Brigham Minerals (MNRL) Q2 Results - August 5

[dan_s]

August 04, 2022--(BUSINESS WIRE)--Brigham Minerals, Inc. (NYSE: MNRL) ("Brigham Minerals," "Brigham," or the "Company"), a leading mineral and royalty interest acquisition company, today announced record operational and financial results for the quarter ended June 30, 2022 and updated full year 2022 guidance.

RECORD SECOND QUARTER 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS

Record daily production volumes of 13,019 Boe/d (72% liquids, 52% oil) < Beat my forecast of 12,300 Boepd.

Production up 8% sequentially from Q1 2022 including a 24% increase in Permian Basin volumes

Record royalty revenues of $90.4 million < Beat my forecast of $82.7 million, primarily due to higher volumes sold.

Up 29% sequentially from Q1 2022 driven by 8% higher volumes and 18% higher realized prices

Record Net income totaling $50.2 million < Beat my forecast of $39.2 million net income.

Record Adjusted EBITDA totaling $79.7 million up 31% sequentially from Q1 2022

Declared record Q2 2022 dividend of $0.77 per share of Class A common stock < Beat my estimated dividend for Q2 of $0.71.

Base Dividend of $0.16 per share of Class A common stock

Variable Dividend increased 39% sequentially to $0.61 per share of Class A common stock

Represents 75% payout ratio of Discretionary Cash Flow ex lease bonus

11.0 net (1,792 gross) activity wells comprised of 6.8 net (1,008 gross) DUCs and 4.2 net (784 gross) permits

2.4 net DUCs converted to PDP during Q2 2022

Record 253 gross wells spud during Q2 2022 (1.5 net locations)

Permian Basin activity wells totaling 6.7 net locations

Generated divestiture proceeds totaling $67.3 million from the sale of undeveloped Anadarko Basin assets

Divested largely undeveloped minerals with anticipated Q3 2022 production of 200 Boe/d

Asset monetization proceeds partially utilized to fund accretive Permian Basin acquisitions and reduce Net Debt(1) to approximately $49 million as of June 30, 2022

Permian Basin now makes up 48% of net royalty acres and 68% of net locations

Acquired 885 net royalty acres deploying $33.2 million in mineral acquisition capital

100% of capital deployed to Permian Basin comprised of 95% PDP, DUC and permitted net locations with anticipated Q3 2022 production of 400 Boe/d

Locations to be converted by top tier operators including Endeavor Energy Resources, Chevron Corporation and Marathon Oil

$24.1 million cash balance and undrawn revolver capacity of $217.0 million as of June 30, 2022

Conservative leverage at 0.2x last quarter annualized Adjusted EBITDA(1)

FULL YEAR 2022 UPDATED GUIDANCE

Updated full year 2022 production guidance of 12,300 to 13,000 Boe/d < This will increase my stock valuation that was $36 pre-release.

Production guidance raised 9% at the midpoint relative to February 2022 guidance

Mineral acquisition capital raised to $100 to $120 million

Includes impact of highly accretive Permian Basin acquisitions entered into during the first half 2022

Robert M. ("Rob") Roosa, Chief Executive Officer, commented, "Our team once again generated record operational and financial results during the quarter including record production, revenue, EBITDA and dividends. Our production volumes increased 8% sequentially to a record 13,019 Boe/d driven by continued strong DUC conversions, particularly conversions in the Permian Basin where production volumes grew by 24% sequentially. We also saw record drilling activity during the quarter with approximately 253 gross wells spud on our assets, and when combined with our acquisition efforts, we were able to maintain an almost constant DUC inventory level even with the aforementioned strong conversions. In total, we ended the second quarter with 11.0 net activity wells in inventory and anticipate our production volumes for the full year 2022 to average between 12,300 and 13,000 Boe/d, which represents a 9% increase relative to our original guidance provided in February."

Blake C. Williams, Chief Financial Officer, added, "Our results continue to excel and highlight the benefits of our high margin business model especially in the current inflationary environment. Our EBITDA grew 31% sequentially and is up 159% year over year, leading to our $0.77 dividend at a 75% payout ratio. While many companies are seeing higher cost, we instead saw an increased EBITDA margin due to our unhedged price realizations and largely fixed cost structure. Our team also took advantage of the supportive commodity price environment by successfully executing our largest, single asset monetization to date generating proceeds of approximately $67.3 million. The proceeds, along with our retained cash flow, were utilized to fully fund our second quarter ground game acquisitions as well as reduce our Net Debt outstanding at the end of the quarter to approximately $49 million. With over $200 million of available liquidity, we plan to continue creating value for our shareholders through accretive acquisitions and our current and future return of capital program."
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MY TAKE: No mention of putting the Company up for sale in the press release, which I did not expect to see. This is a fairly young management team and I don't see why they would want to sell the Company now unless someone makes an offer they cannot refuse. I do own this stock and I doubt that they would sell at a discount to my valuation.

[Fraser921]

From the cc

Okay. thanks. And then, Rob, I think you probably answered this at the end of your prepared remarks, but clearly there was a press report out this week that indicated you all are working with an advisor to explore options that may include a sale or merger of the company. If there's not any comment around that, can you just generally provide your perspective on - or your view on valuations for public oil and gas royalties, versus what is transacting in the private markets? Thanks.

Rob Roosa

Yes. no, appreciate your question, TJ. And as I indicated in my opening remarks, we just don't comment on rumors or speculation. So, I think when you think about Brigham, kind of what we've seen written today, as analysts have digested the second quarter results, we're trading in that kind of 12% or so yield, based - 12$ to 13% yield based on cash flow. So, that's out there. I think one of the research notes I did saw was that that's a little bit wider than we’ve typically seen at kind of a mid-9% yield.

[Fraser921]

A 10 per cent yield on . 77 cents a qtr would imply a price if 30.80 but that assumes cash flow is steady moving forward
They have higher production but realized prices are currently softer than Q2

I never really looked at mineral company’s.

Very interesting and attractive

https://justpaste.it/1w9vc/pdf

[dan_s]

If you believe oil, gas and NGL prices are going to remain anywhere close to where they are today, then all four of the minerals companies (BSM, MNRL, STR and VNOM) in our High Yield Income Portfolio are great values at the current share prices. Plus, they do have the potential for significant stock price appreciation since they all are continuing to grow.

Why?
> They have very low capex requirements (no drilling or completion costs). BSM does have a small amount of working interests.
> They have low cash G&A since all of producing assets are outside operated.
> They all payout dividends that are a high percentage of their free cash flow.
> Minerals do not expire. They are long-term assets.
> All four of our minerals companies have outstanding teams that know how to evaluate properties before they buy them.
> MNRL's big asset sale shores up their already strong balance sheet.

BSM is an MLP and it is the most heavily weighted to natural gas. The other 3 have elected to be taxed as C-Corps (no K-1).