Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone Minerals,"
"Black Stone," or "the Partnership") today announces its financial
and operating results for the third quarter of 2017 and recent
developments after quarter-end.
Highlights
- Despite estimated shut-ins of 500 Boe/d
associated with Hurricane Harvey, reported production for the third
quarter averaged 37.0 MBoe/d.
- Reported oil and gas revenues of $86.4
million and lease bonus and other income of $12.0 million for the
quarter.
- Generated net income of $22.0 million
and Adjusted EBITDA of $77.7 million.
- Reported distributable cash flow of
$69.1 million and distributable cash flow after net working
interest capital expenditures of $67.3 million for the quarter,
resulting in distribution coverage for all units of 1.3x and 1.3x,
respectively.
- After quarter end, reconfirmed
borrowing base at $550 million and amended credit facility with
existing lender group to allow for increased commodity hedging
capacity and extend maturity date to November 1, 2022.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ President, Chief
Executive Officer, and Chairman, commented, "Black Stone had a
solid quarter despite production shut-ins resulting from Hurricane
Harvey. Reported total production remained steady from last quarter
and reported royalty volumes grew on a sequential basis despite the
effects of the storm. We also had another very good quarter on the
lease bonus front that was driven primarily by leasing in the
Delaware Basin. Our business is performing well and we continue to
be successful in extracting full value from our assets for the
benefit of our unitholders."
Quarterly Financial and Operating Results
Production
Black Stone Minerals reported average production of 37.0 MBoe/d
(58% mineral and royalty, 73% natural gas) for the third quarter of
2017. This represents an increase of 6% over average production of
35.0 MBoe/d for the corresponding period in 2016 and is essentially
flat compared to the second quarter of 2017. The Partnership
estimates that production for the third quarter of 2017 was
adversely impacted by approximately 500 Boe/d due to Hurricane
Harvey.
Realized Prices, Revenues, and Net Income
The Partnership’s average realized price per Boe, excluding the
effect of derivative settlements, was $25.36 for the quarter ended
September 30, 2017. This represents a 1% decrease from the
preceding quarter and is comparable to the $25.42 per Boe for the
quarter ended September 30, 2016.
Black Stone Minerals reported oil and gas revenues of $86.4
million for the third quarter of 2017, an increase of 6% from $81.8
million for the third quarter of 2016 that reflects higher
production volumes between the periods. Oil and gas revenue in the
second quarter of 2017 was $87.2 million.
The Partnership recognized a loss on commodity derivative
instruments of $9.3 million in the third quarter of 2017, composed
of a $5.0 million gain from realized settlements and a $14.3
million unrealized loss due to the change in value of the
Partnership’s derivative positions during the quarter. In the third
quarter of 2016, the Partnership reported a gain on commodity
derivative instruments of $7.8 million.
Significant leasing activity in the Delaware Basin drove lease
bonus and other income to $12.0 million for the third quarter of
2017, an increase from $9.6 million in lease bonus and other income
from the same period last year. For the nine months ended September
30, 2017, the Partnership reported $37.1 million in lease bonus and
other income compared to $26.1 million for the same period in
2016.
The Partnership reported net income of $22.0 million, which
includes the non-cash derivative loss described above, for the
quarter ended September 30, 2017, compared to net income of $37.5
million in the corresponding period in 2016.
Financial Position
As of September 30, 2017, the Partnership had $8.9 million in
cash and $362.0 million outstanding under its credit facility.
Subsequent to quarter end, the borrowing base was reconfirmed at
$550.0 million as part of a regularly scheduled semi-annual
redetermination process. As of November 6, 2017, the Partnership
had $332.0 million outstanding under the credit facility and $6.4
million in cash, providing approximately $224.0 million in
available liquidity. Black Stone Minerals is in compliance with all
financial covenants associated with its credit facility.
Earlier this year, Black Stone Minerals put in place an
at-the-market ("ATM") offering program. The ATM program allows the
Partnership to sell common units into the open market from time to
time. During the third quarter of 2017, Black Stone sold
approximately 1.8 million units through the ATM program for
proceeds net of expenses of $30.3 million.
Acquisitions
Black Stone's acquisition activity in the third quarter of 2017
was focused on the Haynesville/Bossier play in East Texas. In
total, the Partnership invested $22.6 million in cash and $13.7
million in equity for acquired assets during the quarter.
For the nine months ended September 30, 2017, the Partnership
had invested $89.1 million in cash and $71.6 million worth of
common units for assets primarily in East Texas and the Delaware
Basin.
Working Interest Participation
In 2017, the Partnership had cash working interest expenditures
of $6.8 million in the third quarter and $40.7 million through
September 30 participating as a non-operating working interest
owner on its own minerals. As a result of reimbursements associated
with the Partnership's working interest farmout with Canaan
Resource Partners ("Canaan"), net working interest capital
expenditures were $1.8 million in the third quarter of 2017 and
$34.1 million for the first nine months of 2017. Capital
expenditures net of farmout reimbursements for 2017 are now
expected to be between $50 million to $60 million, with almost the
entire budget allocated to the Haynesville/Bossier play. Due to the
timing of cash calls and invoices received from the operator of the
Haynesville/Bossier properties and the reimbursement by Canaan, net
working interest capital expenditures can vary between periods.
