Q3 2023 Black Stone Minerals LP Earnings Call
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Speaker 1: transcript
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Speaker 1: transcript
Speaker 1: Good day everyone and welcome to the Blackstone Minerals 3Q Earnings Conference call. At this time, all participants are in a listen-only mode.
Good day, everyone and welcome to the Blackstone minerals, three Q earnings conference call.
At this time all participants are in a listen only mode.
Speaker 1: transcript
Speaker 1: Later you will have the opportunity to ask questions during the question and the answer session. You may register to ask a question at any time by pressing star one on your telephone keypad. You may withdraw yourself from the queue by pressing star two.
Later, you will have the opportunity to ask questions. During the question and answer session. You May Register to ask a question at any time by pressing star one on your telephone keypad.
You may withdraw yourself from the queue by pressing star two.
Speaker 1: transcript
Speaker 1: Please note this call is being recorded. I will be standing by if you should need any assistance.
Please note this call is being recorded.
I'll be standing by if you should need any assistance.
Speaker 1: transcript
Speaker 1: At this time it is my pleasure to turn the conference over to the Director of Finance, Mark Moe. Please go ahead.
At this time it is my pleasure to turn the conference over to the director of Finance Mark <unk>. Please go ahead.
Speaker 2: transcript
Speaker 2: Thank you. Good morning to everyone. Thank you for joining us, Peter Bifone, our online for Blackstone Minerals third quarter, 2023 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.
Thank you good morning to everyone. Thank you for joining us either by phone or online for Black Stone Minerals' third quarter 2023 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.
Speaker 2: transcript
Speaker 2: 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.
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. 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.
Speaker 2: transcript
Speaker 2: These statements involve risks that may cause our actual results to differ materially from the results expressed on-flight in our board with
Speaker 2: transcript
Speaker 2: For 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 2022.
Refer to the cautionary information about forward looking statements in our press release from yesterday and the risk factors section of our 2022 Sanjay we.
Speaker 2: transcript
Speaker 2: We may refer to certain non-GAF financial measures that we believe are useful in evaluating our-
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.
Speaker 2: transcript
Speaker 2: Reconciliation of those measures to the most directly comparable gap measure and other information about these non-gab metrics are described in our earnings press release from
Speaker 2: transcript
Speaker 2: which can be found on our website at www.blackstoneminerals.com.
Black stone minerals dotcom joining.
Speaker 2: transcript
Speaker 2: Joining me on the call today from the company are Tom Carter, Chairman, CEO and President, Evan Kiefer, Chief Financial Officer and Treasurer, Kerry Clark, Senior Vice President, Land and Commercial, Steve Putman, Senior Vice President and General Counsel and Thad Montgomery, Vice President Land. I'll now.
Joining me on the call today from the company are Tom Carter, Chairman, CEO, and President Evan Keeper, Chief Financial Officer, and Treasurer, Gary Clark Senior Vice President land and commercial.
Putman, Senior Vice President and General Counsel and myself.
Murray Vice President.
I'll now turn the call over to Tom.
Speaker 3: transcript
Speaker 3: Thank you, Mark. Good morning and thanks for joining us for our third quarter, 23 results.
Thank you Mark good morning, and thanks for joining us for our third quarter 'twenty three ourselves.
Speaker 3: transcript
Speaker 3: We posted a solid quarter with adjusted EBITDA of $130 million for the quarter, an increase of 19% compared to the second quarter.
The solid quarter with adjusted EBITDA of $130 million for the quarter, an increase of 19% compared to the second quarter.
Speaker 3: transcript
Speaker 3: This is now the six consecutive quarter where blackstone is generated over a hundred million in adjusted e-b-
This is now the sixth.
Consecutive quarter, where Blackstone has generated over $100 million and adjusted EBITDA.
Speaker 3: transcript
Speaker 3: We generated total production volumes for the third quarter of 42.6,000 BoE per day, an increase of 18% from our second quarter volumes. And now we expect to be in the upper end of our production guidance for range of 37 to 39,000 BoE per day.
We generated total production volumes for the third quarter of $42 6000 Boe per day, an increase of 18% from our second quarter volumes and now expect we expect to be in the upper end of our production guidance range of 37% to 39000 Boe per day.
Okay.
Speaker 3: transcript
Speaker 3: Much of the increase was driven by royalty volumes, which increased 20% from the second quarter to 40.3 thousand BOE per day and 8% above the third quarter of 22. The primary driver of oil volumes was new wells coming online in the Permian.
Much of the increase was driven by royalty volumes, which increased 20% from the second quarter to 43000 Boe per day, an 8%, 8% above the third quarter of 'twenty two primary driver of oil volumes when it was new wells coming online in the Permian. Additionally, we had six.
Speaker 3: transcript
Speaker 3: Additionally, we had six new wells come online in the third quarter in the Shelby Traw. Two of those were eight to 24.
New wells come online in the third quarter in the Shelby trough.
Two of those Raytheon and four were X T O.
Speaker 3: transcript
Speaker 3: Despite the lower rig counts in the Louisiana Hainesville this year due to lower pricing, we continue to see activity from new wells resulting in our Louisiana Hainesville volumes increasing 13% compared to the second quarter.
Despite the lower rig counts in the Louisiana Haynesville this year due to lower pricing, we continue to see activity for new wells, resulting in our Louisiana, haynesville volumes, increasing 13% compared to the second quarter.
Hey, Don.
