Falcon Minerals Corporation (“Falcon,” or the “Company,” “we,”
“our,”) (NASDAQ: FLMN, FLMNW), a leading oil and gas minerals
company, today announced financial and operating results for the
first quarter and declares its first quarter dividend.
Highlights
- Net production of 5,152 barrels of oil equivalent per day
(“boe/d”) for the first quarter 2020 (54% oil). Represents a 28%
increase when compared to the fourth quarter of 2019
- 1.43 net, 61 gross wells were turned in line during the first
quarter 2020
- Four Hooks Ranch wells were turned in line on February 7,
2020
- Aggressive cost cutting beginning March 12, 2020 inclusive of
approximately 50% reduction in cash compensation for CEO for full
year 2020 and meaningful reductions to Board of Directors
compensation expenses
- Updating full year 2020 cash G&A guidance to $7.25 million
to $7.75 million. Represents an approximately 20% reduction from
full year 2019
- 193 gross line of sight wells (2.41 net wells) permitted and in
active development as of April 29, 2020
- 2.41 net line of sight wells includes 1.7 net wells in active
development
- Averaged seven rigs running on Falcon’s Eagle Ford position in
the first quarter 2020 (currently four rigs running on
position)
- First quarter 2020 Net Income of $4.5 million(1), or $0.05 per
Class A share
- Adjusted EBITDA of $10.1 million for the first quarter
2020(2)
- First quarter 2020 Free Cash Flow of $0.11 per share(2)
- First quarter dividend declared of $0.025 per share,
approximately a 23% payout ratio, will be paid on June 8, 2020 to
all shareholders of record on May 25, 2020
(1) Net Income shown includes amounts attributable to
non-controlling interests
(2) Please refer to the disclosure on pages 7-8 for the
Reconciliation of Net Income to Non-GAAP Measures
Daniel Herz, President and Chief Executive Officer of Falcon
commented, “While we are pleased with the performance of Falcon’s
business in the first quarter, as we saw both production and net
wells turned in line grow materially, we are wholly focused on the
future.” Mr. Herz went on to say “As we consider the global
economic toll resulting from the COVID-19 pandemic, the associated
impact to the United States oil markets, and the curtailments that
have already been announced, we have elected to be exceedingly
cautious with our use of our free cash flow. Today, Falcon declared
a dividend of $0.025 per Class A share which represents
approximately 23% of our free cash flow for the first quarter 2020.
The Board will consider the appropriate payout ratio on a quarter
by quarter basis.” Mr. Herz continued saying “Falcon’s business
model was designed to weather storms and the benefits of that
design are showing today. Falcon continues to have modest leverage,
a world class asset base, low costs and it is well positioned to
perform in the midst of the current environment and thrive on the
other side of it.”
Financial Update
Falcon realized prices of $43.10 per barrel (“bbl”) for crude
oil, $1.94 per thousand cubic feet (“mcf”) for natural gas and
$14.05/bbl for natural gas liquids (“NGL”) during the in the first
quarter 2020.
Falcon reported Net Income of $4.5 million, or $0.05 per Class A
common share, for the first quarter 2020, which includes amounts
attributable to non-controlling interests. Falcon generated revenue
of $13.6 million (approximately 80% oil) for the first quarter
2020. The Company reported Adjusted EBITDA (a non-GAAP measure as
defined and reconciled on pages 7-8) of $10.1 million for the first
quarter 2020.
Total cash operating costs for the first quarter 2020 were $3.6
million. General and administrative expense for the first quarter
2020, excluding non-cash stock-based compensation expense, was
approximately $2.3 million, compared to $2.5 million for the fourth
quarter 2019. This first quarter is inclusive of year end audit
costs and does not include the full benefit of cost cutting measure
put in place in March 2020.
As of March 31, 2020, the Company had $45.3 million of
borrowings on its revolving credit facility, and $2.2 million of
cash on hand, resulting in a net debt of approximately $43.1
million at the end of quarter. Falcon’s Net Debt / LTM EBITDA ratio
was 0.95x at March 31, 2020.(3) Effective May 1, 2020, in
connection with the Company’s spring redetermination, the borrowing
base decreased from $90 million to $70 million.
