WhiteHawk Income Q3 Earnings Call Highlights

Key Points

• WhiteHawk reported $18 million in third-quarter cash available for distribution, or $0.65 per share, with results including just five days of cash flow from its $105 million SJM II acquisition. The board approved a $0.50 quarterly dividend, covered 1.3 times by distributable cash.
• The company has signed or completed 22 acquisitions worth more than $157 million since its IPO. Recent acquisitions are expected to generate $5.6 million in cash flow in 2027 and $7.5 million in 2028, while management targets annual distributable cash above $2.80 per share in 2027 and $3 in 2028.
• Production rose 10% year over year, and WhiteHawk ended September with $23.6 million in cash and leverage of 0.4 times, below its approximately 1-times long-term target. It also reported substantial gas-price hedges for 2027 and 2028.

WhiteHawk Income NYSE: WHK, referred to as WhiteHawk Minerals on its earnings call, reported $18 million in third-quarter cash available for distribution and said its recent acquisitions are expected to increase cash flow per share over the next two years.

Chief Executive Officer Daniel Herz said the company had signed or completed 13 acquisitions totaling $45.5 million since its previous earnings call. Since its initial public offering five months earlier, WhiteHawk had signed or completed 22 acquisitions totaling more than $157 million, he said.

The company reported third-quarter net income of $6.9 million and cash available for distribution of $0.65 per share. The results included only five days of contributions from the $105 million SJM II acquisition, which closed Sept. 25.

Including a full quarter of cash flow from SJM II and using shares outstanding at the end of the period, cash available for distribution would have been $0.68 per share, Herz said. That compares with the $0.63 per share reported for the second quarter.

Acquisitions and production outlook

Chief Financial Officer Jeffrey Slotterback said the $45.5 million in newly announced acquisitions are expected to generate $5.6 million of cash flow in 2027 and $7.5 million in 2028. Herz said he expects the company’s base assets and further acquisition activity to help drive annual cash available for distribution per share well above $2.80 in 2027 and above $3 in 2028.

Third-quarter production increased 10% from a year earlier and 2% from the second quarter, Herz said. About 59% came from the Marcellus and Utica shales in Appalachia, while another 22% came from the Haynesville Shale.

Herz said WhiteHawk owns 80% of the SJM II asset base, which provides exposure to EQT and Antero in southwestern Pennsylvania and West Virginia. Further purchases are possible if WhiteHawk chooses to buy and the seller chooses to sell, he said.

The company continues to see $3 billion to $5 billion in potential strategic acquisitions in its core areas, Herz said, alongside more than $35 billion in opportunities to buy from individual mineral owners. He said WhiteHawk sees limited competition in Appalachia but more competition for smaller deals in the Haynesville.

Over time, the company expects 40% to 60% of its purchases to consist of producing assets, with the remainder in undeveloped assets, including wells in progress and permits, Herz said. He said WhiteHawk targets unlevered returns of 15% to 20% over the life of the portfolio it buys.

Revenue, hedges and dividend

WhiteHawk reported third-quarter revenue of $21.5 million, including a $1.4 million noncash unrealized loss on hedges. Excluding mark-to-market activity, net operating revenue was $22.9 million, Slotterback said. Operating revenue including a full quarter from acquired assets was $26.8 million, up 19.5% from the second quarter.

The company’s average realized natural gas price was $3.50 per Mcf including hedge settlements, compared with $2.53 before hedges. Pro forma for the acquisitions announced with earnings, WhiteHawk was hedged for 90% of 2027, more than 80% of 2028 and approximately 45% of 2029, Slotterback said.

The board approved a quarterly dividend of $0.50 per share, payable Nov. 30 to shareholders of record on Nov. 23. Slotterback said third-quarter cash available for distribution provided 1.3 times coverage of the dividend.

Balance sheet and operator activity

WhiteHawk ended September with $23.6 million in cash and approximately $62 million in notes outstanding after repaying $6.3 million of debt during the quarter. Its leverage was 0.4 times, Slotterback said, below its long-term target of approximately one times adjusted EBITDA.

The company funded the September SJM II acquisition in part with $75 million in gross proceeds from a common stock issuance and $50 million of Series E preferred equity. A subsequent acquisition closing was funded with cash and borrowings under its revolving credit facility, which had been undrawn at quarter-end, Slotterback said.

Herz said curtailments had a minimal impact across WhiteHawk’s existing holdings. He also said the proposed combination of operators EQT and Range could eventually support higher production and improved pricing, with benefits more likely to emerge in 2028 through 2030.

About WhiteHawk Income (NYSE:WHK)

WhiteHawk Income Corporation is a business development company focused on providing debt financing to middle-market businesses. Its investment strategy centers on privately negotiated loans, including senior secured loans, intended to generate income from its portfolio. The company primarily invests in U.S. businesses and is externally managed by WhiteHawk Capital Partners, an investment manager specializing in middle-market credit. Through its investments, WhiteHawk Income provides companies with access to financing while offering investors exposure to private credit.

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