BSM — Black Stone Minerals, L.P.

Summary of Black Stone Minerals Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $72.2 million for Q4 2025.
• Adjusted EBITDA: $76.7 million, with updates to exclude seismic acquisition costs.
• Production:
  • Mineral and royalty production was 30,900 BOE per day, down 11% from the prior quarter.
  • Total production for Q4 was 32,100 BOE per day.
• Distribution: Declared a distribution of $0.30 per unit for the quarter, equating to $1.20 annualized.
• Distributable Cash Flow: $66.8 million, representing a coverage ratio of 1.05x.

2. Strategic Updates and Business Highlights

• Development Agreements: Signed agreements with Revenant Energy and Caturus Energy to develop approximately 500,000 gross acres, with commitments for up to 37 gross wells per year by 2031.
• New Wells: Aethon has brought new wells online in the Shelby Trough, contributing 25-30 MMcf per day, with more wells expected in 2026.
• Seismic Surveys: Initiating two substantial 3D seismic surveys covering 360,000 gross acres to enhance subsurface evaluation and accelerate development.
• Acquisition Program: Invested about $240 million since 2023 to acquire mineral and royalty acreage, focusing on the Shelby Trough and Haynesville expansion areas.

3. Forward Guidance and Outlook

• Production Growth: Expecting production to increase materially throughout 2026, starting at approximately 32,000 BOE per day.
• Long-Term Optimism: Anticipating significant increases in natural gas production and distributions due to strong demand from LNG and electric power generation.
• Strategic Focus: Continued emphasis on disciplined capital management and proactive asset management to support growth.

4. Bad News, Challenges, or Points of Concern

• Production Decline: Notable decrease in production from Q3 to Q4, attributed to lower natural gas directed drilling activity.
• Market Conditions: The Henry Hub price is projected to remain below $3.50 for much of the year, raising concerns about sustaining distributions without leaning on liquidity.
• Seismic Costs: Significant expenses related to seismic surveys, which are atypical for the company, may impact short-term financial metrics.

5. Notable Q&A Insights

• Production Cadence: Management indicated that production is expected to step up progressively throughout 2026, with new wells coming online early in the year.
• Development Pipeline: The company is open to both new and existing operators for potential development agreements, indicating a diverse approach to partnerships.
• Permian Activity: While there is excitement about developments in the Permian, management is cautious about forecasting broader volumes due to current pricing dynamics.
• Funding Distributions: Confidence expressed in the ability to fund distributions through cash flow without relying heavily on liquidity, supported by strong hedges in place for natural gas.

Overall, Black Stone Minerals reported a solid performance in 2025 with strategic initiatives aimed at future growth, despite facing production declines and market challenges. The outlook for 2026 appears positive, with expectations for increased activity and production.