BSM Black Stone Minerals LP

Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone Minerals," "Black Stone," or "the Company") today announces its financial and operating results for the first quarter of 2023.

Financial and Operational Highlights

• Mineral and royalty production for the first quarter of 2023 equaled 36.8 MBoe/d, a decrease of 8% over the prior quarter; total production, including working interest volumes, was 39.3 MBoe/d for the quarter.
• Net income for the first quarter was $134.4 million. Adjusted EBITDA for the quarter totaled $109.9 million, a decrease of 17% over the prior quarter.
• Distributable cash flow was $104.1 million for the first quarter, a decrease of 17% relative to the fourth quarter of 2022.
• Announced a distribution of $0.475 per unit with respect to the first quarter of 2023 and represents an increase of 19% over the common distribution paid to the first quarter of 2022. Distribution coverage for all units was 1.04x.
• Total outstanding debt at the end of the first quarter was zero; as of April 28, 2023, total debt remained at zero with $66 million of cash.
• Effective April 27, 2023, Black Stone’s borrowing base under its revolving credit facility was reaffirmed at $550 million, with $375 million of commitments.

Management Commentary

Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and Chairman commented, “We had a strong start to the year despite headwinds from weaker natural gas prices. We remain constructive on our long-term outlook and are encouraged by our development agreements with Aethon in the Shelby Trough and various operators in the Austin Chalk. As we continue to focus on growth in our existing assets, Black Stone is able to maintain the highest distribution level since going public.”

Quarterly Financial and Operating Results

Production

Black Stone Minerals reported mineral and royalty volume of 36.8 MBoe/d (78% natural gas) for the first quarter of 2023, compared to 40.0 MBoe/d for the fourth quarter of 2022 and 29.6 MBoe/d for the first quarter of 2022. The decrease was primarily driven by lower volumes in the Wolfcamp where several large suspense payments were received in the fourth quarter.

Working interest production for the first quarter of 2023 was 2.4 MBoe/d, representing an increase of 14% from the levels generated in the quarter ended December 31, 2022 and a decrease of 27% from the quarter ended March 31, 2022. The continued decline year over year in working interest volumes is consistent with the Company's decision to farm out its working-interest participation to third-party capital providers.

Total reported production averaged 39.3 MBoe/d (94% mineral and royalty, 78% natural gas) for the first quarter of 2023 compared to 42.1 MBoe/d and 32.9 MBoe/d for the quarters ended December 31, 2022 and March 31, 2022, respectively.

Realized Prices, Revenues, and Net Income

The Company’s average realized price per Boe, excluding the effect of derivative settlements, was $33.47 for the quarter ended March 31, 2023. This is a decrease of 34% from $50.66 per Boe from the fourth quarter of 2022 and a 35% decrease compared to $51.25 for the first quarter of 2022.

Black Stone reported oil and gas revenue of $118.3 million (51% oil and condensate) for the first quarter of 2023, a decrease of 40% from $196.2 million in the fourth quarter of 2022. Oil and gas revenue in the first quarter of 2022 was $151.6 million.

The Company reported a gain on commodity derivative instruments of $52.3 million for the first quarter of 2023, composed of a $13.3 million gain from realized settlements and a non-cash $39.0 million unrealized gain due to the change in value of Black Stone’s derivative positions during the quarter. Black Stone reported a gain of $31.4 million and a loss of $120.0 million on commodity derivative instruments for the quarters ended December 31, 2022 and March 31, 2022, respectively.

Lease bonus and other income was $4.0 million for the first quarter of 2023, primarily related to leasing activity in the Haynesville/Bossier and Wolfcamp. Lease bonus and other income for the quarters ended December 31, 2022 and March 31, 2022 was $2.8 million and $4.9 million, respectively.

The Company reported net income of $134.4 million for the quarter ended March 31, 2023, compared to net income of $183.2 million in the preceding quarter. For the quarter ended March 31, 2022, the Company reported a net loss of $7.0 million.

Adjusted EBITDA and Distributable Cash Flow

Adjusted EBITDA for the first quarter of 2023 was $109.9 million, which compares to $131.7 million in the fourth quarter of 2022 and $98.8 million in the first quarter of 2022. Distributable cash flow for the quarter ended March 31, 2023 was $104.1 million. For the quarters ended December 31, 2022 and March 31, 2022, distributable cash flow was $125.3 million and $92.6 million, respectively.

