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Brigham Minerals First Quarter 2022 Results

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   |    Wednesday,May 04,2022

Brigham Minerals, Inc. announced record operational and financial results for the quarter ended March 31, 2022.

Highlights:

  • Record daily production volumes of 12,031 Boe/d (71% liquids, 51% oil)
    • Production up 31% sequentially from Q4 2021 including a 21% increase in Permian volumes
  • Record royalty revenues of $70.0 million
    • Up 49% sequentially from Q4 2021 driven by 31% higher volumes and 16% higher realized prices
  • Record Net income totaling $39.1 million
    • Record Adjusted EBITDA(1) totaling $60.7 million up 53% sequentially from Q4 2021
  • Declared record Q1 2022 dividend of $0.60 per share of Class A common stock(2)
    • Base Dividend increased 14% to $0.16 per share of Class A common stock
    • Variable Dividend increased 42% sequentially to $0.44 per share of Class A common stock
    • Represents 75% payout ratio of Discretionary Cash Flow ex lease bonus(1)
  • 11.7 net (1,780 gross) activity wells comprised of 7.1 net (934 gross) DUCs and 4.6 net (846 gross) permits
    • Record 2.7 net DUCs converted to PDP during Q1 2022 backfilled by a record net 2.1 wells spud
    • Permian Basin net activity wells totaling 6.5 net locations
  • Acquired 2,100 net royalty acres deploying $43.7 million in mineral acquisition capital
    • Closed previously announced Midland Basin transaction totaling 1,800 net royalty acres
    • Entirety of cash component of acquisition capital funded via retained cash and portfolio rationalizations
    • Over 99% of capital deployed to the Permian Basin and 38% of net locations comprised of PDP, DUCs and permits
  • $6.2 million cash balance and undrawn revolver capacity of $137.0 million as of March 31, 2022
    • Conservative leverage at 0.4x last quarter annualized Adjusted EBITDA(1)
    • 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 $300.0 million

(1) Non-GAAP measure. See "Non-GAAP Financial Measures" below.
(2) See Quarterly Cash Dividend section below regarding Board approval of future dividends.

Robert M. ("Rob") Roosa, Chief Executive Officer, commented, "Our team generated exceptional operating and financial results during the first quarter 2022. Across the board, we generated record results in production, revenues, Adjusted EBITDA(1), dividend distributions and drilling activity. Strong DUC conversions representing 2.7 net locations, or 37% of our Q4 2021 net DUC inventory, drove 31% production growth. Furthermore, our assets generated tremendous drilling activity with a record 2.1 net locations spud during the first quarter, which helped to largely backfill our DUC inventory. To reiterate, our portfolio is seeing activity that is as good as or better than 2019 levels despite significantly lower rig counts. Importantly, approximately two-thirds of our first quarter 2022 drilling activity was driven by pre-2020 acquisitions with an additional 13,000 gross and over 100 net undeveloped locations in inventory that we anticipate will continue to drive organic portfolio growth. Finally, given our substantial activity well inventory at the end of the first quarter 2022, we now anticipate production volumes averaging 12,000 Boe/d for the remaining nine months of 2022."

Blake C. Williams, Chief Financial Officer, added, "Our business achieved a greater than 50% sequential increase in Adjusted EBITDA(1) in Q1 2022, which is a testament to our focus on asset quality and careful construction of the portfolio. Due to the prudent management of the balance sheet, we have been able to remain unhedged, and thus saw our Adjusted EBITDA Margin(1) expand to 85% during the first quarter allowing our shareholders to fully benefit from the structural change in commodity pricing. We are also pleased to have closed our previously announced Midland Basin transaction utilizing both cash and stock to continue our commitment to accretive mineral consolidation and to continue to fortify our balance sheet. Finally, the regular, ongoing conversion of our asset has led to continued growth in our PDP reserves per share and expansion in our liquidity with our bank group providing a preliminary indication of an uplift in our revolving credit facility from $230 million to $300 million in May 2022 associated with our regularly scheduled semi-annual borrowing base redetermination."

Ops Update

Mineral and Royalty Interest Ownership Update

During the first quarter 2022, the Company executed eight transactions acquiring approximately 2,100 net royalty acres (standardized to a 1/8th royalty interest) and deployed $43.7 million in capital. The Company deployed over 99% of its mineral acquisition capital in the first quarter to 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) and 51 gross permits (0.1 net) to inventory counts. The Company also divested 985 net royalty acres in the Anadarko Basin generating $7.1 million in cash proceeds, net of customary closing adjustments.

DUC Conversions Updates

During the first quarter 2022, the Company identified approximately 167 gross (2.7 net) horizontal wells converted to production, which represented 37% of its net DUC inventory as of the fourth quarter 2021 (20% of gross DUCs).

Drilling Activity Update

During the first quarter 2022, the Company identified 238 gross (2.1 net) wells spud on its mineral position, which represents a 113% sequential increase from the fourth quarter 2021 on a net well basis.

Financial Update

For the three months ended March 31, 2022, crude oil, natural gas and NGL production volumes increased 31% to 12,031 Boe/d as compared to the three months ended December 31, 2021 and increased 35% as compared to the same prior-year period.

For the three months ended March 31, 2022, average realized prices were $91.90 per barrel of oil, $5.52 per Mcf of natural gas, and $40.90 per barrel of NGL, for a total equivalent price of $64.64 per Boe. This represents a 16% increase relative to the three months ended December 31, 2021 and a 61% increase relative to the same prior-year period.

For the three months ended March 31, 2022, G&A expense (before share-based compensation) increased 29% as compared to the three months ended December 31, 2021, while G&A expense from share-based compensation decreased 32%. On a unit basis, total G&A per boe decreased 18% highlighting the scalability of our corporate platform. Subsequent to the release of our year-end results, the Company announced updates to our executive compensation program which now includes short-term incentives based on financial and qualitative metrics. The change results in a reallocation of G&A expense from share-based compensation to cash compensation and will further align pay with performance.

The Company's net income for the three months ended March 31, 2022 was $39.1 million, up 80% from the three months ended December 31, 2021 and up 224% relative to the same prior-year period.

Adjusted EBITDA was $60.7 million for the three months ended March 31, 2022, up 53% from the three months ended December 31, 2021 and up 124% relative to the same prior-year period. Adjusted EBITDA ex lease bonus was $59.2 million for the three months ended March 31, 2022, up 52% from the three months ended December 31, 2021 and up 133% from the same prior-year period. Adjusted EBITDA and Adjusted EBITDA ex lease bonus are Non-GAAP financial measures.

As of March 31, 2022, the Company had a cash balance of $6.2 million and $137.0 million of undrawn revolver capacity under its credit facility, providing the Company with total liquidity of $143.2 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 $300 million. Pro-forma for the increase in the borrowing base, the Company would have had total liquidity of $213.2 million as of March 31, 2022.

 


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