Black Stone Minerals, L.P. (BSM) Earnings

Management highlights

- Overall Strategic Progress & Value Creation * Management confirmed meaningful Q2 2026 progress executing the firm's differentiated diversified strategy, with 2026 marked as an important inflection point for long-term production and value growth. * A 7% quarterly distribution increase was announced, reflecting business strength and a commitment to delivering sustainable returns to unit holders. * Net distribution coverage hit 1.18x for the quarter, maintaining a balance between reinvestment for growth and sustainable distribution increases. - Acquisitions and Active Portfolio Management * Completed approximately $40 million in mineral and royalty acquisitions during Q2 2026; total deployed capital for the acquisition program launched three years ago is nearly $300 million, focused on acreage in or adjacent to core development areas. * Leasing activity generated ~$13 million in lease bonus and other income in H1 2026, far exceeding start-of-year expectations. * A review of free lease provisions launched in late 2025 has generated ~$6.5 million in refunds to date, highlighting the value of active portfolio management. - Core Development Activity (Shelby Trough and Haynesville Expansion) * Atomos Energy operated two rigs on Blackstone acreage at quarter end, turned four wells to sales in July 2026, with 8 more wells expected online by end-2026 and 17 wells planned for the new program year starting July 2026. * Revenant continued its development program and split two additional wells, despite a reduction in its first-year drilling commitment following a previously disclosed well control incident. * Catarus has begun operations with a pilot well underway in Cherokee County, and expects to start full development drilling in H2 2026. * Active rig counts on Blackstone's Haynesville/Shelby Trough acreage increased significantly during the quarter, with strong industry interest in the play driven by dwindling inventory in the legacy Haynesville and proximity to Gulf Coast demand centers. * Recent successful drilling results confirm the subsurface connection between the Shelby Trough and Western Haynesville, reinforcing the long-term development potential of the expansion acreage. - Broader Portfolio Activity * Blue Arrow is advancing development in the Southern Delaware Basin: three wells were turned to sales in Q2, with the remaining 22 wells in the program expected online between H2 2026 and end-2027. * Permian and Bakken acreage delivered strong contributions in Q2, benefiting from solid production and higher oil prices, with increased leasing activity in additional plays including the Woodford Barnett generating near-term leasing revenue and long-term upside.

Guidance

Management did not release formal full-year 2026 or quarterly quantitative guidance in the call, but provided the following qualitative forward-looking outlooks: * 8 additional wells from Atomos Energy's program are expected to come online during the remainder of 2026, with 17 wells planned for the 12-month program starting July 2026. * Catarus expects to commence full development drilling on its acreage in the second half of 2026. * All 22 remaining wells in Blue Arrow's Southern Delaware Basin program are expected to come online between the second half of 2026 and the end of 2027. * Management reaffirmed confidence in the medium- to long-term trajectory of growing production, cash flow, distributions, and value creation for unit holders, driven by increasing activity across core Haynesville/Shelby Trough acreage.

Segment performance

Blackstone Minerals reports total production averaged 33.5 MBE per day for Q2 2026, down from Q1 2026 primarily due to lower natural gas mineral royalty volumes in the Haynesville. Mineral and royalty production alone averaged 32.5 MBE per day. Average realized price (excluding derivative impacts) increased 7% quarter-over-quarter to $37.82 per BOE, supported by strong oil pricing. Oil and condensate accounted for 65% of total oil and gas revenues. Net income for the quarter was approximately $106 million, adjusted EBITDA totaled $91 million, and distributable cash flow reached $80 million. No separate financial performance metrics are reported for individual product/geographic segments in the provided transcript.

Risks & headwinds

* Production volatility is inherent to the business, as well comes online at staggered timelines throughout the year, leading to lumpiness in quarterly production results. Q2 2026 production declined from Q1 2026 driven by this timing dynamic and lower Haynesville gas volumes. * Revenant reduced its first-year drilling commitment following a previously disclosed well control incident, which slowed near-term development activity from that operator. * Leverage has increased from zero in 2024 to just over 0.5x, with $300 million in preferred shares outstanding that will enter their redemption window in just over a year, requiring future capital allocation decisions.

Analyst Q&A

• Q: What is driving management confidence to raise the distribution, after a long period of maintaining a fixed payout, and is this driven by oil volume visibility, expected gas ramp, or another factor? /

  A: Management confirmed confidence stems from a combination of two key factors: strong year-to-date results from the company's oil-weighted assets, and clear visibility of the coming production ramp from contracted development programs in the Haynesville/Shelby Trough. The company only increases distributions when it has confidence it can sustain the higher payout long-term, which it holds at the current time.

• Q: Can you provide an update on new Haynesville development agreements with additional operators, now that Atomos, Revenant, and Catarus are at steady state? /

  A: The company is actively marketing additional Shelby Trough acreage to build on the success of existing operator partnerships, and marketing progress has been very strong. Management expects to be able to formally announce a new agreement with another Haynesville operator in the near future.

• Q: How is management thinking about long-term capital structure, particularly ahead of the preferred share redemption window opening in just over a year, given that leverage has risen from zero in 2024 to ~0.5x today? /

  A: Management notes the company still maintains peer-leading leverage, aligned with its desired long-term capital position. The company has prioritized deploying recent debt capacity to advance bolt-on acquisitions and core development activity in the Shelby Trough, which will remain the near-term capital allocation priority. As the preferred redemption window approaches next year, the company will evaluate all options to determine the best path for the capital structure.

• Q: What is driving the recent sharp increase in rig activity in the three-county Shelby Trough area (now ~19 rigs) despite relatively soft natural gas prices, and how much of this activity is acreage delineation for future development commitments? /

  A: The increase is driven by two factors: operators are achieving solid returns in the current price environment, and operators are working to meet existing delineation requirements under current development contracts with Blackstone. More broadly, legacy Haynesville drilling inventory is dwindling, so the entire industry is shifting activity toward the Shelby Trough expansion area. Blackstone's acreage is well positioned to capture growing demand for natural gas from Gulf Coast industrial and power markets, and management expects this activity trend to continue for years.