Black Stone (BSM) Q1 2025 Earnings Transcript

Image source: The Motley Fool.

Date

Tuesday, May 6, 2025 at 10:00 a.m. ET

Call participants

• Senior Vice President, Chief Financial Officer and Treasurer — Taylor DeWalch
• Senior Vice President, Chief Commercial Officer — Carrie Clark
• Senior Vice President and General Counsel — Steve Putman
• Senior Vice President, Corporate Development — Fowler Carter

Need a quote from a Motley Fool analyst? Email pr@fool.com

Takeaways

• Quarterly distribution -- $0.375 per unit was maintained, resulting in $1.50 annualized, despite commodity price volatility.
• Mineral and royalty production -- 34,200 BOE per day for the period, with total production of 35,500 BOE per day, both steady compared to the prior quarter.
• Net income -- $15.9 million was reported.
• Adjusted EBITDA -- $82.2 million for the quarter.
• Distributable cash flow -- $73.7 million with 0.93 times coverage, attributed to a seismic license purchase.
• Shelby Trough drilling activity -- Aethon operated 3 rigs, turning to sales 11 gross wells to date in 2025, and is on track for another 17 by year-end.
• EXCO operations -- Ran 1 rig and drilled 2 high-interest wells on Shelby Trough acreage during the quarter.
• Louisiana Haynesville accelerated drilling agreements -- 2 incremental high-interest wells turned to sales in March, totaling 4 ADA wells in the region.
• Permian Basin development -- Over 35 gross wells in development in Culberson County, with 24 spud and 9 gross wells expected to turn to sales in the fourth quarter of 2025.
• Acquisition activity -- Over $160 million in mineral acquisitions since September 2023, focused on the Shelby Trough, continuing the company's gas-weighted strategy.

Summary

Black Stone Minerals (NYSE:BSM) demonstrated consistent operational metrics with production and distribution levels maintained steady amid shifting commodity markets. Management cited confidence in ongoing development activity in key regions, underpinned by accelerated drilling agreements and acquisition momentum in strategic natural gas assets. The call outlined plans to continue engaging in countercyclical acquisition opportunities if they align with portfolio strategy and market conditions, while tracking progress on large development projects in both the Shelby Trough and the Permian Basin.

• Management emphasized the near-term benefit of development activity on high-interest acreage for both oil and gas regions.
• The company highlighted its ongoing monitoring of commodity pricing trends and operational activity to inform future distribution policy.
• DeWalch stated, "we continue to look across the market as it makes sense and as it fits our strategy and our portfolio," indicating a selective approach to further acquisition activity.

Industry glossary

• BOE: Barrels of oil equivalent, combining oil, natural gas, and condensate volumes on an energy-equivalent basis.
• ADA wells: Accelerated Drilling Agreement wells, where partners commit to expedite well development in exchange for a reduced royalty rate.
• Shelby Trough: A high-potential East Texas natural gas production region central to Black Stone Minerals’ current development.

Full Conference Call Transcript

Mark Meaux: Thank you, operator. Good morning to everyone. Thank you for joining us either by phone or online for Black Stone Minerals' first quarter 2025 earnings conference call. Today's call is being recorded and will be available on our website along with the earnings release, which was issued last night. Before we start, I'd like to advise you that we will be making forward-looking statements during this call about our plans, expectations, and assumptions regarding our future performance. These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward-looking statements.

For a discussion of these risks, you should refer to the cautionary information about forward-looking statements in our press release from yesterday and the Risk Factors section of our 2024 10-K. We may refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliation of these measures to the most directly comparable GAAP measure and other information about these non-GAAP metrics are described in our earnings press release from yesterday, which can be found on our website at www.blackstoneminerals.com.

Joining me on the call from the company are Taylor DeWalch, Senior Vice President, Chief Financial Officer and Treasurer; Carrie Clark, Senior Vice President, Chief Commercial Officer; Steve Putman, Senior Vice President and General Counsel; and Fowler Carter, Senior Vice President, Corporate Development. I'll now turn the call over to Taylor.

Taylor DeWalch: Thanks, Mark. Good morning to everyone on the call, and thank you for joining us today to discuss our first quarter 2025 results. Tom wishes he could join us this morning, but due to a prior family commitment, he's not able to be on the call today. We had another solid quarter, and we'll be maintaining our quarterly distribution of $0.375 per unit despite the recent volatility in commodity prices and shifting global market dynamics. We continue to closely monitor activity levels across all of our assets, and we are encouraged by the strength in natural gas prices to drive additional near-term gas-weighted activity.

