Black Stone Minerals, L.P. (NYSE:BSM) ("Black Stone Minerals,"
"Black Stone," or "the Partnership") today announces its financial
and operating results for the second quarter of 2017.
Highlights
- Production for the second quarter
averaged 37.3 MBoe/d, a 5% increase over the prior quarter.
- Reported oil and gas revenues of $87.2
million and lease bonus and other income of $11.4 million for the
quarter.
- Generated net income of $54.2 million
and Adjusted EBITDA of $74.7 million.
- Reported distributable cash flow of
$66.3 million and distributable cash flow after net working
interest capital expenditures of $51.0 million for the quarter,
resulting in distribution coverage for all units of 1.3x and 1.0x,
respectively.
- Announced distribution increases of
$0.025 per unit ($0.10 per unit annualized) attributable to the
second quarter of 2017 on both common and subordinated units to
$0.3125 per common unit and $0.20875 per subordinated unit.
- Updated guidance for 2017 that reflects
positive operating trends including higher production, increased
lease bonus income, and lower lease operating expense.
Management Commentary
Thomas L. Carter, Jr., Black Stone Minerals’ President, Chief
Executive Officer, and Chairman commented, "Black Stone had another
very good quarter led by record production volumes and strong lease
bonus income. We've accomplished a lot in the first half of 2017
that sets the Partnership up well for the remainder of 2017 and
beyond. We have reduced future capital obligations through our
working interest farmout, successfully acquired new acreage in the
Permian Basin and Haynesville/Bossier Shales, and taken concrete
steps to drive increased drilling activity on our core East Texas
mineral acreage. These initiatives, combined with the strength of
our legacy minerals business, support our confidence in the
distribution growth potential at Black Stone, as evidenced by the
increased distributions we announced today for both our common and
subordinated unitholders."
Quarterly Financial and Operating Results
Production
Black Stone Minerals reported average production of 37.3 MBoe/d
for the second quarter of 2017, 76% of which is natural gas and 57%
of which is attributable to mineral and royalty interests. This
represents an increase of 18% over average production of 31.6
MBoe/d for the corresponding period in 2016 and an increase of 5%
over the first quarter of 2017 production levels.
Realized Prices, Revenues, and Net Income
The Partnership’s average realized price per Boe, excluding the
effect of derivative settlements, was $25.67 for the quarter ended
June 30, 2017. This represents a 7% decrease from the
preceding quarter and an increase of 31% from $19.55 per Boe for
the quarter ended June 30, 2016.
Black Stone Minerals reported oil and gas revenues of $87.2
million for the second quarter of 2017, an increase of 55% from
$56.2 million for the second quarter of 2016 that reflects improved
commodity prices and higher production volumes between the periods.
Oil and gas revenue in the first quarter of 2017 was $88.2
million.
Gain on commodity derivative instruments was $22.0 million in
the second quarter of 2017, which comprises a $3.1 million gain
from realized settlements and an $18.9 million unrealized gain due
to the change in value of the Partnership’s derivative positions
during the quarter. In the second quarter of 2016, the Partnership
reported a loss on commodity derivative instruments of $30.7
million that included a large unrealized loss for the period.
Leasing in the Bakken/Three Forks, Permian, and Austin Chalk
drove lease bonus and other income to $11.4 million for the second
quarter of 2017, a slight decrease from the $15.1 million in lease
bonus and other income from the same period last year. Through the
first half of 2017, the Partnership has reported $25.0 million in
lease bonus and other income compared to $16.5 million for the same
period in 2016.
The Partnership reported net income of $54.2 million for the
quarter ended June 30, 2017, compared to a net loss of $20.8
million in the corresponding period in 2016.
