Black Stone Minerals LP

Ladies and gentlemen, thank you for standing by. Welcome to the Blackstone Minerals Q3 2022 earnings release. At this time, all lines are currently in a listen only mode. There will be a question and answer session at the end of the presentation. You may enter the queue to ask a question by pressing star and the number one on your phone. You may press the star and the number two to exit the queue. As a reminder, this call is being recorded. I would now like to turn the conference over to Evan Kiefer, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, and good morning to everyone. Thank you for joining us either by phone or online for the Blackstone Minerals third 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 will be making forward-looking statements during this call about our plans, expectations, and assumptions regarding our 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 our cautionary information about forward-looking statements in our press release from yesterday in the risk factor section in our 2021 10-K. We 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 from the company are Tom Carter, Chairman and CEO, Jeff Wood, President and Chief Financial Officer, Steve Putman, Senior Vice President, General Counsel, Kerry Clark, Senior Vice President, Land and Commercial, Garrett Grimion, Vice President of Engineering and Geology, and Thad Montgomery, Vice President of Land. I'll now turn the call over to Tom.

Thanks, Evan, and good morning, and thank you all for joining us. We have a lot of good news to report. We generated total production volumes for the quarter of 40,000 BOE per day, an increase of 19% over our second quarter volumes. All of that increase was from royalty volumes, which were up 23% to 37.3 thousand BOE per day. Our base production is trending up as development activity remains robust across our acreage, and as our target development programs with operators in the Shelby, Trough, Haynesville, and East Texas Austin Chalk continue taking shape while growing and moving forward. Production from the quarter exceeded expectations due to certain operators, particularly in Louisiana Hainesville, bringing new wells online at more aggressive initial flow rates to take advantage of higher natural gas prices. The first payment we receive on newly drilled wells often covers multiple months of early production, so this can have a meaningful impact on our revenues as production and prices hit significant peaks at the same time. We saw that in the third quarter and expect to see similar revenue impacts continue in the future quarters as well. With the higher level of activity, we now expect that our total production for the year will come in at or above the midpoint of our original 22 guidance of 35.5 thousand VOE per day. That implies fourth quarter production levels of around 36,000 VOE per day or better, with potential for further upside from there. Activity levels are ramping up overall, as evidenced by the increasing rig count, both across industry and on our acreage in particular. At the end of the third quarter, we had 92 rigs running on our acreage. That's a 14% increase from 81 at the end of the second quarter, and is well above the 59 rigs on our acreage at the same time last year. The big increase in volumes and the favorable commodity price environment combined to generate record second quarter cash flow for Blackstone Minerals as a public company. We reported adjusted EBITDA of $123 million for the third quarter, which is 9% above the second quarter. Distributable cash flow for the quarter was $116 million, 8% above last quarter. Last week, we announced our third quarter distribution of 45 cents per unit, which also establishes a new high watermark for Blackstone. Last quarter, we went into great detail about the progress we've made on our organic growth projects in the Shelby Trough and Austin Chalk. Both of these programs are gaining pace and garnering interest from potential new basin entrants. Athon has now turned 14 wells to sales, the Shelby Trough and has another 10 wells drilling or waiting on completion. They're working their way up to the full contractual requirement of 27 wells per year and the results have been very good thus far. Our commercial efforts remain heavily focused also on the East Texas Austin Chalk Acreage where development activity and production volumes also continue to grow. Our long history in this area provide us with unparalleled knowledge of the acreage We have been and will continue to be long-term holders of the Austin Chalk, which allows our team to develop and execute commercial strategy from a long-term perspective, focused on responsible, full development across the entire basin. That perspective, combined with high net royalty interest, some remaining working interest, and strong industry relationships, give us more opportunity to influence outcomes than other mineral owners often have. We have brought in four new operators to supplement the development activity of the original three lessees that took part in the test well program in 2020. Over 20 wells have now been drilled in the area and completed with high intensity completions, and another five are currently in development. We've had good success in working with existing operators to step up their development pace and in placing open acreage with new producers, but there's still a lot more to do. We remain focused on the long game and a strategy that employs our unique advantages to expand and accelerate development activity even further across this major acreage position. As these two core areas move further into development mode, we continue to explore other areas within our expansive acreage portfolio to drive new development. As we've said many times over the past few years, we are well positioned to increase volumes by focusing on our commercial strategy of attracting development dollars to maximize the value of our existing acres. This ability to generate production growth without additional equity investments or the occurrence of debt through acquisitions is what sets Blackstone apart from its peers and is largely what has enabled us to generate really strong returns on capital employed over the years. We are excited about the momentum going into 4Q and into next year. Our development success and a strong commodity price environment has allowed us to return more cash to our shareholders, and we're optimistic that that trend will continue into 23 as well. With that, I'll turn it over to Jeff.