AUSTIN, Texas--(BUSINESS WIRE)--Brigham Minerals, Inc. (NYSE: MNRL) (“Brigham Minerals,” “Brigham,” or the “Company”), a leading mineral and royalty interest acquisition company, today announced record operating and financial results for the quarter ended June 30, 2021.

SECOND QUARTER 2021 OPERATIONAL AND FINANCIAL HIGHLIGHTS AND RECENT DEVELOPMENTS

• Daily production volumes of 8,988 Boe/d (70% liquids, 52% oil)
  • Production up 1% sequentially from Q1 2021 driven by a 7% increase in Permian volumes

• Record royalty revenues of $37.0 million
  • Up 15% sequentially from Q1 2021 driven by 13% higher realized prices and 1% higher volumes

• Continued record low general and administrative costs (before share based compensation) of $3.1 million
  • Generated through continued cost reduction efforts initiated in Q2 2020
  • See cost guidance reduction in Operational and Financial Guidance Update table below

• Net income totaling $15.3 million
  • Record Adjusted EBITDA⁽¹⁾ totaling $30.8 million up 14% sequentially from Q1 2021

• Declared Q2 2021 dividend of $0.35 per share of Class A common stock and implemented Base Plus Variable Dividend structure⁽²⁾
  • Comprised of Base Dividend of $0.14 per share of Class A common stock and Variable Dividend of $0.21 per share of Class A common stock, which in total represents a 9% sequential total dividend increase from Q1 2021
  • Represents 80% payout ratio of Discretionary Cash Flow ex lease bonus⁽¹⁾ with retained cash utilized to fund mineral acquisitions focused on activity wells
  • Sustainable Base Dividend supported by PDP base and multi decade, high quality inventory

• 9.1 net (1,415 gross) activity wells at the end of Q2 2021 comprised of 5.0 net (732 gross) DUCs and 4.1 net (683 gross) permits
  • 14% increase in net DUCs to 5.0 net locations driven by a 31% increase in net wells spud
  • Permian Basin net activity wells increased to a record 5.4 net locations

• Acquired 640 net royalty acres deploying $14.4 million in mineral acquisition capital
  • Deployed 96% of mineral acquisition capital to the Permian Basin
  • 63% of acquired net locations comprised of PDP, DUCs and permits
  • Approximately 40% of acquisitions internally funded

• $6.4 million cash balance and undrawn revolver capacity of $92 million as of June 30, 2021
  • Conservative leverage at 0.3x last quarter annualized Adjusted EBITDA ⁽¹⁾
  • Borrowing base increased to $165 million effective July 7, 2021 resulting in pro-forma liquidity of $128.4 million

• Portfolio optimization underway with anticipated Q3 2021 impact totaling approximately $6 million
  • Anticipate initial water royalty sales this month from Southern Delaware surface ownership with total potential water royalty revenue of $0.5 million to $1 million beginning in Q3 2021
  • In July, divested certain non-core Oklahoma minerals generating proceeds of $3.3 million (net royalty acres included in "Other" in ownership table below)
  • In July, sold 50% of mineral interest in five Stack/Merge sections as well as leased open minerals to private operator to accelerate development generating proceeds of $1.6 million

(1) Non-GAAP measure. See “Non-GAAP Financial Measures” below.

(2) See Quarterly Cash Dividend section below regarding Board approval of future dividends

2021 UPDATED GUIDANCE

• Updated full year 2021 production guidance of 9,000 Boe/d to 9,500 Boe/d
  • See additional detail in Operational and Financial Guidance Update table below
  • General and administrative costs reduced 13% at the mid-point to $13.4 million from $15.4 million
  • Mineral acquisition capital reduced 35% at the mid-point to $65 million from $100 million
    • Maintaining discipline in environment with higher seller expectations and transitory competition
  • Mid-point of daily production volumes reduced 3% attributable to reduced mineral acquisitions

