Q2 2024 Black Stone Minerals LP Earnings Call

Speaker Change: [inaudible]

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Operator: Please stand by, your program is about to begin. If you need assistance during your conference today, please press star zero. Good day, everyone, and welcome to today's Black Stone Minerals Q2 Earnings Call.

Operator: Good day, everyone, and welcome to today's Black Stone Minerals Q2 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: Good day everyone and welcome to today's Blackstone Minerals Q2 earnings call.

Operator: At this time, all participants are in a listen-only mode. Later, you'll 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 1 on your telephone keypad. You may withdraw yourself from the queue by pressing Star 2. Please note this call may be recorded. I'll be standing by should you need any assistance. It is now my pleasure to turn the conference over to Mr. Mark Meaux, Director of Finance. Please go ahead.

Operator: Later, you'll have the opportunity to ask questions during the question-and-answer session.

Speaker Change: At this time, all participants are in a listen-only mode.

Operator: 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 may be recorded.

Speaker Change: Later, you'll 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 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. Please note this call may be recorded. I'll be standing by should you need any assistance.

Operator: I'll be standing by, should you need any assistance?

Mark Meaux: He did not know my pleasure to turn the conference over to Mr. Mark Meaux, Director of Finance. Please go ahead.

Speaker Change: It is now my pleasure to turn the conference over to Mr. Mark Meaux, Director of Finance. Please go ahead.

Mark Meaux: Thank you. Good morning to everyone. Thank you for joining us either by phone or online for Black Stone Minerals' second quarter 2024 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.

Mark Meaux: Thank you.

Thomas Carter: Good morning to everyone. Thank you for joining us either by phone or online for a Black Stone Minerals second quarter, 2024 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.

Mark Meaux: Thank you. Good morning to everyone. Thank you for joining us either by phone or online for Blackstone Minerals' second quarter 2024 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.

Mark Meaux: 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 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 2023 10-K. 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.blackstoneminerals.com.

Thomas Carter: 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 risk that may cause our actual results to differ materially from the results expressed or implied 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 factor section of our 2023-10-K.

Speaker Change: 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.

Speaker Change: 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 2023-10-K.

Thomas Carter: 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 gap measure and other information about these non-gap metrics or describes in our earnings press release from yesterday, which can be found on our website at www.blackstoneminerals.com.

Speaker Change: We may refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance.

Speaker Change: Reconciliation of those measures to the most directly comparable gap measure and other information about these non-gap metrics are described in our earnings press release from yesterday, which can be found on our website at

Mark Meaux: Joining me on the call from the company are Tom Carter, Chairman, CEO, and President; Taylor DeWalch, Senior Vice President, Chief Financial Officer and Treasurer; Carrie Clark, Senior Vice President, Chief Commercial Officer; and Steve Putman, Senior Vice President and General Counsel. I'll now turn the call over to...

Thomas Carter: Joining me on the call from the company are Tom Carter, Chairman, CEO and President; Taylor DeWalch, Senior Vice President, Chief Financial Officer and Treasurer; Kerry Clark, Senior Vice President, Chief Commercial Officer; and Steve Putman, Senior Vice President and General Counsel.

Speaker Change: Joining me on the call from the company are Tom Carter, Chairman, CEO, and President.

Speaker Change: Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer Kerry Clark, Senior Vice President, Chief Commercial Officer and Steve Putman, Senior Vice President and General Counsel I'll now turn the call over to Tom.

Thomas Carter: I'll now turn the call over to Tom. Good morning, and thank you all for joining us today. In the second quarter, we continue to see solid results from our unique asset base, and we remain focused on our organic growth strategy, along with targeted acquisitions to further enhance our existing long runway of high-interest development opportunities. And in total production for the quarter was in line with the first quarter. At 40.4,000 BOE per day, which generated 68 million of net income, and just over 100 million of adjusted to EBITDA. 67% of our oil and gas revenues in the quarter came from oil and condensate production.

Thomas Carter: Good morning, and thank you all for joining us today. In the second quarter, we continued to see solid results from our unique asset base, and we remain focused on our organic growth strategy, along with targeted acquisitions to further enhance our existing long runway of high-interest development opportunities. Total production for the quarter was in line with the first quarter, at $40,400 BOE per day, which generated $68 million of net income and just over $100 million of adjusted EBITDA. 67% of our oil and gas revenues in the quarter came from oil and condensate production.

Tom Carter: Good morning and thank you all for joining us today.

