Black Stone (BSM) Q1 2026 Earnings Transcript

Image source: The Motley Fool.

DATE

Tuesday, May 5, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• President — Taylor DeWalch
• Executive Vice President, Commercial — Fowler Carter
• Chief Financial Officer — Chris Bonner

TAKEAWAYS

• Mineral and Royalty Production -- 35.9 MBoe per day, representing a 16% increase from the prior quarter.
• Total Production -- 37.0 MBoe per day, with growth attributed to both Haynesville and Permian assets.
• Acquisitions -- $12 million in mineral and royalty acreage acquired in the Haynesville expansion program, bringing cumulative program investment to more than $250 million since 2023.
• Development Activity -- Adamas spud 4 wells, turned online 7 wells, and Revenant spud 2 wells during the quarter; the Congo wells in Southern San Augustine reached 30 MMcf per day in initial results.
• Active Rigs -- 13 rigs currently operating across core counties under multiple operators, indicating broad-based activity.
• Net Income -- $13.3 million reported for the quarter.
• Adjusted EBITDA -- $87 million for the period.
• Revenue Mix -- 54% of oil and gas revenue came from natural gas and natural gas liquids.
• Distributable Cash Flow -- $76.5 million, resulting in 1.2x distribution coverage.
• Quarterly Distribution -- $0.30 per unit declared, equivalent to $1.20 annualized.
• Guidance -- Production guidance for the year remains unchanged, with management reiterating expectations for year-over-year production growth.
• Commercial Initiatives -- Management is actively marketing an expansion project covering approximately 300,000 gross mineral acres in the Shelby Trough to Haynesville operators.
• Risk Management -- The company is actively managing its hedge position in response to commodity price volatility, including recent weather events and geopolitical pressures.

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

RISKS

• Fowler Carter said, "one of those wells experienced a loss of well control incident. We are assessing the potential impact on their first year development program."
• There is active investigation with no current resolution, and Carter noted, "there may be potential for not going back into that well."
• Management acknowledged that the incident "might be a bit of a speed bump," though over a two-year period, "you won't see any difference."

SUMMARY

Management described notable progress across multiple core assets, with heightened production driven by active operator programs in Haynesville and Shelby Trough. Portfolio expansion continued with both acreage acquisitions and ongoing marketing for further development agreements. Company representatives emphasized successful execution across commercial and financial fronts, while distribution coverage exceeded 1x. Substantial commodity price volatility affected quarterly realizations, spurring risk management actions. Exposure to key Gulf Coast demand centers remains central to the long-term commercial strategy, and infrastructure developments are tracking announced expansion goals.

• Management reported that "Operators under our development agreements in the Shelby Trough continued to advance multiple programs," with specific program details provided for Adamas, Caturus, and Revenant.
• Chris Bonner noted, "Natural gas pricing was impacted by extreme weather-driven swings, including Winter Storm Fern, which created regional pricing dislocations and temporarily pressured our realizations relative to Henry Hub."
• The commercial team confirmed that a Shelby Trough expansion project of roughly 300,000 gross mineral acres is currently being marketed for an additional development agreement to support future incremental production growth.
• Operator deployment includes Adamas, Apex, EXCO, and Rockliff, indicating a diversified portfolio of active development partners spanning multiple counties and plays.
• Management responded that the recent well incident is isolated in nature, noting the impacted area "is pretty well delineated from a subsurface standpoint" and is surrounded by ongoing operator development.

INDUSTRY GLOSSARY

• MBoe: One thousand barrels of oil equivalent, a unit of measure combining oil and gas volumes standardized by energy content.
• MMcf: One million cubic feet, a standard measure of natural gas volume.
• Shelby Trough: A geological sub-basin of the Haynesville formation, recognized for significant natural gas reserves.

Full Conference Call Transcript

Taylor DeWalch: Thanks, Natalie. Good morning, everybody, and thank you for joining us. As detailed in our earnings release last night, we delivered a strong first quarter, highlighted by higher production across our mineral position. Our performance was driven by increased natural gas activity in the Louisiana Haynesville and Shelby Trough, along with strong oil production in the Permian. Looking ahead, we view 2026 as a year of production growth compared to 2025 as development across our core areas continues to ramp, and we maintain our production guidance outlined in February. Our multiple development agreements in the Haynesville and Bossier expansion play are progressing well, and we remain positioned for meaningful production growth over time.

We are seeing continued delineation and also increased activity across the broader Shelby Trough, which reinforces confidence in our long-term inventory profile and growth outlook. This outlook is bolstered by our constructive view on the long-term natural gas backdrop. We are witnessing the industry react to the structural demand growth, which is supported by accelerating LNG export growth, increasing power demand, including data center-driven load growth and continued strength in U.S. industrial activity. These demand drivers continue to highlight the Gulf Coast as a key market for natural gas, where we maintain a significant acreage position and development agreements with direct proximity to premium demand centers.

