Business context and reporting period
Black Stone Minerals, L.P. (NYSE: BSM) filed its Form 10-K for the fiscal year ended December 31, 2023. It owns and manages oil and natural gas mineral and royalty interests across 41 states, alongside non-operated working interests. Its business is substantially dependent on third-party operators; most mineral and royalty interests are non-cost-bearing. The filing reports annual results, not a separate fourth-quarter income statement, so Q4 financial values are not provided clearly in the supplied text.
Key financial and operating metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue, including derivative gains and losses | $592.2 million | $663.6 million |
| Revenue from customer contracts | $501.1 million | $784.3 million |
| Income from operations | $423.6 million | $482.5 million |
| Net income | $422.5 million | $476.5 million |
| Net income attributable to common units and general partner | $400.8 million | $455.5 million |
| Basic earnings per common unit | $1.91 | $2.18 |
| Adjusted EBITDA (non-GAAP) | $474.7 million | $466.4 million |
| Distributable cash flow (non-GAAP) | $451.2 million | $441.1 million |
| Cash flow from operations | $521.3 million | $425.0 million |
| Cash flow from investing activities | $(19.7) million | $(1.2) million |
| Cash flow from financing activities | $(435.5) million | $(428.3) million |
| Year-end cash and cash equivalents | $70.3 million | $4.3 million |
| Year-end credit-facility borrowings | None | $10.0 million |
Production averaged 39.8 thousand Boe/d, up 7.3%; total production was 14.532 million Boe. Realized oil prices declined 18.1% to $76.74/Bbl and natural gas prices declined 57.4% to $3.10/Mcf. Production costs and ad valorem taxes were $3.92/Boe versus $4.89/Boe. Operating margin, calculated as income from operations divided by total revenue, was approximately 71.5% versus 72.7%; net margin on the same revenue basis was approximately 71.4% versus 71.8%.
Common-unit distributions declared and paid totaled $1.90 per unit for 2023, up from $1.54 in 2022. The Board approved a further $0.475 per common unit for Q4 2023, payable February 23, 2024. Preferred-unit distributions have priority over common distributions; the Series B distribution rate rose from 7.0% to 9.8% effective November 28, 2023.
Material changes versus the prior comparable period
- Total revenue declined 10.8%, chiefly because lower realized commodity prices reduced oil and gas sales. Higher production and a favorable derivative result partly offset the decline.
- Oil and gas sales revenue fell to $488.6 million from $771.2 million. Production increased 7.2%, including higher Haynesville/Bossier gas volumes and Permian oil volumes.
- Derivative instruments produced a $91.1 million gain in 2023, compared with a $120.7 million loss in 2022. The 2023 result included $82.7 million of realized gains and $8.4 million of unrealized gains.
- Net income fell 11.3%, while Adjusted EBITDA rose 1.8% and distributable cash flow rose 2.3%. Operating cash flow increased, primarily reflecting improved net cash settlements on derivatives.
- Proved reserves were 64.474 million Boe, up 0.6%. Proved developed reserves were 88.6% of total reserves, down from 91.4%; PUD reserves increased to 7.373 million Boe.
- The standardized measure of discounted future net cash flows declined to $1.020 billion from $1.665 billion, largely reflecting lower reserve pricing assumptions and price-related changes.
Outlook, risks and unusual items
- No formal consolidated earnings or distribution guidance is provided. The 2024 budget for non-operated working-interest capital expenditures is approximately $2.3 million, primarily for workovers and recompletions. The 2023 mineral and royalty acquisitions totaled $14.6 million; management describes continued targeted acquisitions as part of its strategy.
- Aethon invoked contractual “time-out” provisions in December 2023, temporarily suspending certain drilling obligations in Angelina and San Augustine counties for up to nine consecutive months, subject to contractual limits. BSM said it did not expect material changes to wells already underway and was assessing longer-term effects. Shelby Trough concentration is a material exposure.
- Commodity prices, operator drilling decisions and financing, production declines, transportation capacity, reserve-estimate uncertainty, and environmental and regulatory developments could affect production, cash flow and distributions. The filing notes uncertainty around the 2024 pause in approvals for certain LNG export facilities and its potential effect on export growth and gas demand.
- The revolving credit facility matures October 31, 2027. Its October 2023 borrowing base was $580 million, elected commitments were $375 million, and no borrowings were outstanding at year-end. BSM reported covenant compliance; the next borrowing-base redetermination was scheduled for April 2024. Distribution restrictions and covenant tests apply.
- The Board authorized a $150 million unit repurchase program in October 2023; no units were repurchased under it during 2023. The Series B preferred units carried $299.1 million on the balance sheet at year-end and have senior distribution rights.
- Management reported no impairment of proved or unproved oil and gas properties in 2023. The auditor issued unqualified opinions on the financial statements and internal control; its critical audit matters included reserve inputs used in depletion calculations and the revenue accrual estimate.
- Ordinary-course litigation was not expected to have a material adverse effect. The filing identifies environmental, climate, hydraulic-fracturing, cybersecurity, and partnership-tax risks; it reports no known cybersecurity event that had materially affected or was reasonably likely to materially affect the Partnership as of the report date.
Most important facts for investors to verify
- How Aethon’s drilling pause affects future activity, volumes and royalty revenue in the concentrated Shelby Trough acreage.
- Whether production growth and derivative coverage can offset lower commodity prices; review the hedge positions and their coverage against expected volumes.
- The sustainability of common distributions after preferred-unit priority payments, cash needs and any Board-set reserves; confirm the effect of the 9.8% preferred distribution rate.
- Liquidity and covenant headroom following the April 2024 borrowing-base redetermination, including available commitments and applicable distribution restrictions.
- The assumptions behind reserve estimates and the sharp decline in standardized-measure value, including commodity prices, development timing and operator plans.
- Execution and funding of the 2024 capital budget, targeted acquisitions and the $150 million repurchase authorization.