Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone Minerals,"
"Black Stone," or "the Company") today announces its financial and
operating results for the third quarter of 2023.
Financial and Operational Highlights
- Mineral and royalty production for the third quarter of 2023
equaled 40.3 MBoe/d, an increase of 20% over the prior quarter;
total production, including working-interest volumes, was 42.6
MBoe/d for the quarter.
- Net income for the third quarter was $62.1 million. Adjusted
EBITDA for the quarter totaled $130.0 million.
- Distributable cash flow was $124.4 million for the third
quarter, making the sixth consecutive quarter above $100
million.
- Black Stone announced a distribution of $0.475 per unit with
respect to the third quarter of 2023, representing an increase of
6% over the common distribution paid for the third quarter of 2022.
Distribution coverage for all units was 1.25x.
- Total outstanding debt at the end of the third quarter was
zero; as of October 27, 2023, total debt remained at zero with
$90.6 million of cash.
- Approved a $150 million common unit repurchase program.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ Chairman, Chief
Executive Officer and President, commented, “We had a very strong
third quarter driven by production exceeding our expectations and
improving commodity prices. As a result, Black Stone was able to
maintain its distribution at an annualized rate of $1.90 per unit
with over 1.25x coverage for the quarter. With our existing
development contracts and robust activity on our acreage, we now
believe our production for the full year will come in at the upper
end of our guidance range of 37 to 39 Mboe per day.”
Quarterly Financial and Operating Results
Production
Black Stone Minerals reported mineral and royalty volume of 40.3
MBoe/d (72% natural gas) for the third quarter of 2023, compared to
33.6 MBoe/d for the second quarter of 2023 and 37.3 MBoe/d for the
third quarter of 2022. The increase was primarily driven by new
wells coming online in the Permian and the Shelby Trough.
Working-interest production for the third quarter of 2023 was
2.3 MBoe/d, representing a decrease of 12% from the levels
generated in the quarter ended June 30, 2023, and a decrease of 12%
from the quarter ended September 30, 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 42.6 MBoe/d (95% mineral and
royalty, 72% natural gas) for the third quarter of 2023, compared
to 36.2 MBoe/d and 40.0 MBoe/d for the quarters ended June 30, 2023
and September 30, 2022, respectively.
Realized Prices, Revenues, and Net Income
The Company’s average realized price per Boe, excluding the
effect of derivative settlements, was $34.30 for the quarter ended
September 30, 2023. This is an increase of 9% from $31.35 per Boe
in the second quarter of 2023 and a 42% decrease from $59.30 in the
third quarter of 2022.
Black Stone reported oil and gas revenue of $134.5 million (64%
oil and condensate) for the third quarter of 2023, an increase of
30% from $103.2 million in the second quarter of 2023. Oil and gas
revenue in the third quarter of 2022 was $218.0 million.
The Company reported a loss on commodity derivative instruments
of $26.9 million for the third quarter of 2023, composed of a $24.2
million gain from realized settlements and a non-cash $51.1 million
unrealized loss due to the change in value of Black Stone’s
derivative positions during the quarter. Black Stone reported a
gain of $11.3 million and a loss of $4.7 million on commodity
derivative instruments for the quarters ended June 30, 2023 and
September 30, 2022, respectively.
Lease bonus and other income was $2.2 million for the third
quarter of 2023, primarily related to leasing activity in the
Haynesville/Bossier. Lease bonus and other income for the quarters
ended June 30, 2023 and September 30, 2022 was $2.5 million and
$3.2 million, respectively.
The Company reported net income of $62.1 million for the quarter
ended September 30, 2023, compared to net income of $78.4 million
in the preceding quarter. For the quarter ended September 30, 2022,
the Company reported net income of $168.5 million.
Adjusted EBITDA and Distributable Cash Flow
Adjusted EBITDA for the third quarter of 2023 was $130.0
million, which compares to $109.2 million in the second quarter of
2023 and $123.1 million in the third quarter of 2022. Distributable
cash flow for the quarter ended September 30, 2023 was $124.4
million. For the quarters ended June 30, 2023 and September 30,
2022, distributable cash flow was $103.6 million and $116.5
million, respectively.
Financial Position and Activities
As of September 30, 2023, Black Stone Minerals had $56.0 million
in cash, with nothing drawn under its credit facility. At the end
of October, the Company had approximately $90.6 million in cash,
and no debt was outstanding under the credit facility.
Effective October 30, 2023, Black Stone's borrowing base under
the credit facility was increased from $550 million to $580 million
and total commitments under the credit facility were maintained at
$375 million. Black Stone is in compliance with all financial
covenants associated with its credit facility.
Third Quarter 2023 Distributions
As previously announced, the Board approved a cash distribution
of $0.475 for each common unit attributable to the third quarter of
2023. The quarterly distribution coverage ratio attributable to the
third quarter of 2023 was approximately 1.25x. The distribution
will be paid on November 16, 2023 to unitholders of record as of
the close of business on November 9, 2023.
