Black Stone Minerals Q2 2024 Earnings Report

Black Stone Minerals EPS Results

• Actual EPS: $0.29
• Consensus EPS: $0.37
• Beat/Miss: Missed by -$0.08
• One Year Ago EPS: $0.35

Black Stone Minerals Revenue Results

• Actual Revenue: $109.62 million
• Expected Revenue: $124.24 million
• Beat/Miss: Missed by -$14.62 million
• YoY Revenue Growth: N/A

Black Stone Minerals Announcement Details

• Quarter: Q2 2024
• Date: 8/5/2024
• Time: After Market Closes
• Conference Call Date: Tuesday, August 6, 2024
• Conference Call Time: 10:00AM ET

Black Stone Minerals (NYSE:BSM) (NYSE: BSM) is a Houston‐based master limited partnership that owns mineral and royalty interests in oil, natural gas, and other energy-related resources. The company’s portfolio spans key onshore basins across North America, including the Permian, Eagle Ford, Bakken, Haynesville and Appalachia. By holding non-operated working interests and royalty positions, Black Stone Minerals benefits from production activities carried out by leading exploration and production companies without assuming direct drilling or operating responsibilities.

The partnership’s core activities involve the acquisition, management and leasing of mineral and royalty estates. Revenues are generated through the sale of produced hydrocarbons, which can include crude oil, condensate, natural gas, natural gas liquids and carbon dioxide. Black Stone Minerals also negotiates surface use agreements and pipeline easements on its acreage, providing additional income streams tied to midstream infrastructure development.

Tracing its heritage back over a century to private family land holdings in the Gulf Coast region, Black Stone Minerals has grown through strategic mineral acquisitions and joint venture partnerships. The company has established long-standing relationships with major and independent drillers, enhancing its ability to capture value during periods of production growth. Its team combines technical expertise in geology, land management and energy marketing to optimize the performance of its asset base.

Governed by an experienced board and led by a management team with deep roots in the oil and gas sector, Black Stone Minerals emphasizes disciplined capital deployment and operational transparency. While the partnership does not engage in day-to-day drilling operations, it maintains an active leasing program and continually seeks to expand its acreage position through targeted acquisitions. This focused approach supports the company’s objective of delivering stable cash flows and long-term value for unitholders.

Black Stone Minerals Q2 2024 Earnings Call Transcript

Key Takeaways

• Q2 production was flat at 40,400 BOE per day, driving $68 million net income and $100 million adjusted EBITDA, with 67% of revenues from oil and condensate.
• The quarterly distribution was maintained at $0.375 per unit (annualized $1.50) with 1.17x coverage, with excess cash deployed into growth opportunities.
• Since September 2023, the company has invested approximately $65 million in mineral and royalty acquisitions, including $26.5 million in Q2, to extend its development runway.
• Blackstone Minerals remains debt-free on its $375 million revolver with over $61 million cash and has hedged more than 60% of its 2024 gas volumes at $3.55/MMBtu, generating a ~$12 million realized gain.
• In the Shelby Trough and Gulf Coast, eight new wells came online averaging 25–30 MMcf/d initial rates, adding to over 15 Tcf of undeveloped inventory, with further wells scheduled in H2.

[Operator]

Good day, everyone, and welcome to today's Blackstone Minerals Q2 Earnings Call. At this time, all participants are in a listen only mode. Later, you'll have the opportunity to ask questions during the question and answer session. Please note this call may be recorded. I'll be standing by should you need any assistance.

[Operator]

It is now my pleasure to turn the conference over to Mr. Mark Moe, Director of Finance. Please go ahead.

[Speaker 1]

Thank you. Good morning to everyone. Thank you for joining us either by phone or online for Blackstone Minerals' Q2 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 and 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.

[Speaker 1]

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 Cary Clark, Senior Vice President, Chief Commercial Officer and Steve Putman, Senior Vice President and General Counsel. I'll now turn the call over to Tom.

[Speaker 2]

Good morning and thank you all for joining us today. In the Q2, we continued to see solid results from our unique asset base and we remain focused on our organic growth strategy along with targeted acquisitions to further enhance our existing long runway of high interest development opportunities. Total production for the quarter was in line with the Q1 at 40,400 BOE per day, which generated $68,000,000 of net income and just over $100,000,000 of adjusted EBITDA. 67% of our oil and gas revenues in the quarter came from oil and condensate production. We maintained our distribution at 0.37 $5 per unit with excess coverage utilized on growth opportunities.

[Speaker 2]

With our clean balance sheet, commercial strategy and asset mix, we're uniquely positioned to remain focused on the long term decision making opportunities. Strong oil production and revenues for multiple basins as well as constructive natural gas outlook remain the foundation of very positive future for the company. On the acquisitions front, as we discussed previously, starting in the Q4 of 2023, we expanded our commercial initiatives to include a targeted grassroots acquisition program to enhance our existing asset position and to elongate our runway of development opportunities. During the quarter, we added another 26 $500,000 in minerals and royalty acquisitions and have acquired about $65,000,000 in minerals and royalty interest in these areas since September of 2023. We continue to see accretive opportunities to add to our position and we which will ultimately add value for our shareholders.

