Author Topic: BSM - Black Stone Minerals, L.P.  (Read 5506 times)

KJP

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Re: BSM - Black Stone Minerals, L.P.
« Reply #10 on: May 15, 2020, 05:32:57 AM »
Here's a recent VIC writeup:  https://www.valueinvestorsclub.com/idea/BLACK_STONE_MINERALS_LP/2269477254/messages/159979#description

The math is easy enough; estimating the inputs is, of course, a bit more difficult.  The author's worst case scenario for 2021 is already partially off the table, because the company has begun hedging 2021 production at $36/barrel for oil and $2.60/MCF for gas. 


DW1234

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Re: BSM - Black Stone Minerals, L.P.
« Reply #11 on: May 21, 2020, 03:53:07 AM »
FCF till 2021 is not great with current hedges in place and their dedication to paying down debt first. But downside is limited and they will surely survive the next 2 years. To me the most interesting part of this company is what happens after 2021.

Expenses are roughly ~70-80M excluding ad valorem taxes (which are ~16% based on their production).  At a conservative estimate of 2022+ revenue of $200M+ they would earn $0.5/share in FCF. That's a 7-8% yield at current price. That doesn't sound all that great but there's a lot of upside to be had from this $200M revenue point. Their worst year since 2014 was $260M in revenue and average revenue 2014-2019 is $478M.

I am not invested yet, but I do think it's an attractive bet as long as you're willing to wait at least a couple years for things to normalize and for them to weather the current storm.


KJP

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Re: BSM - Black Stone Minerals, L.P.
« Reply #12 on: May 21, 2020, 05:25:23 AM »
FCF till 2021 is not great with current hedges in place and their dedication to paying down debt first. But downside is limited and they will surely survive the next 2 years. To me the most interesting part of this company is what happens after 2021.

Expenses are roughly ~70-80M excluding ad valorem taxes (which are ~16% based on their production).  At a conservative estimate of 2022+ revenue of $200M+ they would earn $0.5/share in FCF. That's a 7-8% yield at current price. That doesn't sound all that great but there's a lot of upside to be had from this $200M revenue point. Their worst year since 2014 was $260M in revenue and average revenue 2014-2019 is $478M.

I am not invested yet, but I do think it's an attractive bet as long as you're willing to wait at least a couple years for things to normalize and for them to weather the current storm.

Are you including interest and preferred distribution in your expense calculation?  (Not saying that's wrong -- they both do come before LP distributions.)

What are the average oil and gas prices and production that you're using to get $200 million in 2022 revenue?

DW1234

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Re: BSM - Black Stone Minerals, L.P.
« Reply #13 on: May 21, 2020, 06:01:33 AM »
I am including interest (4% on avg outstanding loan $225M) and preferred ($21M).

~3M Bbl and ~48M MMcf. I've used a 20% decrease in production for 2020 as well as 2021 to get to this number for 2022. If you take these numbers and a $30 oil price and $2.5 gas price you get $200M+ revenue. There's some extra income from lease bonuses as well which I didn't include here. But it's all very rough numbers just to get an idea anyways.

2022 oil futures currently are in the $40 region and NG seems to be ~$2.75. They also say this:

We are allowed to hedge up to 90% of such volumes for the first 24 months, 70% for months 25 through 36, and 50% for months 37 through 48. As of March 31, 2020, we have hedged 91% of our available oil and condensate hedge volumes and 75% of our available natural gas hedge volumes for 2020.


So they might lock in some 2022 rates maybe even this year given how defensive they're playing it atm. I am by no means an expert on this though, but after doing some (sometimes confusing) number crunching it looks like a reasonable bet to me. It feels like a slamdunk bet at $4-$5. 

bskptkl

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Re: BSM - Black Stone Minerals, L.P.
« Reply #14 on: May 21, 2020, 08:29:42 AM »
It feels like a slamdunk bet at $4-$5.
I know right? Which is why it's trading $6.60. Still yields almost 5% even after cutting div.

I was telling myself to get a full position around $5 and still only ended up with a quarter position.
I like this as a way to play oil recovery (also hedges to my tankers) and a way to fade the relentless money printing.
Would anybody be surprised to see $100 oil in a few years?

given2invest

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Re: BSM - Black Stone Minerals, L.P.
« Reply #15 on: May 21, 2020, 08:32:06 AM »
BSM is one of my largest positions.  I look at it as a conservative way to play both oil and gas in the years to come.  Very low leverage.