Black Stone Minerals(BSM) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total production volumes for Q3 2022 were 40,000 Boe per day, a 19% increase from Q2 2022, driven entirely by a 23% increase in royalty volumes to 37,300 Boe per day [7][16] - Adjusted EBITDA for Q3 was $123 million, up 9% from Q2, while distributable cash flow was $116 million, an 8% increase from the previous quarter [11][16] - Oil and gas revenues reached $218 million, a 6% increase from the last quarter [16] Business Line Data and Key Metrics Changes - Royalty production increased by 23% to 37,300 Boe per day, primarily due to higher gas volumes from producers in Louisiana Haynesville [16] - The company reported a record distribution of $0.45 per unit for Q3, marking a new high watermark [11] Market Data and Key Metrics Changes - Realized prices for oil were over $95 per barrel and for natural gas over $8 per MCF, despite a decrease from Q2 [16] - The rig count on the company's acreage increased by 14% from 81 to 92 rigs, significantly higher than the 59 rigs at the same time last year [10] Company Strategy and Development Direction - The company is focused on organic growth projects in the Shelby Trough and Austin Chalk, with ongoing development activity and increasing production volumes [11][12] - The strategy emphasizes long-term development and maximizing the value of existing acres without additional equity investments or debt [14] - The company aims to attract development dollars to enhance production growth and has successfully brought in new operators to increase activity [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued revenue impacts from higher production levels and favorable commodity prices, expecting total production for the year to meet or exceed original guidance [9][21] - The company anticipates a strong cash flow in 2023 due to increased hedge prices, with natural gas swap strike prices rising over 60% and oil hedge prices increasing over 20% [19][21] Other Important Information - The company reduced its debt from $60 million to $19 million, enhancing financial flexibility, and extended the maturity date of its credit facility to October 2027 [20][21] - The borrowing base of the credit facility was increased from $400 million to $550 million, although total commitments were limited to $375 million [21] Q&A Session Summary Question: Production strength commentary for Q3 - Management confirmed that the production strength was indeed driven by high-rate new wells in Louisiana Haynesville, with ongoing positive activity in the Shelby Trough expected to benefit Q4 volumes [23][24] Question: Activity expectations for Austin Chalk - Management anticipates activity levels in the Austin Chalk to be in the high-20s to low-30s over the next 12 months, with a focus on the core of the play where results have been favorable [26]