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Falcon Minerals - Still Discounted As Activity Begins To Recover

Mar. 04, 2021 1:42 AM ETSitio Royalties Corp. (STR)COP15 Comments
Steve Zachritz profile picture
Steve Zachritz


  • In line quarter.
  • Last quarter they "blessed" our upper end of range volumes for 2021; this quarter they called that number "conservative." We note the Street is at that "conservative" level too.
  • On our "current" upper end volumes, they are trading at a forward yield of 10 to 15%.
  • After the call, it's likely higher activity levels prompt upward estimate revisions including from us.

This is a Z4 Energy Research pre-conference call note.

Falcon Minerals (FLMN) is a small-cap Eagle Ford minerals player. Their 4Q20 report was essentially in line with expectations and follows a previously announced increase in the quarterly dividend. Guidance provided in the quarterly release was better than the Street expected. We last wrote about this name for Seeking Alpha here in November 2020. First, a breakdown of the numbers:

The 4Q20 Numbers

  • Production was a little light but this OK given the small size of the company and the nature of their production which is essentially tiny bits from hundreds of wells.
  • EBITDA was in line after excluding $0.8 mm on a previously disclosed strategic review. We'd like to hear what happened here as two quarters ago this appeared to be front and center, last quarter it was given less focus and was "ongoing" and now it appears to be completed without mention of the alternative that were produced.
  • The 4Q20 dividend was previously disclosed at $0.075 implying an annualized yield of 7.1% as of last night's close of $4.23.


  • Line-of-Sight wells: These are wells that can be thought of as "work in progress"
    • 1.37 net permitted wells. We give less weight to this category than the next two as they've not spud yet and permitted wells can stay that way longer than some might expect.
    • 1.17 net waiting on completion. These are wells that have been drilled and cased and are likely on frac spread's calendar.
    • 0.52 net waiting on connection. These are wells that have been completed and will generally soon be tied to sales. These are generally a near term almost sure thing to contribute to production volumes.
    • Total: 3.06 net wells

For reference, last quarter they had 3.13 net wells in Line-of-Sight

This article was written by

Steve Zachritz profile picture
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Analyst’s Disclosure: I am/we are long FLMN, COP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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