Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNITHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common units are listed on the NYSE under the symbol “BSM.” As of February 19, 2021, there were 207,266,383 common units outstanding held by 448 holders of record. Because many of our common units are held by brokers and other institutions on behalf of unitholders, we are unable to estimate the total number of unitholders represented by these holders of record. As of February 19, 2021, we also had outstanding 14,711,219 Series B cumulative convertible preferred units. There is no established public market in which the Series B cumulative convertible preferred units are traded.
Common Unit Performance Graph
The graph below compares the cumulative five-year total return to unitholders on our common units as compared to the cumulative five-year total returns on the S&P 500 index and the Alerian MLP index. The graph assumes that the value of the investment in our common units was $100.00 on December 31, 2015. Cumulative return is computed assuming reinvestment of distributions.
Comparison of Cumulative Total Return
Assumes Initial Investment of $100
As of December 31,
2015 2016 2017 2018 2019 2020
Black Stone Minerals, L.P. $ 100.00 $ 139.72 $ 142.29 $ 130.83 $ 116.12 $ 64.97
S&P 500 Index 100.00 111.96 136.40 130.42 171.49 203.04
Alerian MLP Index 100.00 118.31 110.59 96.86 103.21 73.60
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The information in this Annual Report appearing under the heading “Common Unit Performance Graph” is being furnished pursuant to Item 201(e) of Regulation S-K and shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act.
Securities Authorized for Issuance under Equity Compensation Plans
See the information incorporated by reference under “Part III, Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters” regarding securities authorized for issuance under our equity compensation plans.
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Cash Distribution Policy
Our partnership agreement generally provides that any distributions are paid each quarter in the following manner:
• first , to the holders of the Series B cumulative convertible preferred units in an amount equal to 7% per annum, subject to certain adjustments; and
• second , to the holders of common units.
The amount of cash to be distributed each quarter will be determined by the Board following the end of that quarter after a review of our cash generated from operations for such quarter. We expect that we will distribute a substantial majority of the cash generated from our operations each quarter. The cash generated from operations for each quarter will generally equal our Adjusted EBITDA for the quarter, less cash needed for debt service, other contractual obligations, fixed charges, and reserves for future operating or capital needs that the Board may determine are appropriate. It is our intent, for at least the next several years, to finance most of our acquisitions and working interest capital needs with cash generated from operations, borrowings under our Credit Facility, our executed farmout agreements, and, in certain circumstances, proceeds from future equity and debt issuances. We may also borrow to make distributions to our unitholders where, for example, we believe that the distribution level is sustainable over the long term, but short-term factors may cause cash generated from operations to be insufficient to pay distributions at the then-current distribution levels on our common units. The Board can change the amount of the quarterly distributions, if any, at any time and from time to time. Our partnership agreement does not require us to pay cash distributions on a quarterly or other basis on our common units. Please read Part I, Item 1A. “Risk Factors — Risks Inherent in an Investment in Us — The Board may modify or revoke our cash distribution policy at any time at its discretion. Our partnership agreement does not require us to pay any distributions at all on our common units. If we make distributions, our Series B cumulative convertible preferred unitholders have priority with respect to rights to share in those distributions over our common unitholders for so long as our Series B cumulative convertible preferred units are outstanding.” For a description of the relative rights and privileges of our Series B cumulative convertible preferred units to distributions, please read "Series B Cumulative Convertible Preferred Units" below.
Replacement capital expenditures are expenditures necessary to replace our existing oil and natural gas reserves or otherwise maintain our asset base over the long term. The Board established a replacement capital expenditure estimate of $11.0 million for the period of April 1, 2018 to March 31, 2019. Due to the expiration of the subordination period, we do not intend to establish a replacement capital expenditure estimate for periods subsequent to March 31, 2019.
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Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy
There is no guarantee that we will make cash distributions to our unitholders. Our cash distribution policy may be changed at any time by the Board and is subject to certain restrictions, including the following:
• Our common unitholders have no contractual or other legal right to receive cash distributions from us on a quarterly or other basis, and if distributions are paid, common unitholders will receive distributions only to the extent the distribution amount exceeds distributions that are required to be paid to our Series B cumulative convertible preferred unitholders.
• Our Credit Facility restricts our distributions if there is a default under our Credit Facility or if our borrowing base is lower than the outstanding loans under our Credit Facility. Among other covenants, our Credit Facility requires we maintain a ratio of total debt to EBITDAX of 3.50:1.00 or less and a current ratio of 1.00:1.00 or greater. If we are unable to comply with these financial covenants or if we breach any other covenant under our Credit Facility or any future debt agreements, we could be prohibited from making distributions notwithstanding our stated distribution policy.
• Our general partner has the authority to establish cash reserves for the prudent conduct of our business, and the establishment of, or increase in, those reserves could result in a reduction in cash distributions to our unitholders. Our partnership agreement does not limit the amount of cash reserves that our general partner may establish. Any decision to establish cash reserves made by our general partner will be binding on our unitholders.