(3) Calculated by dividing the sum of total debt outstanding
less cash on hand as of March 31, 2020 by Adjusted EBITDA for the
trailing 12-month period, as per Falcon’s credit agreement dated
August 23, 2018, as amended from time to time.
First Quarter 2020 Dividend
Falcon’s Board of Directors declared a dividend of $0.025 per
Class A share for the first quarter 2020. During the first quarter
2020, the Company generated pro-forma free cash flow per share of
$0.11(4) (as described and reconciled on page 7-8). The dividend
for the first quarter 2020 will be paid on June 8, 2020 to all
Class A shareholders of record on May 25, 2020. The first quarter
2020 dividend does not have any effect on the current $11.34
exercise price of the Company’s outstanding warrants.
(4) The pro-forma adjustments assume that the non-controlling
interests are converted to Class A common shares, such that
approximately 86.5 million Class A shares would be outstanding. The
pro-forma Class A shares reflects the dilution from 0.5 million
unvested restricted stock awards (RSAs) which receive dividend
equivalent rights (“DER”) on a quarterly basis
Operational Results
Falcon’s production averaged 5,152 boe/d during the first
quarter 2020, of which approximately 54% was oil. Eagle Ford
production was approximately 60% oil during the first quarter 2020.
Falcon had 61 gross wells turned in line (1.43 net wells) with an
average NRI of approximately 2.35% during the first quarter 2020.
This compares to 73 gross wells turned in line (0.59 net wells)
during the fourth quarter of 2019.
Falcon currently has 2,011 producing Eagle Ford wells, and the
Company’s average NRI for all producing wells is approximately
1.31%.
As of April 29, 2020, the Company had 193 line of sight wells
(2.41 net wells) with an average NRI of 1.25% in various stages of
development on Falcon’s Eagle Ford minerals position. These wells
are comprised of the following:
Line of Sight Wells (As of April 29,
2020)
Stage of Activity
Gross Wells
Net Wells
NRI % Permitted
72
0.7
0.97
%
Waiting on completion
96
1.56
1.63
%
Waiting on connection
25
0.15
0.62
%
Total line of sight
193
2.41
1.25
%
During the three months ended March 31, 2020, Falcon acquired
approximately 49 net royalty acres through two transactions in the
Eagle Ford Shale for a total cost of approximately $2.1 million.
The transactions were funded using cash on hand and availability on
the Company’s revolving credit facility.
Full Year Guidance
Given the ongoing uncertainty, continued market volatility, and
production curtailments expected over the coming months, Falcon’s
original 2020 guidance should not be relied upon. Further guidance
has been temporarily suspended. During this suspension, the company
may provide periodic updates, as appropriate.
Falcon is updating the Company’s full year 2020 cash G&A
guidance to $7.25 million to $7.75 million.
Conference Call Details
Falcon management invites investors and interested parties to
listen to the conference call to discuss first quarter 2020 results
on Friday, May 8, 2020 at 9:00 am ET. Participants for the
conference call should dial (888) 567-1602 (International: (862)
298-0701). A replay of the Falcon earnings call will be available
starting at 2:00 pm ET on May 8, 2020. Investors and interested
parties can listen to the replay on www.falconminerals.com in the
Events page of the Investor Relations section or call
(888)-539-4649 (International: (754) 333-7735). At the system
prompt, dial your replay code (151920#); playback will
automatically begin.
About Falcon Minerals
Falcon Minerals Corporation (NASDAQ: FLMN, FLMNW) is a
C-Corporation formed to own and acquire high growth oil-weighted
minerals rights. Falcon Minerals owns mineral, royalty, and
over-riding royalty interests covering approximately 256,000 gross
unit acres in the Eagle Ford Shale and Austin Chalk in Karnes,
DeWitt, and Gonzales Counties in Texas. The Company also owns
approximately 75,000 gross unit acres in the Marcellus Shale across
Pennsylvania, Ohio, and West Virginia. For more information, visit
our website at www.falconminerals.com.