Financial Position and Activities

As of March 31, 2023, Black Stone Minerals had $19.2 million in cash and no amount was drawn under its credit facility. At the end of April, the Company had approximately $66 million in cash, and no debt was outstanding under the credit facility.

Subsequent to quarter-end, Black Stone's borrowing base was reaffirmed at $550 million and total commitments were $375 million. Black Stone is in compliance with all financial covenants associated with its credit facility.

During the first quarter of 2023, the Company made no repurchases of units under the Board-approved $75 million unit repurchase program.

First Quarter 2023 Distributions

As previously announced, the Board approved a cash distribution of $0.475 for each common unit attributable to the first quarter of 2023. The quarterly distribution coverage ratio attributable to the first quarter of 2023 was approximately 1.04x. These distributions will be paid on May 19, 2023 to unitholders of record as of the close of business on May 12, 2023.

Activity Update

Rig Activity

As of March 31, 2023, Black Stone had 78 rigs operating across its acreage position, a decrease relative to the 108 rigs on the Company's acreage as of December 31, 2022 and a decrease compared to the 88 rigs operating on the Company's acreage as of March 31, 2022. The decrease in rigs at the end of the first quarter was driven primarily by a reduction in the Wolfcamp which reverted to the average rig count throughout the first three quarters of 2022. Black Stone also saw a decrease in the Haynesville in response to lower natural gas prices.

Shelby Trough Development Update

Aethon has successfully turned 16 wells to sales and has commenced operations on 10 additional wells under the development agreement covering Angelina County. Aethon has successfully turned four wells to sales and has another nine wells awaiting completion operations under the separate development agreement covering San Augustine County. Additionally, XTO Energy has resumed drilling on the Company's Shelby Trough acreage in San Augustine County and has one well currently awaiting completion operations.

Austin Chalk Update

Black Stone has entered into agreements with multiple operators to drill wells in the areas of the Austin Chalk in East Texas, where we have significant acreage positions. The results of the 2021 three well test program in the Brookeland Field demonstrated that modern completion technology has the potential to greatly improve production rates and increase reserves when compared to the vintage, unstimulated wells in the Austin Chalk formation. Eight operators are actively engaged in redevelopment of the field, with two rigs running continuously in the play. To date, 22 wells with modern completions are now producing in the area, and an additional six wells are currently either being drilled or completed.

Update to Hedge Position

Black Stone has commodity derivative contracts in place covering portions of its anticipated production for 2023 and 2024. The Company's hedge position as of April 28, 2023 is summarized in the following tables:

Oil Hedge Position

 

 

 

 

Oil Swap

Oil Swap Price

 

 

MBbl

$/Bbl

 

1Q23

210

$79.44

 

2Q23

540

$80.80

 

3Q23

540

$80.80

 

4Q23

540

$80.80

 

1Q24

270

$69.79

 

2Q24

270

$69.79

 

3Q24

270

$69.79

 

4Q24

270

$69.79

 

Natural Gas Hedge Position

 

Gas Swap

Gas Swap Price

 

BBtu

$/MMbtu

2Q23

8,190

$5.15

3Q23

8,280

$5.15

4Q23

8,280

$5.15

1Q24

5,460

$3.64

2Q24

5,460

$3.64

3Q24

5,520

$3.64

4Q24

5,520

$3.64

More detailed information about the Company's existing hedging program can be found in the Quarterly Report on Form 10-Q for the first quarter of 2023, which is expected to be filed on or around May 2, 2023.

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 2023 on Tuesday, May 2, 2023 at 9:00 a.m. Central Time. Black Stone recommends participants who do not anticipate asking questions to listen to the call via the live broadcast available at http://investor.blackstoneminerals.com. Analysts and investors who wish to ask questions should dial (800)267-6316 for domestic participants and (203)518-9783 for international participants, the conference ID for the call is BSMQ123. A recording of the conference call will be available on Black Stone's website.

