
|
|
124,989
|
|
|
130,827
|
|
Gain (loss) on commodity derivative instruments
|
|
(41,183
|
)
|
|
(16,333
|
)
|
Total revenue
|
|
$
|
83,806
|
|
|
$
|
114,494
|
|
Realized prices, without derivatives:
|
|
|
|
|
Oil and condensate ($/Bbl)
|
|
$
|
52.08
|
|
|
$
|
61.33
|
|
Natural gas ($/Mcf)1
|
|
3.31
|
|
|
3.38
|
|
Equivalents ($/Boe)
|
|
$
|
28.34
|
|
|
$
|
33.10
|
|
Operating expenses:
|
|
|
|
|
Lease operating expense
|
|
$
|
5,292
|
|
|
$
|
4,248
|
|
Production costs and ad valorem taxes
|
|
14,592
|
|
|
14,925
|
|
Exploration expense
|
|
4
|
|
|
3
|
|
Depreciation, depletion, and amortization
|
|
27,833
|
|
|
28,570
|
|
General and administrative
|
|
21,214
|
|
|
18,521
|
|
Per Boe:
|
|
|
|
|
Lease operating expense (per working interest Boe)
|
|
$
|
4.41
|
|
|
$
|
3.38
|
|
Production costs and ad valorem taxes
|
|
3.47
|
|
|
3.91
|
|
Depreciation, depletion, and amortization
|
|
6.61
|
|
|
7.49
|
|
General and administrative
|
|
5.04
|
|
|
4.86
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
Non-GAAP Financial Measures
Adjusted EBITDA and distributable cash flow 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.
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 our 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. Our computation of Adjusted EBITDA and distributable cash flow
may differ from computations of similarly titled measures of other
companies.
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(In thousands, except per unit amounts)
|
Net income (loss)
|
|
$
|
9,017
|
|
|
$
|
41,957
|
|
Adjustments to reconcile to Adjusted EBITDA:
|
|
|
|
|
Depreciation, depletion, and amortization
|
|
27,833
|
|
|
28,570
|
|
Interest expense
|
|
5,525
|
|
|
4,521
|
|
Income tax expense
|
|
131
|
|
|
1,507
|
|
Accretion of asset retirement obligations
|
|
277
|
|
|
269
|
|
Equity–based compensation
|
|
9,223
|
|
|
6,226
|
|
Unrealized (gain) loss on commodity derivative instruments
|
|
42,926
|
|
|
11,958
|
|
Adjusted EBITDA
|
|
94,932
|
|
|
95,008
|
|
Adjustments to reconcile to distributable cash flow:
|
|
|
|
|
Change in deferred revenue
|
|
(3
|
)
|
|
1,303
|
|
Cash interest expense
|
|
(5,269
|
)
|
|
(4,316
|
)
|
(Gain) loss on sale of assets, net
|
|
—
|
|
|
(2
|
)
|
Estimated replacement capital expenditures1
|
|
(2,750
|
)
|
|
(3,250
|
)
|
Cash paid to noncontrolling interests
|
|
—
|
|
|
(52
|
)
|
Preferred unit distributions
|
|
(5,250
|
)
|
|
(5,275
|
)
|
Distributable cash flow
|
|
$
|
81,660
|
|
|
$
|
83,416
|
|
|
|
|
|
|
Total units outstanding2
|
|
205,712
|
|
|
201,578
|
|
Distributable cash flow per unit
|
|
$
|
0.397
|
|
|
$
|
0.414
|
|
Common unit price as of May 3, 2019
|
|
$
|
18.14
|
|
|
|
Implied distributable cash flow yield
|
|
8.8
|
%
|
|
|
|
|
|
|
|
|
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.
|
|
|
|
2
|
|
The distribution attributable to the three months ended March 31,
2019 is estimated using 109,382,957 common units and 96,328,836
subordinated units as of April 30, 2019; the exact amount of the
distribution attributable to the three months ended March 31, 2019
will be determined based on units outstanding as of the record
date of May 16, 2019. Distributions attributable to the three
months ended March 31, 2018 were calculated using 105,249,131
common units and 96,328,836 subordinated units as of the record
date of May 17, 2018.
|
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