Activity Update
Rig Activity
As of September 30, 2023, Black Stone had 76 rigs operating
across its acreage position, an increase relative to the 73 rigs on
the Company's acreage as of June 30, 2023, and a decrease from the
92 rigs operating on the Company's acreage as of September 30,
2022. The increase in rigs at the end of the third quarter compared
to the second quarter was driven primarily by an increase in
activity in the Gulf Coast and Haynesville/Bossier plays.
Shelby Trough Development Update
Aethon continues to perform with drilling and completing wells
according to our development agreements. Aethon has six rigs
currently on Black Stone acreage in the Shelby Trough. It has
successfully turned 18 wells to sales and has commenced operations
on 28 additional wells under the development agreement covering
Angelina County. Aethon has successfully turned ten wells to sales
and has another seven wells awaiting completion operations under
the separate development agreement covering San Augustine County.
Additionally, XTO Energy 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 the Company has 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. To date, 26 wells with modern completions are now
producing in the field, and an additional three wells are currently
either being drilled or completed.
Update to 2023 Guidance
The Company now expects total production for 2023 to be at the
upper end of the guidance range of 37 to 39 Mboe/d. The Company
expects lease operating expenses to be in line with the revised
guidance range of $11 to $12 million and production costs as a
percentage of oil and gas revenues to be in line with the revised
guidance range of 10% to 12%. Black Stone expects cash G&A to
be on the low end of the guidance range of $42 to $44 million. The
Company expects non-cash G&A to be at the low end of the
revised guidance range of $11 to $13 million.
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 October 27, 2023 is summarized in
the following tables:
Oil Hedge Position
Oil Swap
Oil Swap Price
MBbl
$/Bbl
4Q23
540
$80.80
1Q24
570
$71.45
2Q24
570
$71.45
3Q24
570
$71.45
4Q24
570
$71.45
Natural Gas Hedge Position
Gas Swap
Gas Swap Price
BBtu
$/MMbtu
4Q23
8,280
$5.15
1Q24
10,010
$3.57
2Q24
10,010
$3.57
3Q24
10,120
$3.57
4Q24
10,120
$3.57
More detailed information about the Company's existing hedging
program can be found in the Quarterly Report on Form 10-Q for the
third quarter of 2023, which is expected to be filed on or around
October 31, 2023.
Unit Repurchase Program
During the third quarter of 2023, the Company made no
repurchases of units under the $75 million unit repurchase program
approved by the Board in 2018. Subsequent to quarter-end, the Board
terminated that plan and authorized a $150 million unit repurchase
program. The unit repurchase program authorizes the Company to make
repurchases on a discretionary basis as determined by management,
subject to market condition, applicable legal requirements,
available liquidity, and other appropriate factors. All or a
portion of any repurchases may be made under a Rule 10b5-1 plan,
which would permit common units to be repurchased when the Company
might otherwise be precluded from doing so under applicable laws.
The repurchase program does not obligate the Company to acquire any
particular number of common units and may be modified or suspended
at any time and could be terminated prior to completion. The
Company will report the number of common units repurchased on a
quarterly basis. The program will be funded from the Company’s cash
on hand or through borrowings under the credit facility. Any
repurchased units will be canceled.
Appointment of Evan Kiefer as Permanent CFO
On October 30, 2023, the Board of the Company’s general partner
appointed Evan Kiefer as Senior Vice President, Chief Financial
Officer, and Treasurer, removing his interim title. Mr. Carter
remarked, “Evan is a great asset to the Company, and he has earned
the right to become permanent CFO. On behalf of the Board and the
rest of the Company’s management team, I give him our
congratulations and wish him the best in this role.”
Conference Call
Black Stone Minerals will host a conference call and webcast for
investors and analysts to discuss its results for the third quarter
of 2023 on Tuesday, October 31, 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) 245-3047 for domestic
participants and (203) 518-9708 for international participants, the
conference ID for the call is BSMQ323. 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 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;
- 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 our
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
REVENUE
Oil and condensate sales
$
85,724
$
80,240
$
208,184
$
250,367
Natural gas and natural gas liquids
sales
48,815
137,756
147,857
324,691
Lease bonus and other income
2,180
3,159
8,682
10,262
Revenue from contracts with customers
136,719
221,155
364,723
585,320
Gain (loss) on commodity derivative
instruments
(26,922
)
(4,726
)
36,652
(152,095
)
TOTAL REVENUE
