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 2018 and recent
developments after quarter-end.
Highlights
- Partnership reports quarterly
production of 42.4 Mboe/d, an increase of 11% over the fourth
quarter of 2017.
- Reported oil and gas revenues of $126.2
million and lease bonus and other income of $4.6 million for the
quarter.
- Generated net income of $42.0 million
and Adjusted EBITDA of $95.0 million.
- Reported distributable cash flow of
$83.4 million, resulting in distribution coverage for all units of
1.6x.
- Acquired $32.2 million in mineral and
royalty assets for cash during the quarter, led by a sizeable
acquisition in the Midland Basin.
- After quarter-end, borrowing base
increased to $600 million from $550 million.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ President, Chief
Executive Officer, and Chairman, commented, "Black Stone had a
strong quarter to begin 2018. We set new quarterly records for
production, Adjusted EBITDA, and Distributable Cash Flow. Our
assets continue to perform well across the board. We had strong
production from the Bakken and Permian, and we are seeing a ramp-up
in Haynesville completions that should drive continued production
growth in the second quarter. The mineral and royalty assets that
we acquired from Noble Energy in late 2017 are performing above our
expectations. We also continued to bolster our core positions in
the Midland Basin and the East Texas Haynesville/Bossier play
through targeted acquisitions in the first quarter of 2018. As
such, Black Stone is well positioned to deliver on our commitment
to increase distributions to common and subordinated unitholders to
an annualized rate of $1.35 per unit next quarter."
Quarterly Financial and Operating Results
Production
Black Stone reported average production of 42.4 MBoe/d (67%
mineral and royalty, 69% natural gas) for the first quarter of
2018. This represents an increase of 19% over average production of
35.6 MBoe/d for the corresponding period in 2017 and is 11% higher
than average daily production in the fourth quarter of 2017.
Production for the period benefited from a particularly strong
contribution from the Bakken/Three Forks program, where the
Partnership is seeing increased industry activity over the last
year.
Realized Prices, Revenues, and Net Income
The Partnership’s average realized price per Boe, excluding the
effect of derivative settlements, was $33.10 for the quarter ended
March 31, 2018. This represents a 17% increase from the
preceding quarter and is 20% higher than the $27.52 per Boe
reported for the quarter ended March 31, 2017.
Black Stone reported oil and gas revenues of $126.2 million (58%
oil and condensate) for the first quarter of 2018, an increase of
43% from $88.2 million for the first quarter of 2017. This increase
in oil and gas revenue was driven by the aforementioned increases
in reported production volumes and realized pricing. Oil and gas
revenue in the fourth quarter of 2017 was $98.9 million.
The Partnership recognized a loss on commodity derivative
instruments of $16.3 million in the first quarter of 2018, composed
of a $4.3 million loss from realized settlements and a $12.0
million unrealized loss due to the change in value of the
Partnership’s derivative positions during the quarter. In the first
quarter of 2017, the Partnership reported a gain on commodity
derivative instruments of $22.7 million.
Black Stone recognized $4.6 million in lease bonus and other
income in the first quarter of 2018, the majority of which related
to the Canyon Lime and other plays in the Mid-Continent. The
Partnership reported $13.7 million in lease bonus and other income
in the same period in 2017.
The Partnership reported net income of $42.0 million, which
includes the non-cash derivative loss described above, for the
quarter ended March 31, 2018, compared to net income of $61.6
million in the corresponding period in 2017.
Adjusted EBITDA and Distributable Cash Flow
Black Stone reported Adjusted EBITDA of $95.0 million for the
first quarter of 2018, compared to $77.9 million for the
corresponding quarter in 2017 and $79.5 million in the fourth
quarter of 2017. Distributable cash flow for the first quarter of
2018 was $83.4 million, an increase of 22% from the $68.5 million
reported in the first quarter of 2017 and a 20% increase from the
$69.4 million in the fourth quarter of 2017. These results for the
first quarter of 2018 are both quarterly records for the
Partnership as a publicly traded partnership.
Financial Position
As of March 31, 2018, the Partnership had $6.3 million in cash
and $436.0 million outstanding under its credit facility.
Subsequent to quarter-end, the borrowing base was increased to
$600.0 million as part of a regularly scheduled semi-annual
redetermination process. As of May 4, 2018, the Partnership had
$394.0 million outstanding under the credit facility and $12.5
million in cash, providing $218.5 million in available liquidity.
Black Stone Minerals is in compliance with all financial covenants
associated with its credit facility.
