Completes New Farmout Arrangement That
Further Supports Development Activity in East Texas; Schedules
Conference Call for 10:30 Central Time Today
Black Stone Minerals, L.P. (NYSE:BSM) (“Black Stone Minerals,”
“Black Stone,” or “the Partnership”) announces it has entered into
a definitive agreement to acquire a diverse set of mineral and
royalty assets for $340 million, to be funded primarily by the
private placement of newly issued Series B Cumulative Convertible
Preferred Units to an affiliate of The Carlyle Group. Black Stone
also announces it has entered into a farmout agreement that covers
substantially all of the Partnership's remaining working interests
in the Shelby Trough area of East Texas targeting the Haynesville
and Bossier shales for the next several years.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ President, Chief
Executive Officer, and Chairman, commented, “Black Stone has
several transactions to announce today that provide benefits to the
Partnership both near- and long-term. First, we’re acquiring a
sizable and diverse mineral and royalty package that substantially
expands our Permian and other positions, complements our overall
existing asset base extremely well, and is immediately accretive to
our distributable cash flow per unit. We see a great opportunity to
actively manage these assets to generate lease bonus and move more
lands into development. I am confident these assets will contribute
to the growth of our Partnership for years to come.”
Mr. Carter continued, “And with this acquisition we have also
established a new relationship with a high-quality capital provider
in The Carlyle Group. Carlyle has a well-earned track record of
success, and we’re excited to partner with them on this important
transaction. Finally, the new farmout announced today is another
example of how we’re able to create value from our core mineral and
royalty business. Together, these transactions further improve our
ability to grow production and increase cash flow for the benefit
of our unitholders, while reducing working interest capital
expenditures.”
Acquisition Overview
Black Stone Minerals has agreed to acquire a diverse mineral and
royalty package for $340 million from subsidiaries of Noble Energy,
Inc. (“Noble”). Highlights of the transaction include the
following:
- Approximately 1.1 million gross
(140,000 net) mineral acres, 380,000 gross acres of
non-participating royalty interests (“NPRI”), and 600,000 gross
acres of overriding royalty interests (“ORRI”) collectively spread
over 20 states with significant concentrations in Texas, Oklahoma,
and North Dakota.
- Increases the Partnership’s exposure in
the greater Permian Basin through the addition of approximately
8,300 net royalty acres1 in the Midland Basin and approximately
7,200 net royalty acres in the Delaware Basin, as well as increases
Black Stone’s exposure to the Bakken/Three Forks play by over
10,000 net royalty acres.
- Assets to be acquired also include
positions in the Powder River Basin in Wyoming, the SCOOP play in
Oklahoma, and the Granite Wash play in Texas.
- Estimated average daily production for
November 2017 of 2.6 MBoe/d, excluding NGLs (56% oil/44% natural
gas).
- Annualized current run-rate cash flows
of approximately $34 million per year.
The transaction is expected to close on November 28, 2017 with
an effective date as of July 1, 2017.
Including the acquisition of Noble’s assets, Black Stone has
closed or entered into agreements on 135 transactions in 2017
totaling approximately $500 million ($428 million in cash, $72
million in equity). These transactions include a total of
approximately 250,000 net mineral acres as well as 380,000 gross
acres of non-participating royalty interests and 600,000 gross
acres of overriding royalty interests. Among these mineral and
royalty interests are approximately 18,000 net royalty acres in the
core Midland and Delaware basins and approximately 57,000 net
royalty acres in the core of the Shelby Trough region of the
Haynesville/Bossier play. These acquisitions have also increased
Black Stone’s position in the Bakken/Three Forks plays, the Powder
River Basin, STACK/SCOOP plays, the Central Basin Platform, the
Cotton Valley play, and various other plays in East Texas.
Series B Cumulative Convertible Preferred Units
Black Stone Minerals has entered into a definitive agreement to
issue $300 million of Series B Cumulative Convertible Preferred
Units (the “Series B Preferred Units”) to an affiliate of The
Carlyle Group (“Carlyle”) at $20.3926 per preferred unit,
representing a 15% premium to the trailing 20-day volume-weighted
average price of the common units. Summary terms of the preferred
units include:
- Distributions of 7.0% per annum for six
years, and thereafter a distribution equal to the greater of 7.0%
or the yield on the 10-year Treasury plus 5.5%.
- The Series B Preferred Units are
convertible into common units of BSM on a one-to-one basis at the
purchaser’s option after two years. Black Stone can convert the
Series B Preferred Units after two years, subject to certain
conditions including minimum price and volume thresholds for Black
Stone’s common units.
- The Series B Preferred Units may be
redeemed by the Partnership after six years at 105% of the issuance
price, and at 100% of the issuance price each two-year anniversary
thereafter. The purchaser cannot force redemption by Black
Stone.
The transaction is expected to close on November 28, 2017, and
Black Stone intends to use the proceeds to partially fund the Noble
acquisition.
David Albert, Co-Head of the Carlyle Energy Mezzanine
Opportunities Fund, commented, “Tom Carter and his team have built
a best-in-class oil and gas minerals company. We are thrilled to be
partnered with them, and to provide capital to Black Stone Minerals
to support this important and synergistic asset acquisition.”