Distributions
The Board of Directors of the general partner (the "Board") has
approved cash distributions attributable to the third quarter of
2017 of $0.3125 per common unit and $0.20875 per subordinated unit.
Distributions will be payable on November 24, 2017 to unitholders
of record on November 17, 2017.
In determining the amount of distributions to common and
subordinated unitholders, the Board takes into account numerous
factors, including the level of distribution coverage. In addition
to the industry-accepted method of calculating distribution
coverage, the Partnership also evaluates distribution coverage
after deducting net working interest capital expenditures with a
goal over the long-term of funding working interest capital
expenditures with retained cash flow. The quarterly distribution
coverage attributable to the third quarter of 2017 for all units
was approximately 1.3x before net working interest capital
expenditures and approximately 1.3x after net working interest
capital expenditures.
Credit Facility Amendment and Extension
On November 1, 2017, Black Stone entered into a fourth amended
and restated credit agreement with its existing group of lenders.
The amended credit agreement increases the Partnership's capacity
to hedge commodity volumes and extends the maturity date from
February 2019 to November 2022.
Conference Call
Black Stone Minerals will host a conference call and webcast for
investors and analysts to discuss its results for the third quarter
2017 on Tuesday, November 7, 2017 at 9:00 a.m. Central Time. To
join the call, participants should dial (877) 447-4732 and use
conference code 96210757. 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 November 30, 2017.
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 and 64
onshore basins in the continental United States. The Partnership
also owns and selectively participates as a non-operating working
interest partner in established development programs, primarily on
its mineral and royalty holdings. 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 39.6% for individuals.
BLACK STONE MINERALS, L.P.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except per unit
amounts)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017 2016
REVENUE Oil and condensate sales $ 41,361 $ 42,780 $ 119,097 $
104,581 Natural gas and natural gas liquids sales 45,047 38,986
142,651 85,706 Gain (loss) on commodity derivative instruments
(9,341 ) 7,813 35,387 (12,295 ) Lease bonus and other income 12,044
9,592 37,082 26,129 TOTAL REVENUE
89,111 99,171 334,217 204,121 OPERATING
(INCOME) EXPENSE Lease operating expense 4,569 5,007 12,906 14,179
Production costs and ad valorem taxes 11,549 9,228 35,314 23,301
Exploration expense 8 6 616 643 Depreciation, depletion, and
amortization 29,204 28,731 84,483 79,654 Impairment of oil and
natural gas properties — — — 6,775 General and administrative
17,305 16,677 51,998 52,213 Accretion of asset retirement
obligations 260 206 760 680 (Gain) loss on sale of assets, net —
— (931 ) (4,772 ) TOTAL OPERATING EXPENSE 62,895
59,855 185,146 172,673 INCOME (LOSS)
FROM OPERATIONS 26,216 39,316 149,071 31,448 OTHER INCOME (EXPENSE)
Interest and investment income (9 ) 460 30 651 Interest expense
(4,172 ) (2,282 ) (11,660 ) (4,773 ) Other income (expense) (1 ) 41
352 148 TOTAL OTHER EXPENSE (4,182 ) (1,781 )
(11,278 ) (3,974 ) NET INCOME (LOSS) 22,034 37,535 137,793 27,474
NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 20 8 27
15 DISTRIBUTIONS ON REDEEMABLE PREFERRED UNITS (666 ) (1,324 )
(2,452 ) (4,439 ) NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL
PARTNER AND COMMON AND SUBORDINATED UNITS $ 21,388 $ 36,219
$ 135,368 $ 23,050 ALLOCATION OF NET INCOME
(LOSS): General partner interest $ — $ — $ — $ — Common units
16,371 23,114 83,989 24,343 Subordinated units 5,017 13,105
51,379 (1,293 ) $ 21,388 $ 36,219 $
135,368 $ 23,050 NET INCOME (LOSS) ATTRIBUTABLE TO
LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT: Per common unit
(basic) $ 0.16 $ 0.24 $ 0.86 $ 0.26
Weighted average common units outstanding (basic) 101,623
95,740 97,777 95,086 Per subordinated unit
(basic) $ 0.05 $ 0.14 $ 0.54 $ (0.01 )
Weighted average subordinated units outstanding (basic) 95,388
95,189 95,269 95,125 Per common unit
(diluted) $ 0.16 $ 0.24 $ 0.86 $ 0.26
Weighted average common units outstanding (diluted) 101,623
96,011 97,777 95,619 Per subordinated unit
(diluted) $ 0.05 $ 0.14 $ 0.54 $ (0.01 )
Weighted average subordinated units outstanding (diluted) 95,388
95,189 95,269 95,467 DISTRIBUTIONS
DECLARED AND PAID: Per common unit $ 0.3125 $ 0.2875
$ 0.8875 $ 0.8125 Per subordinated unit $ 0.2088
$ 0.1838 $ 0.5763 $ 0.5513
The following table shows the Partnership’s production,
revenues, realized prices, and expenses for the periods
presented.
