From left to right: Brock Morris, SVP of Engineering and Geology; Jeff Wood, SVP, and CFO; Tom Carter, Chairman, CEO, and President;
Steve Putman , SVP, General Counsel, and Secretary
doubled proppant intensity, and added over 2,500 lateral feet on
certain well completions in the Shelby Trough. The results have
been outstanding; we are seeing some of the best performing gas
wells in the country drilled right in our back yard.
Oily plays like the Permian have become the main focus
for a number of companies around the industry. How does Black
Stone think about balancing its oil to natural gas ratio?
CARTER: Well, we are weighted to natural gas currently on a production basis but more balanced with respect to cash flow contributions. The expected growth in the Haynesville will further increase
our natural gas exposure. We are comfortable with that and have no
intention of forcing some specific ratio. We believe it would be very
difficult, expensive, and risky to try to make a meaningful mid-course
correction on commodity type by jumping into the Permian with
some mega-deal, for example. With that said, we like the Permian,
Bakken, and Eagle Ford strategically and will continue to put capital
into those plays. Ultimately, we are focused on returns much more
than any targeted oil to natural gas ratio. That makes us relatively
agnostic in terms of the specific commodity, but we believe we will
deliver the highest long-term value to our unitholders.
With such a diverse portfolio, how do you think about
growing operations and capital allocation across your
CARTER: We went public in 2015 with about 25 MBOE/day and
we see 40 + MBOE/day in the not too distant future, despite just
coming through a very, very tough time for our industry. We will
grow our business by continuing to be creative with industry op-
erators to seek a disproportionate share of their capital in plays
where our resource size and concentrated positions allow.
In addition to the cost-free growth we expect from the embedded
drop-downs I discussed earlier, we will continue to be an active
consolidator in the minerals space, through both bolt-on transactions and through larger, diversified packages where we see ourselves as the natural counterparty.
Are you focused on mineral acquisitions. and how do
these prices compare to traditional lease acquisitions?
CARTER: Yes, we have grown through acquisitions over several
decades and plan to continue that course. Typically, mineral acquisitions are up to 5x to 10x more per acre than a traditional lease
acquisition, but we believe in the much higher value of minerals
given the nature of the perpetual ownership.
What makes an asset a potentially attractive acquisition
CARTER: We focus on long-term returns with appropriate capital
outlays and risks. It’s no secret that we’re looking for something
that is going to be in harm’s way of the drill bit. The type of deals
we like most are larger, diversified mineral packages. We like to
believe that we have some competitive advantages that allow us
to generate incremental value from those types of assets. We’re
generally more successful in processes for those types of assets
compared to more concentrated assets. That is not to say that we
don’t look at more concentrated asset packages, but those tend to
be easier to understand and value and as a result they attract more
Thanks very much for your time, Tom.