Black Stone Minerals, L.P. (NYSE:BSM) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 10:00 am ET

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Black Stone Minerals, L.P. (NYSE:BSM) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions]

Our first question comes from the line of Pearce Hammond with Simmons Energy. Your line is open.

Analyst
Pearce Hammond

Good morning and thanks for taking my questions.

Executive
Thomas L. Carter

Hi Pearce.

Analyst
Pearce Hammond

Hey. So, my first question pertains to capital allocation. Just sort of your thoughts on unit buybacks versus distributions versus debt reduction, obviously this quarter you paid down some debt, $20 million worth. But given where the units are right now, does that kind of bump up the priority on unit buybacks? So, I just want to get your thoughts on that subject.

Executive
Jeff Wood

Sure, Pearce. This is Jeff. That's a great question.

It really just depends on the opportunities at the time. I mean, the first priority always for us is to maintain a really strong balance sheet. that we would assume -- decided we were focused more on that this quarter, with using virtually all of our excess cash flow to reduce debt balances. And we just think that positions us to be in a better position to take advantage of opportunities down the line, especially when, as I mentioned in my comments, we're not too excited about using equity directly to finance acquisitions.

I think from that point and we feel pretty good about our liquidity position today. From that point, it's just what gives us the best opportunity. I think, as you mentioned, the potential for share repurchases is certainly there. We are seeing some interesting things in the acquisition environment. So, it's just what provides us the best kind of long-term IRR ROI on the use of that capital. So again, kind of focused on debt reduction, but we feel pretty good about our liquidity today. And it's just going to really depend on primarily what we see out there in the acquisition market going forward.

Analyst
Pearce Hammond

Great and then my follow-up, Jeff, pertains to the Shelby Trough. And I know you guys are working hard to get some other producers in there, drilling in the area, but given that XTO is postponing the completion of some of those docks that I think you thought might get done last quarter, when you reported. How does it impact the 2020 production profile for the Company because I thought previously -- we had thought it might be more of an impact in ;21 rather than in '20.

Executive
Jeff Wood

Yes. So Pearce, maybe I'll take that, and then see if Tom may just want to comment on Shelby Trough progress more generally. I think that's right. So, last quarter, the expectation was that XTO is going to move in and do those -- complete those docks on a little more rapid time frame and that was going to push out the impact. I think now, look Shelby Trough is one of our bigger areas of production. I will point out again that it's dry gas. So, it's not as big a percentage of our total cash flows. But I think with those docks, our current understanding of what XTO plans are out there,