Good day, ladies and gentlemen. And welcome to the Q3 2017 Black Stone Minerals LP Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Brent Collins, Vice President of Investor Relations. Sir, the podium is yours.

Thank you, Brian. Good morning to everyone, and thank you for joining us either by phone or online for Black Stone Minerals' Third Quarter 2017 Earnings Conference Call. Today's call is being recorded and will be available on our website along with the earnings release that was issued yesterday afternoon. Before we start, I'd like to advise you that we will be making forward-looking statements during this call about our plans, expectations and assumptions regarding our future performance. These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward-looking statements. For a discussion of these risks, you should refer to the cautionary information about forward-looking statements in our press release from yesterday and the Risk Factors section of our 10-Q, which will be filed later today. We may refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliation of those measures to the most directly comparable GAAP measures and other information about these non-GAAP metrics are described in our earnings press release from yesterday, which can be found on our website at blackstoneminerals.com. Company officials on the call this morning are Tom Carter, Chairman, President and CEO; Jeff Wood, Senior Vice President and CFO; Holbrook Dorn, Senior Vice President of Business Development; Brock Morris, Senior Vice President of Engineering and Geology; and Steve Putman, Senior Vice President and General Counsel. I'll now turn the call over to Tom.

Thanks, Brent. Good morning. Thank you all for joining us today. Black Stone had a solid third quarter of 2017. Production averaged 37,000 Boe per day for the quarter, which is essentially flat to the second quarter of 2017 despite some production shut-ins resulting from Hurricane Harvey. Despite those shut-ins, we grew our mineral and royalty volumes on a sequential basis. We averaged 75 gross well additions per month in the third quarter, and our year-to-date average would suggest that we'll have slightly over 900 gross well adds in 2017. From a net revenue interest perspective, the additions were led by the Permian Basin, followed by Bakken/Three Forks, Haynesville/Bossier and the Eagle Ford. Those four assets together accounted for approximately 70% of our net revenue interest adds in the quarter. Looking ahead, we are very encouraged by what we have been seeing from a permitting standpoint across our acreage. By our estimates, as of September 30, approximately 15,000 horizontal well permits have been filed in the lower 48 in the preceding 12 months. That number has been steadily increasing through 2017 on a trailing 12-month basis. We estimated that as of the same date, approximately 8% of all of those permits involved BSMC acreage, which is a pretty remarkable statistic for a mineral and royalty owner. Lease bonus and other income for the quarter was $12 million and was mainly driven by leasing in the Delaware Basin. We've had a very good year with respect to lease bonus, which is a tribute to both the strength of our acreage position and to the great work of our land team, which does an outstanding job of promoting our acreage to operators. For the first nine months of the year, we recorded $37.1 million, compared to $26.1 million for the same period…

Thank you, Tom, and good morning, everyone. So we posted another solid quarter and that's across all of our key metrics. As Tom mentioned, we reported average daily production for the third quarter of 37,000 Boe per day and that's essentially flat with reported second quarter volumes. Our royalty volumes grew slightly and our working interest volumes were down about 3% from the record high we reported last quarter. We estimate the third quarter production was negatively impacted by approximately 500 Boe per day as a result of Hurricane Harvey, but to our knowledge, all of our operators in those affected areas are now back to normal operations. Between the impact from Harvey and some revised completion timing estimates from our primary operator in the Shelby Trough, we now expect to come in at or just below the low-end of our revised production guidance of 37,000 Boe to 38,000 Boe per day for the full year. With our high royalty and working interest that we have in the XTO development area in East Texas, changing in their completion schedules can shift volumes across quarters and that's what's happening here. I will note that we view this only as a timing issue and we remain very encouraged by XTO's great progress and its plans for continued development in that area. Turning to our financial results, lease bonus and other income was $12 million for the third quarter and was driven primarily by leasing activity in the Delaware. Through September 30, we recorded over $37 million of lease bonus, which puts us above the high-end of our guidance for the year. The specific timing of lease bonus is a bit hard to predict by quarter. So we are going to stay on the conservative side now and just say that we expect…

Thank you. [Operator Instructions] Our first question comes from the line of Nick Raza from Citi. Sir, your line is now open.

Thank you. Just really quick. Could you just talk about the macro sort of view about just purchasing royalty interest in other regions besides the Permian's, particularly around, maybe the Marcellus, the Utica, sort of the Appalachian region, or maybe the Bakken for that matter?

Hi Nick. This is Holbrook. The Permian is a – there is a lot of capital that's flown into that space and so it is very expensive and we are seeing opportunities in lots of other plays across the lower 48. I think our Shelby Trough activity is evidence of that where we've acquired approximately 38,000 net mineral acres for prices that we think are fairly compelling, especially when you consider the risk reward, versus plays like the Delaware and the Midland that are more pricey and more front page news.

Okay. And as there - do you sort of have a view on acreage up in the Northeast, which is obviously, production seems to be ramping up there as well?

Yes, we've – we’ve always liked Appalachia and the Marcellus and the Utica plays up there. We have a small position up there. We love to add to it. It's just always been a challenge trying to really get in front of where bases is going out there. And we'll see, as more pipes come on and that story cleans itself up. It may be easier to price those assets.

