Brigham Minerals, Inc. (NYSE:MNRL) is a leading mineral and royalty interest company that has strategically positioned itself at the heart of the most active, liquids-rich resource plays in the United States. With a diversified portfolio spanning the Delaware, Midland, Anadarko, Denver-Julesburg (DJ), and Williston Basins, Brigham Minerals is poised to capitalize on the robust production growth and strong commodity price environment.

Business Overview

Brigham Minerals was formed to acquire and actively manage a portfolio of mineral and royalty interests in the core of what the company views as the most active, highly economic, liquids-rich resource plays across the continental United States. The company's primary business objective is to maximize risk-adjusted total return to its stockholders through the growth of its free cash flow generated from its existing mineral portfolio and the continued sourcing and execution of accretive mineral acquisitions in the core of highly economic, liquids-rich resource plays.

As of September 30, 2022, Brigham Minerals owned 82,175 net royalty acres across 38 counties within the Delaware and Midland Basins in West Texas and New Mexico, the Anadarko Basin in Oklahoma, the Denver-Julesburg (DJ) Basin in Colorado and Wyoming, and the Williston Basin in North Dakota. This diversified portfolio provides the company with exposure to some of the most prolific oil and gas-producing regions in the United States.

Financials

Brigham Minerals has delivered impressive financial results, driven by strong production growth and favorable commodity prices. For the full year 2022, the company reported annual net income of $68,026,000, annual revenue of $161,217,000, annual operating cash flow of $109,199,000, and annual free cash flow of $5,596,000.

In the third quarter of 2022, the company's production volume increased 15% to 15,000 Boe/d (73% liquids, 50% oil) compared to the second quarter of 2022. Mineral and royalty revenues, which are composed of crude oil, natural gas, and NGL sales, increased 3% to $92.8 million in the third quarter of 2022 compared to the second quarter, driven by the higher production volumes, partially offset by a 12% decrease in realized commodity pricing.

Net income for the third quarter of 2022 was $44.4 million, inclusive of $7.8 million in merger-related costs. Adjusted Net Income, which excludes the impact of these one-time costs, was $52.2 million, up 4% from the second quarter of 2022. Adjusted EBITDA and Adjusted EBITDA ex lease bonus were $82.1 million and $80.7 million, respectively, for the third quarter of 2022, increasing 3% and 2%, respectively, compared to the second quarter.

Liquidity

As of September 30, 2022, Brigham Minerals had a cash balance of $33.0 million and $217.0 million of capacity on its revolving credit facility, providing the company with total liquidity of $250.0 million. The company's strong liquidity position and cash flow generation allow it to fund its acquisition-driven growth strategy while also returning capital to shareholders through a sustainable dividend program.

In the third quarter of 2022, Brigham Minerals deployed approximately $12.2 million in capital to acquire 365 net royalty acres, primarily in the Permian Basin. The company has a track record of disciplined capital allocation, focusing on accretive acquisitions in the core of the most active, liquids-rich resource plays.

Brigham Minerals' current dividend structure consists of a base dividend of $0.16 per share of Class A common stock plus a variable dividend. On November 2, 2022, the company's Board of Directors declared a dividend of $0.81 per share of Class A common stock, payable on November 25, 2022, to stockholders of record at the close of business on November 18, 2022.

Recent Developments

Merger with Sitio Royalties Corp.

On September 6, 2022, Brigham Minerals announced that it had entered into a definitive agreement to merge with Sitio Royalties Corp. in an all-stock transaction. The combined company, to be named New Sitio, will be one of the largest publicly traded mineral and royalty companies, with a premier asset base across the most active, liquids-rich resource plays in the United States.

Under the terms of the agreement, Brigham Minerals' stockholders will receive 1.133 shares of New Sitio Class A common stock for each share of Brigham Minerals' Class A common stock they own. The transaction is expected to close in the first half of 2023, subject to customary closing conditions and approvals.

Risks and Challenges

Brigham Minerals' business model and financial performance are subject to various risks, including commodity price volatility, operator activity levels, and regulatory changes. The company's results are heavily dependent on the drilling and completion activities of its operators, which can be impacted by factors such as oil and gas prices, access to capital, and industry regulations.

Outlook

Despite these risks, the company's outlook remains positive. The strong commodity price environment, coupled with the company's strategic positioning in the core of the most active resource plays, positions Brigham Minerals to continue delivering robust financial performance and generating attractive returns for its shareholders.

Conclusion

Brigham Minerals is a leading mineral and royalty interest company that has strategically positioned itself at the heart of the most active, liquids-rich resource plays in the United States. The company's diversified portfolio, strong financial performance, and disciplined capital allocation strategy make it well-positioned to capitalize on the favorable industry dynamics and drive long-term value for its shareholders.