Black Stone Minerals (NYSE:BSM), in their third quarter earnings call of 2023, reported a 19% increase in adjusted EBITDA to $130 million and an 18% increase in total production volumes to 42,600 BOE per day. Despite challenges with natural gas prices, the company maintained its distribution of $0.475 per unit and announced a $150 million unit repurchase program. The company's representative, Evan Kiefer, revealed they have $90 million on the balance sheet to be paid out as a distribution next month. They are also considering opportunities in the M&A market, focusing on areas where others may not be looking.
Key takeaways from the call include:
- Total production volumes for the quarter were 42,600 BOE per day, an 18% increase from Q2, driven by royalty volumes in the Permian and Shelby Trough.
- A peak of 90 rigs on Black Stone's acreage was reached in August.
- Despite natural gas price challenges, the company maintained its distribution of $0.475 per unit.
- Black Stone announced a $150 million unit repurchase program.
- The company expects to hit the upper end of its production guidance range for 2023 with lease operating expenses and production costs remaining in line with expectations.
- The majority of the increase in oil production in Q3 came from wells drilled in 2023.
- The company is in the drilling phase of 28 Angelina County Aethon wells, expected to come online next year.
- Black Stone is exploring opportunities in the M&A market, particularly in areas overlooked by others.
During the call, Kiefer stated that Black Stone has the option to use cash built through coverage or their unused line of credit with $375 million of cash commitments for potential redemptions. While they expect a production decline in Q4 due to lower rig counts in the Haynesville, they remain optimistic about volumes going into next year.
When asked about the increase in oil production, Kiefer explained that the majority of the increase came from wells drilled in 2023, with a smaller portion from prior periods. He also mentioned that the 28 Angelina County Aethon wells are in the drilling phase and are expected to come online in the middle of next year.
Tom Carter, another representative from the company, added that Aethon is expanding their program and doing more multi-pad development wells, which may result in some delays in turning the wells to sales. When asked about M&A opportunities, Carter stated that while the overall M&A market is frothy in terms of valuations, they are looking for opportunities in places where others aren't looking.
Overall, the presenters expressed optimism about Black Stone's ability to continue growing their platform.
InvestingPro Insights
Based on the data from InvestingPro, Black Stone Minerals presents an impressive financial performance. The company holds a market capitalization of $3780M and a P/E ratio of 8.72 as of Q3 2023, indicating a strong valuation. With a gross profit of $671.23M and a gross profit margin of 90.78%, BSM has demonstrated a solid profitability.
InvestingPro Tips reveal that BSM holds more cash than debt on its balance sheet, which aligns with the company's statement of having $90 million for distribution. The company has also been consistently increasing its earnings per share, a positive sign for potential investors. Moreover, BSM has raised its dividend for 3 consecutive years and maintained these payments for 9 years, which is reflected in the company's dividend yield of 10.56% as of 2023. These factors, coupled with the company's high return on assets of 36.34%, indicate a healthy financial state.
In light of these insights, readers might find additional InvestingPro Tips helpful. There are 13 more tips available on BSM, providing a comprehensive view of the company's performance and potential. These tips could be beneficial for those interested in investing in BSM or learning more about its financial health.
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