Black Stone Minerals(US:BSM)2020-08-04 19:15Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $72.4 million for Q2 2020, slightly up from Q1 [18] - Distributable cash flow for the quarter was $64.4 million, down slightly from the previous quarter, with a payout ratio of approximately 2.1 times at the announced distribution of $0.15 per unit [18] - Total debt was reduced by over $230 million or 60% from the end of Q1, bringing outstanding debt down to $153 million as of July 31 [12][18] Business Line Data and Key Metrics Changes - The company generated 34,000 BOE per day of mineral and royalty production in Q2, down 7% from the previous quarter, and total production volumes were 42.6 MBOE per day [16] - The company added 2.9 net wells during Q2, a decrease of 25% from the previous quarter, with the majority of the decrease occurring in the Midland and Delaware basins [9][10] Market Data and Key Metrics Changes - There was a 40% to 50% decrease in permitting activity, new well additions, and active rigs across the company's acreage compared to the previous quarter [9] - The company had 29 drilling rigs operating at the end of Q2, down from 50 at the end of Q1 and about 100 a year ago [10] Company Strategy and Development Direction - The company has focused on reducing internal costs, significantly lowering outstanding debt, and driving new activity on existing acreage in response to lower commodity prices and reduced producer activity [8] - A new development agreement was signed with Aethon Energy for the Shelby Trough, with the first well expected to be spud in October [13] - The company is optimistic about future natural gas prices, with expectations from major equity research firms indicating prices above the strip for 2021 [12] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging environment with significant reductions in rig activity and production, but expressed optimism about future development and cash flow returns to unitholders [15] - The company expects continued production declines through the rest of the year, with revised guidance indicating production levels in the mid 30,000 BOE per day range for the latter half of 2020 [19][20] Other Important Information - The company lowered its lease bonus guidance from $20 million to $30 million to under $10 million for the year due to reduced operator willingness to pay large upfront bonuses [21] - G&A expenses are on track to meet or reduce original guidance of $39 million to $43 million, with total G&A through the first half of 2021 at $23.4 million [22] Q&A Session Summary Question: Level of shut-ins in Q2 - Management modeled about 30% shut-ins, primarily concentrated in the Bakken [23][24] Question: Plans for cash payout closer to 100% - The company aims to balance returns for investors with debt repayment, indicating a cautious approach to increasing payout ratios [24] Question: Direction of natural gas volumes in the next year - The Aethon program is expected to ramp up in 2021, with positive developments anticipated in gas volumes [26][27] Question: Reason for slower development in San Augustine - Development pace is influenced by contractual relations with operators, with potential for bringing in additional operators soon [32] Question: Metrics for assessing balance sheet health - The company considers absolute debt levels, borrowing base cushion, and leverage ratios, maintaining a conservative approach in the current environment [39]