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Brigham Minerals, Inc. Reports Record Second Quarter 2022 Operational and Financial Results and Provides Updated 2022 Guidance

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AUSTIN, Texas, August 04, 2022--(BUSINESS WIRE)--Brigham Minerals, Inc. (NYSE: MNRL) ("Brigham Minerals," "Brigham," or the "Company"), a leading mineral and royalty interest acquisition company, today announced record operational and financial results for the quarter ended June 30, 2022 and updated full year 2022 guidance.

RECORD SECOND QUARTER 2022 OPERATIONAL AND FINANCIAL HIGHLIGHTS

  • Record daily production volumes of 13,019 Boe/d (72% liquids, 52% oil)

    • Production up 8% sequentially from Q1 2022 including a 24% increase in Permian Basin volumes

  • Record royalty revenues of $90.4 million

    • Up 29% sequentially from Q1 2022 driven by 8% higher volumes and 18% higher realized prices

  • Record Net income totaling $50.2 million

    • Record Adjusted EBITDA(1) totaling $79.7 million up 31% sequentially from Q1 2022

  • Declared record Q2 2022 dividend of $0.77 per share of Class A common stock(2)

    • Base Dividend of $0.16 per share of Class A common stock

    • Variable Dividend increased 39% sequentially to $0.61 per share of Class A common stock

    • Represents 75% payout ratio of Discretionary Cash Flow ex lease bonus(1)

  • 11.0 net (1,792 gross) activity wells comprised of 6.8 net (1,008 gross) DUCs and 4.2 net (784 gross) permits

    • 2.4 net DUCs converted to PDP during Q2 2022

    • Record 253 gross wells spud during Q2 2022 (1.5 net locations)

    • Permian Basin activity wells totaling 6.7 net locations

  • Generated divestiture proceeds totaling $67.3 million from the sale of undeveloped Anadarko Basin assets

    • Divested largely undeveloped minerals with anticipated Q3 2022 production of 200 Boe/d

    • Asset monetization proceeds partially utilized to fund accretive Permian Basin acquisitions and reduce Net Debt(1) to approximately $49 million as of June 30, 2022

    • Permian Basin now makes up 48% of net royalty acres and 68% of net locations

  • Acquired 885 net royalty acres deploying $33.2 million in mineral acquisition capital

    • 100% of capital deployed to Permian Basin comprised of 95% PDP, DUC and permitted net locations with anticipated Q3 2022 production of 400 Boe/d

    • Locations to be converted by top tier operators including Endeavor Energy Resources, Chevron Corporation and Marathon Oil

  • $24.1 million cash balance and undrawn revolver capacity of $217.0 million as of June 30, 2022

    • Conservative leverage at 0.2x last quarter annualized Adjusted EBITDA(1)

FULL YEAR 2022 UPDATED GUIDANCE

  • Updated full year 2022 production guidance of 12,300 to 13,000 Boe/d

    • Production guidance raised 9% at the midpoint relative to February 2022 guidance

  • Mineral acquisition capital raised to $100 to $120 million

    • Includes impact of highly accretive Permian Basin acquisitions entered into during the first half 2022

  • See additional detail in Operational and Financial Guidance Update table below

(1)

Non-GAAP measure. See "Non-GAAP Financial Measures" below.

(2)

See Quarterly Cash Dividend section below regarding Board approval of future dividends.

Robert M. ("Rob") Roosa, Chief Executive Officer, commented, "Our team once again generated record operational and financial results during the quarter including record production, revenue, EBITDA(1) and dividends. Our production volumes increased 8% sequentially to a record 13,019 Boe/d driven by continued strong DUC conversions, particularly conversions in the Permian Basin where production volumes grew by 24% sequentially. We also saw record drilling activity during the quarter with approximately 253 gross wells spud on our assets, and when combined with our acquisition efforts, we were able to maintain an almost constant DUC inventory level even with the aforementioned strong conversions. In total, we ended the second quarter with 11.0 net activity wells in inventory and anticipate our production volumes for the full year 2022 to average between 12,300 and 13,000 Boe/d, which represents a 9% increase relative to our original guidance provided in February."

Blake C. Williams, Chief Financial Officer, added, "Our results continue to excel and highlight the benefits of our high margin business model especially in the current inflationary environment. Our EBITDA(1) grew 31% sequentially and is up 159% year over year, leading to our $0.77 dividend at a 75% payout ratio. While many companies are seeing higher cost, we instead saw an increased EBITDA margin(1) due to our unhedged price realizations and largely fixed cost structure. Our team also took advantage of the supportive commodity price environment by successfully executing our largest, single asset monetization to date generating proceeds of approximately $67.3 million. The proceeds, along with our retained cash flow, were utilized to fully fund our second quarter ground game acquisitions as well as reduce our Net Debt(1) outstanding at the end of the quarter to approximately $49 million. With over $200 million of available liquidity, we plan to continue creating value for our shareholders through accretive acquisitions and our current and future return of capital program."

