Black Stone Minerals, L.P. Reports First Quarter Results

Source: www.gulfoilandgas.com 5/2/2022, Location: North America

Black Stone Minerals, L.P. announces its financial and operating results for the first quarter of 2022.

Financial and Operational Highlights
- Mineral and royalty production for the first quarter of 2022 equaled 29.6 MBoe/d, a decrease of 16% over the prior quarter, driven in part by the timing of new wells turned to sales in the Shelby Trough Haynesville/Bossier; total production, including working interest volumes, was 32.9 MBoe/d for the quarter.
- Adjusted EBITDA for the quarter totaled $98.8 million, an increase of 27% over the prior quarter. Net loss for the first quarter was $7.0 million.
- Distributable cash flow was $92.6 million for the first quarter, an increase of 30% relative to the fourth quarter of 2021.
- Announced a distribution of $0.40 per unit with respect to the first quarter of 2022, which represents a 48% increase from the distribution paid with respect to the fourth quarter of 2021. Distribution coverage for all units was 1.1x.
- Total debt at the end of the first quarter was $69.0 million; total debt to trailing twelve-month Adjusted EBITDA was 0.2x at quarter-end. As of April 29, 2022, total debt had been reduced to $44.0 million.
- Effective April 28, 2022, Black Stone’s borrowing base under its revolving credit facility was reaffirmed at $400 million. Management Commentary

Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and Chairman commented, “We remain very encouraged by the level of activity across our acreage in this strong commodity price environment, and by the initial drilling results on our concentrated mineral positions in the Haynesville and Austin Chalk plays. This optimism is reflected in the significant distribution increase we announced last week.”

Quarterly Financial and Operating Results

Production
Black Stone Minerals reported mineral and royalty volume of 29.6 MBoe/d (71% natural gas) for the first quarter of 2022, compared to 35.2 MBoe/d for the fourth quarter of 2021 and 31.1 MBoe/d for the first quarter of 2021. The decrease was most pronounced in the Shelby Trough and was due in part to the timing of new wells brought on line. Aethon Energy ("Aethon"), the Company’s primary operating partner in the area, had four wells turned to sales shortly after the end of the first quarter. In addition, XTO Energy shut in some existing production in the Shelby Trough as it resumed drilling operations on three wells in San Augustine County. Finally, the Company successfully worked with producers in the second half of 2021 to release suspended production volumes across its mineral position, which increased reported volumes in that period.

Working interest production for the first quarter of 2022 was 3.3 MBoe/d, representing a decrease of 15% from the levels generated in the quarter ended December 31, 2021 and a decrease of 43% from the quarter ended March 31, 2021. The continued decline in working interest volumes is consistent with the Company's decision to farm out its working-interest participation to third-party capital providers.

Total reported production averaged 32.9 MBoe/d (90% mineral and royalty, 72% natural gas) for the first quarter of 2022 compared to 39.1 MBoe/d and 36.8 MBoe/d for the quarters ended December 31, 2021 and March 31, 2021, respectively.

Realized Prices, Revenues, and Net Income
The Company’s average realized price per Boe, excluding the effect of derivative settlements, was $51.25 for the quarter ended March 31, 2022. This is an increase of 16% from $44.12 per Boe from the fourth quarter of 2021 and a 95% increase compared to $26.27 for the first quarter of 2021.

Black Stone reported oil and gas revenue of $151.6 million (50% oil and condensate) for the first quarter of 2022, a decrease of 5% from $158.9 million in the fourth quarter of 2021. Oil and gas revenue in the first quarter of 2021 was $87.1 million.

The Company reported a loss on commodity derivative instruments of $120.0 million for the first quarter of 2022, composed of a $31.2 million loss from realized settlements and a non-cash $88.8 million unrealized loss due to the change in value of Black Stone’s derivative positions during the quarter. Black Stone reported a gain of $18.4 million and a loss of $27.9 million on commodity derivative instruments for the quarters ended December 31, 2021 and March 31, 2021, respectively.

Lease bonus and other income was $4.9 million for the first quarter of 2022, primarily related to leasing activity in the Wolfcamp play. Lease bonus and other income for the quarters ended December 31, 2021 and March 31, 2021 was $2.1 million and $2.4 million, respectively.

The Company reported a net loss of $7.0 million for the quarter ended March 31, 2022, compared to net income of $134.2 million in the preceding quarter. For the quarter ended March 31, 2021, the Company reported net income of $16.2 million.

Adjusted EBITDA and Distributable Cash Flow
Adjusted EBITDA for the first quarter of 2022 was $98.8 million, which compares to $77.6 million in the fourth quarter of 2021 and $60.0 million in the first quarter of 2021. Distributable cash flow for the quarter ended March 31, 2022 was $92.6 million. For the quarters ended December 31, 2021 and March 31, 2021, distributable cash flow was $71.3 million and $53.8 million, respectively.

Financial Position and Activities
As of March 31, 2022, Black Stone Minerals had $6.7 million in cash and $69.0 million outstanding under its credit facility. At March 31, 2022, the ratio of total debt to trailing twelve-month Adjusted EBITDA was 0.2x. As of April 29, 2022, $44.0 million was outstanding under the credit facility and the Company had $10.1 million in cash.

Subsequent to quarter-end, Black Stone's borrowing base was reaffirmed at $400 million. Black Stone is in compliance with all financial covenants associated with its credit facility.

During the first quarter of 2022, the Company made no repurchases of units under the Board-approved $75 million unit repurchase program.

First Quarter 2022 Distributions
As previously announced, the Board approved a cash distribution of $0.40 for each common unit attributable to the first quarter of 2022. The quarterly distribution coverage ratio attributable to the first quarter of 2022 was approximately 1.1x. These distributions will be paid on May 20, 2022 to unitholders of record as of the close of business on May 13, 2022.

Activity Update

Rig Activity
As of March 31, 2022, Black Stone had 88 rigs operating across its acreage position, a slight decrease relative to the 95 rigs on the Company's acreage as of December 31, 2021 and an increase compared to the 59 rigs operating on the Company's acreage as of March 31, 2021. Most of the decrease in rig count at the end of the first quarter relative to year-end 2021 was in the Delaware Basin.

Shelby Trough Development Update
Aethon has successfully turned six wells to sales (four of which came online in April 2022) and has commenced operations on four additional wells under the development agreement covering Angelina County. Aethon is currently drilling two wells and has another two wells awaiting completion operations under the separate development agreement covering San Augustine County. Additionally, XTO Energy has resumed drilling three wells on Black Stone Shelby Trough acreage in San Augustine County that were originally spud in 2019.

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

Update to Hedge Position
Black Stone has commodity derivative contracts in place covering portions of its anticipated production for 2022 and 2023. The Company's hedge position as of April 29, 2022 is summarized in the following tables:


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