[Speaker 2]

In East Texas and Louisiana, we continue to work with multiple operators to promote development on our acreage while monitoring the current environment and preparing for the anticipated improvement in the natural gas market. We also remain focused on the Shelby trough operations and our extensive undeveloped inventory totaling over 15 Tcf of Gulf Coast resource with multiple successful recent well results. Another 8 wells on our minerals were brought online in the 2nd quarter in this area with initial rates in the range of 25,000,000 to 30,000,000 cubic feet per day. And several more wells are scheduled to come online in the second half of the year after being drilled in the first half of the year. Overall, it was a strong quarter and we've maintained our strategic objective working with the operators to achieve full field development across all of our assets.

[Speaker 2]

We continue looking toward the future by advancing our commercial initiatives and growing production and returning the distribution to the high watermark previously set. With that, I'll turn it over to Taylor to walk through the financial details of the quarter.

[Speaker 3]

Thanks, Tom. Good morning, everyone. As Tom pointed out, we had a very solid second quarter. Mineral royalty production was 38,200 BOE per day and total production volumes were just over 40,000 BOE per day, both of which are about flat from last quarter. We saw an increase in our oil volumes, which helped offset the continued downturn in the gas market.

[Speaker 3]

We maintain our updated full year guidance from the Q1, continuing to thoughtfully review current market dynamics. As Tom previously mentioned, net income was $68,300,000 for the quarter with adjusted EBITDA being $100,200,000 We previously announced that our distribution for the quarter was $0.375 per unit or $1.50 on an annualized basis. Distributable cash flow for the quarter was $92,500,000 which represents 1.17x coverage for the quarter. Our Board elected to keep the distribution flat from the previous quarter so that we can continue to use the excess coverage to pursue attractive mineral and royalty acquisitions. We continue to have a strong balance sheet because of flexibility through these dynamic market cycles.

[Speaker 3]

Total commitments under the credit facility remain at $375,000,000 and there are currently no outstanding borrowings on the revolver. As of the end of last week, we had just over $61,000,000 in cash. We are well hedged for the remainder of the year. Our 2024 natural gas hedges are approximately $3.55 per MMBtu, Comparing that to an average price at Henry Hub of about $2 per MMBtu for the Q2, we benefited with a realized gain of approximately $12,000,000 We have over 60% of our expected volumes hedged for the remainder of 2024 that will help insulate our cash flows from near term price Again, we

[Speaker 4]

had another

[Speaker 3]

solid Again, we had another solid quarter and we'll continue to focus on generating long term value for our shareholders. With that, we'll open the call for questions.

[Operator]

And our first question will come from Tim Rezvanus with KeyBanc.

[Speaker 4]

Good morning folks and thank you for taking my questions. My first question, in the release you gave some comments on Aethon, but I was hoping to maybe give a little more color. You mentioned in the release delayed initial production from some wells in the Q2. Can you clarify what that means? Is that a deferred tilt or are they choking back production?

[Speaker 4]

And then if you could kind of get broader comments on if AFON has sort of formally come out of it this time out that they answered in December? Thank you.

[Speaker 3]

Thanks, Jim. Appreciate the question. And I guess this is Tanner. I'll take a quick passage, just your first part of that question on the delayed production to clarify what we said in the release. So we had previously announced that there was a number of wells that the first production date was just going to be delayed a little bit.

[Speaker 3]

And so the comment there in the release is specific to those wells that were previously announced, and we're excited to see those wells go ahead and come online. Like we mentioned 8 of the 10 and anticipate the other 2 coming online in the second half of the year.

[Speaker 4]

Okay. Okay. So that's the IP rate you gave suggests those are the typical fully producing rates. Okay. And then can you clarify on the time out part of that question?

[Speaker 4]

Are they officially out? Do you get notification? How does that process work?

[Speaker 5]

Hi, Tim. This is Carrie Clark. Yes, I think not to we can't really speak to that not withholding any inspiration, but I think what was put in the press release is we're still talking with Aethon as far as a formal declaration of coming out of quote coming out of time out. That's not really something that we can speak to definitively right now. But I can say that they did spud 3 new wells in February and those wells I think have just come online.

[Speaker 5]

We have not seen initial production rates yet, but we're still talking with them on how best to move forward holistically.

[Speaker 4]

Okay. Okay. I understand. Appreciate that. And then as my follow-up, in the release, you continue to highlight mineral acquisitions in this emerging but not yet disclosed Gulf Coast area.

[Speaker 4]

And I was curious kind of what is precluding you from discussing it more openly? Is there a critical mass of acreage you want to acquire? Are you waiting to get some sort formal agreement with an operator? I really think you can't give color, but I was wondering if you could give a little more detail on what the posts are to evolve that process? Thank you.

[Speaker 5]

Sure. Yes. I mean, we're as is pretty standard, we're not seeking in a great amount of detail publicly or formally about that acquisition program, but we've shared quite a bit of information about it. We're just still trying to maintain we're trying to assimilate a position that's accretive to the position that we already have that lines up with the science and some technical work that we've done over the last year. And it's that I think pretty much covers it as far as the acquisition program.

[Speaker 4]

Okay. Sorry, I understand you can't say too much. Thanks.

[Speaker 3]

Thanks, Tim.

[Operator]

Thank you. And looks like we have no additional questions at this time. I'd like to pass it now back to speakers for any closing remarks.

[Speaker 2]

Okay. Thank you all very much for joining us for the 2Q 'twenty four earnings call and we look forward to speaking with you at the next quarter. Thank you so much.

[Operator]

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.