Gotcha. And then, I guess, the other question I had, really quickly was, in terms of just your gas price realized, understanding that you might not have a lot of clarity on the NGL component or the Btu component. I mean, how should we go about thinking about that for just modeling purposes and forecasting?

This is Brock Morris. Just, thinking about where our future production is coming from, a lot of our growth is going to be out of the Haynesville, which is not going to have any liquids to speak of. So in general, I might expect the benefit of the NGLs and our gas price to be a smaller part of our production mix going forward.

Yes. But Nick, the nice thing, of course, of that is that, we see relatively low differentials out of that East Texas production just given how close we are to hut. So -- and the vast majority of that growth will be royalty production, which does not bear any transportation costs.

Gotcha. Okay, that’s helpful. That’s all I had guys. Thank you so much.

Thanks, Nick.

[Operator Instructions] Our next question comes from the line of Brent [Indiscernible] from Raymond James. Your line is now open.

Hey, good morning guys. Thanks for taking my question and congrats on a nice quarter. Just in relation to the amended credit facility just curious, what's kind of the additional hedging capacity that was provided by that amendment?

So previously, Brent, we were restricted to really PDP volumes and so we've added a component here that enables us to hedge greater volumes, because it's a test it looks at the past three months of our production, and then also what our future forecasted production and then we've got to reduce that by certain percentages going forward. So it just enables us to have greater flexibility over the next two years to hedge greater volumes if we want to and probably, equally importantly, it enables us to look out further in our hedging program than we've been able to with the strict PDP constraints under the prior version of the facility. So we will get that forward. You can see it. But it's basically kind of 90% for a couple of years of either backward looking three months production or our expected production and then that 90% ramps down to 70% and 50% as we go further out in time.

Okay. That's helpful. And, forgive me, if this is – I don't see any slides right now. But can you give us a sense of what kind of positions you are taking on for the next few years? Is it just swaps, colors, what kind of things you are looking at?

Yes, so historically, we've looked to be kind of 75-ish percent hedged in the near-term and maybe 50% of expected volumes as we look out in the 12 to 24 months timeframe and we remain pretty consistent. With that, we file our Q later today. It'll have the detail of those hedging positions. But, so far, we've remained pretty consistent. As I said, we put on positions covering about 20% of 2019. Those were just yesterday and those were the first positions we've added for 2019 and – and then, higher percentages for 2017 and 2018. And then, in terms of the method by which we hedge to-date, everything in the entire book has just been swaps.

Okay, okay, great. That's helpful. And then, just one last question. Related to the lease bonus, just curious what is it that actually drives the lease bonus numbers? Is that just negotiations with the lessee or is there – is it just on a case-by-case basis?

This is Holbrook. It is negotiations with the lessees. When we have acreage in a competitive area, that multiple parties are trying to lease, we try and run as competitive as a process as possible. In other areas that may be less active, sometimes you just have to take what the market is offering, because there may only be one or two active operators in a given county.

Okay, fair enough. And then, I guess just a follow-up on that is, in 3Q, you guys mentioned the activity was primarily in the Delaware Basin, whereas, last quarter, I think you mentioned three areas, the Bakken, the Permian and the Austin Chalk. Is there a specific area that we should think about as being a target for 4Q or is it primarily going to be in that Delaware Basin area?

4Q, I think we are working on a number of traits right now. There could be some Delaware activity. There could also be some Austin Chalk activity and frankly, there could be some step-up in the Panhandle, and I think, we have an $18 million gross acre position with over 7 million net acres. So we move a tremendous amount of land paperwork through this office on any given day. So, we love it when we have a bunch of different plays pop up from a lease bonus perspective.

Sure. Okay, fair enough. Great, thanks guys.

[Operator Instructions] Our next question comes from the line of Peter Vig from RoundRock Capital. Your line is open.

Good morning. Good morning. You guys announced earlier this year that you had executed a series of leases in the Haynesville. I think all of those leases carried multi-well obligations per year. My question is, how many wells have been drilled under those leases? And second, given that volumes were pretty flat in the quarter, is there an inventory, if you would of docks out there that are going to be completed later on this year or early 2019?

Hi Peter. Brock Morris. So we had two wells, which were drilled prior to what we talked about earlier this year. Since then, four wells have been drilled and completions on those are underway, and three more are currently drilling.

Okay. All right. The other question I had, Tom, you kind of hinted around a new area or new well that you are excited about. By any chance, is this in the Wilcox play, which you own a big mineral spread in, or could – can you – if it isn't there, can you comment where we might be talking about?

Yes. It is in the Wilcox.

I’m sorry.

No, it hasn't been drilled yet. Yes, it's about to spud.

Okay.

And it is in the Wilcox.

Okay. That does it for me. Thanks.

Thanks, Peter.

And I am currently seeing no further questions, and I will now like to turn the call back to Tom Carter, President and CEO for any further remarks.

Thank you all for joining us today and we look forward to speaking with you next quarter.