Black Stone Minerals Q3 2024 Earnings Call Transcript

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November 5, 2024

Key Takeaways

  • Blackstone Minerals maintained its quarterly distribution of $0.375 per unit despite a slight decrease in production driven by natural gas market volatility.
  • The company completed approximately $15 million in grassroots mineral and royalty acquisitions during Q3 and has invested about $80 million since Q4 2023, aiming for accretive opportunities to strengthen its development pipeline.
  • Q3 production averaged 35,300 BOE/d from minerals and royalties (37,400 BOE/d total), generating net income of $92.7 million and adjusted EBITDA of $86.4 million, with distributable cash flow covering distributions about 1x.
  • Liquidity remains strong with $43 million in cash, no borrowings on a $375 million credit facility, and over 60% of remaining 2024 oil and gas volumes hedged (gas at ~$3.55/MMBtu), providing downside protection.
  • Operationally, Aethon brought three Shelby Trough wells online (20–25 MMcf/d each) and Comstock added multiple Toledo Bend wells (~25 MMcf/d), backed by amended joint exploration agreements to support ongoing rig and fracking activity.
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Earnings Conference Call
Black Stone Minerals Q3 2024
00:00 / 00:00

There are 5 speakers on the call.

Operator

Hello, everyone, and thank you for joining us today for this Blackstone Minerals Q3 2024 Earnings Conference Call. Today's session is also being recorded. And to get us started with opening remarks and introductions, I am pleased to turn the floor to Director of Finance, Mr. Mark Moe. Please go ahead, sir.

Speaker 1

Thank you, operator. Good morning to everyone. Thank you for joining us either by phone or online for Blackstone Minerals' Q3 2024 earnings conference call. Today's call is being recorded and will be available on our website along with the earnings release, which was issued last night. Before we start, I'd like to advise you that we will be making forward looking statements during this call about our plans, expectations and assumptions regarding our future performance.

Speaker 1

These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward looking statements. For a discussion of these risks, you should refer to the cautionary information about forward looking statements in our press release from yesterday in the Risk Factors section of our 2023 10 ks. We may refer to certain non GAAP financial measures that we believe are useful in evaluating our performance. Reconciliation of those measures to the most directly comparable GAAP measure and other information about these non GAAP metrics are described in our earnings press release from yesterday, which can be found on our website at www.blackstoneminerals.com. Joining me on the call from the company are Tom Carter, Chairman, CEO and President Taylor DeWalsh, Senior Vice President, Chief Financial Officer and Treasurer Gary Clark, Senior Vice President, Chief Commercial Officer and Steve Putman, Senior Vice President and General Counsel.

Speaker 1

I'll now turn the call over to Tom.

Speaker 2

Thanks, Mark. Good morning and thanks for joining us today. We had a successful Q3 and as previously announced, maintained our consistent distribution despite a decrease in production from last quarter driven by volatility in the natural gas area throughout the year. During the quarter, we progressed our mineral acquisition program and we continue working with our partners for long term development. We remain confident in the outlook across our acreage position and are focused on our targeted acquisition strategy to further enhance our existing long runway of high interest development opportunities.

Speaker 2

On the acquisition front, we continue to expand our asset footprint through the targeted grassroots acquisition program we previously discussed throughout the year. During the quarter, we added about $15,000,000 in minerals and royalty assets along with a substantial lease, all of which further build a contiguous asset for an operator for long term development. Thus far, we have acquired about $80,000,000 in minerals and royalty interest since the Q4 of 2023 and plan to continue pursuing accretive opportunities, which will ultimately drive long term value for our shareholders. In East Texas and Louisiana, we continue to work with multiple operators to promote development on our acreage, while we also monitor the current commodity environment and prepare the anticipated improvements in the natural gas market. In Shelby Trough, another 3 wells were brought online by Aethon in the Q3 with initial production rates in the 20,000,000 to 25,000,000 cubic feet per day range.

Speaker 2

We recently signed amendments to our existing joint exploration agreement and are currently looking at them operating 1 rig and fracking multiple wells in Angelina County. On the Louisiana side of the play, Comstock recently turned online multiple wells in the Toledo Bend area for about 25,000,000 cubic feet per day and we're excited about the ongoing activity in this area as we work with multiple operators to promote near term development. Overall, it was a successful quarter and we will continue to maintain our strategic objective of working with operators to achieve full development across all of our assets with the goal of accretive production growth through this active asset management and targeted acquisitions. With that, I'll turn it over to Taylor to walk through the financial details of the quarter.