Tom Carter: In the second quarter, we continue to see solid results from our unique asset base and we remain focused on our organic growth strategy along with targeted acquisitions to further enhance our existing long runway of high interest development opportunities.

Tom Carter: Total production for the quarter was in line with the first quarter.

Tom Carter: at 40.4 thousand BOE per day, which generated 68 million of net income and just over 100 million of adjusted EBITDA.

Tom Carter: Sixty-seven percent of our oil and gas revenues in the quarter came from oil and condensate production. We maintained our distribution at 37.5 cents per unit, with excess coverage utilized on growth opportunities.

Thomas Carter: We maintained our distribution at 37.5 cents per unit, with excess coverage utilized on growth opportunities. Commercial Strategy and AssetMix were uniquely positioned to remain focused on the long-term decision-making opportunities. Strong oil production and revenues from multiple basins as well as a constructive natural gas outlook remain the foundation of a very positive future for the company on the acquisitions front. As we discussed previously, starting in the fourth quarter of 2023, we expanded our commercial initiatives to include a targeted grassroots acquisition program to enhance our existing asset position and to elongate our runway of development opportunities. During the quarter, we added another 26.5 million in minerals and royalty acquisitions and have acquired about 65 million in minerals and royalty interests in these areas since September 23.

Thomas Carter: We maintain our distribution in 37.5 cents per unit, with excess coverage utilized on growth opportunities. With our clean balance sheet, commercial strategy, and asset mix, we're uniquely positioned to remain focused on the long-term decision-making opportunities, strong oil production and revenues for multiple basins, as well as a constructive natural gas outlook, remain the foundation of a very positive future for the company.

Tom Carter: With our clean balance sheet, commercial strategy, and asset mix, we're uniquely positioned to remain focused on the long-term decision-making opportunities.

Tom Carter: Strong oil production and revenues from multiple basins, as well as a constructive natural gas outlook, remain the foundation of a very positive future for the company. On the acquisitions front,

Thomas Carter: on the acquisition front. As we discussed previously, starting in the fourth quarter of 2023, we expanded our commercial initiatives to include a targeted grassroots acquisition program to enhance our existing asset position and to elongate our runway of development opportunities. During the fourth quarter, we added another 26.5 million in minerals and royalty acquisitions and have acquired about 65 million in minerals and royalty interest in these areas since September of 23. We continue to see creative opportunities to add to our position, which will ultimately add value for our shareholders. In East Texas and Louisiana, we continue to work with multiple operators to promote development on our acreage while monitoring the current environment and preparing for the anticipated improvement in the natural gas market.

Tom Carter: as we discussed previously, starting in the fourth quarter of 2023.

Tom Carter: We expanded our commercial initiatives to include a targeted grassroots acquisition program to enhance our existing asset position and to elongate our runway of development opportunities.

Tom Carter: During the quarter, we added another $26.5 million in minerals and royalty acquisitions and have acquired about $65 million in minerals and royalty interest in these areas since September of 2023.

Thomas Carter: We continue to see creative opportunities to add to our position and we, which will ultimately add value for our shareholders. In East Texas and Louisiana, we continue to work with multiple operators to promote development on our acreage while monitoring the current environment and preparing for the anticipated improvement in the natural gas market. We also remain focused on the Shelby Trough operations and our extensive undeveloped inventory, totaling over 15 TCF of Gulf Coast resources with multiple successful recent well results.

Tom Carter: We continue to see creative opportunities to add to our position, which will ultimately add value for our shareholders.

Tom Carter: In East Texas and Louisiana, we continue to work with multiple operators to promote development on our acreage while monitoring the current environment and preparing for the anticipated improvement in the natural gas market.

Thomas Carter: We also remain focused on the Shelby Trawl Operations and our extensive undeveloped inventory, totaling over 15 TCF of gas of Gulf Coast resource with multiple successful recent well results. Another eight wells on our minerals were brought online in the second quarter in this area with initial rates in the range of 25 to 30 million cubic feet per day. And several more wells are scheduled to come online in the second half of the year, being drilled in the first half of the year. Overall, it was a strong quarter, and we maintain our strategic objective of working with the operators to achieve full field development across all of our assets.

Tom Carter: We also remain focused on the Shelby Trough operations and our extensive undeveloped inventory, totaling over 15 TCF of Gulf Coast resource, with multiple successful recent well results. Another eight wells on our minerals were brought online in the second quarter.