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017
2016 (Unaudited) (Dollars in thousands, except for
realized prices and per Boe data) Production:
Oil and condensate (MBbls) 911 1,015 2,597 2,848
Natural gas (MMcf)1 14,974 13,207
44,459 36,014 Equivalents (MBoe) 3,407 3,216
10,007 8,850
Revenue: Oil and condensate sales $ 41,361 $
42,780 $ 119,097 $ 104,581 Natural gas and natural gas liquids
sales1 45,047 38,986 142,651 85,706 Gain (loss) on commodity
derivative instruments (9,341 ) 7,813 35,387 (12,295
)
Lease bonus and other income 12,044 9,592
37,082 26,129 Total revenue $ 89,111 $
99,171 $ 334,217 $ 204,121
Realized prices: Oil and
condensate ($/Bbl) $ 45.39 $ 42.15 $ 45.87 $ 36.72 Natural gas
($/Mcf)1 3.01 2.95 3.21
2.38 Equivalents ($/Boe) $ 25.36 $ 25.42 $ 26.16 $ 21.50
Operating expenses: Lease operating expense $ 4,569 $ 5,007
$ 12,906 $ 14,179 Production costs and ad valorem taxes 11,549
9,228 35,314 23,301 Exploration expense 8 6 616 643 Depreciation,
depletion, and amortization 29,204 28,731 84,483 79,654 Impairment
of oil and natural gas properties — — — 6,775 General and
administrative 17,305 16,677 51,998 52,213
Per Boe: Lease
operating expense (per working interest Boe) $ 3.19 $ 4.25 $ 3.06 $
4.71 Production costs and ad valorem taxes 3.39 2.87 3.53 2.63
Depreciation, depletion, and amortization 8.57 8.93 8.44 9.00
General and administrative 5.08 5.19 5.20 5.90
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 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, distributable cash flow, and distributable cash
flow after net working interest capital expenditures 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. We define distributable cash
flow after net working interest capital expenditures as
distributable cash flow less net working interest capital
expenditures. Net working interest capital expenditures consists of
all capital expenditures related to working interest wells less the
recoupment of working interest expenditures under our farm-out
agreement.
Adjusted EBITDA, distributable cash flow, and distributable cash
flow after net working interest capital expenditures 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, distributable cash flow, and distributable cash
flow after net working interest capital expenditures 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, distributable cash flow, and distributable cash flow after
net working interest capital expenditures may differ from
computations of similarly titled measures of other companies.
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017 2016
(Unaudited) (In thousands) Net income (loss) $ 22,034
$ 37,535 $ 137,793 $ 27,474 Adjustments to reconcile to Adjusted
EBITDA: Depreciation, depletion and amortization 29,204 28,731
84,483 79,654 Interest expense 4,172 2,282 11,660 4,773 Impairment
of oil and natural gas properties — — — 6,775 Accretion of asset
retirement obligations 260 206 760 680 Equity-based compensation1
7,675 7,981 18,614 33,120 Unrealized (gain) loss on commodity
derivative instruments 14,320 (2,511 ) (23,048 ) 51,515
Adjusted EBITDA 77,665 74,224 230,262 203,991 Adjustments to
reconcile to distributable cash flow: Change in deferred revenue
(701 ) (396 ) (1,670 ) (175 ) Cash interest expense (3,946 ) (2,083
) (10,999 ) (4,179 ) (Gain) loss on sales of assets, net — — (931 )
(4,772 ) Estimated replacement capital expenditures2 (3,250 )
(3,750 ) (10,250 ) (7,500 ) Cash paid to noncontrolling interests
(24 ) (29 ) (90 ) (83 ) Redeemable preferred unit distributions
(666 ) (1,324 ) (2,452 ) (4,439 ) Distributable Cash Flow 69,078
66,642 203,870 182,843 Net working interest capital expenditures
(1,793 ) (26,329 ) (34,088 ) (63,039 ) Distributable cash flow
after net working interest capital expenditures $ 67,285 $
40,313 $ 169,782 $ 119,804 1 On April
25, 2016, the Compensation Committee of the Board approved a
resolution to change the settlement feature of certain employee
long-term incentive compensation plans from cash to equity. As a
result of the modification, $10.1 million of cash-settled
liabilities were reclassified to equity-settled liabilities during
the second quarter of 2016. 2 On August 3, 2016, the Board
established a replacement capital expenditure estimate of $15.0
million for the period of April 1, 2016 to March 31, 2017. There
was no established estimate of replacement capital expenditures
prior to this period. On June 8, 2017, the Board established a
replacement capital expenditure estimate of $13.0 million for the
period of April 1, 2017 to March 31, 2018.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171106006453/en/
Black Stone Minerals, L.P.Brent Collins, (713)
445-3200Vice President, Investor Relationsinvestorrelations@blackstoneminerals.com
Black Stone Minerals (NYSE:BSM)
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