Brigham Minerals (MNRL) Price Target Update - Aug 31

[dan_s]

Note from John Freeman at Raymond James

BRIGHAM MINERALS, INC. (MNRL-NYSE)
Exploration and Production

Updating Estimates; Reiterate Strong Buy with price target of $49
RECOMMENDATION
We are updating estimates post 2Q22 earnings. Recapping 2Q results, Brigham’s production came in at 13.2 Mboe/d, 10% above RJ/Street estimates with oil, NGLs and gas all substantially higher than estimates. In-turn, MNRL increased their production guidance for the year to 12.3-13 mboe/d, a 9% bump over previous numbers. Since earnings, Brigham announced the acquisition of 3,900 NRA from Avant Natural resources for $132M in cash. The deal is expected to add 750-950 boe/d in 2023. Post deal, we are estimating 14.3 mboe/d in 2023 (up from 13.5) and a total 2023 dividend yield of 10%.

Brigham remains completely unhedged, allowing them to fully benefit from the robust commodity price environment. Additionally, Brigham will be in a solid position, given its minimal leverage and strong cash flow, to take down some of the larger minerals deals that are finding their way to market. Overall, we reiterate our Strong Buy rating and raise our target price to $49/share.

Large Midland Basin Acquisition: Production adjusted price falls in the ~$28k/nra range, only a touch higher than VNOM’s Swallowtail acquisition last year ($27k/nra). Overall, we appreciate the immediate production bump as well as the extended inventory offered by the deal, the immediate bump in payout RJe $3.14/share vs $3.10/share is also appealing.

Acquisitions going forward. Brigham actually has increased their “ground game” budget for the year, despite initial hesitation by the company stating the hotter market has discouraged some deal flow. The budget was also increased to accomodate the sale of Anadarko Basin assets and subsequent purchase of Midland Basin assets.

VALUATION
We value MNRL using a net asset value-based approach, which attributes value to legacy PDP, undeveloped upside potential, and modeled acquisitions. Our $49/share price target is determined by the PV of forecasted distributions.

If you'd like to see the full report from Raymond James, send me at email at dmsteffens@comcast.net