Robert M. (“Rob”) Roosa, Chief Executive Officer, commented, “Drilling activity continued to rebound in the second quarter with a 16% gross (31% net) increase in wells spud compared to the first quarter, which substantially outpaced the 9% industry-wide rig increase in our liquids rich basins. Drilling activity drove a 14% increase in net DUCs to 5.0 net locations, which we anticipate will be highly contributory to production volumes over the next twelve months as operators such as Chevron Corporation, Pioneer Natural Resources Inc., Exxon Mobil Corporation, PDC Energy, Inc. and Diamondback Energy, Inc. turn our DUCs in line to production. Collectively, these large, well-capitalized E&Ps operate 60% of our DUCs and are running an aggregate 19 frac crews in our basins. Driven by this high-quality DUC inventory, we anticipate our production volumes over the next twelve months, or the period from Q3 2021 through Q2 2022, will average between 9,000 Boe/d and 10,000 Boe/d. Our acquisition team remained highly disciplined as commodity prices increased throughout the second quarter targeting highly accretive acquisitions focused on activity wells and continued to deliver, deploying $14.4 million in mineral acquisition capital, almost entirely to the Permian Basin. As a result of higher seller price expectations and the desire to maintain discipline in the face of increased competition, which has historically proven to be transitory, we anticipate deploying $15 million of acquisition capital over the next two quarters, which will be majority funded by retained cash and our portfolio optimization and rationalization activities.”

Blake C. Williams, Chief Financial Officer, added, “Our high-quality asset base delivered strong second quarter results highlighted by both record revenues and Adjusted EBITDA⁽¹⁾. Realized pricing improved 13% over the first quarter, which along with our production uplift drove a 9% increase in our dividend to $0.35 per share this quarter. Further, we were able to internally fund approximately 40% of our second quarter mineral acquisition capital, which is up from 30% in the first quarter. Finally, we are excited to implement a base plus variable dividend structure⁽²⁾ with a quarterly base dividend of $0.14 per share, which represents an attractive and sustainable fixed base yield relative to broader market indices. We believe the base dividend has been battle tested as it equates to our second quarter 2020 dividend, which incorporates the substantial commodity price, economic and activity disruptions attributable to the COVID-19 pandemic and the actions of OPEC +. In addition to the base dividend, our second quarter dividend includes a variable amount of $0.21 per share, bringing our total payout to 80% of Discretionary Cash Flow ex lease bonus⁽¹⁾ for the second quarter. The variable dividend represents an incremental 4.4% annualized yield for a total dividend yield of 7.3% to our Class A shareholders at our current stock price. In summary, the implementation of this dividend structure⁽²⁾ represents the confidence in both our team and our assets’ ability to consistently return capital to shareholders regardless of commodity prices or activity.”

(1) Non-GAAP measure. See “Non-GAAP Financial Measures” below.

(2) See Quarterly Cash Dividend section below regarding Board approval of future dividends

OPERATIONAL UPDATE

Mineral and Royalty Interest Ownership Update

During the second quarter 2021, the Company executed 22 transactions acquiring approximately 640 net royalty acres (standardized to a 1/8th royalty interest) and deployed $14.4 million in capital. The Company focused approximately 96% of its mineral acquisition capital in the second quarter towards the Permian Basin. Second quarter acquisitions are expected to deliver near-term production and cash flow growth with the addition of 24 gross DUCs (0.3 net) and 28 gross permits (0.2 net) to inventory counts.