Financial Position
As of June 30, 2017, the Partnership had $7.5 million in cash
and $393.0 million outstanding under its credit facility. The
borrowing base currently stands at $550.0 million following a $50.0
million increase in its most recent semi-annual redetermination in
April of 2017; the next regularly scheduled redetermination is
expected to be completed in October of this year. As of August 4,
2017, the Partnership had $381.0 million outstanding under the
credit facility and $10.6 million in cash, providing approximately
$180 million in available liquidity. Black Stone Minerals is in
compliance with all financial covenants associated with its credit
facility.
Acquisitions
Black Stone's acquisition activity in the second quarter of 2017
was focused on the Haynesville/Bossier play in East Texas and
consisted primarily of the previously announced transactions to
acquire mineral and royalty interests throughout Angelina and
surrounding counties in East Texas, including the acquisition of
the Angelina County Lumber Company assets. In total, the
Partnership invested $18.1 million in cash and $45.7 million in
equity for acquired assets during the quarter.
For the six months ended June 30, 2017, the Partnership had
invested $66.5 million in cash and $57.9 million in common units
for assets in East Texas and the Delaware Basin.
Subsequent to quarter end, Black Stone continued to build upon
its Haynesville/Bossier position in East Texas. It has closed on
approximately $11 million in acquisitions located in the Shelby
Trough of East Texas. Additionally, the Partnership has entered
into an agreement for approximately $4.6 million in cash and 590
thousand common units to acquire additional interests in the Shelby
Trough. This acquisition is subject to customary closing
conditions.
Working Interest Participation
In 2017, the Partnership incurred $10.4 million in the second
quarter and $30.8 million in the first half participating as a
non-operating working interest owner on its own minerals. Black
Stone currently expects that it will invest between $40 and $50
million in 2017 in its working interest participation program, the
majority of which will be deployed in the Haynesville Shale in the
Shelby Trough area of East Texas. This estimate has been revised
down from the previously provided guidance of $50 to $60 million.
The decrease in expected capital expenditures relates to the
deferral of completions of several high working interest wells in
the XTO-operated program in the Shelby Trough, which will now be
completed in early 2018.
Distributions
The Board of Directors of the general partner (the "Board") has
approved cash distributions attributable to the second quarter of
2017 of $0.3125 per common unit and $0.20875 per subordinated unit.
These distributions represent increases of $0.025 per unit ($0.10
per unit annualized) for both the common and subordinated units
from the preceding quarter. Distributions will be payable on August
24, 2017 to unitholders of record on August 17, 2017.
In determining the amount of distributions to common and
subordinated unitholders, the Board takes into account numerous
factors, including the level of distribution coverage. In addition
to the industry-accepted method of calculating distribution
coverage, the Partnership also evaluates distribution coverage
after deducting net working interest capital expenditures with a
goal over the long-term of funding working interest capital
expenditures with retained cash flow. The quarterly distribution
coverage attributable to the second quarter of 2017 for all units
was approximately 1.3x before net working interest capital
expenditures and approximately 1.0x after net working interest
capital expenditures.
Revised 2017 Guidance
The following table provides the assumptions for Black Stone's
original and current 2017 guidance:
Original
Guidance
Revised
Guidance
Average daily production (MBoe/d) 35 - 37 37 - 38 Percentage oil
~25% ~25% Percentage royalty interest ~60% ~60% Lease bonus
and other income ($MM) $25 - $35 $30 - $35 Lease operating
expense ($MM) $18 - $22 $17 - $20 Production costs and ad valorem
taxes (as % of total pre-derivative O&G revenue) 13% - 15% 13%
- 15% Exploration expense ($MM) $0.5 - $1.5 $0.5 - $1.5
G&A - cash ($MM) $41 - $43 $41 - $43 G&A - non-cash ($MM)
$25 - $27
$25 - $27
G&A - TOTAL ($MM) $66 - $70 $66 - $70 DD&A ($/Boe)
$8.50 - $9.50 $8.25 - $9.25
Production
Production guidance for the full year of 2017 is being increased
by approximately 4% at the midpoint of provided guidance ranges,
and reflects the strong performance from the first half of the year
combined with expected moderate quarterly production increases for
the remainder of 2017. The increase comes despite the deferral in
completions of several high interest Haynesville Shale wells into
2018.