Thomas Carter: Another eight wells on our minerals were brought online in the second quarter, in this area with initial rates in the range of 25 to 30 million cubic feet per day, and several more wells are scheduled to come online in the second half of the year after being drilled in the first half. Overall, it was a strong quarter, and we maintain our strategic objective of working with the operators to achieve full field development across all of our assets.

Tom Carter: Overall, it was a strong quarter and we maintain our strategic objective of working with the operators to achieve full field development across all of our assets. We continue looking toward the future by advancing our commercial initiatives and growing production.

Thomas Carter: We continue looking toward the future by advancing our commercial initiatives and growing production and returning the distribution to the high water mark previously set.

Thomas Carter: We continue looking toward the future by advancing our commercial initiatives and growing production and returning distribution to the high watermark previously set. With that, I'll turn it over to Taylor to walk through the financial details of the quarter.

Taylor DeWalch: With that, I'll turn it over to Taylor to walk through the financial details of the quarter. Thanks, Tom. Good morning, everyone. At Tom pointed out, we had a very solid second quarter. Mineral and royalty production was 38.2000 BOE per day, and total production volumes were just over 40,000 BOE per day. Both of which are about flat from last quarter. We saw an increase in our old volumes, which helped offset the continued downturn in the gas market. We maintain our updated full year guidance from the first quarter. Continue to softly review current market dynamics. It's Tom; previously mentioned net income was $68.3 million for the quarter, with adjusted EBITDA being $100.2 million.

Taylor DeWalch: Thanks, Tom. Good morning, everyone.

Taylor DeWalch: As Tom pointed out, we had a very solid second quarter. Mineral and royalty production was 38.2,000 BOE per day, and total production volumes were just over 40,000 BOE per day, both of which are about flat from last quarter. We saw an increase in our oil volumes, which helped offset the continued downturn in the gas market. We maintain our updated full-year guidance from the first quarter and continue to softly review current market dynamics.

Taylor DeWalch: As Tom previously mentioned, net income was $68.3 million for the quarter, with adjusted EBITDA being $100.2 million. We previously announced that our distribution for the quarter is 37.5 cents per unit, or $1.50 on an annualized basis. Distributable cash flow for the quarter was $92.5 million, which represents 1.17 times coverage for the quarter.

Taylor DeWalch: We previously announced that our distribution for the quarter is 37.5 cents per unit, or $1.50 on an annualized basis. Distributable cash flow for the quarter was $92.5 million, which represents 1.17 times coverage for the quarter. Our board elected to keep the distribution flat from the previous quarter so that we can continue to use the excess coverage to pursue attractive mineral and royalty acquisitions. We continue to have a strong balance sheet because of flexibility through these dynamic market cycles. Total commitments under the credit facility remain at $375 million, and there are currently no outstanding borrowings on the revolver.

Taylor DeWalch: Our board elected to keep the distribution flat from the previous quarter so that we can continue to use the excess coverage to pursue attractive mineral and royalty equity. We continue to have a strong balance sheet that gives us flexibility through these dynamic market cycles. Total commitments under the credit facility remain at $375 million, and there are currently no outstanding borrowings on the revolver. As of the end of last week, we had just over $61 million in cash.

Taylor DeWalch: As of the end of last week, we had just over $61 million in cash. We are well-edged for the remainder of the year. Our 2024 natural gas hedges are approximately $3.55 per MNBPU, comparing that to an average price at Henry Hub of about $2 per MNBPU for the second quarter. We've benefited with a real-life gain of approximately $12 million. We have over 60% of our expected volumes hedged for the remainder of 2024 that will help inflate our cash flows from near-term price volatility. We have continued to add to our hedge portfolio for 2025 and will maintain our strategy of adding on hedges for 2026.

Taylor DeWalch: We are well-hedged for the remainder of the year. Our 2024 natural gas hedges are at approximately $3.55 per MMBTU. Comparing that to an average price at Henry Hub of about $2 per MMBTU for the second quarter, we've benefited with a realized gain of approximately $12 million. We have over 60% of our expected volumes hedged for the remainder of 2024, which will help insulate our cash flows from near-term price volatility. We have continued to add to our hedge portfolio for 2025 and will maintain our strategy of adding on hedges for 2026. Again, we had another solid quarter, and we'll continue to focus on generating long-term value for our shareholders. With that, we'll open the call for questions.

Tom Carter: We have over 60% of our expected volumes hedged for the remainder of 2024 that will help insulate our cash flows from near-term price volatility. We have continued to add to our hedge portfolio for 2025 and will maintain our strategy of adding on hedges for 2026.