Speaker 3: transcript
Speaker 3: continues to ramp up production of the shoulder trough and held the six rigs on a location at the end of the third quarter, increasing from five rigs in the second.
Continues to ramp up production in the Shelby trough and held the six hell the six rigs home location at the end of the third quarter, increasing from five rigs in the second quarter.
Speaker 3: transcript
Speaker 3: To date, 28 wells have been turned to sales in the Shelby trough under our development agreement with eight.
To date 28 wells have been turned to sales in the Shelby trough under our development agreement with Ita.
Speaker 3: transcript
Speaker 3: And there are currently 35 wells in the drilling completion phase, which exceeds the minimum pace of 27 wells per year in Angelina and San Augustine counties that we expect to benefit our production in 2024.
And there are currently 35 wells in the drilling completion phase, which exceeds the minimum pace of 27 wells per year.
Angelina in San Augustine counties that we expect to benefit our production in 2024.
Speaker 3: transcript
Speaker 3: We saw a 4% increase in rigs operating on our acreage in the third quarter. The increase driven.
We saw a 4% increase in rigs operating on our acreage in the third quarter the increase driven.
Speaker 3: transcript
Speaker 3: by Hainesville and Gulf Coast with 76 rigs currently running as of September 30th.
By Haynesville and Gulf Coast was 76 rigs currently running as of September 30th.
Speaker 3: transcript
Speaker 3: In the fourth quarter we saw Rig Count Peak 90 in August due to new drilling in the Permian from various up...
Throughout the quarter, we saw rig count peak at 90 and August due to new drilling in the Permian from various operators.
Speaker 3: transcript
Speaker 3: The US rig count has contracted approximately 6% during the quarter, which highlights the natural ebbs and flows of development on diversified acreage positions such as ours.
The U S rig count has contracted approximately 6% during the quarter, which highlights the natural ebbs and flows of development on the reverse side acreage position such as ours.
We previously announced that we are maintaining our distribution of 47.
Speaker 3: transcript
Speaker 3: We previously announced that we are maintaining our distribution of 47.5 cents per unit, our dollar 90 on an annualized basis and reported yesterday.
Five.
Per unit or $1 90 on an annualized basis, and our report and reported yesterday.
Speaker 3: And as reported yesterday, it represents a 1.25 times coverage for the quarter.
And as reported yesterday represents a 125 times coverage for the quarter. Despite.
Speaker 3: transcript
Speaker 3: Despite the challenges with natural gas prices, we've been able to maintain a strong balance sheet through the year and hold the distribution at a highest level since going public.
Despite the challenges with natural gas prices, we've been able to maintain a strong balance sheet through the year and hold the distribution at its highest level since going public.
Speaker 3: transcript
Speaker 3: Additionally, we have put into place a 150 million unit repurchase program that replaces our previous $75 million pro.
Additionally, we have put into place a $150 million unit repurchase program that replaces our previous $75 million program.
Speaker 3: transcript
Speaker 3: This will allow us the flexibility and ability to opportunistically buy our own unit.
This will allow us the flexibility and ability to opportunistically buy our own units.
Speaker 3: transcript
Speaker 3: It's been a great year and we're encouraged by the positive momentum into this end of the day.
It's been a great year, and we're encouraged by the positive momentum into the end of the year yesterday, We announced Kevin Kieffer has been appointed as senior Vice President and Chief Financial Officer, and Treasurer, removing the interim and his title.
Speaker 3: transcript
Speaker 3: Yesterday we announced Evan Kiefer has been appointed as Senior Vice President and Chief Financial Officer and Treasurer, removing the interim in his title.
Speaker 3: transcript
Speaker 3: With over 10 years of experience with Blackstone, I congratulate him on this position.
With over 10 years of experience with Blackstone I congratulate him on this position.
Speaker 4: transcript
Speaker 4: With that, I'll turn it over to Evan to walk through the details of the quarter. Evan? Perfect. Thank you, Tom, and good morning to everyone. As Tom pointed out, we had a very good third quarter. Reported average daily production is 42.6,000 BOE per day, which is an increase of 18% over a reported second quarter production.
With that I'll turn it over to Adam to walk through the details of the quarter.
Perfect. Thank you Tom and good morning to everyone as Tom pointed out we had a very good third quarter reported average daily production is $42 6000 Boe per day, which is an increase of 18% over our reported second quarter production.
Speaker 4: transcript
Speaker 4: This was led by production from new wells coming online in the Permian, as well as better than expected results in the Haynesville, in the Shelby Trough, and Louisiana.
This was led by production from new wells coming online in the Permian as well as better than expected results in the Haynesville in the Shelby trough and Louisiana.
Lease bonus and other income for the quarter was 22.2 dollars 2 million for the third quarter and $8 7 million for the first three quarters of the year, while we have emphasized development programs over a lease bonus we remain encouraged by continued leasing activity in the Haynesville Bossier, Despite the lower price environment this year compared to <unk>.
Speaker 4: transcript
Speaker 4: Leap bonus, another income for the quarter was 22.3, or sorry, 2.2 million for the third quarter, and 8.7 million for the first recorders of the year. While we have emphasized development programs over lease bonus, we remain encouraged by continued leasing activity in the Hainesville Boasier, despite the lower price environment this year compared to 2022.
'twenty two.
And speaking of pricing, we saw a recovery in oil prices in the third quarter with realized prices of approximately $78 per barrel.
Speaker 4: transcript
Speaker 4: And speaking of pricing, we saw a recovery in oil prices in the third quarter with realized prices of approximately $78 per barrel.