109,797
216,429
401,375
433,225
OPERATING (INCOME) EXPENSE
Lease operating expense
2,615
2,896
8,149
9,256
Production costs and ad valorem taxes
16,441
17,856
41,952
51,309
Exploration expense
1,711
10
1,719
192
Depreciation, depletion, and
amortization
12,367
12,208
33,935
35,018
General and administrative
14,448
13,044
38,950
39,326
Accretion of asset retirement
obligations
254
209
749
616
(Gain) loss on sale of assets, net
(73
)
—
(73
)
(17
)
TOTAL OPERATING EXPENSE
47,763
46,223
125,381
135,700
INCOME (LOSS) FROM OPERATIONS
62,034
170,206
275,994
297,525
OTHER INCOME (EXPENSE)
Interest and investment income
511
20
1,041
22
Interest expense
(621
)
(1,693
)
(2,080
)
(4,264
)
Other income (expense)
143
(58
)
(53
)
(22
)
TOTAL OTHER EXPENSE
33
(1,731
)
(1,092
)
(4,264
)
NET INCOME (LOSS)
62,067
168,475
274,902
293,261
Distributions on Series B cumulative
convertible preferred units
(5,250
)
(5,250
)
(15,750
)
(15,750
)
NET INCOME (LOSS) ATTRIBUTABLE TO THE
GENERAL PARTNER AND COMMON UNITS
$
56,817
$
163,225
$
259,152
$
277,511
ALLOCATION OF NET INCOME (LOSS):
General partner interest
$
—
$
—
$
—
$
—
Common units
56,817
163,225
259,152
277,511
$
56,817
$
163,225
$
259,152
$
277,511
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED
PARTNERS PER COMMON UNIT:
Per common unit (basic)
$
0.27
$
0.78
$
1.23
$
1.33
Per common unit (diluted)
$
0.27
$
0.75
$
1.22
$
1.31
WEIGHTED AVERAGE COMMON UNITS
OUTSTANDING:
Weighted average common units outstanding
(basic)
209,982
209,402
209,963
209,374
Weighted average common units outstanding
(diluted)
209,982
224,371
224,932
224,343
The following table shows the Company’s production, revenues,
pricing, and expenses for the periods presented:
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(Unaudited)
(Dollars in thousands, except
for realized prices and per Boe data)
Production:
Oil and condensate (MBbls)
1,092
844
2,731
2,574
Natural gas (MMcf)1
16,980
16,994
48,101
42,648
Equivalents (MBoe)
3,922
3,676
10,748
9,682
Equivalents/day (MBoe)
42.6
40.0
39.4
35.5
Realized prices, without derivatives:
Oil and condensate ($/Bbl)
$
78.50
$
95.07
$
76.23
$
97.27
Natural gas ($/Mcf)1
2.87
8.11
3.07
7.61
Equivalents ($/Boe)
$
34.30
$
59.30
$
33.13
$
59.39
Revenue:
Oil and condensate sales
$
85,724
$
80,240
$
208,184
$
250,367
Natural gas and natural gas liquids
sales1
48,815
137,756
147,857
324,691
Lease bonus and other income
2,180
3,159
8,682
10,262
Revenue from contracts with customers
136,719
221,155
364,723
585,320
Gain (loss) on commodity derivative
instruments
(26,922
)
(4,726
)
36,652
(152,095
)
Total revenue
$
109,797
$
216,429
$
401,375
$
433,225
Operating expenses:
Lease operating expense
$
2,615
$
2,896
$
8,149
$
9,256
Production costs and ad valorem taxes
16,441
17,856
41,952
51,309
Exploration expense
1,711
10
1,719
192
Depreciation, depletion, and
amortization
12,367
12,208
33,935
35,018
General and administrative
14,448
13,044
38,950
39,326
Other expense:
Interest expense
621
1,693
2,080
4,264
Per Boe:
Lease operating expense (per
working-interest Boe)
$
12.16
$
11.97
$
12.25
$
11.21
Production costs and ad valorem taxes
4.19
4.86
3.90
5.30
Depreciation, depletion, and
amortization
3.15
3.32
3.16
3.62
General and administrative
3.68
3.55
3.62
4.06
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(Unaudited)
(In thousands, except per unit
amounts)
Net income (loss)
$
62,067
$
168,475
$
274,902
$
293,261
Adjustments to reconcile to Adjusted
EBITDA:
Depreciation, depletion, and
amortization
12,367
12,208
33,935
35,018
Interest expense
621
1,693
2,080
4,264
Income tax expense (benefit)
(109
)
140
177
229
Accretion of asset retirement
obligations
254
209
749
616
Equity–based compensation
3,777
4,534
8,412
11,809
Unrealized (gain) loss on commodity
derivative instruments
51,111
(64,145
)
29,006
(10,472
)
(Gain) loss on sale of assets, net
(73
)
—
(73
)
(17
)
Adjusted EBITDA
130,015
123,114
349,188
334,708
Adjustments to reconcile to Distributable
cash flow:
Change in deferred revenue
(1
)
(8
)
(8
)
(23
)
Cash interest expense
(359
)
(1,346
)
(1,305
)
(3,223
)
Preferred unit distributions
(5,250
)
(5,250
)
(15,750
)
(15,750
)
Distributable cash flow
$
124,405
$
116,510
$
332,125
$
315,712
Total units outstanding1
209,991
209,407
Distributable cash flow per unit
$
0.592
$
0.556
1
The distribution attributable to the three
months ended September 30, 2023 is estimated using 209,990,924
common units as of October 27, 2023; the exact amount of the
distribution attributable to the three months ended September 30,
2023 will be determined based on units outstanding as of the record
date of November 9, 2023. Distributions attributable to the three
months ended September 30, 2022 were calculated using 209,406,927
common units as of the record date of November 10, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231030060177/en/
Black Stone Minerals, L.P. Contact Evan Kiefer Senior
Vice President, Chief Financial Officer, and Treasurer Telephone:
(713) 445-3200 investorrelations@blackstoneminerals.com
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