Falcon Minerals Corporation, a leading oil and gas minerals company, announces financial and operating results for the second quarter 2021 and declares its second quarter 2021 dividend.
- Net production of 5,034 barrels of oil equivalent per day (“boe/d”) for the second quarter 2021, a 22% sequential increase compared to the first quarter 2021
- 55 gross, 0.51 net wells were turned in line during the second quarter 2021
- Averaged 4 rigs running on Falcon’s Eagle Ford position during the second quarter 2021
- 171 gross line-of-sight wells (1.80 net wells) permitted and in active development as of July 26, 2021
- Line-of-sight inclusive of 83 gross and 0.59 net wells that are DUCs or waiting to be connected
- Adjusted EBITDA of $13.8 million for the second quarter 2021 excluding expenses associated with the executive transition in June 2021 ($12.1 million inclusive of transition expenses)(1)
- Pro-forma Free Cash Flow increase of 48% over the first quarter 2021 to $13.3 million in the second quarter 2021, excluding expenses associated with the executive transition in June 2021 ($11.6 million inclusive of transition expenses)(1)
- Second quarter 2021 net income of $7.2 million(2)
- Second quarter 2021 dividend declared of $0.15 per share, a 50% sequential increase over the first quarter 2021
- Dividend will be paid on September 8, 2021 to all shareholders of record on August 25, 2021
Bryan C. Gunderson, President and Chief Executive Officer of Falcon Minerals commented, “The high net revenue interest wells that we saw turn in line late in the first quarter and early in the second quarter helped deliver compelling quarter over quarter growth. Production grew by 22% and Pro-forma Free Cash Flow grew approximately 48% sequentially over the first quarter 2021. Falcon’s shareholders are benefitting directly from this Free Cash Flow generation through the company’s dividend and the 50% increase to $0.15 per share.” Mr. Gunderson continued by saying, “The balance sheet is strong with a 10% reduction to borrowings outstanding under the Company’s credit facility and Net Debt to LTM EBITDA decreasing to 0.92x. Looking ahead to the second half of the year, we anticipate that Falcon’s Free Cash Flow will provide an attractive yield to investors.” Mr. Gunderson concluded by saying “I am excited to welcome Matt Ockwood to the team as Chief Financial Officer. Together, we look forward to driving value for Falcon shareholders.”
Falcon realized prices of $64.45 per barrel (“bbl”) for crude oil, $2.79 per thousand cubic feet (“mcf”) for natural gas and $25.23/bbl for natural gas liquids (“NGL”) during the second quarter 2021.
Falcon reported net income of $7.2 million, or $0.08 of net income per Class A common share, for the second quarter 2021, which includes amounts attributable to non-controlling interests. Falcon generated royalty revenue of $18.9 million (approximately 76% oil) for the second quarter 2021. The Company reported Adjusted EBITDA (a non-GAAP measure defined and reconciled on pages 7-8) of $13.8 million for the second quarter 2021 excluding expenses associated with the executive transition in June 2021.
Cash operating costs consisting of production and ad valorem taxes and marketing and transportation expenses for the second quarter 2021 were $1.6 million. General and administrative expense for the second quarter 2021 were impacted by expenses associated with the executive transition in June 2021, including severance and legal costs, totaling approximately $1.7 million. Excluding these expenses, as well as non-cash stock-based compensation, cash general and administrative expense was approximately $2.4 million during the quarter.
As of June 30, 2021, the Company had $36.5 million of borrowings on its revolving credit facility, and $3.0 million of cash on hand, resulting in net debt of approximately $33.5 million at the end of the quarter. Falcon’s net debt / LTM EBITDA ratio was 0.92x at June 30, 2021.(3)
(3) Calculated by dividing the sum of total debt outstanding less cash on hand as of June 30, 2021 by Adjusted EBITDA for the trailing 12-month period. Please refer to the disclosure on pages 7-8 for the Reconciliation of net income to Non-GAAP Measures.
Second Quarter 2021 Dividend
Falcon’s Board of Directors declared a dividend of $0.15 per Class A share for the second quarter 2021. During the second quarter 2021, the Company generated Pro-forma Free Cash Flow of $13.3 million (as described and reconciled on page 7-8) excluding expenses associated with the executive transition in June 2021. The dividend for the second quarter 2021 will be paid on September 8, 2021 to all Class A shareholders of record on August 25, 2021. The second quarter 2021 dividend does not have any effect on the current $11.34 exercise price of the Company’s outstanding warrants.
The Company expects that greater than 50% of its 2021 dividends will not constitute taxable dividend income and instead will result in a non-taxable reduction to the tax basis of the shareholders’ common stock. The reduced tax basis will increase a shareholders’ capital gain (or decrease shareholders’ capital loss) when shareholders’ sell their common stock.
Falcon’s production averaged 5,034 boe/d during the second quarter 2021, of which approximately 49% was oil. Eagle Ford production was approximately 59% oil during the second quarter 2021. Falcon had 55 gross wells turned in line (0.51 net wells) with an average net royalty interest (“NRI”) of approximately 0.93% during the second quarter 2021.
Falcon currently has 2,206 gross producing Eagle Ford wells, and the Company’s average NRI for all producing wells is approximately 1.26%.
As of July 26, 2021, the Company had 171 line-of-sight wells (1.80 net wells) with an average NRI of 1.05% in various stages of development on Falcon’s Eagle Ford minerals position.