Black Stone Minerals, L.P. (BSM) - Q3 2024 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended September 30, 2024. 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, focusing on maximizing value from its non-cost-bearing asset base, which includes approximately 68,000 producing wells.
Key Financial Metrics
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Total Revenue | $134.9M | $109.8M | $350.0M | $401.4M |
| Net Income (Common Units) | $85.4M | $56.8M | $202.9M | $259.2M |
| Net Income Per Unit (Diluted) | $0.41 | $0.27 | $0.96 | $1.22 |
| Adjusted EBITDA | $86.4M | $130.0M | $290.8M | $349.2M |
| Distributable Cash Flow | $78.6M | $124.4M | $267.5M | $332.1M |
| Cash from Operations (9M) | $298.1M | $387.1M | - | - |
| Cash and Equivalents | $21.0M | $70.3M (Dec 2023) | - | - |
| Debt Outstanding | $0 | $0 | - | - |
| Available Credit Facility | $375.0M | $375.0M | - | - |
Material Changes vs. Prior Period
- Revenue Volatility: Q3 2024 total revenue increased 22.8% year-over-year, driven primarily by a $31.7M gain on commodity derivative instruments compared to a $26.9M loss in Q3 2023. This gain offset a 24.5% decline in revenue from contracts with customers due to lower production volumes and realized prices.
- Production Decline: Q3 2024 production decreased 12.4% to 3,437 MBoe (37.4 MBoe/day) compared to Q3 2023. Oil volumes dropped 19.9% and natural gas volumes dropped 9.5%, attributed to reduced mineral and royalty production in the Permian Basin and Haynesville/Bossier play.
- 9M Revenue Decline: For the nine months ended September 30, 2024, total revenue decreased 12.8% to $350.0M. This was due to a reduced gain on derivatives ($14.8M vs. $36.7M in 2023) and lower natural gas sales, partially offset by slightly higher oil sales.
- Acquisitions: The company spent $64.2M on cash acquisitions of unproved properties in the Gulf Coast region during the first nine months of 2024, compared to minimal acquisition activity in the prior year.
Outlook, Commentary, and Risks
- Hedging Strategy: As of September 30, 2024, BSM had hedged 75% of available oil volumes for 2024 and 71% for 2025. Natural gas hedges covered 77% of 2024 volumes and 79% of 2025 volumes. Open contracts consist of fixed-price swaps.
- Shelby Trough Development: In September 2024, BSM amended Joint Exploration Agreements (JEAs) with Aethon Energy in San Augustine and Angelina counties. The agreements extended program years by nine months and withdrew time-out provisions. Aethon released rights to 25,000 acres.
- Liquidity and Distributions: The company maintains a $1.0B credit facility with a borrowing base of $580.0M and elected commitments of $375.0M. There is no outstanding debt. The Board approved a distribution of $0.375 per common unit for Q3 2024, payable November 15, 2024.
- Risk Factors: Key risks include volatility in oil and natural gas prices, reliance on third-party operators for drilling activity (particularly in the Shelby Trough), and the ability to replace reserves. The company notes that natural gas prices remain volatile due to storage levels and geopolitical factors.
Investor Verification Checklist
- Derivative Impact: Verify the sustainability of Q3 earnings, which were significantly boosted by a $31.7M derivative gain compared to a prior-year loss.
- Production Trends: Monitor the 12.4% quarterly production decline and the specific impact of reduced activity in the Permian and Haynesville/Bossier plays.
- Operator Commitments: Review the status of Aethon Energy's drilling commitments under the amended JEAs in East Texas to ensure future development aligns with revised schedules.
- Capital Allocation: Assess the $64.2M in recent acquisitions and the $150M share repurchase program (no repurchases made in 9M 2024) against cash flow generation.
- Preferred Unit Obligations: Note the 9.8% distribution rate on Series B preferred units, which must be paid before common unit distributions.