Themes from Q2 Earnings Calls

Part 2: Mineral Aggregators

Mineral and Royalty Rights Special Topics

Last week, we reviewed the second quarter earnings calls for a select group of E&P companies and briefly discussed the macroeconomic factors affecting the oil and gas industry.

In this post, we focus on the key takeaways from mineral aggregator second quarter 2021 earnings calls.

Operators Maintaining Drill Bit Discipline

Aggregators keep a close eye on E&P companies as they often reap the benefits of the drill bit, but also fall victim to capital discipline initiatives.  In the second quarter, many aggregators made note of operators’ disciplined approach as prices and rig counts continued to rise.

  • “Our portfolio has benefited as bigger and better capitalized operators have taken over operatorship of our minerals to enable more consistent and disciplined development. Our focus on the highest rate of return undeveloped locations throughout our history ensures that our mineral position migrates to the top of any operator’s drilling inventory.”
    Ben Brigham, Executive Chairman & Director, Brigham Minerals
  • “Despite the increase in rig count through the second quarter, we do anticipate that trend to flatten through the remainder of the year, as operators maintain their capital discipline.”
    Jeff Wood, President & CFO, Black Stone Minerals
  • “Operators in the U.S. continue to practice discipline with their drilling activity even in the face of significantly higher commodity prices.”
    Bob Ravnaas, Chairman & CEO, Kimbell Royalty Partners

Capitalizing on Favorable Price Environment

Industry participants remain optimistic as prices have increased significantly over the last year.  Some aggregators were heavily hedged, and others, like Brigham Minerals, are reaping the benefits of their unhedged position.

  • “In fact, this is the best macro setup I’ve seen in my career, and I’ve lived through numerous cycles. Benefiting from our diversified portfolio of high-quality mineral assets, our shareholders are positioned to benefit from what I believe is very likely a long ramp of elevated pricing for oil, NGL and natural gas prices. This is particularly true given that unlike some of our peers, we are unhedged.”
    Bud Brigham, Founder & Executive Chairman, Brigham Minerals
  • “Oil prices are now well above pre-COVID levels, but the U.S. land rig count is 39% below year end 2019 levels. Furthermore, natural gas prices are trading at multiyear highs, driven primarily by increased power demand in the U.S. and surging exports of LNG to Europe and Asia. Given that a significant portion of our daily production is natural gas, we expect this improved pricing to benefit our cash available for distribution in Q3 2021 and into the winter months based on the current strip pricing.”
    Bob Ravnaas, Chairman & CEO, Kimbell Royalty Partners
  • “The increase in royalty volumes was mainly due to the Midland and Delaware properties but we also saw nice increases outside of our major shale plays as well, but seen a remarkable rebound in commodity prices since the middle of last year and are currently well above pre-pandemic price levels.”
    Tom Carter, Chairman & CEO, Black Stone Minerals

Distributions Ramping Up

Aggregators have built a reputation of acting as a yield vehicle with the ability to reinvest, unlike traditional royalty trusts.  Their popularity increased as they maintained healthy distributions over the years, however the challenging environment in 2020 put most payouts in jeopardy.  With the uptick in prices and a more optimistic outlook, aggregators seem confident to return to historical payout levels.

  • “The $0.31 per common unit distribution this quarter reflects a 75% payout of cash available for distribution. We will use the retained amount, 25%, to pay down a portion of the outstanding borrowings under Kimbell’s credit facility.”
    Davis Ravnaas, President, CFO & Chairman, Kimbell Royalty Partners
  • “This allowed us to maintain a 100% distribution in the second quarter of 2020 and importantly enter 2021 unhedged with our investors fully exposed to the run-up in commodity prices as the economic reopening took hold toward the end of last year and more fully during the first quarter of this year associated with the vaccine rollout.”
    Robert Roosa, CEO & Director, Brigham Minerals
  • “We generated $72.1 million of distributable cash flow for the second quarter or $0.35 per unit. That gave us a lot of flexibility to increase our distribution while still holding some cash and reserve for further debt repayment.”
    Jeff Wood, President & CFO, Black Stone Minerals Conclusion

Aggregators seemed optimistic across the board in the second quarter of 2021.  Prices have rebounded, and distribution policies are returning to normal, which in their minds creates good shareholder sentiment.  However, the continued capital discipline of E&P operators may affect aggregators in the short to intermediate term.


Mercer Capital has its finger on the pulse of the minerals market.  An important trend has been the rise of mineral aggregators, which have largely supplanted the trusts as the primary method of publicly traded minerals ownership.  Contact a Mercer Capital professional to discuss your needs in confidence.