Lease Bonus
The guidance range of lease bonus and other income for 2017 is
being increased by $5 million, driven by robust leasing across a
broad portion of the portfolio throughout the first half of the
year. The increase in guidance is tempered by a cautious outlook
for the remainder of the year given uncertainty around commodity
prices.
Conference Call
Black Stone Minerals will host a conference call and webcast for
investors and analysts to discuss its results for the second
quarter 2017 on Tuesday, August 8, 2017 at 9:00 a.m. Central Time.
To join the call, participants should dial (877) 447-4732 and use
conference code 47678656. A live broadcast of the call will also be
available at http://investor.blackstoneminerals.com. A
recording of the conference call will be available at that site
through August 31, 2017.
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 Partnership
owns mineral interests and royalty interests in over 40 states and
60 onshore basins in the continental United States. The Partnership
also owns and selectively participates as a non-operating working
interest partner in established development programs, primarily on
its mineral and royalty holdings. The Partnership expects that its
large, diversified asset base and long-lived, non-cost-bearing
mineral and royalty interests will result in production and reserve
growth, as well as increasing quarterly distributions to its
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 Partnership 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
Partnership’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 Partnership’s ability to execute
its business strategies;
- the volatility of realized oil and
natural gas prices;
- the level of production on the
Partnership’s properties;
- regional supply and demand factors,
delays, or interruptions of production;
- the Partnership’s ability to replace
its oil and natural gas reserves; and
- the Partnership’s ability to identify,
complete, and integrate acquisitions.
Information for Non-U.S. Investors
This press release is intended to be a
qualified notice under Treasury Regulation Section 1.1446-4(b).
Although a portion of Black Stone Minerals’ income may not be
effectively connected income and may be subject to alternative
withholding procedures, brokers and nominees should treat 100% of
Black Stone Minerals’ distributions to non-U.S. investors as being
attributable to income that is effectively connected with a United
States trade or business. Accordingly, Black Stone Minerals’
distributions to non-U.S. investors are subject to federal income
tax withholding at the highest marginal rate, currently 39.6% for
individuals.
BLACK STONE MINERALS, L.P. CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited) (In thousands, except per
unit amounts) Three Months Ended
Six Months Ended June 30, June 30, 2017
2016 2017 2016 REVENUE Oil and
condensate sales $ 37,262 $ 34,553 $ 77,736 $ 61,801 Natural gas
and natural gas liquids sales 49,903 21,607 97,604 46,719 Gain
(loss) on commodity derivative instruments 22,003 (30,733 ) 44,728
(20,107 ) Lease bonus and other income 11,356
15,142 25,038 16,537 TOTAL
REVENUE 120,524 40,569 245,106
104,950 OPERATING (INCOME) EXPENSE Lease
operating expense 4,148 4,283 8,337 9,172 Production costs and ad
valorem taxes 11,863 7,012 23,765 14,074 Exploration expense 46 629
608 637 Depreciation, depletion, and amortization 28,900 29,202
55,279 50,923 Impairment of oil and natural gas properties — 679 —
6,775 General and administrative 17,481 18,134 34,693 35,535
Accretion of asset retirement obligations 253 200 500 474 (Gain)
loss on sale of assets, net (7 ) (92 ) (931 )
(4,772 ) TOTAL OPERATING EXPENSE 62,684
60,047 122,251 112,818 INCOME
(LOSS) FROM OPERATIONS 57,840 (19,478 ) 122,855 (7,868 ) OTHER