(1)

Non-GAAP measure. See "Non-GAAP Financial Measures" below.

OPERATIONAL UPDATE

Mineral and Royalty Interest Ownership Update

During the second quarter 2022, the Company executed twenty transactions acquiring approximately 885 net royalty acres (standardized to a 1/8th royalty interest) and deployed $33.2 million in capital. The Company deployed all of its mineral acquisition capital in the second quarter to the Permian Basin. Second quarter acquisitions are expected to deliver near-term production and cash flow growth with the addition of 116 gross DUCs (0.8 net) and 27 gross permits (0.2 net) to inventory counts. The Company also divested 12,550 net royalty acres in the Anadarko Basin generating approximately $67.3 million in cash proceeds, net of customary closing adjustments.

The table below summarizes the Company’s approximate mineral and royalty interest ownership as of the dates indicated.

Delaware

Midland

Anadarko

DJ

Williston

Total

Net Royalty Acres

June 30, 2022(1)

30,010

9,015

9,850

24,755

8,180

81,810

March 31, 2022

29,875

8,265

22,400

24,740

8,185

93,465

Acres Added and (Sold) Q/Q

135

750

(12,550)

15

(5)

(11,655)

% Added and (Sold) Q/Q

—%

9%

(56)%

—%

—%

(12)%

(1) June 30, 2022 NRA totals include Division Order Interest adjustments relative to prior quarters

DUC Conversions Updates

During the second quarter 2022, the Company identified approximately 223 gross (2.4 net) horizontal wells converted to production, which represented 33% of its net DUC inventory as of the first quarter 2022 (24% of gross DUCs). Well conversions to proved developed producing during second quarter are summarized in the table below:

Q2 2022 Wells Converted to Proved Developed Producing

Gross

Net

DUCs

223

2.4

Acquired Wells Net of Divestitures

(238)

(1.6)

Converted Permitted and Other

15

Total

0.8

Drilling Activity Update

During the second quarter 2022, the Company identified a record 253 gross (1.5 net) wells spud on its mineral position, which represents a 6% sequential increase from the first quarter 2022 on a gross well basis. Brigham’s average quarterly gross and net wells spud over 2019 to 2021 relative to the second quarter 2022 are summarized in the table below:

2019(1)

2020(1)

2021(1)

Q1 22

Q2 22

Gross Wells Spud

219

95

164

238

253

Net Wells Spud

1.4

0.7

1.3

2.1

1.5

(1) Amounts represent average quarterly numbers during the year.

DUC and Permit Inventory Update

The Company expects 2022 production volumes will be driven by the continued conversion of its DUC and permit inventory. Brigham’s gross and net DUC and permit inventory as of June 30, 2022 by basin is outlined in the table below:

Development Inventory by Basin(1)

Delaware

Midland

Anadarko

DJ

Williston

Total

Gross Inventory

DUCs

231

373

35

205

164

1,008

Permits

274

146

5

173

186

784

Net Inventory

DUCs

2.1

1.9

0.1

2.3

0.4

6.8

Permits

2.0

0.7

1.1

0.4

4.2

(1) Individual amounts may not add to totals due to rounding.

FINANCIAL UPDATE

For the three months ended June 30, 2022, crude oil, natural gas and NGL production volumes increased 8% to 13,019 Boe/d as compared to the three months ended March 31, 2022 and increased 45% as compared to the same prior-year period.

For the three months ended June 30, 2022, average realized prices were $108.37 per barrel of oil, $6.95 per Mcf of natural gas, and $42.31 per barrel of NGL, for a total equivalent price of $76.31 per Boe. This represents a 18% increase relative to the three months ended March 31, 2022 and a 69% increase relative to the same prior-year period.

The Company's net income for the three months ended June 30, 2022 was $50.2 million, up 28% from the three months ended March 31, 2022 and up 227% relative to the same prior-year period.

Adjusted EBITDA was $79.7 million for the three months ended June 30, 2022, up 31% from the three months ended March 31, 2022 and up 159% relative to the same prior-year period. Adjusted EBITDA ex lease bonus was $79.2 million for the three months ended June 30, 2022, up 34% from the three months ended March 31, 2022 and up 164% from the same prior-year period. Adjusted EBITDA and Adjusted EBITDA ex lease bonus are Non-GAAP financial measures. For a definition of Adjusted EBITDA and Adjusted EBITDA ex lease bonus and a reconciliation to our most directly comparable measure calculated and presented in accordance with GAAP, please read "Non-GAAP Financial Measures" below.