Speaker 4: transcript
Speaker 4: and $2.90 per MCF. That represents an increase of 8% and 1% in oil and gas prices compared to the second quarter respectively.
And $2 90 per Mcf that represents an increase of 8% and 1% in oil and gas prices compared to the second quarter respectively.
Speaker 4: transcript
Speaker 4: For comparison, during the third quarter of 2022, average price of oil was over $90 per barrel and over $8 per MCF. The current quarter represents a 17% decrease in crude prices and 65% decrease in natural gas prices from this period last year. And continues to highlight why we hedge our near term production volume.
For comparison during the third quarter of 2022 average price of oil was over $90 per barrel and over $8 per Mcf.
Current quarter represents a 17% decrease in crude prices and 65% decrease in natural gas prices from this period last year and continues to highlight why we hedge our near term production volumes we.
Speaker 4: transcript
Speaker 4: We have a solid hedge book that brought in approximately $24 million of realized cash settlements for the quarter, with approximately 55% of our production hedge for the remainder of 2023. With natural gas, hedge that is a little over $5 per MCF.
We have a solid hedge book.
That brought in approximately $24 million of realized cash settlements for the quarter with approximately 55% of our production hedged for the remainder of 2023 with natural gas hedged at a little over $5 per Mcf.
Speaker 4: transcript
Speaker 4: In 2024, we have continued to add to our PEDGE portfolio with the target of approximately 70% of our estimated production by the end of the year.
In 2024, we have continued to add to our hedge portfolio with a target of approximately 70% of our estimated production by the end of the year.
This resulted in our adjusted EBITDA for the quarter of $130 million, which is up from 19 or up 19% from the second quarter and rivals our high watermark that was set in the fourth quarter of 2022.
Speaker 4: transcript
Speaker 4: This results in our adjusted evidop for the quarter of $130 million, which is up from 19% from the second quarter and rivals our high watermark that was set in the fourth quarter of 2022.
Speaker 4: transcript
Speaker 4: Yesterday, we announced our updated guidance that reflects the strong quarter and positive trends that we are seeing. As Tom mentioned, the production guidance that we expect to come in at the upper end of our guidance range for 2023, while expecting lease operating expenses and production costs remain in line with our expectations.
Yesterday, we announced our updated guidance reflects the strong quarter and positive trends that we're seeing as Tom.
<unk> the production guidance that we expect to come in at the upper end of our guidance range for 2023, while expecting lease operating expenses and production costs to remain in line with our expectations.
Speaker 4: transcript
Speaker 4: Additionally, we expect GNA, cash and non-cash to be in the lower end of our guidance range.
Additionally, we expect G&A cash and noncash to be in the lower end of our guidance range.
Speaker 4: transcript
Speaker 4: We previously announced the distribution of 47.5 cents per unit for $1.90 per unit on an annualized base.
We previously previously announced the distribution of 47, five cents per unit or $1 90 per unit on an annualized basis district.
Speaker 4: transcript
Speaker 4: Distributable cash flow for the quarter was $124.4 million, and this results in a distribution coverage for the third quarter of 1.25 times.
Distributable cash flow for the quarter was $124 4 million and this resulted in distribution coverage for the third quarter of $1 two five times.
Speaker 4: transcript
Speaker 4: This is now the fourth consecutive quarter where we have ended the quarter with no borrowings on our revolver. And as of last week, we had over $90 million of cash prior to payment of the distribution next month. Effective yesterday, we increased our borrowing rates from $550 million to $580 million due to an increase in commodity prices. But we have elected the whole commitment flat at $375 million. At $50 equivalent to $90 million shipped up this month's esteem.
This is now the fourth consecutive quarter, where we have ended the quarter with no borrowings on our revolver and as of last week, we had over $90 million of cash prior to the payment of the distribution next month.
Effective yesterday, we increased our borrowing base from $550 million to $580 million due to an increase in commodity prices, but we have elected to hold commitment flat at $375 million.
As Tom mentioned, our board approved a $150 million unit repurchase program, while we will continue to prioritize returning cash to our investors. This allows us to opportunistically repurchase our common units.
Speaker 4: transcript
Speaker 4: As Tom mentioned, our board approved a $150 million unit repurchase program. While we will continue to prioritize returning cash to our investors, this allows us to opportunistically repurchase our common unit.
Speaker 4: transcript
Speaker 4: With the low gas price environment today and LNG export capacity expected to increase into 2025, we are bullish on our long-term gas exposure and do not think the current univaluation at approximately 10.5% yield fully reflects that view. Additionally, the first redemption window for a preferred unit opens at the end of next month.
With the low gas price environment today in LNG export capacity expected to increase into 2025, we are bullish on our long term gas exposure and do not think the current unit valuation at approximately 10, 5% yield fully reflects that view.
Additionally, the first redemption window for preferred units opened at the end of next month.
Speaker 4: transcript
Speaker 4: This unit repurchase program gives us the flexibility to potentially repurchase common units which trades at a discount to that contractual redemption price of 105% of FAR or just over $21 per furred unit.
This unit repurchase program gives us the flexibility to potentially repurchase common units, which trades at a discount to that contractual redemption price of 105% of par or just over $21 per preferred unit.
Repurchasing common units allows us to operate.