Cautionary Note Regarding Forward-Looking Statements
This document contains forward-looking statements that involve a
number of assumptions, risks and uncertainties that could cause
actual results to differ materially from those contained in the
forward-looking statements. Falcon cautions readers not to place
any undue reliance on these forward-looking statements as
forward-looking information is not a guarantee of future
performance. Such forward-looking statements include, but are not
limited to, statements about future financial and operating
results, future dividends paid, resource and production potential,
Falcon’s plans, objectives, expectations and intentions and other
statements that are not historical facts. Risks, assumptions and
uncertainties that could cause actual results to materially differ
from the forward-looking statements include, but are not limited
to, those associated with general economic and business conditions;
the COVID-19 pandemic and its impact on Falcon and on the oil and
gas industry as a whole; Falcon’s ability to realize the
anticipated benefits of its acquisitions; changes in commodity
prices; uncertainties about estimates of reserves and resource
potential; inability to obtain capital needed for operations;
Falcon’s ability to meet financial covenants under its credit
agreement or its ability to obtain amendments or waivers to effect
such compliance; changes in government environmental policies and
other environmental risks; the availability of drilling equipment
and the timing of production in Falcon’s regions; tax consequences
of business transactions; and other risks, assumptions and
uncertainties detailed from time to time in Falcon’s reports filed
with the U.S. Securities and Exchange Commission, including under
the heading “Risk Factors” in Falcon’s most recent annual report on
Form 10-K as well as any subsequently filed quarterly reports on
Form 10-Q and current reports on Form 8-K. Forward-looking
statements speak only as of the date hereof, and Falcon assumes no
obligation to update such statements, except as may be required by
applicable law.
FALCON MINERALS CORPORATION CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share
amounts) (Unaudited) Three Months Ended
March 31,
2020
2019
Revenues: Oil and gas sales
$
13,600
$
21,258
Expenses: Production and ad valorem taxes
854
1,128
Marketing and transportation
397
784
Amortization of royalty interests in oil & gas properties
3,674
3,511
General, administrative and other
3,073
2,504
Total expenses
7,998
7,927
Operating income
5,602
13,331
Other income (expense): Other income
31
31
Interest expense
(680
)
(654
)
Total other income (expense)
(649
)
(623
)
Income before income taxes
4,953
12,708
Provision for income taxes
444
1,405
Net income
4,509
11,303
Net income attributable to non-controlling interests
(2,304
)
(5,921
)
Net income attributable to shareholders
$
2,205
$
5,382
Class A common shares (basic and diluted)
$
0.05
$
0.12
FALCON MINERALS CORPORATION CONSOLIDATED BALANCE
SHEETS (In thousands) (Unaudited) March
31, December 31, ASSETS
2020
2019
Current assets: Cash and cash equivalents
$
2,189
$
2,543
Accounts receivable
5,846
7,889
Prepaid expenses
1,096
1,182
Total current assets
9,131
11,614
Royalty interests in oil & gas properties, net of
accumulated amortization
217,619
219,192
Property and equipment, net of accumulated depreciation
505
517
Deferred tax asset, net
55,908
56,352
Other assets
3,798
2,530
Total assets
$
286,961
$
290,205
LIABILITIES AND SHAREHOLDER'S EQUITY Current
liabilities: Accounts payable and accrued expenses
$
1,107
$
2,206
Other current liabilities
590
-
Total current liabilities
1,697
2,206
Credit facility
45,250
42,500
Other non-current liabilities
1,290
473
Total liabilities
48,237
45,179
Shareholder’s equity: Class A common stock
5
5
Class C common stock
4
4
Additional paid in capital
125,921
129,127
Non-controlling interests
112,794
115,890
Retained earnings
-
-
Total shareholder’s equity
238,724
245,026
Total liabilities and shareholder’s equity
$
286,961
$
290,205
Non-GAAP Financial Measures
Adjusted EBITDA and Pro-forma Free Cash Flow are supplemental
non-GAAP financial measures used by management and external users
of our financial statements, such as industry analysts, investors,
lenders and rating agencies. We believe Adjusted EBITDA and
Pro-forma Free Cash Flow are useful because they allow us to
evaluate our performance and compare the results of our operations
period to period without regard to our financing methods or capital
structure. In addition, management uses Adjusted EBITDA and
Pro-forma Free Cash Flow to evaluate cash flow available to pay
dividends to our common shareholders.
