Black Stone Minerals LP

on a listen-only mode. After the speaker's presentations, there will be a question-and-answer session. To ask a question during that session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any assistance during the call, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Evan Kiefer, Vice President of Investor Relations. Mr. Kiefer, the floor is yours.

Thank you, Chris. Good morning to everyone, and thank you for joining us either by phone or online for the Blackstone Minerals fourth quarter and full year 2021 earnings conference call. Today's call is being recorded and will be available on our website along with the earnings release, which was issued last night. Before we start, we'd like to advise you that we'll be making forward-looking statements during this call about our plans, expectations, and assumptions regarding our future performance. These risks These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward-looking statements. For discussion of these risks, you should refer to the cautionary information about forward-looking statements in our press release from yesterday and the risk factors sections from our 2021 10-K, which we expect to file later today. You may refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. A reconciliation of those metrics or those measures that Most directly comparable GAAP measure and other information about these non-GAAP metrics are described in our earnings press release from yesterday, which can be found on our website at blackstoneminerals.com. Joining me on the call from the company are Tom Carter, Chairman and CEO, Jeff Wood, President and Chief Financial Officer, Steve Putman, Senior Vice President and General Counsel, Carrie Clark, Senior Vice President of Land and Legal, Garrett Grimeon, Vice President of Engineering and Geology, and Thad Montgomery, Director of Land. I'll now turn the call over to Tom.

Thank you, Evan. Good morning to everyone on the call, and thanks for joining us today to discuss our fourth quarter and full year 21 financial and operating results. We posted another solid quarter and are entering 2022 with good momentum across our business. Oil and gas prices continue to strengthen in the fourth quarter, That's a trend we benefited from through 21. Realized prices in the fourth quarter were just over $73 per barrel of oil and $5.40 per mcf of gas. On a BOE basis, prices were up 14% from the third quarter and doubled from the levels we saw in the fourth quarter of 2020. Not surprisingly, the more constructive commodity price environment has been positive for overall activity and volume trends as well. We had 95 rigs operating on our acreage at the end of the year, which is up over 60% from the 59 rigs operating at the end of the third quarter. And it's more than double the 38 rigs we saw at the end of 2020. Our royalty volumes in the fourth quarter totaled 35.2 MBOE per day, which is up by 7% over the third quarter royalty volumes, driven by increases in our Bakken, Louisiana, Hainesville, and Midland, Delaware productions. Our working interest volumes continued to trend down in the fourth quarter as our legacy working interest production rolls off from the Shelby Trough wells, where we participated prior to our farm outs of that interest in 2017. As a result, royalty volumes now represent 90% of our total production volumes. While royalty volumes trended up throughout the year, the average volumes for 2021 were relatively flat to 2020 volumes. royalty production levels. As those of you who have been with us for a while know well, our overall volume growth has been slowed over the past couple of years due to declining natural gas production in our concentrated acreage position in the Shelby Trough Hainesville-Bossier Plague in East Texas. After maintaining very active drilling programs in the area, XTO and BP shut down their Shelby Trough programs in 2019, and in doing so released the rights to much of the acreage. We made it a top priority to bring in a new operator in the area, and in 2020 and 2021, we did that through two separate development deals with Athon Energy. Athon continues to ramp up its activity in the Shelby Trough. In Angelina County, Texas, two wells are currently producing under our agreement with Athon, and another eight wells are being drilled or completed. In St. Augustine County, ATHON is currently drilling three wells under a separate development agreement covering that area. We have also renewed existing and added new farm out agreements covering the area to relieve Blackstone of any direct capital burdens of working interest. Our overall activity levels with ATHON across the Shelby Trough are expected to increase quickly over the next two years, leading to what may be 20 to 30 wells a year from that area. That will add to our total Hainesville volumes from East Texas and Louisiana over the coming years. Hainesville has always been an important contributor to our total production mix, and we believe that the play is uniquely well-positioned to benefit from continued growth in LNG export volumes. So that program is up and running with a very experienced and well-capitalized operator. We're working to repeat that success in other areas where we have significant mineral and royalty positions, either by attracting capital to unleashed acreage or working with existing operators to accelerate drilling activity on the acreage. We have prioritized this organic growth strategy for some time now and have added horsepower through our new hires to our team focused on this effort. Clearly, volumes from new drilling activity on existing acreage provide a higher return to our shareholders than adding volume through acquisitions. We think the organic focus is particularly appropriate in the current high commodity price environment, which enhances the economics when we are showing acreage packages to potential operating partners and, in our view, creates more downside risk when paying for acquisitions. Our extensive footprint in the Austin Chalk is an important component of our growth efforts. As you probably know from previous calls, we've been working with existing operators and marketing unleashed acreage packages in the area. We continue to make progress on those efforts and are seeing some encouraging results in the initial deals struck last year. Thus far, five wells have been drilled and turned to sales and another two wells are at various stages of drilling or completion under these agreements. Not surprisingly, we've seen some variability across such a large acreage position, and in general, we remain very optimistic that there is a sizable fairway or fairways ripe for development using the latest generation of high-intensity completions. And of course, we're not stopping with the Shelby Trough or Austin Chalk. We're currently actively looking into other parts of our mineral portfolio that could benefit from this combination of constructive commodity prices and improved technology, and where new development can drive further volume growth. We're optimistic about the years ahead. We have a strong balance sheet, a robust portfolio of growth opportunities, and a great team focused on turning these opportunities into additional volumes, all with the goal of returning more cash to our shareholders. With that, I'll turn the call over to Jeff to go through some of the details of the quarter and our outlook for next year.