As of June 30, 2022, the Company had a cash balance of $24.1 million and $217.0 million of undrawn revolver capacity under its credit facility, providing the Company with total liquidity of $241.1 million.

Results of Operations

Unaudited Financial and Operational Results

Three Months Ended

Six Months Ended

($ in thousands, except for realized prices and unit expenses)

June 30, 2022

March 31, 2022

June 30, 2022

June 30, 2021

Operating Revenues

Oil sales

$

66,415

$

50,688

$

117,103

$

49,542

Natural gas sales

13,968

10,312

24,280

12,141

NGL sales

10,020

8,995

19,015

7,498

Total mineral and royalty revenue

$

90,403

$

69,995

$

160,398

$

69,181

Lease bonus and other revenue

476

1,433

1,909

2,403

Total Revenues

$

90,879

$

71,428

$

162,307

$

71,584

Production

Oil (MBbls)

612

552

1,164

834

Natural gas (MMcf)

2,011

1,868

3,879

2,916

NGLs (MBbls)

237

220

457

301

Equivalents (MBoe)

1,185

1,083

2,268

1,621

Equivalents per day (Boe/d)

13,019

12,031

12,528

8,959

Realized Prices ($/Boe)

Oil ($/Bbl)

$

108.37

$

91.90

$

100.57

$

59.39

Natural gas ($/Mcf)

6.95

5.52

6.26

4.16

NGLs ($/Bbl)

42.31

40.90

41.63

24.88

Average Realized Price

$

76.31

$

64.64

$

70.74

$

42.66

Operating Expenses

Gathering, transportation and marketing

$

2,246

$

2,003

$

4,249

$

3,326

Severance and ad valorem taxes

5,361

4,331

9,692

4,133

Depreciation, depletion, and amortization

13,449

12,313

25,762

18,447

General and administrative (before share-based compensation)

3,587

4,428

8,015

6,284

Total operating expenses (before share-based compensation)

$

24,643

$

23,075

$

47,718

$

32,190

General and administrative, share-based compensation

1,959

1,481

3,440

4,855

Total Operating Expenses

$

26,602

$

24,556

$

51,158

$

37,045

Income from Operations

$

64,277

$

46,872

$

111,149

$

34,539

Other expenses:

Interest expense, net

(1,154

)

(914

)

(2,068

)

(654

)

Other income, net

14

20

34

15

Income Before Taxes

$

63,137

$

45,978

$

109,115

$

33,900

Income tax expense

12,957

6,913

19,870

6,503

Net Income

$

50,180

$

39,065

$

89,245

$

27,397

Less: Net income attributable to non-controlling interest

(7,931

)

(8,083

)

(16,014

)

(7,613

)

Net income attributable to Brigham Minerals, Inc. stockholders

$

42,249

$

30,982

$

73,231

$

19,784

Three Months Ended

Six Months Ended

Unit Expenses ($/Boe)

June 30, 2022

March 31, 2022

June 30, 2022

June 30, 2021

Gathering, transportation and marketing

$

1.90

$

1.85

$

1.87

$

2.05

Severance and ad valorem taxes

4.52

4.00

4.27

2.55

Depreciation, depletion and amortization

11.35

11.37

11.36

11.38

General and administrative (before share-based compensation)

3.03

4.09

3.53

3.87

General and administrative, share-based compensation

1.65

1.37

1.52

2.99

Interest expense, net

0.97

0.84

0.91

0.40

Quarterly Cash Dividend

The Company’s Board of Directors (the "Board") has declared a quarterly cash dividend incorporating results for the second quarter 2022 of $0.77 per share of Class A common stock at a 75% payout ratio. This represents a 28% increase in payout compared to the dividend declared for the first quarter of 2022. The second quarter dividend represents a base dividend of $0.16 per share and a variable dividend of $0.61 per share and will be paid on August 26, 2022 to holders of record as of August 19, 2022. An amount equal to the cash dividend per share will also be set aside for each outstanding award granted under the long-term incentive plan for payment upon the vesting of such awards in accordance with their terms.

Future declarations of dividends are subject to approval by the Board and to the Board’s continuing determination that the declarations of dividends are in the best interests of the Company and its shareholders. Future dividends may be adjusted at the Board’s discretion based on market conditions and capital availability.