Speaker 3

Thanks, Tom, and good morning, everyone. As Tom pointed out, we had a successful quarter despite continued commodity price volatility. Mineral and royalty production was 35,300 BOE per day in the Q3 and total production volumes were 37,400 BOE per day, both of which were down a bit from last quarter. We maintained our updated guidance from the Q1 and continue to thoughtfully review current market dynamics. Net income was $92,700,000 for the 3rd quarter with adjusted EBITDA being $86,400,000 63 percent of oil and gas revenue in the quarter came from oil and condensate production.

Speaker 3

We maintained our distribution at $0.375 per unit for the quarter or $1.50 on an annualized basis. Distributable cash flow for the quarter was $78,600,000 which represents approximately 1 times coverage for the quarter. Our solid balance sheet and ample liquidity gives us flexibility through these dynamic market cycles and provides the opportunity to focus on commercial opportunities in the short and long term. We appreciate working with our banking partners. And as of November 1, our credit facility was reaffirmed at $580,000,000 with total commitments remaining at $375,000,000 and there are currently no outstanding borrowings on our revolver.

Speaker 3

As of the end of last week, we had approximately $43,000,000 of cash. We are well hedged for the remainder of the year. Our 2024 natural gas hedges are at approximately $3.55 per MMBtu and comparing that to an average price in or out of $2.16 for the Q3, we benefited with a gas settlement of approximately $15,000,000 We have over 60% of our expected gas and oil volumes hedged for the remainder of 2024 that will help insulate our cash flows for near term price volatility. We also have attractive hedges in place for 2025 and we'll maintain our strategy of adding on additional hedges for 2026. Again, we had a successful quarter and we'll continue to focus on generating long term value for our shareholders.

Speaker 3

With that, I'd like to open the call for questions.

Operator

Gentlemen, thank you. We'll hear from Tim Rezvan at KeyBanc Capital Markets.

Speaker 4

Good morning folks and thank you for taking my question. I'd like to start first with the AFON update that you provided. I know you kind of put some factual sort of terms around there. Can you step back and give us kind of an idea on how you see activity level sort of trending going forward? I think the market consternation was on how 2025 volumes would look.

Speaker 4

If you could kind of just sort of step picture and say what is this amendment kind of what sort of visibility do you have over the next couple of years on activity? Thank you.

Speaker 3

Thanks, Tim. This is Taylor. I'll just start off and first off, I just want to say appreciate your report last night this morning. So just generally speaking, I think taking a step back and looking at the entire macro picture, we're certainly being thoughtful in thinking about natural gas activity across the entire basin. And we continue to work with our operators across all of Louisiana, Andes, Texas, as mentioned in Tom's remarks a little bit earlier.

Speaker 3

As it relates to Aethon, we continue to work with them as well. And certainly appreciate the activity in the current rig that they're running in the area. And we'll continue to work with all of our partners. So I hope that answers your question.

Speaker 4

So is that a way of saying you think there's going to be one dedicated rig on the area of interest?

Speaker 3

I'd say as far as exact rig activity, what I would say about Aethon activity just in the hole is that we continue to see them being active in the area. And as we've seen historically, they're going to maintain a level of commitment that they've been working and we're going to continue to work with them in developing the Shelby Trough.

Speaker 4

Okay. Okay. Appreciate that. And then, like you pivot to the Gulf Coast area, another kind of measured quarter of acquisitions about $15,000,000 and you've talked about the progression. Is this cadence of acquisition, is that reflective of your ability to get deals done or are you trying to be measured about the spending?

Speaker 4

Like theoretically, could you spend $50,000,000 or $100,000,000 if something came up next quarter? Just trying to understand kind of it sounds like there's a big opportunity set, but just trying to understand the measured spending to date and maybe where you think you could take that? Thanks.

Speaker 3

Yes, thanks. And that's a good question. And what I'd say is we're continuing to be thoughtful in the current market in our ability to acquire additional minerals in this area in the Gulf Coast that we're looking at. I'd say that we've reached a cadence that we feel pretty comfortable about, but we continue to look on a quarterly, monthly basis at what opportunities there are and assess those on an individual basis.

Speaker 4

Thank you.

Operator

Gentlemen, we have no signals from our phone audience. I'll turn it back to you for any additional or closing remarks.

Speaker 2

Okay. Well, thank you all. We don't have any additional questions. And again, we thank you for joining us today and we look forward to talking with you next quarter.

Operator

Ladies and gentlemen, this does conclude today's Blackstone Minerals conference call and we thank you all for your participation. You may now disconnect your lines.

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