Hedge Position
Black Stone has commodity derivative contracts in place covering
significant portions of its anticipated production for the
remainder of 2018 and 2019. For the balance of 2018, approximately
83% of expected oil volumes are hedged at prices averaging $55.24
per barrel and approximately 74% of expected gas volumes are hedged
at prices averaging $3.01 per Mcf. For 2019, approximately 48% of
anticipated oil volumes are hedged at prices averaging $56.57 per
barrel and approximately 39% of expected gas volumes are hedged at
an average price of $2.86 per Mcf. More detailed information about
the Partnership's existing hedge position can be found in the
Quarterly Report on Form 10-Q for the three months ended March 31,
2018, which is expected to be filed on or around May 8, 2018.
Acquisitions
Black Stone acquired $32.2 million of properties for cash in the
first quarter of 2018. Included in that amount was a $22.6 million
mineral package in the Midland Basin. Additionally, the Partnership
continued to consolidate its acreage position in the Shelby Trough
area in East Texas.
Working Interest Capital Expenditures
The Partnership invested a net total of $28.2 million in working
interest capital during the first quarter of 2018, inclusive of
$18.0 million in reimbursements from farmout partners. The majority
of this capital is related to its participation in the completion
of wells drilled on its Haynesville/Bossier properties in the
Shelby Trough of East Texas prior to the previously announced
farmouts with Canaan Resource Partners and Pivotal Petroleum
Partners. As a result of those farmouts, the Partnership expects
the first quarter of 2018 to be the last quarter of meaningful
working interest participation capital expenditures related to the
Haynesville/Bossier development.
The Partnership expects net working interest capital
expenditures to total $32 to $40 million during 2018. Spending
related to Black Stone's participation in Haynesville/Bossier
development for 2018 is expected to be $20 to $25 million net of
farmout reimbursements, the vast majority of which was incurred in
the first quarter. Black Stone also intends to invest $12 to $15
million delineating its PepperJack prospect in Hardin and Liberty
counties, Texas during 2018. The PepperJack A#1 well, targeting the
Lower Wilcox formation in Southeast Texas, was drilled and logged
during the first quarter of 2018 at a cost of $6.3 million with
encouraging results. The PepperJack B#1 well will be drilled during
the second quarter of this year. Black Stone plans to ultimately
market the development project to an operator to complete these
wells and develop the field. The Partnership expects to receive
substantial reimbursement of prior capital expenditures, lease
bonus consideration, and a healthy continuous drilling commitment
from the operator, while retaining a meaningful royalty interest in
the project going forward.
Distributions
The Board of Directors of the general partner (the "Board") has
approved cash distributions attributable to the first quarter of
2018 of $0.3125 per common unit and $0.20875 per subordinated unit.
Distributions will be payable on May 24, 2018 to unitholders of
record on May 17, 2018. The quarterly distribution coverage ratio
attributable to the first quarter of 2018 was approximately 1.6x
for all units (2.5x for common units).
2018 Outlook
Black Stone generally reviews its guidance on a semi-annual
basis unless circumstances suggest there has been a material change
that warrants updating information for the investment community.
The following items have changed since the original budget was
announced and should be noted for financial modeling purposes:
- DD&A - Black Stone is reducing its
2018 DD&A per BOE guidance to $7.50 - $8.50 per Boe, down from
$8.00 - $9.00 per Boe. The change is primarily a result of higher
proved reserves at year-end 2017 compared to what had been assumed
for budgeting purposes.
- Maintenance Capital - On April 27,
2018, the Board of Directors approved a replacement capital
expenditure estimate of $11.0 million for the period from April 1,
2018 to March 31, 2019. The decrease from the prior twelve-month
estimate of $13.0 million reflects the decline of working interest
as a driver of reserve replacement for the Partnership going
forward.
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 2018 on Tuesday, May 8, 2018 at 9:00 a.m. Central Time. To join
the call, participants should dial (877) 447-4732 and use
conference code 8485889. 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 7, 2018.
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 37.0% for individuals.
