Black Stone Minerals LP

Ladies and gentlemen, thank you for standing by and welcome to the Blackstone Minerals first quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Thank you. I would now like to hand the conference over to your speaker today, Evan Kiefer, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Wren. And good morning to everyone. Thank you for joining us either by phone or online for the Blackstone Minerals first quarter 2022 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, I'd like to advise you that we'll be making forward-looking statements during this call about our plans, expectations, and assumptions regarding the future performance. 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 section of our 2021 10-K. We may refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. A reconciliation of those measures to the 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 today from the company are Jeff Wood, President and Chief Financial Officer, Steve Plattman, Senior Vice President, General Counsel, Carrie Clark, Senior Vice President, Land and Commercial, Garrett Grimeon, Vice President of Engineering and Geology, and Dad Montgomery, Vice President of Land. I'll now turn the call over to Tom.

Good morning to all of you, and thanks for joining us on the call today for our first quarter financial and operating results. We generated almost $100 million of adjusted EBITDA in the first quarter. That was an increase of 27% over the fourth quarter of 2021. Distributable cash flow for the quarter came in at over $92 million. These results benefited from the continued rise in oil and gas properties in the first quarter. Realized prices were up 16% over the fourth quarter. Drilling activity remained robust during the first quarter. We had 88 rigs operating on our acreage as of March 31st. That's down slightly from 95%. at the end of last year and higher than the 59 rigs at this time last year. Despite relatively steady rig activity, we saw a decrease in royalty production in the first quarter compared with the last quarter's levels. Much of the decrease came from Shelby Trough. Athon is meeting or exceeding its minimum well requirements in the Shelby Trough under our development agreement covering Angelina and San Augustine County. The timing of when these wells are brought on line can result in some variability in production volumes, especially since these wells typically generate over 20 million cubic feet of gas when turned to sales, and we typically have high royalty interest in them relative to some other wells. So they make a big difference timing-wise. Overall, we are very excited about the drilling activity in the Shelby Trough. We have separate development agreements with Athon covering our minerals, acreage in Angelina and St. Augustine counties. In Angelina, Athon has successfully turned six wells to sales, four of which came online in April of 2022, and has commenced operations on four additional wells. In St. Augustine County, Athon is currently drilling two wells and has another two wells awaiting completion operation. From there, our overall activity levels across the Shelby Trough are expected to increase quickly over the next few years, leading to 20 to 30 wells a year in the area drilled by Athon alone. We remain very happy to have chosen such an experienced and well-capitalized operating partner for this important development area. Athon's drilling results thus far in the Shelby Trough have been very encouraging, and we expect this to be a mutually beneficial partnership for many years to come. Further benefiting the volume picture in the area, XTO Energy has resumed drilling three wells on Blackstone's Shelby Trough acreage in St. Augustine County that were originally spud in 2019. As we discussed last quarter, we have fully farmed out all of Blackstone's working interest in the Shelby Trough as well. We will benefit from the carry provisions in those deals while ensuring that we have no ongoing capital burdens associated with ATHON's aggressive development program. Recent world events have highlighted the global strategic importance of U.S. gas reserves, and we believe the Haynesville shale is the best position to play to benefit from continued growth in LNG export volumes over time. I've discussed over the past several calls our ongoing efforts to bring additional operator capital onto our extensive minerals in East Texas. Last year, we entered into agreements with several operators to drill Austin chalk wells in East Texas. These operators use high intensity completions in an area where prior generations of unstimulated wells yielded solid results. The outcome of that test program was very encouraging And several of our key operators in the area have now committed to rig contracts for ongoing development of the field. Currently, four operators are actively engaged in redevelopment of the field, with two rigs running continuously in the play. To date, seven wells with modern completions are now producing in the area. An additional five are currently either being drilled or completed. We also remain engaged with additional potential operators to commence development on surrounding acreage. Things continue to move in the right direction in this important acreage for Blackstone, and we are working hard to create a scenario where multiple operators are drilling multiple wells per year in the area. We're nicely positioned with key organic growth projects ramping up, a very constructive pricing environment, and a leverage ratio of 0.2 times That combination of factors allowed for sizable distribution increases announced last week. The 40 cents per unit, or $1.60 annualized, is the highest distribution level since our IPO in 2015. High prices certainly contributed to that, but we were also able to increase our payout ratio given our very low debt balances and an increasing line of sight on volume growth going forward. We are excited that the hard work through the down cycle has enabled us to come back even stronger and return more cash to our shareholders. With that, I'll turn it over to Jeff to go through some of the details of the quarter.