Good day, and welcome to the Black Stone Minerals First Quarter Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I'd now like to turn the call over to Mark Meaux, Director of Finance. Please go ahead.

Thank you. Good morning to everyone. Thank you for joining us either by phone or online for Black Stone Minerals First Quarter 2024 Earnings Conference Call. Today's call is being recorded and will be available on our website along with the earnings release, which was issued last night. 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 2023 10-K. 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 measure 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 www.blackstoneminerals.com. Joining me on the call from the company are Tom Carter, Chairman, CEO and President; Evan Kiefer, Senior Vice President, Chief Financial Officer and Treasurer; Carrie Clark, Senior Vice President, Chief Commercial Officer; and Steve Putman, Senior Vice President and General Counsel. I'll now call -- I'll now turn the call over to Tom.

Thank you, Mark. Good morning, everyone, and thank you for joining us this morning to discuss the quarter. We posted a good first quarter with net income of $63.5 million and adjusted EBITDA of $104.1 million. We generated total production volumes for the first quarter of 40.3 BOE per day, a decrease of 2% from our fourth quarter '23 volumes. Royalty volumes for the quarter were 38,900 BOE per day. Oil volumes trended down in the Midland and Delaware basins, but were partially offset by an increase in the resilient Bakken area. And despite the ongoing natural gas challenges, natural gas volumes increased from the fourth quarter in the Fayetteville, Gulf Coast, Lance Mesa Verde and other tranche. Factors like these continue to illustrate the benefit of a diversified portfolio, where we continue to see additions in noncore plays that contribute to new production year-over-year. Our unique asset mix is a strategic advantage that continues to consistently add long-term value to Black Stone and its unitholders. With that, let me just turn to focus on the Haynesville/Bossier, which is a significant -- as everyone knows, a significant long-term growth engine for Black Stone. In the Shelby Trough, we announced in December that one of our operators invoked a "time-out" under the provision of our joint exploration agreement, which would allow them to seize activity for a period of time. We have a good group of operators in the Shelby Trough, being XTO, Aethon, [ Pine Wave ], [ Milestone ], Exco and others. And in addition, in Louisiana, we have Chesapeake, Southwestern, Comstock and others. So we've got a great portfolio of operators. The operator that declared a time-out, however, is currently drilling 3 wells and is expected to continue levels of activity there. This suggests that either the operator…

Thank you, Tom, and good morning to everyone. As Tom pointed out, we had a positive first quarter. We generated 38,100 BOE per day of mineral and royalty production for the first quarter, which was down 2% from last quarter and 40,300 BOE per day in total production volume. This resulted in our net income of $63.9 million and adjusted EBITDA for the first quarter of $104.1 million. We previously announced that we were reducing our distribution to $0.375 per unit or $1.50 on an annualized basis. As reported yesterday, distributable cash flow for the quarter was $96.4 million, which represents 1.22x coverage for the quarter. Due to the challenges of natural gas prices, production curtailments and delays in turning wells on production, our Board elected to reduce the distribution and utilize the excess coverage in the first quarter towards growth opportunity. We continue to have a very strong balance sheet that gives us a lot of flexibility through these dynamic market cycle. As Tom mentioned, we have acquired approximately $50 million of nonproducing mineral and royalty interest and utilizing that excess cash from the first quarter to supplement these acquisitions, we continue to have no outstanding borrowings on our revolver. As of last week, we had approximately $89 million of cash and that's prior to the payment of the distribution later this month. The borrowing base for our revolving credit facility was reaffirmed at $580 million, while we elected to hold commitments at $375 million. Yesterday, we also announced updated production guidance that reflects the challenges that we're seeing in the natural gas price environment today. In response to production curtailments and a continued slowdown in bringing new production online, we are lowering our 2024 production guidance range for the full year by approximately 4% to between 38,500 BOE…

[Operator Instructions] We'll go first to Derrick Whitfield with Stifel.

For my first question, I wanted to focus on your 2024 guidance. With your lower guidance, could you help frame how you're thinking about the cadence of production throughout the year. And while clearly price dependent and not as material as some might think, what is your assumption on curtailments in your guidance?

Yes, Derrick, this is Evan, and I'll start with that. One of the things we're looking at, not only just from public guidance, whether it's -- Chesapeake has come out and said that they intend on delaying wells through the next quarter as well as what Aethon has indicated as well. What we're really looking at is average pricing in the third quarter is, call it, on average, $2.50. The fourth quarter is closer to $3. And I think whenever you start to move up at those levels, there'll be a little bit more interest in turning those wells online and getting the production as opposed to right now, we're closer to $2 in the second quarter. So our current guidance update to really contemplate curtailments through the second quarter into the third and then assuming at that level that they start to come back online, really kind of targeting that third quarter into the second half of the year.

That make sense. And then maybe shifting over to acquisition activity. You've been active in acquiring over $50 million in minerals since last September, as you guys have noted, while I know you guys would prefer not to disclose the location at this time. Could you at least help frame the opportunity as to whether it's oil or gas, kind of the competitive environment that you're seeing and the depth of the opportunity beyond what's been disclosed?

I'll answer that. The -- unlike a lot of people in the industry, where mineral acquisitions are going on in the Permian and the acquisition of a royalty acre in the Permian is extremely expensive, we are focusing our acquisitions on other areas that are not nearly as expensive but that are contiguous to and around significant positions that we already have in other areas. And while I'm not trying to say too much about where that is, it doesn't take a lot of imagination to figure out where that might be. And we think with what we see strip in late '25 and beyond that those acquisitions made today will have significantly higher return on investments for Blackstone than trying to wade in where everybody else is. So I hope that answers your question.

It does. And then just in terms of the depth beyond what you guys have committed to today, any color you could offer there?

Yes, meaning how much do we expect to spend?

Or how much more could you spend given the competitive landscape you're seeing?

I would answer that this way. I think we expect and have budgeted to spend a multiple of what we spent so far. And that depends on price, but we've got a pretty robust program going on, and we're probably as active right now as we've been since '23.

That's terrific color. And I certainly look forward to updates from you guys in the future.

As soon as we get a little bit more, we'll say more about it.

[Operator Instructions] We'll go next to John Martini with KeyBanc Capital Markets.

First question is on distribution. You trimmed it in 1Q and had more than enough coverage to pay for it. Are you looking to maintain this $0.375 distribution going forward, just given the current gastric hedges in place?

Yes, John, that's a great question. And with the higher coverage that we had in the first quarter, that was really elected to help support some of the acquisition effort. Now given the production delays and curtailments, we do expect that coverage to fall in the future. And a lot of it is really going to be dependent on how long the low gas environment continues. Do we see the strength kind of continue in the second half of the year as the strip would indicate. And so we do like setting a distribution level that is achievable and expect to maintain it. But as always, there's some openness as to where the strip in the current environment persists.

Okay. That's helpful. It's actually all we had. We appreciate the color there.

Great. Thank you, John.

And at this time, it appears we have no further questions. I'd like to turn the floor back over to Mr. Tom Carter for any additional or closing comments.

All right. Well, thank you all for joining us today. I just summarize by saying we're in one of the many sort of bumpy roads that we run into in our industry, but we're pretty excited about the next 4 or 5 years and what we see coming down the road and are trying to position Black Stone to be in the best position to really perform to there. And thank you very much for joining us today.

Thank you. Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation. You may disconnect at this time.