As mentioned in the press release, we also expect to continue to benefit from near-term development activity and production on certain high interest acreage in both oil and gas regions. Mineral and royalty production was 34,200 BOE per day in the first quarter and total production volumes were 35,500 BOE per day, both of which are about in line with the previous quarter. Net income was $15.9 million for the first quarter with adjusted EBITDA of $82.2 million. As mentioned, we maintained our distribution for the quarter and $1.50 on an annualized basis. Distributable cash flow for the quarter was $73.7 million, which represents 0.93 times coverage for the quarter.

The slightly lower level of coverage was largely driven by a seismic license purchase that complements our robust subsurface evaluation of the expanded Shelby Trough area. Overall, given our strong financial position, asset outlook and the unique nature of the seismic purchase, the Board approved maintaining our quarterly distribution for the quarter. However, we are always closely monitoring the commodity environment and activity trends across our portfolio and the near-term implications these trends imply for our business. In East Texas, we continue to work with multiple operators to promote development on our Shelby Trough acreage.

Currently, Aethon is operating 3 rigs on the company's acreage and has already turned to sales 11 gross wells in 2025, with another 17 expected for the remainder of the year. EXCO has also been active on the Shelby Trough acreage during the quarter, running 1 rig and drilling 2 high interest wells. In addition, BSM continues to benefit from the accelerated drilling agreements in the Louisiana Haynesville with 2 incremental high-interest wells turned to sales in March. This brings the total ADA wells in Louisiana Haynesville to 4, while we continue to monitor the other wells in progress.

As a reminder, under these agreements, the operators will provide near-term certainty and accelerated development of BSM's high interest areas in exchange for a slightly reduced royalty burden. In our Permian position, we continue tracking activity across our acreage, including the previously mentioned large development in Culberson County. This development includes more than 35 gross wells on BSM acreage. Notably, 24 of these wells have been spud to date, and we anticipate 9 gross wells to turn to sales in the fourth quarter of 2025. We also continue to monitor several incremental large-scale development projects across our Permian portfolio.

Again, we had a solid quarter and remain confident in the long-term strategy and outlook across our assets and our ability to generate long-term value for our shareholders. With that, I would like to open the call for questions.

Operator: Thank you.[Operator Instructions] And your first question comes from the line of John Annis with Texas Capital. Your line is open.

John Annis: Good morning all and thanks for taking my questions. For my first one, building off of your prepared remarks, I wanted to ask if you could share what you are seeing in terms of activity in the Haynesville, just given the rerate in natural gas prices. And then as it relates to Aethon, could you give a sense of any visibility you have into their cadence of completing the remaining 17 gross wells in 2025?

Taylor DeWalch: Hi, John, this is Taylor. I appreciate the questions. Yes, I think when we look at the Haynesville activity; we're certainly encouraged by the continued strength in natural gas prices and looking forward to continued increase in activity levels across the basin when we specifically look at some of the high interest development that we've called out. We continue to be encouraged that the majority of those are going to continue to happen this year.

And I think speaking specifically to Aethon and your second question, we continue to track on schedule with our completions for those 17 wells throughout the remainder of this year, and just look forward to the ongoing development, both from Aethon and other operators in that area.

John Annis: Terrific color. For my follow-up, shifting over to acquisition activity. You have been active in acquiring over $160 million in minerals since September 2023, as you guys have noted, and continue to target the Shelby Trough, my question is, how do you view the current opportunity set? And does the decrease in oil prices make acquisitions in oilier basins potentially an attractive countercyclical opportunity, or do you continue to focus on the Shelby Trough?

Taylor DeWalch: Thanks. That's a good question. We've been, as you mentioned, very active in our acquisitions and really see a lot of opportunity for long-term growth that ties into just long-term natural gas strategy, especially with our beneficial location of those acquisitions and their proximity to the Gulf Coast in that demand center. I think as we look at our ongoing acquisition strategy, we continue to look across the market as it makes sense and as it fits our strategy and our portfolio, so there may be opportunities that we will continue to evaluate and look at but as of right now, and as we have been historically looking over the last couple of years, certainly focused in one area.

John Annis: That’s it for me. I appreciate the time.

Taylor DeWalch: Thanks, John.

Operator: [Operator Instructions] And that concludes our question-and-answer session. I'll hand the call back over to Taylor for any closing remarks.

Taylor DeWalch: Thank you, operator, and thank you all for calling in to our call this morning, and we look forward to talking again next quarter.

Operator: This concludes today's conference call. Thank you all for joining, and you may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.