We define Adjusted EBITDA as Net Income plus interest expense,
net, depletion expense, provision for income taxes and share-based
compensation. We define Pro-forma Free Cash Flow as Net Income plus
depletion expense, provision for income taxes and share-based
compensation less cash income taxes. Adjusted EBITDA and Pro-forma
Free Cash Flow are not measures of Net Income as determined by
GAAP. We exclude the items listed above from Net Income in
calculating Adjusted EBITDA and Pro-forma Free Cash Flow because
these amounts can vary substantially from company to company within
our industry depending upon accounting methods and book values of
assets, capital structures and the method by which the assets were
acquired. Certain items excluded from Adjusted EBITDA and Pro-forma
Free Cash Flow are significant components in understanding and
assessing a company’s financial performance, such as a company’s
cost of capital and tax structure, as well as historic costs of
depreciable assets, none of which are components of Adjusted EBITDA
and Pro-forma Free Cash Flow.
Adjusted EBITDA and Pro-forma Free Cash Flow should not be
considered an alternative to, or more meaningful than, Net Income,
royalty income, cash flow from operating activities or any other
measure of financial performance presented in accordance with GAAP.
Our computations of Adjusted EBITDA and Pro-forma Free Cash Flow
may not be comparable to other similarly titled measures of other
companies.
Reconciliation of Net Income to Adjusted EBITDA and Pro-forma
Free Cash Flow (in thousands, except per share amounts):
Fully Converted Three Months Per Share
Basis Ended Three Months Ended March 31,
2020 March 31, 2020 (1) Net Income
$
4,509
$
0.05
Interest expense (2)
680
0.01
Depletion and depreciation
3,700
0.04
Share-based compensation
724
0.01
Income taxes
444
0.01
Adjusted EBITDA
$
10,057
$
0.12
Interest expense (2)
(680
)
(0.01
)
Pro-forma Free Cash Flow
$
9,377
$
0.11
- Per share information is presented on a fully converted basis
and includes both the 46.5 million Class A common shares (inclusive
of 0.5 million unvested restricted stock awards which receive DERs)
and the 40.0 million Class C common shares that are outstanding as
of March 31, 2020. As such, Net Income per fully converted share in
this schedule is not comparable to earnings per share (EPS) of
$0.05 for the period ended March 31, 2020 as shown on the Statement
of Operations.
- Interest expense includes amortization of deferred financing
costs.
Calculation of cash available for dividends for the first
quarter 2020 (in thousands):
Three Months Ended March 31,
2020
Adjusted EBITDA
$
10,057
Interest expense
(680
)
Net cash available for distribution
$
9,377
Cash to be distributed to non-controlling interests
$
1,000
Cash to be distributed to Falcon Minerals Corp.
$
1,150
Dividends to be paid to Class A shareholders
$
1,150
FALCON MINERALS CORPORATION SELECTED OPERATING
DATA (Unaudited) Three Months Ended
March 31,
2020
2019
Production Data: Oil (bbls)
253,528
274,978
Natural gas (boe)
144,835
172,687
Natural gas liquids (bbls)
70,474
72,891
Combined volumes (boe)
468,837
520,556
Average daily combined volume (boe/d)
5,152
5,784
Average sales prices: Oil (bbls)
$
43.10
$
59.46
Natural gas (mcf)
$
1.94
$
3.29
Natural gas liquids (bbls)
$
14.05
$
18.23
Combined per boe
$
28.70
$
40.51
Average costs ($/boe): Production and ad valorem
taxes
$
1.82
$
2.17
Marketing and transportation expense
$
0.85
$
1.51
Cash general and administrative expense
$
4.96
$
4.81
Interest expense, net
$
1.45
$
1.26
Depletion
$
7.84
$
6.74
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507006141/en/
Bryan C. Gunderson Chief Financial Officer
bgunderson@falconminerals.com
Falcon Minerals (NASDAQ:FLMN)
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