Speaker 4: transcript
Speaker 4: Repurchasing common units allows us to offer, allows us the opportunity to reduce any potential delusion. Should those units convert in the common in the future, as well as offset any increased interest rate that goes into effect at the end of next month. Just as a reminder, that rate resets from 7% to the 10-year plus 550 basis points, or approximately 10.4% based off current rates.
Laos us the opportunity to reduce any potential dilution should those units converting to common in the future as well as offset any increased interest rate that goes into effect at the end of next month, just as a reminder that rate resets from 7% two to 10 year, plus 550 basis points or approximately 10, 4% base.
Current rates are.
Speaker 4: transcript
Speaker 4: I'll echo Tom's comments as there's a great quarter that in the with that we will open the call for comments.
I'll Echo Toms comments as there was a great quarter.
That we will open the call for comments.
Yes.
Yeah.
Thank you.
Speaker 1: transcript
Speaker 1: Ladies and gentlemen, at this time, if you would like to ask a question, please press star 1 on your telephone keypad.
Ladies and gentlemen at this time, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker 1: transcript
Speaker 1: If you would like to remove yourself from the question queue, you may do so by pressing star 2.
If you would like to remove yourself from the question queue. You may do so by pressing star two.
Speaker 1: transcript
Speaker 1: Once again, that's Star One to ask a question and Star Two to remove yourself. We will pause for just a moment to assemble the question, Q.
Once again Thats star one to ask a question in star two to remove yourself, we will pause for just a moment to assemble the question queue.
Speaker 1: transcript
Speaker 1: We'll take our first question from 10 Resvan with Keybank Capital Mark.
We will take our first question from Ken <unk> with Keybanc capital markets.
Speaker 4: transcript
Speaker 4: Good morning, folks, thanks for taking my questions and having congratulations on the permanent role. I guess I'll start with the repurchases.
Good morning folks thanks for taking my questions and congratulations on the permanent role.
I guess I'll start with the repurchases.
Speaker 4: transcript
Speaker 4: I'm just trying to understand the rationale behind that.
I'm, just trying to understand kind of the rationale behind that.
Speaker 4: transcript
Speaker 4: You talked about a 10B-5-1 and then you also talked about off-steady dilution. So, should we assume you will be active this quarter is the 10B-5-1 in place?
You talked about a <unk> five one and then you also talked about offsetting dilution so.
Should we assume you will be active this quarter is the <unk> one in place or.
Speaker 4: transcript
Speaker 4: Or is that something you may put in place? Or I was trying to understand kind of the rationale behind the repurchase.
Is that something that you may put in place or I'm, just trying to understand kind of the rationale.
Yes.
Behind the repurchase decision now.
Speaker 4: transcript
Speaker 4: Yeah, nothing is in place right now. This is just gives us the flexibility and the opportunity to repurchase units going forward. You know, one of the things we really were looking at is the overall principal value on the preferred units being par at a little over $20 and at 105% today puts it at 21, 41 per unit.
Yeah, nothing Thats in place right. Now this is just gives us the flexibility and the opportunity to repurchase units going forward.
One of the things we really were looking at is the overall principal value on the preferred units being par at a little over $20 and 105% today puts it at $21 41 per unit.
Speaker 4: transcript
Speaker 4: And since those are convertible one-to-one into common, and with the yield going to, you know, call it 10.5% on our common units and 10% on the preferred, just gives us a little bit of that discount to the common units, which we like relative to the preferred.
And since those are convertible one to one and a common.
And with the yield going to call. It 10, 5% on our common units and 10% on the preferred just gives us a little bit of that discount to the common unit, which we like relative to the preferred.
Speaker 4: transcript
Speaker 4: Okay, okay. And I guess that you do have another month to decide what you're going to do with the preferred, you know, obviously you have a little bit of a cash balance building. Will that be something that you will disclose in the marketplace if you do decide to redeem some or all of them?
Okay, Okay, and I guess, if you do have another month to decide what you're going to do with the preferreds.
Obviously, you have a little bit of a cash balance building.
Will that be something that you would you will disclose to the marketplace. If you do decide to regain some or all of them.
Yes that is correct, yes, and we have $90 million today on the balance sheet really that's going to be paid out as far as the distribution in the middle of next month.
Speaker 4: transcript
Speaker 4: Yes, that is correct. Yeah, and we have $90 million today on the balance sheet. Really, that's going to be paid out as far as the distribution in the middle of next month. But as we go forward, thinking about the...
But as we go forward thinking about the.
Speaker 4: transcript
Speaker 4: potential redemption of the preferred or redeeming any common units, that'll most likely just be used out of any cash that we build through coverage, or we have the line of credit that's currently unused with $375 million of cash commitments today.
Potential redemption of the common or preferred or.
Redeeming any common units that will most likely just be used out of any cash that we build through coverage or we have the line of credit is currently on us with $375 million of cash commitments today.
Speaker 4: transcript
Speaker 4: Okay, okay, so you have options. Okay, I appreciate that.
Okay. Okay. So you have to have options.
I appreciate that and if I could just.
Speaker 4: transcript
Speaker 4: I can save one last one in. Obviously, very strong production number. You know, the modest revision of guidance saying, number red? No, really. So you're ready? Yes. So calm down.ZY.4get.ulladeika.google.com
I can sneak one last one in obviously, a very strong production number.
The debt.
Modest revision to guidance, saying, you'll be at the upper end.
Speaker 4: transcript
Speaker 4: infer some sort of decline in fourth quarter production. Can you talk about kind of what you're seeing and...
And far as some sort of decline in fourth quarter production can.
Can you talk about kind of what youre seeing in.
