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Black Stone Minerals, L.P. First Quarter 2023 Results

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| Tuesday,May 02,2023

Black Stone Minerals, L.P. announced first quarter 2023 results.

Highlights

Mineral and royalty production for the first quarter of 2023 equaled 36.8 MBoe/d, a decrease of 8% over the prior quarter; total production, including working interest volumes, was 39.3 MBoe/d for the quarter.
Net income for the first quarter was $134.4 million. Adjusted EBITDA for the quarter totaled $109.9 million, a decrease of 17% over the prior quarter.
Distributable cash flow was $104.1 million for the first quarter, a decrease of 17% relative to the fourth quarter of 2022.
Announced a distribution of $0.475 per unit with respect to the first quarter of 2023 and represents an increase of 19% over the common distribution paid to the first quarter of 2022. Distribution coverage for all units was 1.04x.
Total outstanding debt at the end of the first quarter was zero; as of April 28, 2023, total debt remained at zero with $66 million of cash.
Effective April 27, 2023, Black Stone's borrowing base under its revolving credit facility was reaffirmed at $550 million, with $375 million of commitments.

Black Stone Minerals announces its financial and operating results for the first quarter of 2023.

Thomas L. Carter, Jr., Black Stone Minerals' Chief Executive Officer and Chairman said: "We had a strong start to the year despite headwinds from weaker natural gas prices. We remain constructive on our long-term outlook and are encouraged by our development agreements with Aethon in the Shelby Trough and various operators in the Austin Chalk. As we continue to focus on growth in our existing assets, Black Stone is able to maintain the highest distribution level since going public."

Quarterly Financial and Operating Results

Production

Black Stone Minerals reported mineral and royalty volume of 36.8 MBoe/d (78% natural gas) for the first quarter of 2023, compared to 40.0 MBoe/d for the fourth quarter of 2022 and 29.6 MBoe/d for the first quarter of 2022. The decrease was primarily driven by lower volumes in the Wolfcamp where several large suspense payments were received in the fourth quarter.

Working interest production for the first quarter of 2023 was 2.4 MBoe/d, representing an increase of 14% from the levels generated in the quarter ended December 31, 2022 and a decrease of 27% from the quarter ended March 31, 2022. The continued decline year over year 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 39.3 MBoe/d (94% mineral and royalty, 78% natural gas) for the first quarter of 2023 compared to 42.1 MBoe/d and 32.9 MBoe/d for the quarters ended December 31, 2022 and March 31, 2022, respectively.

Realized Prices, Revenues, and Net Income

The Company's average realized price per Boe, excluding the effect of derivative settlements, was $33.47 for the quarter ended March 31, 2023. This is a decrease of 34% from $50.66 per Boe from the fourth quarter of 2022 and a 35% decrease compared to $51.25 for the first quarter of 2022.

Black Stone reported oil and gas revenue of $118.3 million (51% oil and condensate) for the first quarter of 2023, a decrease of 40% from $196.2 million in the fourth quarter of 2022. Oil and gas revenue in the first quarter of 2022 was $151.6 million.

The Company reported a gain on commodity derivative instruments of $52.3 million for the first quarter of 2023, composed of a $13.3 million gain from realized settlements and a non-cash $39.0 million unrealized gain due to the change in value of Black Stone's derivative positions during the quarter. Black Stone reported a gain of $31.4 million and a loss of $120.0 million on commodity derivative instruments for the quarters ended December 31, 2022 and March 31, 2022, respectively.

Lease bonus and other income was $4.0 million for the first quarter of 2023, primarily related to leasing activity in the Haynesville/Bossier and Wolfcamp. Lease bonus and other income for the quarters ended December 31, 2022 and March 31, 2022 was $2.8 million and $4.9 million, respectively.

The Company reported net income of $134.4 million for the quarter ended March 31, 2023, compared to net income of $183.2 million in the preceding quarter. For the quarter ended March 31, 2022, the Company reported a net loss of $7.0 million.

Adjusted EBITDA and Distributable Cash Flow

Adjusted EBITDA for the first quarter of 2023 was $109.9 million, which compares to $131.7 million in the fourth quarter of 2022 and $98.8 million in the first quarter of 2022. Distributable cash flow for the quarter ended March 31, 2023 was $104.1 million. For the quarters ended December 31, 2022 and March 31, 2022, distributable cash flow was $125.3 million and $92.6 million, respectively.

Financial Position and Activities

As of March 31, 2023, Black Stone Minerals had $19.2 million in cash and no amount was drawn under its credit facility. At the end of April, the Company had approximately $66 million in cash, and no debt was outstanding under the credit facility.

Subsequent to quarter-end, Black Stone's borrowing base was reaffirmed at $550 million and total commitments were $375 million. Black Stone is in compliance with all financial covenants associated with its credit facility.

During the first quarter of 2023, the Company made no repurchases of units under the Board-approved $75 million unit repurchase program.

First Quarter 2023 Distributions

As previously announced, the Board approved a cash distribution of $0.475 for each common unit attributable to the first quarter of 2023. The quarterly distribution coverage ratio attributable to the first quarter of 2023 was approximately 1.04x. These distributions will be paid on May 19, 2023 to unitholders of record as of the close of business on May 12, 2023.

Activity Update

Rig Activity

As of March 31, 2023, Black Stone had 78 rigs operating across its acreage position, a decrease relative to the 108 rigs on the Company's acreage as of December 31, 2022 and a decrease compared to the 88 rigs operating on the Company's acreage as of March 31, 2022. The decrease in rigs at the end of the first quarter was driven primarily by a reduction in the Wolfcamp which reverted to the average rig count throughout the first three quarters of 2022. Black Stone also saw a decrease in the Haynesville in response to lower natural gas prices.

Shelby Trough Development Update

Aethon has successfully turned 16 wells to sales and has commenced operations on 10 additional wells under the development agreement covering Angelina County. Aethon has successfully turned four wells to sales and has another nine wells awaiting completion operations under the separate development agreement covering San Augustine County. Additionally, XTO Energy has resumed drilling on the Company's Shelby Trough acreage in San Augustine County and has one well currently awaiting completion operations.

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 we have significant acreage positions. The results of the 2021 three well test program in the Brookeland Field demonstrated that modern completion technology has the potential to greatly improve production rates and increase reserves when compared to the vintage, unstimulated wells in the Austin Chalk formation. Eight operators are actively engaged in redevelopment of the field, with two rigs running continuously in the play. To date, 22 wells with modern completions are now producing in the area, and an additional six wells 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 2023 and 2024. The Company's hedge position as of April 28, 2023 is summarized in the following tables:

Oil Hedge Position
	Oil Swap	Oil Swap Price
	MBbl	$/Bbl
1Q23	210	$79.44
2Q23	540	$80.80
3Q23	540	$80.80
4Q23	540	$80.80
1Q24	270	$69.79
2Q24	270	$69.79
3Q24	270	$69.79
4Q24	270	$69.79

Natural Gas Hedge Position
	Gas Swap	Gas Swap Price
	BBtu	$/MMbtu
2Q23	8,190	$5.15
3Q23	8,280	$5.15
4Q23	8,280	$5.15
1Q24	5,460	$3.64
2Q24	5,460	$3.64
3Q24	5,520	$3.64
4Q24	5,520	$3.64

More detailed information about the Company's existing hedging program can be found in the Quarterly Report on Form 10-Q for the first quarter of 2023, which is expected to be filed on or around May 2, 2023.