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 Company owns mineral interests and royalty interests in 41 states in the continental United States. Black Stone believes its large, diversified asset base and long-lived, non-cost-bearing mineral and royalty interests provide for stable to growing production and reserves over time, allowing the majority of generated cash flow to be distributed to 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 Company 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 Company’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 Company’s ability to execute its business strategies;
• the conflict in conflict in Ukraine and actions taken, and may in the future be taken, against Russia or otherwise as a result;
• the availability of U.S. liquefied natural gas ("LNG") export capacity and the level of demand for LNG exports;
• the volatility of realized oil and natural gas prices;
• the level of production on the Company’s properties;
• overall supply and demand for oil and natural gas, as well as regional supply and demand factors, delays, or interruptions of production;
• conservation measures, technological advances, and general concern about the environmental impact of the production and use of fossil fuels;
• the Company’s ability to replace its oil and natural gas reserves;
• the Company’s ability to identify, complete, and integrate acquisitions;
• general economic, business, or industry conditions;
• cybersecurity incidents, including data security breaches or computer viruses;
• competition in the oil and natural gas industry; and
• the availability, high cost, or shortages of rigs, equipment, raw materials, supplies, or personnel to develop and operate out properties; and
• the level of drilling activity by the Company's operators, particularly in areas such as the Shelby Trough where the Company has concentrated acreage positions.

 

BLACK STONE MINERALS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per unit amounts)

 

 

Three Months Ended March 31,

 

 

2023

 

 

 

2022

 

 

 

 

 

REVENUE

 

 

 

Oil and condensate sales

$

60,909

 

 

$

75,831

 

Natural gas and natural gas liquids sales

 

57,423

 

 

 

75,754

 

Lease bonus and other income

 

3,975

 

 

 

4,859

 

Revenue from contracts with customers

 

122,307

 

 

 

156,444

 

Gain (loss) on commodity derivative instruments

 

52,271

 

 

 

(120,020

)

TOTAL REVENUE

 

174,578

 

 

 

36,424

 

OPERATING (INCOME) EXPENSE

 

 

 

Lease operating expense

 

2,668

 

 

 

3,161

 

Production costs and ad valorem taxes

 

12,667

 

 

 

13,949

 

Exploration expense

 

4

 

 

 

180

 

Depreciation, depletion, and amortization

 

11,147

 

 

 

10,917

 

General and administrative

 

12,648

 

 

 

13,763

 

Accretion of asset retirement obligations

 

245

 

 

 

202

 

TOTAL OPERATING EXPENSE

 

39,379

 

 

 

42,172

 

INCOME (LOSS) FROM OPERATIONS

 

135,199

 

 

 

(5,748

)

OTHER INCOME (EXPENSE)

 

 

 

Interest and investment income

 

157

 

 

 

—

 

Interest expense

 

(814

)

 

 

(1,209

)

Other income (expense)

 

(99

)

 

 

(45

)

TOTAL OTHER EXPENSE

 

(756

)

 

 

(1,254

)

NET INCOME (LOSS)

 

134,443

 

 

 

(7,002

)

Distributions on Series B cumulative convertible preferred units

 

(5,250

)

 

 

(5,250

)

NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON UNITS

$

129,193

 

 

$

(12,252

)

ALLOCATION OF NET INCOME (LOSS):

 

 

 

General partner interest

$

—

 

 

$

—

 

Common units

$

129,193

 

 

$

(12,252

)

NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON UNIT:

 

 

 

Per common unit (basic)

$

0.62

 

 

$

(0.06

)

Per common unit (diluted)

$

0.60

 

 

$

(0.06

)

WEIGHTED AVERAGE COMMON UNITS OUTSTANDING:

 

 

 

Weighted average common units outstanding (basic)

 

209,941

 

 

 

209,323

 

Weighted average common units outstanding (diluted)

 

224,910

 

 

 

209,323

 

The following table shows the Company’s production, revenues, pricing, and expenses for the periods presented:

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

(Unaudited)

(Dollars in thousands, except for realized prices and per Boe data)

Production:

 

 

 

 

Oil and condensate (MBbls)

 

 

793

 

 

831

 

Natural gas (MMcf)1

 

 

16,452

 

 

12,759

 

Equivalents (MBoe)

 

 

3,535

 

 

2,958

 

Equivalents/day (MBoe)

 

 

39.3

 

 

32.9

 

Realized prices, without derivatives:

 

 