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

DUC Conversions Updates

During the second quarter 2021, the Company identified approximately 204 gross (0.7 net) horizontal wells converted to production, which represented 26% of its gross DUC inventory as of the first quarter 2021 (16% of net DUCs). Well conversions to proved developed producing during second quarter are summarized in the table below:

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

Drilling Activity Update

During the second quarter 2021, the Company identified 153 gross (1.3 net) wells spud on its mineral position, which represents a 31% sequential increase from the first quarter 2021 on a net well basis. Brigham’s gross and net wells spud activity over the past ten quarters is summarized in the table below:

DUC and Permit Inventory Update

The Company expects 2021 production growth 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, 2021 by basin is outlined in the table below:

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

FINANCIAL UPDATE

For the three months ended June 30, 2021, crude oil, natural gas and NGL production volumes increased 1% to 8,988 Boe/d as compared to the three months ended March 31, 2021 and increased 2% as compared to the same prior-year period. The majority of the operator activity and production volumes affected by Winter Storm Uri in February 2021 returned over the course of the quarter resulting in flat production volumes relative to the first quarter 2021.

For the three months ended June 30, 2021, average realized prices were $63.11 per barrel of oil, $4.58 per Mcf of natural gas, and $23.77 per barrel of NGL, for a total equivalent price of $45.24 per Boe. This represents a 13% increase relative to the three months ended March 31, 2021 and a 191% increase relative to the same prior-year period.

The Company saw general and administrative costs (before share-based compensation) continue to remain at record lows of $3.1 million for the three months ended June 30, 2021 as compared to the three months ended March 31, 2021 and decrease 22% relative to the same prior-year period.

The Company's net income for the three months ended June 30, 2021 was $15.3 million. Adjusted EBITDA was $30.8 million for the three months ended June 30, 2021, up 14% from the three months ended March 31, 2021 and up 421% relative to the same prior-year period. Adjusted EBITDA ex lease bonus was $30.0 million for the three months ended June 30, 2021, up 18% from the three months ended March 31, 2021 and up 413% 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, 2021, the Company had a cash balance of $6.4 million and $92.0 million of undrawn revolver capacity under its credit facility, providing the Company with total liquidity of $98.4 million. In connection with the Company's semi-annual borrowing base redetermination, the Company's borrowing base was increased to $165.0 million effective July 7, 2021 resulting in pro forma liquidity of $128.4 million.

Results of Operations

Quarterly Cash Dividend

The Company’s Board of Directors (the “Board”) has declared a quarterly cash dividend incorporating results for the second quarter 2021 of $0.35 per share of Class A common stock. This represents a 9% increase in payout compared to the dividend declared for the first quarter of 2021. The second quarter dividend represents a base dividend of $0.14 per share and a variable dividend of $0.21 per share and will be paid on August 27, 2021 to holders of record as of August 20, 2021. 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 2021.

Brigham Minerals Second Quarter 2021 Earnings Conference Call

• Thursday, August 5, 2021 at 9:00 a.m. Eastern Time (8:00 a.m. Central Time)
• Pre-register by visiting: https://www.incommglobalevents.com/registration/q4inc/8365/brigham-minerals-second-quarter-2021-earnings-conference-call-/
• Listen to a live audio webcast of the call by visiting the Company’s website
  • https://investors.brighamminerals.com
• A recording of the webcast will be available on the Company’s website after the call

Non-GAAP Financial Measures

Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Discretionary Cash Flow and Discretionary Cash Flow ex lease bonus 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 (Loss) 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 and magnitude of the 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.

Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Discretionary Cash Flow and Discretionary Cash Flow ex lease bonus 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, 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. Our computation of Adjusted EBITDA, Adjusted EBITDA ex lease bonus, Discretionary Cash Flow and Discretionary Cash Flow ex lease bonus 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, Discretionary Cash Flow and Discretionary Cash Flow ex lease bonus to the most directly comparable GAAP financial measure for the periods indicated.

SUPPLEMENTAL SCHEDULES

Reconciliation of Adjusted EBITDA and Adjusted EBITDA ex Lease Bonus

Reconciliation of Discretionary Cash Flow and Discretionary Cash Flow ex Lease Bonus

(1) Refer to Reconciliation of Adjusted EBITDA from Net Income (Loss) above.

Unaudited Condensed Consolidated Balance Sheets

Brigham Minerals, Inc.
Blake C. Williams
Chief Financial Officer
(512) 220-1500
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