Taylor DeWalch: Again, we have another solid quarter and will continue to focus on generating long-term value for our shareholders.

Tom Carter: Again, we had another solid quarter and we'll continue to focus on generating long-term value for our shareholders. With that, we'll open the call for questions.

Operator: With that, we'll open the call for questions. Thank you. If this time, if you'd like to ask a question, please press these star and one on your telephone keypad. You may remove yourself from queue at any time by pressing star two. Again, that is star one to ask a question. We'll pause for a moment to allow questioners to queue.

Operator: Thank you. At this time, if you'd like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Again, that is star 1 to ask a question. We'll pause for a moment to allow questioners to queue, and our first question will come from Tim Resnick with KeyBank.

Timothy Rezvan: In our first question, we'll come from 10 residents with Key Bank.

Timothy Rezvan: Morning, folks. And thank you for taking my questions. My first question in the release, you gave some comments on Athon, but I was hoping to maybe get a little more color. You mentioned in the release delayed initial production from some wells in the second quarter. Can you clarify what that means? Is that deferred till, or are they choking back production? And then if you could kind of get broader comments on if Athon has sort of formally come at it this time out that they answer in December. Thank you. Thanks, Tim. Appreciate the question. I'll take a quick pass.

Tim Resnick: Good morning, folks. Thank you for taking my questions. My first question: in the release, you gave some comments on Aethon, but I was hoping to maybe get a little more color. You mentioned in the release a delayed initial production from some wells in the second quarter. Can you clarify what that means? Is that deferred till later, or are they choking back production? And then, if you could kind of get broader comments on whether Aethon has sort of formally come out of this time out that they answered in December. Thank you.

Speaker Change: Good morning, folks, and thank you for taking my questions.

Speaker Change: My first question.

Speaker Change: In the release you gave some comments on Aethon, but I was hoping to maybe get a little more color

Speaker Change: you mentioned in the release a delayed initial production from some wells in the second quarter.

Taylor DeWalch: Thanks, Tim. I appreciate the question. And I guess, this is Taylor. I'll take it.

Speaker Change: Thanks Tim, appreciate the question and I guess, this is Taylor, I'll take it.

Taylor DeWalch: Quick passage, just your first part of that question on the delayed production, to clarify what we said in the release. So, we had previously announced that there were a number of wells for which the first production date was just going to be delayed a little bit. And so, the comment there in the release is specific to those wells that were previously announced, and we're excited to see those wells go ahead and come online, like we mentioned, 8 of the 10, and anticipate the other two coming along in the second half of the year.

Thomas Carter: It's just your first part of that question on the delayed production to clarify what we said in the release. So we had previously announced that there was a number of wells that the first production date was just going to be delayed a little bit. And so the comment there in the release is specific to those wells that were previously announced. And we're excited to see those wells go ahead and come online. Like we mentioned, eight of the 10, and anticipate the other two coming along in the second half of the year. Okay. So, that that's the IP rate you gave suggests those are, you know, the typical, you know, fully producing rates.

Taylor: So we had previously announced that there was a number of wells

Taylor: And so the comment there in release is specific to those wells that were previously announced. And we're excited to see those wells go ahead and come online, like we mentioned, 8 of the 10, and anticipate the other two coming online in the second half of the year.

Carrie Clark: OK, OK, so those IP rates you gave suggest those are, you know, the typical, you know, fully producing rates. OK. And then can you clarify on the timeout part of that question? Are they officially out? Do you get notification? How does that process work?

Speaker Change: Okay, okay, so the IT rates you gave suggest those are, you know, the typical, you know, fully producing rates. Okay, and then can you clarify on the timeout?

Thomas Carter: Okay. And then can you clarify on the timeout part of the question, are they officially out? Do you get notification? How does that process work? I tend to carry cars. Yeah, I think not to, we can't really speak to that not withholding any information, but I think what we've put in the press release is the work still talking with Athon as far as a formal declaration of coming out of, quote, coming out of timeout. That's not really something that we can speak to disseminatively right now. But, you know, can say that they, they through New Wells in February.

Speaker Change: Part of that question, are they officially out? Do you get notification? How does that process work?

Carrie Clark: This is Carrie Clark, not to... We can't really speak to that, not withholding any information, but I think what we've put in the, [inaudible] We're still talking with Aethon as far as a formal declaration of coming out of, quote, coming out of timeout. That's not really... It's something that we can speak to definitively right now, but, you know, can say that they did spud three new wells in February, and those wells, I think, have just come online. We have not seen initial production rates yet, but... We're still talking with them on how best to move forward holistically.

