Black Stone Minerals (BSM) Q4 Results - Feb 25

[dan_s]

Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone Minerals," "Black Stone," or "the Company") today announces its financial and operating results for the fourth quarter and full year of 2019 and provides guidance for 2020.

Fourth Quarter 2019 Highlights

Reported total production in the fourth quarter of 46.2 MBoe/d. < Compares to my forecast of 48.5 MBoepd.
Recognized net income and Adjusted EBITDA for the quarter of $40.0 million and $100.0 million, respectively. < Compares to my forecast of $58.1 million net income.
Reported Distributable cash flow of $90.2 million, resulting in distribution coverage for all units of 1.5x based on the announced cash distribution of $0.30 per unit; retained $28.4 million of distributable cash in the fourth quarter.
Reduced debt by almost $20 million during the fourth quarter to $394 million; total debt to trailing twelve-month Adjusted EBITDA was 1.0x at year-end.

Other Financial and Operational Highlights

Achieved full year 2019 production of 48.5 MBoe/d; mineral and royalty volumes in 2019 increased 14% over the prior year to average 36.4 MBoe/d.
Reported 2019 net income and Adjusted EBITDA of $214.4 million and $399.5 million, respectively.
Reported estimated proved reserves at year-end 2019 of 68.5 MMBoe (75% natural gas and 87% proved developed producing), a decrease of 2% over year-end 2018.

Management Commentary

Thomas L. Carter, Jr., Black Stone Minerals’ Chief Executive Officer and Chairman commented, "In an industry environment of challenging metrics, we are fortunate to have had another year of solid operational and financial performance in 2019. We delivered record royalty production and continued to strengthen the balance sheet by reducing total debt levels during the year. We are positioned to deal with the current difficult commodity price environment, which has resulted in slowing industry activity, and intend to continue to be conservative financially. In recognition of this, we lowered our distribution with respect to the fourth quarter. We have also taken significant steps to lower our cost structure in 2020 forward to better align our organization with current industry conditions. We made the difficult decision to reduce our headcount, and have lowered executive and Board compensation levels. We anticipate recommending to the Board a distribution of approximately $1.00 per common unit for the full year 2020, depending on actual commodity prices and producer activity on our acreage during the year, a move that we expect will further strengthen our balance sheet through debt reduction while preserving a meaningful return to our unitholders."

[dan_s]

Stifel's take:

Black Stone Minerals, L.P. (BSM, $9.97, Buy; Target $14.00) -
Announces 2020 budget focused on cost control and debt reduction - Derrick Whitfield

We view the release as slightly negative to negative. The positives include: i) a quarterly EBITDA beat, ii) a strong quarterly lease bonus from Permian and Williston activity, iii) a meaningful 2020 G&A reduction, and iv) absolute debt reduction of over $50mm Q419 to date. The negatives include: i) a quarterly total and oil production miss, ii) lower than expected 2020 total and oil production guidance, and iii) management is anticipating a ~17% reduction in the quarterly distribution for 2020 to $0.25 per unit. Net-net we expect the lower distribution and lower 2020 production expectations to overshadow cost improvements and debt reduction. We caution investors to note the lower distribution will allow the company to further reduce outstanding debt which will benefit the company in the long-term. Additionally, we believe BSM can sustain a quarterly distribution of $0.25 per unit into 2021 without adding net debt.

[dan_s]

T J Schultz at RBC Capital rates BSM a Hold in a note on 02/25/20 with a price target of $12.00

BSM has ~75% of their 2020 forecast oil production hedged at a weighed average of approximately $57.00/bbl

BSM reports natural gas and NGLs on a combined basis. Including cash settlements on their hedges, BSM got $2.89/mcfe in 2019.
A high percentage of their natural gas is hedged with Swaps at $2.69/mcf for 2020.

Based on their guidance, my forecast model show that they should have no problem covering their $0.25/quarter distributions in 2020.

My updated forecast/valuation model for BSM has been posted to the EPG website.