INCOME (EXPENSE) Interest and investment income 33 38 39 191
Interest expense (3,981 ) (1,443 ) (7,488 ) (2,491 ) Other income
(expense) 282 73 351
107 TOTAL OTHER EXPENSE (3,666 ) (1,332
) (7,098 ) (2,193 ) NET INCOME (LOSS) 54,174 (20,810
) 115,757 (10,061 ) NET (INCOME) LOSS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS 16 9 7 7 DISTRIBUTIONS ON REDEEMABLE
PREFERRED UNITS (672 ) (1,310 ) (1,786 )
(3,114 ) NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL
PARTNER AND COMMON AND SUBORDINATED UNITS $ 53,518 $ (22,111
) $ 113,978 $ (13,168 ) ALLOCATION OF NET INCOME (LOSS):
General partner interest $ — $ — $ — $ — Common units 32,100 (7,445
) 67,617 862 Subordinated units 21,418 (14,666
) 46,361 (14,030 ) $ 53,518 $ (22,111 )
$ 113,978 $ (13,168 ) NET INCOME (LOSS) ATTRIBUTABLE TO
LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT: Per common unit
(basic) $ 0.33 $ (0.08 ) $ 0.69 $ 0.01
Weighted average common units outstanding (basic) 97,990
96,356 97,448 96,418
Per subordinated unit (basic) $ 0.22 $ (0.15 ) $ 0.49
$ (0.15 ) Weighted average subordinated units outstanding
(basic) 95,388 95,189 95,269
95,092 Per common unit (diluted) $ 0.32
$ (0.08 ) $ 0.68 $ 0.01 Weighted average common units
outstanding (diluted) 99,472 96,418
98,930 96,481 Per subordinated unit
(diluted) $ 0.22 $ (0.15 ) $ 0.49 $ (0.15 ) Weighted
average subordinated units outstanding (diluted) 95,388
95,092 95,269 95,092
DISTRIBUTIONS DECLARED AND PAID: Per common unit $ 0.2875
$ 0.2625 $ 0.5750 $ 0.5250 Per
subordinated unit $ 0.1838 $ 0.1838 $ 0.3675 $
0.3675
The following table shows the Partnership’s production,
revenues, realized prices, and expenses for the periods
presented.
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016
2017 2016 (Unaudited) (Dollars in
thousands, except for realized prices and per Boe data)
Production: Oil and condensate (MBbls) 824 947 1,685 1,833
Natural gas (MMcf)1 15,425 11,558
29,485 22,807 Equivalents (MBoe) 3,395 2,873 6,599
5,634
Revenue: Oil and condensate sales $ 37,262 $ 34,553 $
77,736 $ 61,801 Natural gas and natural gas liquids sales 49,903
21,607 97,604 46,719 Gain (loss) on commodity derivative
instruments 22,003 (30,733 ) 44,728 (20,107 ) Lease bonus and other
income 11,356 15,142 25,038
16,537 Total revenue $ 120,524 $ 40,569 $ 245,106 $ 104,950
Realized prices: Oil and condensate ($/Bbl) $ 45.22 $ 36.49
$ 46.13 $ 33.72 Natural gas ($/Mcf)1 3.24 1.87
3.31 2.05 Equivalents ($/Boe) $ 25.67 $ 19.55
$ 26.57 $ 19.26
Operating expenses: Lease operating expense
$ 4,148 $ 4,283 $ 8,337 $ 9,172 Production costs and ad valorem
taxes 11,863 7,012 23,765 14,074 Exploration expense 46 629 608 637
Depreciation, depletion, and amortization 28,900 29,202 55,279
50,923 Impairment of oil and natural gas properties — 679 — 6,775
General and administrative 17,481 18,134 34,693 35,535
Per
Boe: Lease operating expense (per working interest Boe) $ 2.83
$ 4.67 $ 3.00 $ 5.01 Production costs and ad valorem taxes 3.49
2.44 3.60 2.50 Depreciation, depletion, and amortization 8.51 10.16
8.38 9.04 General and administrative 5.15 6.31 5.26 6.31
_______________
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 Partnership 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 our 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, distributable cash flow, and distributable cash
flow after net working interest capital expenditures are
supplemental non-GAAP financial measures used by our management and
external users of our financial statements such as investors,
research analysts, and others, to assess the financial performance
of our assets and our ability to sustain distributions over the
long term without regard to financing methods, capital structure,
or historical cost basis.