• Under Section 17-607 of the Delaware Act, we may not make a distribution if the distribution would cause our liabilities to exceed the fair value of our assets.
• We may lack sufficient cash to pay distributions to our unitholders due to shortfalls in cash generated from operations attributable to a number of operational, commercial, or other factors as well as increases in our operating or general and administrative expenses, principal and interest payments on our outstanding debt, working-capital requirements, and anticipated cash needs.
We expect to continue to distribute a substantial majority of our cash from operations to our unitholders on a quarterly basis, after, among other things, the establishment of cash reserves. To fund our growth, we may eventually need capital in excess of the amounts we may retain in our business or borrow under our Credit Facility. To the extent efforts to access capital externally are unsuccessful, our ability to grow could be significantly impaired.
Any distributions paid on our common units with respect to a quarter will be paid within 60 days after the end of such quarter.
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Subordinated Units
The limited partners of BSM’s Predecessor acquired all of our subordinated units in connection with our IPO. The subordination period under the partnership agreement ended on the first business day after we earned and paid an aggregate amount of at least $1.35 (the annualized minimum quarterly distribution applicable for quarterly periods ending March 31, 2019 and thereafter) multiplied by the total number of outstanding common and subordinated units for a period of four consecutive, non-overlapping quarters ending on or after March 31, 2019, and there were no outstanding arrearages on our common units. This test was met upon the payment of the distribution for the first quarter of 2019. Accordingly, 96,328,836 subordinated units converted into 96,328,836 common units on May 24, 2019 and common units are no longer entitled to arrearages.
Series A Redeemable Preferred Units
Until March 31, 2018, the holders of our outstanding Series A redeemable preferred units had the option to elect to have us redeem, effective as of December 31, 2017, their Series A redeemable preferred units at face value, plus any accrued and unpaid distributions. All Series A redeemable preferred units not redeemed by March 31, 2018 automatically converted to common and subordinated units effective as of January 1, 2018 or as soon as practicable thereafter. Therefore, there are currently no Series A redeemable preferred units outstanding.
Series B Cumulative Convertible Preferred Units
The holders of our Series B cumulative convertible preferred units receive cumulative quarterly distributions in an amount equal to 7.0% of the face amount of the preferred units per annum (the “Distribution Rate”), provided that the Distribution Rate will be adjusted as follows: commencing on the sixth anniversary of November 28, 2017 and readjusting every two years thereafter (each, a “Readjustment Date”), the rate will equal the greater of (i) the Distribution Rate in effect immediately prior to the relevant Readjustment Date and (ii) the 10-year Treasury Rate as of such Readjustment Date plus 5.5% per annum; provided, however, that for any quarter in which quarterly distributions are accrued but unpaid, the then-Distribution Rate shall be increased by 2.0% per annum for such quarter. We cannot pay any distributions on any junior securities, including any of our common units, prior to paying the quarterly distribution payable to the preferred units, including any previously accrued and unpaid distributions.
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ITEM 6. SELECTED FINANCIAL DATA
The financial information below should be read in conjunction with “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report.
At December 31,
2020 2019 2018 2017 2016
(in thousands, except per unit amounts)
Total revenue $ 342,751 $ 487,821 $ 609,568 $ 429,659 $ 260,833
Net income (loss) 121,819 214,368 295,560 157,153 20,188
Net income (loss) attributable to the general partner and common units and subordinated units 100,819 193,368 274,511 152,145 14,437
Net income (loss) attributable to limited partners per common and subordinated unit (basic) 1
Per common unit (basic) $ 0.49 $ 1.01 $ 1.46 $ 1.01 $ 0.26
Per subordinated unit (basic) — 0.64 1.25 0.56 (0.11)
Net income (loss) attributable to limited partners per common and subordinated unit (diluted) 1
Per common unit (diluted) $ 0.49 $ 1.01 $ 1.45 $ 1.01 $ 0.26
Per subordinated unit (diluted) — 0.64 1.25 0.56 (0.11)
Cash distributions declared per common and subordinated unit
Per common unit $ 0.68 $ 1.48 $ 1.33 $ 1.20 $ 1.10
Per subordinated unit — 0.74 1.13 0.79 0.74
Total assets 2
$ 1,243,978 $ 1,545,208 $ 1,750,124 $ 1,576,451 $ 1,128,827
Long-term debt 121,000 394,000 410,000 388,000 316,000
Total mezzanine equity 298,361 298,361 298,361 322,422 54,015
1 See Note 13 – Earnings Per Unit in the consolidated financial statements included elsewhere in this Annual Report.
2 We recorded noncash impairments of oil and natural gas properties in the amounts of $51.0 million and $6.8 million for the years ended December 31, 2020 and 2016, respectively. We did not have impairments of oil and natural gas properties for the years ended 2019, 2018, and 2017.
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