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Brigham MInerals First Quarter 2021 Results

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   |    Friday,May 14,2021

Brigham Minerals, Inc. reported its Q1 2021 results.

Q1 Highlights:

• Daily production volumes of 8,931 Boe/d (70% liquids, 51% oil)
  • Down 5% sequentially from Q4 2020 due to impacts associated with Winter Storm Uri

• Record total revenues of $33.8 million
  • Up 42% sequentially from Q4 2020 driven by 45% higher realized prices and $1.6 million in lease bonus

• Net income totaling $12.1 million
  • Record Adjusted EBITDA⁽¹⁾ totaling $27.1 million up 57% sequentially from Q4 2020

• Declared Q1 2021 dividend of $0.32 per share of Class A common stock
  • Represents a 23% sequential increase from Q4 2020
  • Represents 80% payout ratio of Discretionary Cash Flow ex lease bonus⁽¹⁾ with retained cash utilized to fund accretive mineral acquisitions
  • $1.6 million in lease bonus revenue also retained

• Acquired 1,645 net royalty acres deploying $21.8 million in mineral acquisition capital
  • Deployed 91% of mineral acquisition capital to the Permian Basin with 75% of net locations comprised of PDP, DUCs and permits
  • Approximately 30% of acquisitions internally funded

• 9.1 net (1,511 gross) activity wells in inventory at the end of Q1 2021 comprised of 4.4 net (778 gross) DUCs and 4.7 net (733 gross) permits
  • Represents a 17% increase in net activity well locations from Q4 2020 driven by a 150% increase in net wells spud during Q1 2021 as well as the acquisition of 1.4 net permitted locations largely in the Midland Basin
  • Permian Basin net activity well locations increased by 37% from Q4 2020 to a record 5.2 net locations

• $5.6 million cash balance and revolver capacity of $103 million as of March 31, 2021
  • Associated with the Company's late-May semi-annual borrowing base redetermination under its revolving credit facility, the Administrative Agent has indicated a preliminary recommended borrowing base increase to $165 million.

Robert M. ("Rob") Roosa, Chief Executive Officer, commented, "Drilling activity rebounded substantially in Q1 2021 with a 150% increase in net wells spud on our minerals as compared to Q4 2020, which helped drive a 22% increase in net DUCs to 4.4 net locations. Importantly, we anticipate the majority of our DUCs will be completed by Exxon Mobil Corporation, Chevron Corporation, Devon Energy Corporation, Continental Resources, Inc. and PDC Energy, Inc. who collectively were running 18 frac crews in our basins. As our operators turn in line our DUCs to production, we anticipate our production volumes to approach 10,000 barrels of oil equivalent per day during the second half of 2021. Our acquisition teams also delivered during the quarter, deploying $21.8 million in mineral acquisition capital with over 90% of the capital deployed to the Permian and approximately 75% of the net locations associated with those acquisitions added to our PDP, DUC and permit inventory buckets. Through those acquisitions, we were able to almost double our Permian Basin permit inventory thereby providing a natural replenishment mechanism to our DUC inventory as it gets turned in line to production."

Blake C. Williams, Chief Financial Officer, added, "Our outstanding first quarter results with record revenues and Adjusted EBITDA⁽¹⁾ demonstrate Brigham Minerals' ability to offer shareholders substantial yield and growth with direct exposure to the best acreage and operators. Realized pricing improved 45% over Q4 2020, which allowed us to increase our dividend to $0.32 per share this quarter, a 23% sequential increase. In addition, our land team was able to capitalize on the optionality imbedded within our portfolio by generating $1.6 million in lease bonus revenue. Ultimately, we were able to internally fund approximately 30% of our first quarter mineral acquisition capital. Electing to reinvest more of our Discretionary Cash Flow⁽¹⁾ this quarter provides incremental flexibility to manage the balance sheet and pursue accretive acquisitions targeting short-duration payouts while still returning significant capital to our shareholders."

Ops Update

Mineral and Royalty Interest Ownership Update

During the three months ended March 31, 2021, the Company executed 15 transactions acquiring approximately 1,645 net royalty acres (standardized to a 1/8th royalty interest) and deployed $21.8 million in capital. The Company focused approximately 91% of its mineral acquisition capital in the first quarter towards the Permian Basin. First quarter acquisitions are expected to deliver near-term production and cash flow growth with the addition of 41 gross DUCs (0.3 net DUCs) and 39 gross permits (1.4 net permits) to inventory counts.

The table below summarizes the Company's approximate mineral and royalty interest ownership as of the dates indicated.

DUC Conversions Updates

The Company identified approximately 97 gross (0.4 net) horizontal wells converted to production, which represented 13% of its gross DUC inventory as of Q4 2020 (11% of net DUCs). Well conversions to proved developed producing during Q1 2021 are summarized in the table below:

Drilling Activity Update

During the first quarter 2021, the Company identified 132 gross (1.0 net) wells spud on its mineral position, which represents a 150% sequential increase from the fourth quarter 2020 on a net basis. Brigham's gross and net wells spud activity over the past nine quarters is summarized in the table below:

DUC and Permit Inventory Update

The Company expects 2021 production growth will be driven by the continued conversion of its DUC and permit inventory. Brigham's gross and net DUC and permit inventory as of March 31, 2021 by basin is outlined in the table below:

Financials

For the three months ended March 31, 2021, crude oil, natural gas and NGL production volumes decreased 5% to 8,931 Boe/d as compared to the three months ended December 31, 2020 and decreased 14% as compared to the same prior year period. The recent Winter Storm Uri in February 2021 adversely affected operator activity and production volumes in the southern United States, including the Permian and Anadarko Basins. This resulted in production curtailments which accounted for the total decrease in production volumes relative to Q4 2020. The decrease in production volumes relative to Q1 2020 was primarily due to the reduction in drilling activity during the second half of 2020 and first quarter 2021.

For the three months ended March 31, 2021, average realized prices were $55.55 per barrel of oil, $3.75 per Mcf of natural gas, and $25.97 per barrel of NGL, for a total equivalent price of $40.03 per Boe. This represents a 45% increase relative to the three months ended December 31, 2020 and a 34% increase relative to the same prior-year period.

The Company saw a decrease in general and administrative costs before share-based compensation of 2% for the three months ended March 31, 2021 as compared to the three months ended December 31, 2020 and 13% as compared to the same prior-year period as a result of the Company's ongoing efforts to reduce its overall general and administrative expenses.

The Company's net income for the three months ended March 31, 2021 was $12.1 million. Adjusted EBITDA was $27.1 million for the three months ended March 31, 2021, up 57% from the three months ended December 31, 2020 and up 8% relative to the same prior-year period. Adjusted EBITDA ex lease bonus was $25.5 million for the three months ended March 31, 2021, up 48% from the three months ended December 31, 2020 and up 20% from the same prior-year period. Adjusted EBITDA and Adjusted EBITDA ex lease bonus are Non-GAAP financial measures. For a definition of Adjusted EBITDA and Adjusted EBITDA ex lease bonus and a reconciliation to our most directly comparable measure calculated and presented in accordance with GAAP, please read "Non-GAAP Financial Measures" below.

As of March 31, 2021, the Company had a cash balance of $5.6 million and $103.0 million of capacity under its revolving credit facility, providing the Company with total liquidity of $108.6 million. Associated with the Company's late-May semi-annual borrowing base redetermination under its revolving credit facility, the Administrative Agent has indicated a preliminary recommended borrowing base increase to $165 million. In addition to the increase in the borrowing base, there are several proposed changes to the terms of the revolving credit facility, including various affirmative, negative, and financial maintenance covenants.