Speaker 4: transcript
Speaker 4: you know why we shouldn't think that, you know, you'll be above that, 39,000 a day for the year. Just trying to think about the kind of the near-term cadence of production.
Why we Shouldnt think that.
You'll be above that 30.
39000, a day for the year, just trying to think about the kind of the near term cadence of production.
Speaker 4: transcript
Speaker 4: Yeah, of course, and thanks for the question. Yeah, you know, when we model our forecast and look forward, we typically just model what we have very clean visibility and line of sight into. So that's going to be based off of any feedback we received from operators from permits and drilling activity that we see on our acreage.
Yes of course, thanks for the question, yes, when we model our forecast and look forward. We typically just model what we have very clean visibility and line of sight into so that's going to be based off of any feedback we received from operators from Kermit and drilling activity that we see on our acreage and so.
Speaker 4: transcript
Speaker 4: And so whenever we look into, you know, our results for the third quarter, that was all from new wells that we saw drill at the beginning of the year, with the lower rig count and the hains though, we see some challenges there going forward and expect overall production, although it was up for the quarter to still remain fairly flat going into next year. But, you know, there's always...
So whenever we look into our results for the third quarter that was all from new wells that we saw drilled at the beginning of the year.
With the lower rig count in the Haynesville, we see some challenges there going forward and expect overall production, although was up for the quarter to still remain fairly flat going into next year, but.
There is always things.
Speaker 4: transcript
Speaker 4: things that occur on a large, diversified position, such as ours, that we don't necessarily have that clean visibility into. And so because we model what we see and have that visibility into, there's that inherent.
Things that occur.
A large diversified positions such as ours that we don't necessarily have that clean visibility into and so because we model, what we see and have that visibility into <unk>.
Inherent.
Speaker 4: transcript
Speaker 4: Conservatism built into our views. You know, right now with where we see the program going and where we see, you know, with the drill paste and everything, there is that decrease from current volumes into the fourth quarter, but we're still encouraged and optimistic as to what volumes can go into next year and beyond.
Conservatism built into our views.
Right now with where we see the program going and where we see with the drill pace and everything there is that decrease from current volumes into the fourth quarter, but we're still encouraged and optimistic as to what volumes can go into next year and beyond.
Okay. Thanks for the responses.
Thank you.
Operator: Please stand by your program as about to begin. If you need audio assistance during today's program, please press star zero.
Yes.
Speaker 1: transcript
Speaker 1: Once again ladies and gentlemen, not star one for questions. We'll go next to Derek Whitfield with Steve Ful.
Once again, ladies and gentlemen that star one for questions. We will go next to Derrick Whitfield with Stifel.
Speaker 5: transcript
Operator: Good day everyone and welcome to the Black Stone Minerals 3Q Earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-the-answer session. You may register to ask a question at any time by pressing star one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. Please note this call is being recorded. I will be standing by if you should need any assistance.
Good morning on congrats Evan on your well enroll.
Speaker 5: transcript
Speaker 5: Thank you. Following up on Tim's question, given the strength of your oil production in the quarter, could you help frame how much of that increase was for prior quarter activity versus underlying growth?
Thank you following up following up on Tim's question, given the strength of your oil production.
The quarter could you help frame how much of that increase was for prior quarter activity versus underlying growth.
Yeah. So.
Speaker 4: transcript
Speaker 4: Yeah, so based off of the production that we saw on the third quarter, all of that was really, or at least the vast majority of that wasn't from Wells or drilled in 2023. The actual breakdown between what was in the current quarter versus production that we received from prior periods is...
Based off of.
The production that we saw in the third quarter all of that was really or at least the vast majority of that was from wells that were drilled in 2023.
Mark Meaux: At this time, it is my pleasure to turn the conference over to the director of finance, Mark Meaux. Please go ahead. Thank you. Good morning to everyone. Thank you for joining us either by phone or online for Black Stone Minerals third quarter 2023 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.
And the actual breakdown between what was in the current quarter versus production that we received from prior periods.
Speaker 4: transcript
Speaker 4: Going to be a smaller portion or smaller piece of that, but like I said, the majority of the increase in oil volumes from this quarter was all really drilled in 2023.
Going to be a smaller portion are smaller piece of that but like I said the majority of the increase in oil volumes in this quarter was all really drilled in 2023.
Speaker 5: transcript
Speaker 5: And with regard to the 28 Angelina County AC on wells that are in various stages of development, could you help frame the splits on where they lie in development and your expectations on when the wells will be turned in line?
And with regard to the 28, Angelina County, ACI on wells that are in various stages of development could you help frame the splits on where they lie in development and your expectations on when the wells will be turned in line.
Mark Meaux: These statements involve risks that may cause our actual results to differ materially from the results expressed on-flight in our forward-looking statements. For 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 2022-10K. We may refer to certain non-GAF financial measures that we believe are useful in evaluating our performance.
Yes so.
Speaker 4: transcript
Speaker 4: Yeah, so, you know, we have through that agreement.
We have through that agreement.
Certain criteria that requires them to drill and complete those wells whenever we look at what the wells are currently being in the drilling phase that may include wells that are on.
Speaker 4: transcript
Speaker 4: certain criteria that requires them to drill and complete those wells. Whatever we look at, what the wells are currently being in the drilling phase, that may include wells that are on the same pad. That's going to be...
The same pad.
