Minerals for HIGH Yield

Minerals for HIGH Yield

Postby dan_s » Wed Nov 17, 2021 9:05 am

From KeyBanc:
Minerals Monthly: Minerals Names Increased Dividends by 18% on Average in 3Q21; We Expect the Pace
of Minerals M&A to Remain Strong in the Near Term


Minerals names within our coverage universe, including BSM, KRP, MNRL, and VNOM, increased quarterly dividends nicely in
3Q21 as dividends were up 18% on average vs. 2Q21 to an average yield of around 8%. Production results were more mixed
as VNOM's 3Q21 production came in 4.2% above consensus and BSM's came in 3% above consensus, but MNRL missed on
3Q21 production by 3.5% and KRP missed on 3Q21 production by close to 1%. Additionally, MNRL's 3Q21 oil production was
11% below consensus and KRP's 3Q21 oil production was 6% below consensus.

VNOM raised its 2021 production guide by 3.3% and BSM expects its 2021 production to come in at the high end of its guidance range.
However, both KRP and MNRL left their 2021 production guidance unchanged.
MNRL announced with 3Q21 earnings that it is acquiring 8,400 net royalty acres primarily
in the DJ Basin for ~$96M (2.2M shares of stock and $44M in cash). The deal includes 2022 production of 1,100-1,200 Boepd
(50% liquids), which equates to $83,500 per flowing Boe, and MNRL plans to finance the $44M cash portion with cash on hand
and revolver borrowings. MNRL said that bid-ask spreads on deals have narrowed over the few months prior to 3Q21 earnings
and that there have been a number of larger packages in the Permian brought to market. Additionally, KRP announced that it is
acquiring a diversified package of royalty interests for $57M in cash. However, KRP financed the transaction with an underwritten
public offering of 3.75M common units for gross proceeds of around $52.5M. The deal includes 700 Boepd of production (34% oil),
which equates to ~$81,400 per flowing Boe. KRP also said during 3Q21 earnings that M&A activity has heated up recently and
that bid-ask spreads have narrowed. Overall, we expect the pace of minerals M&A to remain strong in the near term on narrower
bid-ask spreads.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 27277
Joined: Fri Apr 23, 2010 8:22 am

Re: Minerals for HIGH Yield

Postby dan_s » Wed Nov 17, 2021 9:09 am

We expect shares of VNOM to have a slightly positive reaction vs. peers tomorrow as the Company announced that its Board of
Directors increased the authorization of its common unit repuchase program by $50M to $150M. Additionally, the authorization was
extended indefinitely from December 31, 2021 previously. As of September 30, VNOM had expended ~$57.4M, or roughly 38%
of the increased authorized amount, leaving $92.6M of availability.
Dan Steffens
Energy Prospectus Group
dan_s
 
Posts: 27277
Joined: Fri Apr 23, 2010 8:22 am


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