Falcon Minerals - Steeply Discounted Eagle Ford Yield Player

Seeking AlphaLong Ideas | Basic MaterialsFalcon Minerals - Steeply Discounted Eagle Ford Yield PlayerNov. 20, 2020 3:29 PM ET|| About: Falcon Minerals Corporation (FLMN), Includes: COPby: Steve ZachritzSteve Zachritz Growth, long-term horizon, Commodities, Oil & GasZ4 Energy Research.cls-1{fill:#024999;}SummaryFalcon reported an essentially in line third quarter and more than doubled the distribution from second quarter levels.
Management essentially blessed the upper end of our production thoughts for 2021 and has greater visibility on volumes than in prior quarters.
The name trades with a significant implied forward yield based upon our number at even $30 oil next year. Our $40 base case implies a 15% yield.
This is a Z4 Research post quarter update on Falcon Minerals (Nasdaq: FLMN). The shares were largely abandoned, as we had previous written, as oil prices plunged with the OPEC+ slow reaction to the demand impact of Covid-19. As a reminder, they are an Eagle Ford minerals player on good acreage with strong operators. As a minerals name they have no capital budget and lease operating expense.
Falcon reported 3Q20 results that were ahead on volumes and essentially in line for EBITDA and they more than doubled the distribution vs 2Q levels. In brief the quarterly numbers were decent:
Production was 4.471 MBOEpd (48% oil) vs 4.35 MBOEpd (51% oil) expected. For reference 2Q20 levels were 4.45 MBOEpd (51% oil) Revenue of $9.9 mm vs $10.0 mm expected as stronger volumes almost offset the gassier volume mix. Realized oil price of 98% of Nymex average for the quarter. Operating costs remain in good territory largely as expected. EBITDA of $6.5 mm came in just shy of the $7.0 mm expected but they were able to boost the quarterly distribution from $0.03 in 2Q20 to $0.065 this quarter. Current and Expected Activity: There were two rigs active on their acreage during 3Q20 and they have 3.13 net wells in active development (what they refer to as Line of Site... Read more

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