Mark Meaux: Reconciliation of those measures to the most directly comparable GAF measure and other information about these non-GAF metrics are described in our earnings press release from yesterday, which can be found on our website at www.blackstoneminerals.com.
That's going to be.
Speaker 5: transcript
Speaker 6: On average, call it 10 months from initial drill to turn in line going forward. And so we would expect to see those wells coming online most likely in the middle of next year.
On average call. It 10 months from initial drill to turn in line.
Going forward and so we would expect to see those wells coming online most likely in the middle of next year.
Mark Meaux: Joining me on the call today from the company are Tom Carter, Chairman, CEO, and President, Evan Keepert, Chief Financial Officer, and Treasurer, Carrie Clark, Senior Vice President, Land and Commercial, Steve Putman, Senior Vice President, and General Counsel and Sad Montgomery, Vice President Land. I'll now turn the call over to Tom. Thank you, Mark.
Speaker 3: transcript
Speaker 3: I'll just add something to that statement. Hey, Thon is...
I would just I would just add something to that statement.
Hey, Don is.
Speaker 3: transcript
Speaker 3: Really doing a great job out there in the show.
Really doing a great job out there in the Shelby trough.
Speaker 3: transcript
Speaker 3: and they have a growing program out there and some of the metrics around timing that we built into a
And they have a growing program out there and some of the metrics around timing.
Thomas Carter: Good morning, and thanks for joining us for our third quarter 23 results. We posted a solid quarter with adjusted EBITDAV $130 million for the quarter, and an increase of 19% compared to the second quarter. This is now the sixth consecutive quarter where Blackstone is generated over $100 million in adjusted EBITDAV. We generated total production volumes for the third quarter of $42.6,000 B.O.E, per day, an increase of 18% from our second quarter volumes.
We built into our contracts.
Speaker 3: transcript
Speaker 3: some two or three years ago are morphing as multi-pad development wells become more common and the program is likely to expand. And
Some two years or three years ago.
Morphing as multi pad development wells become more common.
And.
The program is likely to expand.
And.
Speaker 3: transcript
Speaker 3: So we may see a little bit more lumpiness in turning to sales because they're doing more wells at once and it takes longer to get a full set of them up and ready to turn on. But we see that as positive and we really look to work closely with a dawn on all of this.
So we may see a little bit more lumpiness in turning to sales because they're doing more wells at once and it takes longer to get a full set of them.
Thomas Carter: And now we expect to be in the upper end of our production guidance range of 37 to 39,000 B.O.E, per day. Much of the increase was driven by royalty volumes, which increased 20% from the second quarter to 40.3,000 B.O.E, per day, an 8% above the third quarter of 22. Primary driver of oil volumes was new wells coming online in the Permis. DeWalch. Additionally, we had six new wells come online in the third quarter in the Shelby trough.
Up and ready to turn on but we see that as positive and we really look to work closely with <unk> on all of that.
Speaker 5: transcript
Speaker 5: And perhaps staying with you for one last follow up if I could, I know your focus in recent years has been on organic conversion opportunities. Having said that, how would you characterize the current state of the M&A market and your desire to participate in that?
And perhaps staying with you for one last follow up if I could I know your focus in recent years has been on organic conversion opportunities, having said that how would you characterize the current state of the M&A market and your desire to participate in that.
Speaker 3: transcript
Speaker 3: Well, I'll answer that this way. The overall M&A market is pretty pretty.
Thomas Carter: Two of those were A-Thon and four were X-D-O. Despite the lower rigged counts in the Louisiana Bay, Haynesville this year due to lower pricing, we continue to see activity from new wells resulting in our Louisiana Haynesville volumes increasing 13% compared to the second quarter. A-Thon continues to ramp up production in the Shelby trough and held the six rigs on location at the end of the third quarter increasing from five ridges in the second quarter.
Well I'll answer that this way.
The overall M&A market is pretty.
Pretty.
Speaker 3: transcript
Speaker 3: brothy in terms of valuations, I would say.
Frothy in terms of valuations I would say.
Speaker 3: transcript
Speaker 3: but we think they're continued to be more opportunities since we would have said we saw.
But we think there continues to be more opportunities since we would've said we saw.
Speaker 3: transcript
Speaker 3: a year or two ago, but we're trying to look in places where maybe other people aren't looking.
A year or two ago, but we are trying to.
Look in places, where maybe other people aren't looking.
Thomas Carter: Today, 28 wells have been turned to sales in the Shelby trough under our development agreement with A-Thon. And there are currently 35 wells in the drilling completion phase which exceeds the minimum pace of 27 wells per year in Angelina and San Augustine counties that we expect to benefit our production in 2024. We saw a 4% increase in rigs operating on our acreage in the third quarter. The increased driven by Haynesville and Gulf Coast was 76 rigs currently running as of September 30.
Terrific. Thanks for your time.
Thank you Derek.
Okay.
Okay.
At this time.
Speaker 1: transcript
Speaker 1: I will turn the comments back over to our presenters for additional or closing comments.
I will turn the conference back over to our presenters for any additional or closing comments.
Well, thank you all for joining us today.
Thomas Carter: Throughout the quarter we saw rig count peak at 90 in August due to new drilling in the Permian from various operators. The U.S, rig count has contracted approximately 6% during the quarter which highlights the natural ebbs and flows of development on a reverse side acreage position such as ours. We previously announced that we are maintaining our distribution of 47.5 cents per unit or $1.90 on an annualized basis and reported yesterday and as reported yesterday it represents a 1.25 times coverage for the quarter.
