Black Stone Minerals, L.P. Q3 FY2026 earnings call

• Production Growth: Q3 saw growth in both oil and natural gas production. Mineral and royalty production increased 6% sequentially, driven by higher natural gas volumes from the Hainesville-Bossier play and higher oil volumes from the Permian Basin.
• Shelby Trough Strategy: Advanced the Shelby Trough strategy through the amendment and expansion of the Catalyst Agreement, bringing a broader portion of the position into a contracted development program. This moves the company closer to realizing the production potential of its mineral inventory.
• Development Agreements: Total area covered by Catalyst, Atomos, and Revenant agreements is approximately 1.4 million gross acres. Additional activity includes Atomos bringing wells online, Revenant’s first production expected by year-end, and Catalyst spudding its first two development wells with production expected in H1 2017.
• Portfolio Management: Actively managing the portfolio across the lower 48 through current leasing while promoting growth via development agreements. The company has approximately 50,000 gross acres under traditional leases in the Shelby Trough and continues to explore significant unleased positions.
• Financial Discipline: Maintained prudent distribution coverage at 1.25x despite raising the distribution for the second consecutive quarter, balancing investment in growth with financial flexibility.

The transcript does not provide a breakdown of financial performance by specific product segments (e.g., oil vs. natural gas) in terms of absolute revenue figures or percentage contribution to total revenue. It notes that mineral and royalty production averaged 34.5 MB per day, with oil and condensate accounting for nearly two-thirds of oil and gas revenues.

• Distribution: Raised the quarterly distribution to 35 cents per unit (annualized $1.40) for the second consecutive quarter, citing strong cash flow and maintained coverage ratios.
• Production Outlook: Expects steady ramp-up in natural gas production into next year as Adamas, Revenant, and Catalyst wells come online. Anticipates continued growth in oil volumes from high-interest developments like Blue Arrow.
• Long-term Growth: Focus on executing existing agreements to drive higher production and support distribution growth over time. Believes the combination of development programs and broader portfolio opportunities provides a strong foundation for growing returns.

• Commodity Price Sensitivity: Operator activity and CapEx budgets are price-sensitive; declines in commodity prices could impact drilling pace, particularly in the Permian and Bakken basins.
• Takeaway Capacity: While management believes midstream projects (e.g., Williams/Momentum deal) will alleviate constraints, there is an inherent risk that takeaway capacity services could limit the pace of development if infrastructure lags behind volume growth.
• Execution Risk: Success depends on the timely completion of acquisition programs and the successful ramp-up of multiple parallel development agreements (Catalyst, Atomos, Revenant).

Q: What drove the sequential production growth, and how should investors view volume trends given upcoming well completions? / A: CFO Chris Bonner attributed growth to higher natural gas volumes in Hainesville-Bossier and oil in the Permian. He noted a steady ramp in gas production as Adamas, Revenant, and Catalyst wells come online, while encouraging oil growth from Blue Arrow and broader operator activity, though noting some price sensitivity in other basins.

Q: Regarding the expanded Catalyst Agreement, what data justified the 730,000-acre expansion, and is resource capture complete? / A: Co-CEO Fowler Carter stated that extensive subsurface data from pilot wells gave confidence in the expansion but declined to comment further on specific well results. Co-CEO Taylor DeWalch added that the company is more than halfway through its acquisition program and continues to bolt on assets to achieve scale necessary to incentivize operators, indicating no immediate end to acquisitions.

Q: Are there concerns regarding takeaway capacity constraints limiting development pace in the Shelby Trough? / A: Co-CEO Taylor DeWalch addressed this by highlighting ongoing midstream infrastructure projects, specifically mentioning the Williams and Momentum deal. He expressed confidence that capital injection into these pipelines towards LNG export centers would prevent large-scale takeaway constraints as supply curves increase.

Q: How does the company plan to fund incremental acquisitions given it is over half-drawn on credit facilities? / A: Taylor DeWalch emphasized maintaining a clean balance sheet and utilizing the current elevated oil price cycle to strengthen the business. CFO Chris Bonner confirmed that the existing credit facility is sufficient to meet needs for the remainder of the acquisition program, suggesting no immediate need for additional debt or equity financing.