Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Black Stone Minerals LP reported a net income of $63.9 million and adjusted EBITDA of $104.1 million for the first quarter.
- The company has a strong balance sheet with no outstanding borrowings on its revolver and approximately $89 million in cash.
- Black Stone Minerals LP has hedged over 60% of its expected volume for the remainder of 2024, providing some insulation against near-term pricing volatility.
- The company has acquired approximately $50 million of non-producing mineral and royalty interests, aiming to supplement these acquisitions and expand its footprint.
- Despite production curtailments and delays, Black Stone Minerals LP is focused on long-term strategies and growth, particularly in the Shelby Trough area with significant long-term growth potential.
Negative Points
- Total production volumes decreased by 2% from the previous quarter, with oil volumes trending down in the Midland and Delaware basins.
- Due to challenges with natural gas prices and production curtailments, the company reduced its distribution to $0.375 per unit.
- Black Stone Minerals LP lowered its 2024 production guidance by approximately 4% due to ongoing challenges in the natural gas price environment.
- The company faces uncertainties in the natural gas market, which could impact its financial performance and operational plans.
- Despite a strong quarter financially, the company continues to navigate a challenging commodity price environment, which could pose risks to future growth and profitability.
Q & A Highlights
Q: For my first question, I'm going to focus on your 2024 guidance with your lower guidance, could you help frame how you're thinking about the cadence of production throughout the year? And while clearly price dependent and not as material as some might think. What is your assumption on curtailments in your guidance?
A: (Evan Kiefer - CFO, SVP, Treasurer) Yes, Eric, this is Kevin. One of the things we're looking at not only just from public guidance, whether it's Chesapeake has come out and said that they intend on drilling wells for the next quarter as well as what A-Power has indicated as well. What we're really looking at is average pricing in the third quarter's, call it on average $2.50, the fourth quarter is closer to $3. And I think where we started to move on those levels will be a little bit more interested in turning that well, those wells online and giving the production as opposed to right now are closer to $2 in the second quarter. So our current guidance update to really contemplate curtailments through the second quarter into the third and then assuming that that level that they start to come back online really kind of targeting that third quarter into the second half of the year.
Q: Makes sense. And then maybe shifting over to acquisition activity, and you've been active in acquiring over $50 million in minerals since last September. As you guys have noted, while I know you guys would prefer not to disclose the location at this time. Could you at least help frame the opportunity as to whether it's oil or gas kind of the competitive environment that you're seeing and the depth of the opportunity beyond what's been disclosed?
A: (Thomas Carter - Independent Director) I'll answer that, unlike a lot of people in the industry where mineral acquisitions are going on in the Permian and the acquisition of a royalty acres in the Permian is extremely expensive. We are focusing our acquisitions on other areas that are not nearly as expensive, but that are contiguous to and around significant positions that we already have in other areas. And while I'm not trying to say too much about where that is, it doesn't take a lot of imagination to figure out where that might be. And we think with what we see in the script and towards the late '25 and beyond that, those acquisitions made today will have significantly higher return on investments for Blackstone than trying to wade in where everybody else is. So I hope that answers your question.
Q: It does. And then just in terms of the debt beyond what you guys have committed to today? Any color you can offer there?
A: (Thomas Carter - Independent Director) Yep, meaning, how much do we expect to spend? Or how much more could you spend given the competitive landscape this year? I wouldn't answer that this way. I think we expect and have budgeted the spend. I paid a multiple of what we spent so far and that depends on price, but we've got a pretty robust program going on and we're probably is active right now as we've been since '23.
Q: First question is on distribution. You will be trimmed in 1Q and had more than enough coverage to pay for it. Are you looking to maintain this $0.375 distribution going forward, just given the current gas and hedges in place?
A: (Evan Kiefer - CFO, SVP, Treasurer) Yes, John, that's a great question. And with the higher coverage that we had in the first quarter, that was really elected to help support some of the acquisition efforts. Now given the production delays and curtailments, we do expect that coverage could fall in the future and a lot of that is really going to be dependent on how long the low gas environment continues. Do we see this strength kind of continue in the second half of the year as the strip would indicate. And so we do like setting a distribution level that is achievable and expect to maintain it. But as always, there's some openness as to where the strip in the current environment percent.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