We define 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,
accretion of asset retirement obligations, unrealized gains and
losses on commodity derivative instruments, and non-cash
equity-based compensation. We define distributable cash flow as
Adjusted EBITDA plus or minus amounts for certain non-cash
operating activities, estimated replacement capital expenditures,
cash interest expense, and distributions to noncontrolling
interests and preferred unitholders. We define distributable cash
flow after net working interest capital expenditures as
distributable cash flow less net working interest capital
expenditures. Net working interest capital expenditures consists of
all capital expenditures related to working interest wells less the
recoupment of working interest expenditures under our farmout
agreement.
Adjusted EBITDA, distributable cash flow, and distributable cash
flow after net working interest capital expenditures 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 our financial
performance.
Adjusted EBITDA, distributable cash flow, and distributable cash
flow after net working interest capital expenditures have important
limitations as analytical tools because they exclude some but not
all items that affect net income (loss), the most directly
comparable GAAP financial measure. Our computation of Adjusted
EBITDA, distributable cash flow, and distributable cash flow after
net working interest capital expenditures may differ from
computations of similarly titled measures of other companies.
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016
2017 2016 (Unaudited) (In
thousands) Net income (loss) $ 54,174 $ (20,810 ) $ 115,757 $
(10,061 ) Adjustments to reconcile to Adjusted EBITDA:
Depreciation, depletion and amortization 28,900 29,202 55,279
50,923 Interest expense 3,981 1,443 7,488 2,491 Impairment of oil
and natural gas properties — 679 — 6,775 Accretion of asset
retirement obligations 253 200 500 474 Equity-based compensation2
6,278 19,239 10,939 25,139 Unrealized (gain) loss on commodity
derivative instruments (18,921 ) 44,070
(37,368 ) 54,025 Adjusted EBITDA 74,665 74,023
152,595 129,766 Adjustments to reconcile to distributable cash
flow: Change in deferred revenue (643 ) 424 (969 ) 221 Cash
interest expense (3,760 ) (1,246 ) (7,053 ) (2,097 ) (Gain) loss on
sales of assets, net (7 ) (92 ) (931 ) (4,772 ) Estimated
replacement capital expenditures1 (3,250 ) (3,750 ) (7,000 ) (3,750
) Cash paid to noncontrolling interests (41 ) (21 ) (66 ) (54 )
Redeemable preferred unit distributions (672 ) (1,310
) (1,786 ) (3,114 ) Distributable Cash Flow 66,292
68,028 134,790 116,200 Net working interest capital expenditures
(15,330 ) (11,600 ) (32,295 ) (36,710 )
Distributable cash flow after net working interest capital
expenditures $ 50,962 $ 56,428 $ 102,495 $
79,490
_______________
1 On August 3, 2016, the Board established
a replacement capital expenditure estimate of $15.0 million for the
period of April 1, 2016 to March 31, 2017. There was no established
estimate of replacement capital expenditures prior to this period.
On June 8, 2017, the Board established a replacement capital
expenditure estimate of $13.0 million for the period of April 1,
2017 to March 31, 2018.
2 On April 25, 2016, the Compensation
Committee of the Board approved a resolution to change the
settlement feature of certain employee long-term incentive
compensation plans from cash to equity. As a result of the
modification, $10.1 million of cash-settled liabilities were
reclassified to equity-settled liabilities during the second
quarter of 2016.
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version on businesswire.com: http://www.businesswire.com/news/home/20170807005875/en/
Black Stone Minerals, L.P.Brent Collins, 713-445-3200Vice
President, Investor
Relationsinvestorrelations@blackstoneminerals.com
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