BSM

Black Stone Minerals, L.P. (BSM) - 10-Q Summary

Business Context and Reporting Period

This filing covers the quarterly period ended June 30, 2026. Black Stone Minerals, L.P. is a publicly traded Delaware limited partnership owning oil and natural gas mineral and royalty interests across 41 U.S. states. The company operates in a single segment, generating revenue from hydrocarbon sales and lease bonuses. As of July 31, 2026, there were 212.7 million common units and 14.7 million Series B cumulative convertible preferred units outstanding.

Key Financial Metrics (Six Months Ended June 30, 2026)

Material Changes vs. Prior Period

• Revenue: Total revenue decreased 4.8% to $208.3 million compared to $218.7 million in the prior year period. This decline was driven by a $34.5 million increase in net losses on commodity derivative instruments, partially offset by a 22.1% increase in oil and condensate sales due to higher realized prices ($78.44/Bbl vs. $67.07/Bbl) and volumes.
• Net Income: Net income decreased 12.0% to $119.6 million, primarily due to the derivative losses and higher interest expense ($7.2 million vs. $3.7 million) resulting from increased average borrowings.
• Expenses: Exploration expense increased 37.8% to $9.5 million due to seismic data acquisition costs. General and administrative expenses rose 13.1% to $32.9 million due to higher personnel and equity-based compensation costs.
• Production: Total production equivalents increased slightly by 0.6% to 6,381 MBoe, driven by a 4.4% increase in oil volumes, while natural gas volumes remained relatively flat.

Outlook, Commentary, and Risks

• Development Activity: The company continues to execute development agreements in the Shelby Trough. Adamas Energy is on track with its drilling program, and Revenant Energy amended its agreement to convert future commitments to lateral-foot targets. Caturus Energy began drilling pilot wells in the Shelby Trough.
• Acquisitions: The company acquired $48.7 million in mineral and royalty interests in the first half of 2026, primarily in East Texas, funded by cash and equity issuance.
• Hedging: As of June 30, 2026, the company held fixed-price swap contracts for oil (weighted average ~$64.39/Bbl for 2026) and natural gas (weighted average ~$3.73/MMBtu for 2026). The company does not hedge for speculative purposes.
• Liquidity: The company maintains a $1.0 billion credit facility with a borrowing base of $580.0 million. It is in compliance with all financial covenants, including a maximum debt-to-EBITDAX ratio of 3.5:1.0.
• Distributions: The Board approved a distribution of $0.32 per common unit for the second quarter, payable in August 2026. Series B preferred unit distributions remain at a 9.8% annual rate.
• Risks: Key risks include volatility in oil and natural gas prices, reliance on third-party operators for drilling activity, and potential changes in commodity derivative fair values. Geopolitical events, such as the conflict in Iran, have impacted global supply chains and price volatility.

Investor Verification Checklist

• Derivative Impact: Verify the sensitivity of future earnings to commodity price changes given the significant unrealized losses recognized in the first half of 2026.
• Operator Performance: Monitor the drilling progress and well turn-to-sales timelines of key operators (Adamas, Revenant, Caturus) in the Shelby Trough to ensure development commitments are met.
• Debt Covenants: Confirm continued compliance with the Credit Facility covenants, specifically the debt-to-EBITDAX ratio, as interest rates and commodity prices fluctuate.
• Preferred Unit Redemption: Note that the next redemption window for Series B preferred units opens November 28, 2027, following an agreement to defer redemption until that date.
• Acquisition Integration: Assess the accretive nature of the $48.7 million in acquisitions made in the first half of 2026 relative to current production volumes.