Brigham Minerals, Inc. Class A

Hello and welcome to the Brigham Minerals Third Quarter 2021 Earnings Conference Call. My name is Elliot and I will be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star followed by one on your telephone keypad. We'll now hand over to our host, Jacob Sexton. Jacob, please go ahead when you're ready.

Thank you, operator, and welcome, everyone. Welcome to the Brigham Minerals Third Quarter 2021 Earnings Conference Call. Joining us today are Bud Brigham, Founder and Executive Chairman, Rob Rosa, Founder and Chief Executive Officer, and Blake Williams, Chief Financial Officer. Before we begin, I would like to remind you that our remarks, including the answers to your questions, contain forward-looking statements, and we refer you to our earnings release for a detailed discussion of these forward-looking statements and associated risks. In addition, during this call, we make references to certain non-GAAP financial measures. Reconciliations to applicable GAAP measures can also be found in our earnings release. We have a new investor presentation titled Third Quarter 2021 Investor Presentation available for download on our website, www.brighamminerals.com, and we recommend downloading the presentation in the event we refer to it during the conference call. Lastly, as a reminder, today's call is being webcast and is accessible through the audio link on our IR website. I would now like to turn the call over to Bud Brigham, founder and executive chairman.

Bud Brigham Thank you, Jacob, and thanks to everyone for joining us on our third quarter 2021 earnings conference call. On our second quarter call, I outlined a number of reasons why I was extremely optimistic about the future outlook for Brigham Minerals. I will quickly recap those thoughts relative to what we've seen transpire since August. Our third quarter activity well inventory, our ducts and permits, improved from the second quarter as we expected. Our activity wells and inventory at the end of September is in line with our 2019 inventory levels, and the recovery of our inventory to pre-COVID levels demonstrates the premium quality of the inventory assembled by our team. Our acreage includes the first locations operators choose to develop. As a result, we are set up extremely well for continued production and cash flow growth over the next 12 to 24 months as our ducts and permits are converted to PDP. Second, our balance sheet continues to remain extremely strong, and without a doubt, we will keep it that way. Because we keep a strong balance sheet, unlike many of our peers, we are able to remain unhedged and therefore fully expose our shareholders to the upside in oil, NGL, and natural gas prices. And as a reminder, during the worst of COVID and OPEC+, again, unlike some of our peers, Brigham Minerals did not execute any hedges, and our shareholders have therefore benefited entirely from the pricing run-up of all three product streams during 2021. Third, And most importantly, even with the run-up in crude oil prices from the upper 60s in August, when we last met, to the current mid-$80 pricing today, I still believe there is upside to oil prices, particularly relative to the strip. In fact, in my view, we're in the best macro setup that I've seen in my career. And I should point out that this is the period in these cycles when we've historically compounded the most value. When costs are lowest, coming out of the trough of the disruption, and now with demand and therefore prices increasing relative to the disrupted supply, the margins and rates of return for drillers are in the sweet spot. In fact, today the drilling economics are the best in the Permian that I've ever seen. Importantly, this cycle is very different from the numerous prior cycles I've experienced since the 1980s. primarily because the politics and shareholder pressures are restricting our industry's ability to increase capital investment, thereby constraining supply growth in the face of rapidly returning demand. The restricted capital investment, therefore, should help to dampen the overall cyclicality that we've historically experienced in our industry. In particular, public operators have gotten the message. They are being extremely disciplined and are limiting their capex increases in order to distribute capital back to shareholders and pay down their debt. Without the normal rig and therefore supply response as prices elevate, we will benefit from a longer runway of higher prices and higher margins. I don't see this changing anytime soon, at least given the current overall conditions. I'm also optimistic about our team's ability to consolidate in this positive macro backdrop and generate substantial shareholder returns. And I'm proud to announce that we have entered into a purchase and sell agreement for our first large deal as a public company. Our team's tireless efforts have generated a DJ-based acquisition that checks multiple boxes for our shareholders. This includes generating substantial accretion. We are buying the deal at a high team's yield on 2022 cash flow, and the stable cash flow profile of this deal should allow us to further enhance the newly implemented base dividend in the first quarter of 2022, if approved by our board. Our team underwrote this acquisition almost exclusively to PDP and Ducks, thereby reducing reliance on unpermitted locations and minimizing Colorado political risk. In the past, we've highlighted our ability to look at multiple basins, and this is a clear example of executing on a great deal that many simply didn't or couldn't look at. I hope and firmly believe that this is the first of many deals, and folks out there ought to realize we're going to be a serious consolidator and do so in a way that focuses above all else on creating value for shareholders. As we get close to wrapping up 2021, I'm personally extremely excited for 2022, particularly when you think about the incredibly strong activity well inventory that will be turned in line to production. the tremendous balance sheet flexibility to continue to compound value through our ground game, the extremely positive macro backdrop that looks to be a multi-year phenomenon, and lastly, the outlook to continue to consolidate. With that, I'll turn the call over to Ron.