Speaker Change: Hi, this is Carrie Clark. Yeah, I think

Tim Resnick: Okay, okay. I understand. I appreciate that.

Carrie Clark: We can't really speak to that, not withholding any information, but I think what we've put

Carrie Clark: It is...

Thomas Carter: And those wells, I think, have just come online. We have not seen the initial production rates yet, but we're still talking with them on how best to move forward holistically. Okay. I understand. I appreciate that.

Tim Resnick: And then as a follow-up, in the release, you continue to highlight mineral acquisitions in this emerging, but not yet disclosed, Gulf Coast area. And I was curious, kind of, what is precluding you from, you know, discussing it more openly? Is there a critical mass of acreage you want to acquire? Are you waiting to get some sort of formal agreement with an operator? I realize you can't give color, but I was wondering if you could give a little more detail on what the guideposts are to evolve that process. Thank you.

Thomas Carter: And then, as my follow-up in the release, you know, you continue to highlight mineral acquisitions in this emerging, but not yet disclosed Gulf Coast area. And that's just kind of what is precluding you from, you know, discussing it more openly. Is there a critical mass of acreage you want to acquire? Are you waiting to get some sort of formal agreement with an operator? Or at least you can't give color, but I want to give a little more detail on what the guide posts are to evolve that process. Thank you. Sure. Yeah. I mean, we're, you know, as is pretty standard.

Speaker Change: Okay, okay. I understand. I appreciate that and then it's my follow-up

Speaker Change: And I'm just curious, kind of, what is precluding you from, you know, discussing it more openly? Is there a critical mass of acreage you want to acquire? Are you waiting to get some sort of formal agreement with an operator?

Speaker Change: I realize you can't give color, but I was wondering if you could give a little more detail on what the guideposts are to evolve that process. Thank you.

Carrie Clark: Sure, yeah, I mean, we're. As is pretty standard, we're not speaking in a great amount of detail publicly or formally about that acquisition program, but we've shared. We have quite a bit of information about it. We're just still trying to maintain, you know, we're trying to assimilate a position that's accretive to the position that we already have that lines up with the science and some technical work that we've done over the last year. And It's, you know, that pretty much covers it as far as the acquisition program is concerned.

Thomas Carter: We're not speaking in a great amount of details publicly or formally about that acquisition program, but we've shared quite a bit of information about it. We're just still trying to maintain. We're trying to assimilate a position that's a creative to the position that we already have that lines up with the science and some technical work that we've done over the last year. And it's, you know, that's, I think pretty much covers it that as far as the acquisition program. Okay. All right. I understand you can't say too much. Thanks. Thanks, Tim. Thank you.

Speaker Change: quite a bit of information about it. We're just still trying to maintain, you know, we're trying to assimilate a position that's accretive to the position that we already have that lines up with the science and some technical work that we've done over the last year. And...

Speaker Change: I think pretty much covers it as far as the acquisition program.

Tim Resnick: Sorry, I understand you can't say too much. Thanks. Thanks, Tim. Thank you. Again, as a quick reminder...

Speaker Change: Okay.

Speaker Change: All right, I understand you can't say too much. Thanks.

Operator: Thank you. Again, as a quick reminder, if you'd like to ask a question, please press star 1 now. And it looks like we have no additional questions at this time. I'd like to pass this now to the speakers for any closing remarks.

Operator: Again, as a quick reminder, if you would like to ask a question, please press star one now.

Jim: Thanks, Jim.

Speaker Change: Thank you. Again, as a quick reminder, if you'd like to ask a question, please press star 1 now.

Mark Meaux: And it looks like we have no additional questions at this time. I'd like to pass it now back to speakers for any closing remarks.

Speaker Change: And it looks like we have no additional questions at this time. I'd like to pass it now back to speakers for any closing remarks.

Thomas Carter: Okay, thank you all very much for joining us for the 2Q24 earnings call, and we look forward to speaking with you next quarter. Thank you so much.

Mark Meaux: Okay.

Mark Meaux: Thank you all very much for joining us for the 2Q24 earnings call. And we look forward to speaking with you at the next quarter. Thank you so much.

Speaker Change: Okay thank you all very much for joining us for the 2Q24 earnings call and we look forward to speaking with you at the next quarter. Thank you so much.

Operator: Thank you, ladies and gentlemen.

Operator: Thank you, ladies and gentlemen. This concludes today's presentation.

Operator: This concludes today's presentation. You may now disconnect. Thank you. ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