We're we're pretty optimistic with the pace of activity levels that we're seeing.
Speaker 3: transcript
Speaker 3: We're pretty optimistic with the pace and activity levels that we're seeing and our ability to continue to grow our platform and we look forward to talking to you. Again, next.
And our ability to continue to grow our platform and we look forward to talking to you.
Again next quarter.
Okay.
Okay.
Thank you ladies and gentlemen that does conclude today's program you may disconnect at this time.
Speaker 1: transcript
Speaker 1: Thank you ladies and gentlemen, that does conclude today's program. You may disconnect at this time.
Thomas Carter: Despite the challenges with natural gas prices we've been able to maintain a strong balance sheet through the year and hold the distribution at the highest level since going public. Additionally we have put into place a 150 million unit repurchase program that replaces our previous 75 million dollar program. This will allow us the flexibility and ability to opportunistically buy our own units.
Mhm.
Speaker 6: transcript
Speaker 7: the
Okay.
Uh-huh.
Okay.
Speaker 6: transcript
Speaker 7: What.
Okay.
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Okay.
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[music].
Thomas Carter: It's been a great year and we're encouraged by the positive momentum into the end of the year.
Hum.
Thomas Carter: Yesterday we announced Evan Kiefer has been appointed as Senior Vice President Chief Financial Officer and Treasurer removing the interim in his title. With over 10 years of experience with Blackstone I congratulate him on this position.
Hum.
Uh-huh.
Okay.
Sure.
Okay.
Okay.
[music].
Evan Kiefer: With that I'll turn it over to Evan to walk through the details of the quarter. Thank you Tom and good morning to everyone. As Tom pointed out we had a very good third quarter. Reported average daily production is 42.6000 BOE per day which is an increase of 18% over a reported second quarter production. This was led by production from new wells coming online in the Permian as well as better than expected results in the Hainesville in the Shelby Troph and Louisiana.
Yes.
Okay.
[music].
Okay.
[music].
Speaker 6: transcript
Speaker 7: Trans itu queria'
Evan Kiefer: Leap bonus another income for the quarter was 22.2 million for the third quarter and 8.7 million for the first recorders of the year. While we have emphasized development programs over lease bonus we remain encouraged by continued leasing activity in the Hainesville Bozier despite the lower price environment this year compared to 2022. In speaking of pricing, we saw a recovery in oil prices in the third quarter with realized prices of approximately $78 per barrel and $2.90 per MCF.
Speaker 6: transcript
Speaker 7: Oh.
Speaker 6: transcript
Speaker 7: That.
Hum.
[music].
Evan Kiefer: That represents an increase of 8% and 1% in oil and gas prices compared to the second quarter respectively. For comparison during the third quarter of 2022, average price of oil was over $90 per barrel and over $8 per MCF. The current quarter represents a 17% decrease in crude prices and 65% decrease in natural gas prices from this period last year and continues to highlight why we hedge our near term production volumes.
Evan Kiefer: We have a solid hedge book that brought in approximately $24 million of realized cash settlements for the quarter with approximately 55% of our production hedge for the remainder of 2023. With natural gas hedge at a little over $5 per MCF. In 2024, we have continued to add to our hedge portfolio with the target of approximately 70% of our estimated production by the end of the year. This results in our adjusted EBITOP for the quarter of $130 million which is up from 19% from the second quarter and rivals our high watermark that was set in the fourth quarter of 2022.
Evan Kiefer: Yesterday, we announced our updated guidance that reflects the strong quarter and positive trends that we are seeing. As Tom mentioned, the production guidance that we expect to come in at the upper end of our guidance range for 2023, while expecting lease operating expenses and production costs remain in line with our expectations. Additionally, we expect GNA, cash and non-cash to be in the lower end of our guidance range. We previously announced the distribution of $47.5 per unit for a $1.90 per unit on an annualized basis.
Evan Kiefer: Distributable cash flow for the quarter was $124.4 million and this results in a distribution coverage for the third quarter of 1.25 times. This is now the fourth consecutive quarter where we have ended the quarter with no borrowings on our revolver. And as of last week, we had over $90 million of cash prior to payment of the distribution next month. Effective yesterday, we increased our borrowing base from $550 million to $580 million due to an increase in commodity prices. But we have elected the whole commitment flat at $375 million.
Evan Kiefer: As Tom mentioned, our board approved a $150 million unit repurchase program. While we will continue to prioritize returning cash for our investors, this allows us to opportunistically repurchase our common units. With the low gas price environment today and LNG export capacity expected to increase into 2025, we are bullish on our long-term gas exposure and do not think the current unit valuation at approximately 10.5% yield fully reflects that view.
Evan Kiefer: Additionally, the first redemption window for a preferred unit opens at the end of next month. This unit repurchase program gives us the flexibility to potentially repurchase common units which trades at a discount to that contractual redemption price of 105% of FAR or just over $21 per preferred unit. Repurchasing Common Units allows us to offer, allows us the opportunity to reduce any potential delusion should those units convert in the common in the future, as well as offset any increased interest rate that goes into effect at the end of next month, just as a reminder that rate reset from 7% to the 10 year plus 550 basis points or approximately 10.4% based off current rates.
Evan Kiefer: I'll echo Tom's comments as there's a great quarter that with that, we will open the call for comments. Thank you.
Operator: Ladies and gentlemen, at this time, if you would like to ask a question, please press star one on your telephone keypad. If you would like to remove yourself from the question queue, you may do so by pressing star two. Once again, that's star one to ask a question and star two to remove yourself. We will pause for just a moment to assemble the question queue.