OPERATIONAL AND FINANCIAL GUIDANCE UPDATE

Below is Brigham's updated guidance for the full year 2022:

Original

2022 Guidance

Updated

2022 Guidance

Change %

Guidance Ranges

Low

High

Low

High

Capital Allocation

Quarterly Base Dividend (Annualized)(1)

$0.16 ($0.64)

$0.16 ($0.64)

Payout Ratio (Base + Variable Dividend)

75%

80%

70%

80%

Daily Net Production (Boe/d)

11,300

12,000

12,300

13,000

+9%

Oil Cut (%)

48%

52%

48%

52%

Lease Bonus ($ millions)

$1.0

$3.0

$1.5

$3.5

+25%

Expenses

Cash G&A Expense ($ millions)

$13.3

13.8(2)

$15.3

15.8(2)

+15%

Cash G&A Expense Unit Cost ($/Boe)

$3.20 midpoint

$3.36 midpoint

+5%

Share Based Compensation Expense ($ millions)(2)

$9.2

$10.0(2)

$7.2

$8.0(2)

-21%

Total G&A Expense ($ millions)

$22.5

$23.8

$22.5

$23.8

0%

Total G&A Expense Unit Cost ($/Boe)

$5.44 midpoint

$5.01 midpoint

-8%

Gathering, Transportation, and Marketing ($/Boe)

$2.75

$3.25

$2.00

$2.50

-25%

Production Taxes (% of Revenue)

7%

9%

7%

9%

Taxes

Tax Depletion ($/Boe)

$11.50

$13.50

$11.50

$13.50

Percent of Dividend Expected to be Return of Capital

20%

40%

20%

40%

Mineral Acquisition Capital

Ground Game Acquisition Budget ($ millions)

$60

$80

$100

$120

+57%

(1) Subject to future board approval

(2) Original 2022 Guidance modified in May 2022 to reflect subsequent implementation of short term incentive plan, which re-allocated approximately $2 million from share based compensation to cash G&A

Brigham Minerals Second Quarter 2022 Earnings Conference Call

Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Adjusted EBITDA Margin, Discretionary Cash Flow, Discretionary Cash Flow ex lease bonus, and Net Debt are non-GAAP supplemental financial measures used by our management and by external users of our financial statements such as investors, research analysts and others to assess the financial performance of our assets and their ability to sustain dividends over the long term without regard to financing methods, capital structure or historical cost basis.

We define Adjusted EBITDA as Net Income before depreciation, depletion and amortization, share-based compensation expense, interest expense, and income tax expense, less other income. We define Adjusted EBITDA ex lease bonus as Adjusted EBITDA further adjusted to eliminate the impacts of lease bonus and other revenues we receive due to the unpredictability of timing of the revenue. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenue. We define Discretionary Cash Flow as Adjusted EBITDA, less cash interest expense and cash taxes. We define Discretionary Cash Flow ex lease bonus as Discretionary Cash Flow further adjusted to eliminate the impacts of lease bonus revenue. We define Net Debt as total debt less cash and cash equivalents.

Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Adjusted EBITDA Margin, Discretionary Cash Flow, Discretionary Cash Flow ex lease bonus, and Net Debt do not represent and should not be considered alternatives to, or more meaningful than, net income or any other measure of financial performance presented in accordance with GAAP as measures of our financial performance. Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Adjusted EBITDA Margin, Discretionary Cash Flow and Discretionary Cash Flow ex lease bonus have important limitations as analytical tools because they exclude some but not all items that affect net income, the most directly comparable GAAP financial measure. Net Debt should not be considered an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Our computation of Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Adjusted EBITDA Margin, Discretionary Cash Flow, Discretionary Cash Flow ex lease bonus, and Net Debt may differ from computations of similarly titled measures of other companies.

The following tables present a reconciliation of Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Adjusted EBITDA Margin, Discretionary Cash Flow, Discretionary Cash Flow ex lease bonus, and Net Debt to the most directly comparable GAAP financial measure for the periods indicated.

SUPPLEMENTAL SCHEDULES

Reconciliation of Adjusted EBITDA, Adjusted EBITDA ex Lease Bonus and Adjusted EBITDA Margin

Three Months Ended

Six Months Ended

($ In thousands)

June 30,
2022

March 31,
2022

June 30,
2021

June 30,
2022

June 30,
2021

Net Income

$

50,180

$

39,065

$

15,326

$

89,245

$

27,397

Add:

Depreciation, depletion, and amortization

13,449

12,313

9,080

25,762

18,447

Share-based compensation expense

1,959

1,481

2,555

3,440

4,855

Interest expense, net

1,154

914

387

2,068

654

Income tax expense

12,957

6,913

3,430

19,870

6,503

Less:

Other income, net

14

20

2

34

15

Adjusted EBITDA

$

79,685

$

60,666

$

30,776

$

140,351

$

57,841

Less:

...