BLACK STONE MINERALS, L.P.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
(In thousands, except per unit
amounts)
Three Months EndedMarch
31,
2018 2017 REVENUE Oil and condensate
sales $ 72,983 $ 40,474 Natural gas and natural gas liquids sales
53,245 47,701 Lease bonus and other income 4,599 13,682
Revenue from contracts with customers 130,827 101,857 Gain
(loss) on commodity derivative instruments (16,333 ) 22,725
TOTAL REVENUE 114,494 124,582 OPERATING (INCOME)
EXPENSE Lease operating expense 4,248 4,189 Production costs and ad
valorem taxes 14,925 11,902 Exploration expense 3 562 Depreciation,
depletion, and amortization 28,570 26,379 General and
administrative 18,521 17,212 Accretion of asset retirement
obligations 269 247 (Gain) loss on sale of assets, net (2 ) (924 )
TOTAL OPERATING EXPENSE 66,534 59,567 INCOME (LOSS)
FROM OPERATIONS 47,960 65,015 OTHER INCOME (EXPENSE) Interest and
investment income 33 6 Interest expense (4,521 ) (3,507 ) Other
income (expense) (1,515 ) 69
TOTAL OTHER EXPENSE
(6,003 ) (3,432 ) NET INCOME (LOSS) 41,957 61,583 Net (income) loss
attributable to noncontrolling interests (27 ) (9 ) Distributions
on Series A redeemable preferred units (25 ) (1,114 ) Distributions
on Series B cumulative convertible preferred units (5,250 ) —
NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND
COMMON AND SUBORDINATED UNITS $ 36,655 $ 60,460
ALLOCATION OF NET INCOME (LOSS): General partner interest $ — $ —
Common units 24,329 35,517 Subordinated units 12,326 24,943
$ 36,655 $ 60,460 NET INCOME (LOSS)
ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT:
Per common unit (basic) $ 0.23 $ 0.37 Weighted
average common units outstanding (basic) 103,774 96,901
Per subordinated unit (basic) $ 0.13 $ 0.26
Weighted average subordinated units outstanding (basic) 95,395
95,149 Per common unit (diluted) $ 0.23 $ 0.37
Weighted average common units outstanding (diluted) 103,774
97,590 Per subordinated unit (diluted) $ 0.13
$ 0.26 Weighted average subordinated units outstanding
(diluted) 95,395 95,149 DISTRIBUTIONS DECLARED AND
PAID: Per common unit $ 0.3125 $ 0.2875 Per
subordinated unit $ 0.2088 $ 0.1838
The following table shows the Partnership’s production,
revenues, realized prices, and expenses for the periods
presented.
Three Months Ended March 31, 2018
2017
(Unaudited)(Dollars in
thousands, except forrealized prices and per Boe
data)
Production: Oil and condensate (MBbls) 1,190 861
Natural gas (MMcf)1
15,742 14,060 Equivalents (MBoe) 3,814 3,204
Revenue:
Oil and condensate sales $ 72,983 $ 40,474
Natural gas and natural gas liquids
sales1
53,245 47,701 Lease bonus and other income 4,599 13,682
Revenue from contracts with customers 130,827 101,857 Gain (loss)
on commodity derivative instruments (16,333 ) 22,725 Total revenue
$ 114,494 $ 124,582
Realized prices: Oil and condensate
($/Bbl) $ 61.33 $ 47.01 Natural gas ($/Mcf)1 3.38 3.39
Equivalents ($/Boe) $ 33.10 $ 27.52
Operating expenses:
Lease operating expense $ 4,248 $ 4,189 Production costs and ad
valorem taxes 14,925 11,902 Exploration expense 3 562 Depreciation,
depletion, and amortization 28,570 26,379 General and
administrative 18,521 17,212
Per Boe: Lease operating
expense (per working interest Boe) $ 3.38 $ 3.19 Production costs
and ad valorem taxes 3.91 3.71 Depreciation, depletion, and
amortization 7.49 8.23 General and administrative 4.86 5.37
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, 2018
2017 (Unaudited) (In thousands) Net income $
41,957 $ 61,583 Adjustments to reconcile to Adjusted EBITDA:
Depreciation, depletion and amortization 28,570 26,379 Interest
expense 4,521 3,507 Income tax expense 1,507 — Accretion of asset
retirement obligations 269 247 Equity–based compensation 6,226
4,661 Unrealized (gain) loss on commodity derivative instruments
11,958 (18,447 ) Adjusted EBITDA 95,008 77,930 Adjustments
to reconcile to distributable cash flow: Deferred revenue 1,303
(325 ) Cash interest expense (4,316 ) (3,292 ) (Gain) loss on sale
of assets, net (2 ) (924 ) Estimated replacement capital
expenditures1 (3,250 ) (3,750 ) Cash paid to noncontrolling
interests (52 ) (25 ) Preferred unit distributions (5,275 ) (1,114
) Distributable cash flow $ 83,416 $ 68,500 1
On August 3, 2016, the Board of Directors of our general
partner (the “Board”) approved a replacement capital expenditure
estimate of $15.0 million for the period of April 1, 2016 to March
31, 2017. 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180507006100/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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