Pivotal Farmout Transaction
On November 21, 2017, Black Stone entered into a farmout
agreement with Pivotal Petroleum Partners (“Pivotal”), a portfolio
company of Tailwater Capital LLC, that covers substantially all of
the Partnership's remaining working interests in the Shelby Trough
area of East Texas targeting the Haynesville and Bossier shales for
the next several years.
Mr. Carter remarked, “The Shelby Trough is a part of our
portfolio where we have seen operators become increasingly active
over the last year. As we’ve previously discussed, Black Stone has
assembled an industry-leading mineral position in this part of the
Haynesville/Bossier play. We’ve also been able to attract
well-capitalized, high-quality operators to our acreage and have
provided incentives to allow for its active development. Following
our farmout earlier this year with Canaan Resource Partners, we
created a similarly sized working interest opportunity on our
minerals that we are now farming out. With this transaction, we
have essentially eliminated future drilling and completion capital
requirements related to our working interest assets in the Shelby
Trough for the foreseeable future, yet we will continue to benefit
from the working interest through a meaningful retained economic
interest in those wells through the farmout, in addition to our
base royalty. The tremendous success we are seeing from our
operating partners there exposes us to continued significant growth
in our royalty production and revenues from this play. We are
focused on managing and growing our mineral and royalty business,
and this is a great example of how we were able to add value to
that core business from the working interest optionality embedded
in our portfolio.”
Transaction highlights include:
- Farmout covers majority of Black Stone
Minerals’ Haynesville and Bossier shale acreage under active
development agreements in the Shelby Trough in Angelina and San
Augustine counties, Texas.
- Pivotal will receive the Partnership's
working interest in the remaining 20% of Black Stone's working
interest in the XTO Energy-operated wells (10% working interest on
an 8/8ths basis) not covered by the previously announced farmout
with Canaan Resource Partners, as well as 100% of Black Stone's
working interest (ranging from approximately 12.5% to 25% on an
8/8ths basis) in wells operated by its other major operator in the
area.
- Once Pivotal achieves a preferred
return, the majority of the farmed-out working interest and
associated net revenue interests revert to Black Stone with minimal
future capital obligations.
- Pivotal is obligated to fund Black
Stone's working interest in over 80 wells across several
development areas, subject to certain conditions. After fulfilling
its initial obligation, Pivotal will have the option to continue
funding development of the areas, also subject to certain
conditions for up to a total term of eight years.
Impact to Multi-Year Outlook
Management expects the announced transactions to have positive
impacts on a number of key performance measures in the coming
years, including increased production, reduced capital obligations,
and higher distributable cash flow per unit. The Partnership
expects to provide an updated multi-year outlook in the first
quarter of 2018.
Production
Black Stone has purposefully pivoted from direct working
interests to carried interests, as well as expanded its mineral and
royalty base significantly. Even with the reduction in projected
working interest production volumes as a result of the Pivotal
farmout, Black Stone expects total production volumes will increase
compared to previous guidance as a result of expanded mineral
ownership and activity in the Haynesville/Bossier, as well as the
announced Noble acquisition and the incorporation of recent
industry operating and permitting activity across the asset base.
Higher margin royalty production volumes are expected to make up a
larger percentage of that improved production forecast.
Net Working Interest Capital Expenditures
Through the Pivotal and the Canaan Resource Partners
transactions, Black Stone has farmed out all of its working
interest capital expenditures associated with drilling and
completing wells in the Shelby Trough for the foreseeable future
while ensuring development capital will continue to be invested in
the area. The Partnership estimates that total capital expenditures
by its partners in the farmout programs will exceed $100 million
per annum under full development.
Cash Flow Available for Distribution and Distribution
Coverage
The higher production levels and reduced working interest
capital expenditures are expected to benefit cash distributions
available for both common and subordinated unitholders. Black Stone
anticipates the transactions announced today and the improved
outlook for its base business will allow for subordinated units to
convert into common units at a conversion ratio greater than
previously provided in public disclosure. Even after taking into
account the increase in conversion ratio, the Partnership expects
to generate higher levels of distributable cash flow per unit,
which would allow for increased common unit distributions compared
to previous guidance and/or increased levels of distribution
coverage.
As discussed below under “Forward-Looking Statements,” there are
a number of factors that could cause the Partnership’s actual
results to differ materially from this outlook.
Advisors
BofA Merrill Lynch and Barclays served as lead placement agents
to Black Stone in connection with the private placement of the
Series B Cumulative Convertible Preferred Units. Vinson &
Elkins LLP acted as legal counsel in connection with the private
placement and Porter Hedges LLP advised Black Stone on the Noble
acquisition.
Conference Call
The Partnership will host a conference call to discuss these
recent developments on November 27, 2017 at 10:30 a.m. Central time
(11:30 a.m. Eastern time). Dial-in information is provided below. A
telephonic replay of the conference call will be available
approximately two hours after the call.
Call Type Phone Number
Conference ID Domestic participant
1-877-447-4732 6697799 Domestic replay
1-855-859-2056 6697799 International participant 1-615-247-0077
6697799 International replay 1-404-537-3406 6697799
Presentation materials, as well as access to the live webcast of
the conference call, can be accessed through the Investors section
of the Partnership’s website at www.blackstoneminerals.com.
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 complete
the transactions described in this press release;
- 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.
1 A net royalty acre (“NRA”) is the economic equivalent of one
surface acre leased at a 1/8th royalty
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171127005249/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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