 

 

Oil and condensate ($/Bbl)

 

$

76.81

 

$

91.25

 

Natural gas ($/Mcf)1

 

 

3.49

 

 

5.94

 

Equivalents ($/Boe)

 

$

33.47

 

$

51.25

 

Revenue:

 

 

 

 

Oil and condensate sales

 

$

60,909

 

$

75,831

 

Natural gas and natural gas liquids sales1

 

 

57,423

 

 

75,754

 

Lease bonus and other income

 

 

3,975

 

 

4,859

 

Revenue from contracts with customers

 

 

122,307

 

 

156,444

 

Gain (loss) on commodity derivative instruments

 

 

52,271

 

 

(120,020

)

Total revenue

 

$

174,578

 

$

36,424

 

Operating expenses:

 

 

 

 

Lease operating expense

 

$

2,668

 

$

3,161

 

Production costs and ad valorem taxes

 

 

12,667

 

 

13,949

 

Exploration expense

 

 

4

 

 

180

 

Depreciation, depletion, and amortization

 

 

11,147

 

 

10,917

 

General and administrative

 

 

12,648

 

 

13,763

 

Other expense:

 

 

 

 

Interest expense

 

 

814

 

 

1,209

 

Per Boe:

 

 

 

 

Lease operating expense (per working interest Boe)

 

$

12.13

 

$

10.75

 

Production costs and ad valorem taxes

 

 

3.58

 

 

4.72

 

Depreciation, depletion, and amortization

 

 

3.15

 

 

3.69

 

General and administrative

 

 

3.58

 

 

4.65

 

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 Company 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 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 Black Stone's management and external users of the Company's financial statements such as investors, research analysts, and others, to assess the financial performance of its assets and ability to sustain distributions over the long term without regard to financing methods, capital structure, or historical cost basis.

The Company defines 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, if any, accretion of asset retirement obligations, unrealized gains and losses on commodity derivative instruments, non-cash equity-based compensation, and gains and losses on sales of assets, if any. Black Stone defines Distributable cash flow as Adjusted EBITDA plus or minus amounts for certain non-cash operating activities, cash interest expense, distributions to preferred unitholders, and restructuring charges, if any.

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 the Company's 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 U.S. GAAP financial measure. The Company's computation of Adjusted EBITDA and Distributable cash flow may differ from computations of similarly titled measures of other companies.

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

(Unaudited)

(In thousands, except per unit amounts)

Net income (loss)

 

$

134,443

 

 

$

(7,002

)

Adjustments to reconcile to Adjusted EBITDA:

 

 

 

 

Depreciation, depletion, and amortization

 

 

11,147

 

 

 

10,917

 

Interest expense

 

 

814

 

 

 

1,209

 

Income tax expense (benefit)

 

 

147

 

 

 

103

 

Accretion of asset retirement obligations

 

 

245

 

 

 

202

 

Equity–based compensation

 

 

2,118

 

 

 

4,551

 

Unrealized (gain) loss on commodity derivative instruments

 

 

(38,986

)

 

 

88,776

 

Adjusted EBITDA

 

 

109,928

 

 

 

98,756

 

Adjustments to reconcile to Distributable cash flow:

 

 

 

 

Change in deferred revenue

 

 

(5

)

 

 

(9

)

Cash interest expense

 

 

(559

)

 

 

(862

)

Preferred unit distributions

 

 

(5,250

)

 

 

(5,250

)

Distributable cash flow

 

$

104,114

 

 

$

92,635

 

 

 

 

 

 

Total units outstanding1

 

 

209,967

 

 

 

209,398

 

Distributable cash flow per unit

 

$

0.496

 

 

$

0.442

 

1

 

The distribution attributable to the three months ended March 31, 2023 is estimated using 209,966,519 common units as of April 28, 2023; the exact amount of the distribution attributable to the three months ended March 31, 2023 will be determined based on units outstanding as of the record date of May 13, 2023. Distributions attributable to the three months ended March 31, 2022 were calculated using 209,398,324 common units as of the record date of May 14, 2022.

 

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Black Stone Minerals, L.P. Contacts Evan Kiefer Interim Chief Financial Officer and Treasurer Telephone: (713) 445-3200 investorrelations@blackstoneminerals.com