Ken Rezvan: We'll take our first question from Ken Rezvan with Keybank Capital Markets.
Evan Kiefer: Good morning, folks. Thanks for taking my questions and having congratulations on the permit roll. I guess I'll start with the repurchases. I'm just trying to understand kind of the rationale behind that. You talked about a 10B-51 and then you also talked about offsetting delusions. So, should we assume you will be active this quarter is the 10B-51 in place or is that something you may put in place or I'm just trying to understand kind of the rationale behind the repurchase decision now.
Evan Kiefer: Yeah, nothing is in place right now. This just gives us the flexibility and the opportunity to repurchase units going forward. One of the things we really were looking at is the overall principle value on the preferred units being par at a little over $20 and at 105% today puts it at 21-41 per unit and since those are convertible one to one in the common and with the yield going to call it 10.5% on our common units and 10% on the preferred just gives us a little bit of that discount to the common units which we like relative to the preferred.
Evan Kiefer: Okay, okay and I guess that you do have another month to decide what you're going to do with the preferred, you know, obviously you have a little bit of a cash balance building. Will that be something that you will disclose in the marketplace if you do decide to redeem some or all of them? Yes, that is correct. Yeah, and we have $90 million today on the balance sheet. Really, that's going to be paid out as far as the distribution in the middle of next month.
Evan Kiefer: But, you know, as we go forward thinking about the potential redemption of the preferred or redeeming any common units, that will most likely just be used out of any cash that we build through coverage or we have the line of credit that's currently unused with $375 million of cash commitments today. Okay, so you have options. I appreciate that.
Evan Kiefer: If I can sneak one last one in, obviously a very strong production number, the modest revision of guidance saying you'll be at the upper end. In first, some sort of decline in fourth quarter production, can you talk about what you're seeing and why we shouldn't think that you'll be above that 39,000 a day for the year? Just trying to think about the near term cadence of production. Yeah, of course, Tim. And thanks for the question.
Evan Kiefer: Yeah, you know, when we model our forecast and look forward, we typically just model what we have very clean visibility and line of sight into. So that's going to be based off of any feedback we received from operators from permits and drilling activity that we see on our acreage. And so whenever we look into, you know, our results for the third quarter, that was all from new wells that we saw drill at the beginning of the year.
Evan Kiefer: With the lower rig count and the hands though, we see some challenges there going forward and expect overall production, although was up for the quarter to still remain fairly flat going into next year, but you know, there's always things that occur on a large, diversified position, such as ours that we don't necessarily have that clean visibility into. And so because we model what we see and have that visibility into, you know, there's that.
Evan Kiefer: And parents, conservatism built into our views, you know, right now with where we see the program going and where we see, you know, with the drill pace and everything that is that decrease from current volumes into the fourth quarter, but we're still encouraged and optimistic as to what volumes can go into next year and beyond. Okay, thanks for the responses. Thank you.
Operator: Once again, ladies and gentlemen, that's star one for questions.
Derrick Whitfield: We'll go next to Derek Whitfield with Diffle.
Evan Kiefer: Good morning on Congrats Evan on your well-earned role. Thank you. Following up on Tim's question, given the strength of your oil production in the quarter, could you help frame how much of that increase was for prior quarter activity versus underlying growth. Yeah, so based off of, you know, the production that we saw on the third quarter, all of that was really or at least the vast majority of that wasn't from wells or drilled in 2023.
Evan Kiefer: The actual breakdown between what was in the current quarter versus production that we received from prior periods is going to be a smaller portion or smaller piece of that. But like I said, the majority of the increase in oil volumes from this quarter was all really drilled in 2023. And with regard to the 28 Angelina County AC on wells that are in various stages of development, could you help frame the splits on where they lie and development and your expectations on when the wells will be turned in line.
Evan Kiefer: Yeah, so, you know, we have through that agreement, certain criteria that requires them to drill and complete those wells. Whenever we look at what the wells are currently being in the drilling phase that may include wells that are on the same pad, that's going to be on average, call it 10 months from initial drill to turn in line going forward. Exactly in the middle of next year. I would just add something to that statement.
Evan Kiefer: Ethan is really doing a great job out there in the Shelby Traw. And they have a growing program out there and some of the metrics around timing that we built into our contract some two or three years ago are morphing as multi pad development wells become more common. And the program is likely to expand. And so we may see a little bit more lumpiness in turning to sales because they're doing more wells at once and it takes longer to get a full set of them up and ready to turn on.
Evan Kiefer: But we see that as positive and we really look to work closely with a dawn on all that. And perhaps stay with you for one last follow up if I could. I know your focus in recent years has been on organic conversion opportunities. Having said that, how would you characterize the current state of the MNA market and your desire to participate in that? Well, I'll answer that this way. The overall MNA market is pretty, pretty brothy in terms of valuations, I would say. But we think they're continued to be more opportunities since we would have said we saw a year or two ago, but we're trying to look in places where maybe other people aren't looking.
Thomas Carter: Terrific. Thanks for your time. Thank you, Derek. At this time, I will turn the conference back over to our presenters for any additional or closing comments. Well, thank you all for joining us today. We're pretty optimistic with the pace and activity levels that we're seeing in our ability to continue to grow our platform. And we look forward to talking to you again next.
Operator: Award. Thank you, ladies and gentlemen, that does conclude today's program. You may disconnect