Additionally, we continue to closely monitor the potential long-term implications of supply disruptions in the Middle East and how that could add incremental demand for secure U.S. molecules. We believe each of these drivers, coupled with premier natural gas assets in close proximity to the Gulf Coast and infrastructure projects to transport those molecules positions us well to benefit from the structural demand over time and provide significant value to our unitholders. With that, I'll turn it over to Fowler to walk through additional details on the commercial front.

Fowler Carter: Thanks, Taylor. Well, it was a great quarter, and we executed across our commercial initiatives, building on the momentum established last year, including continued activity under our Haynesville expansion acquisition program. During the quarter, we acquired an additional $12 million of mineral and royalty acreage. This brings total development -- excuse me, total deployment under the program since its inception in '23 to more than $250 million, further strengthening our positioning across the Haynesville and expanding Shelby Trough area. Operators under our development agreements in the Shelby Trough continued to advance multiple programs during the period. Adamas spud 4 wells during the quarter and turned online 7 wells.

This included the Congo wells in Southern San Augustine County, which continued to push the historical extent of the Shelby Trough and delivered strong initial results, reaching 30 MMcf per day. Additionally, Caturus is preparing for their initial activity to begin in June with a pilot hole and several commitment wells. Revenant also spud 2 wells during the quarter. And as mentioned in the press release last night, one of those wells experienced a loss of well control incident. We are assessing the potential impact on their first year development program.

More broadly, we have continued to see an increase in activity within the legacy Shelby Trough area and the emerging Haynesville/Bossier expansion resource play, connecting the Shelby Trough to the Western Haynesville. Currently, there are 13 active rigs across Angelina, Nacogdoches and San Augustine counties under Adamas, Apex, EXCO and Rockliff. Expanse is also actively drilling in the Southern Anderson County area, while Comstock continues drilling throughout the Western Haynesville. Across the broader portfolio, we also saw strong leasing activity and remain encouraged by continued interest in the Permian. Building on that activity, we progressed the opportunity highlighted last quarter in our Shelby Trough expansion area, which includes another approximately 300,000 gross mineral acres.

We are currently marketing this project to experienced Haynesville operators to secure an additional development agreement, which we believe would be comparable in scale to our other programs and provide meaningful incremental production growth over time. With that, I will turn the call over to Chris to cover the financial results.

Chris Bonner: Thanks, Fowler, and good morning. As highlighted earlier, we saw strong production in the first quarter with mineral and royalty production of 35.9 MBoe per day, which is up 16% from the prior quarter. Total production was 37.0 MBoe per day. The period was also marked by significant commodity price volatility. Natural gas pricing was impacted by extreme weather-driven swings, including Winter Storm Fern, which created regional pricing dislocations and temporarily pressured our realizations relative to Henry Hub in February before conditions moderated in March. Oil pricing meanwhile reflected broader geopolitical developments that intensified later in the quarter to remain ongoing.

As we navigate this environment, we are actively managing our hedge position as part of our broader risk management approach and monitoring pricing and operator activity across the portfolio. Turning to the quarter's financial results. Net income was $13.3 million for the quarter with adjusted EBITDA of $87 million. 54% of our oil and gas revenue in the quarter came from natural gas and natural gas liquids. As previously announced, we declared a distribution of $0.30 for the quarter or $1.20 on an annualized basis. Distributable cash flow for the quarter was $76.5 million, which represents 1.2x coverage for the period.

In the first quarter, we continued to execute across the business, positioning the partnership well for the balance of 2026 and remain confident that our diversified portfolio across multiple basins, together with our commercial strategy and the extended Shelby Trough supports our ability to deliver sustainable long-term value for unitholders. With that, we'll open it up for questions.

Operator: [Operator Instructions] Your first question comes from the line of Tim Rezvan with KeyBanc Capital Markets.

Timothy Rezvan: For my first question, I was hoping you could provide maybe a little more context on what exactly the outcome is with the loss of well control incident from one of a Revenant's wells. Does that well, once you get, like abandoned? Or is there still a hope of salvaging it? And then when you talked about assessing the potential impact, can you talk about what that means? Does that mean some sort of like deferral or delay? Just any more context would be helpful.

Fowler Carter: Tim, this is Fowler. I'll tackle that. Right now, it just happened. So the truth is we don't know. There is an investigation currently ongoing. Right now, I'd say there is potential for going back into that well and there may be potential for not going back into that well. We just don't know yet. It is too early to tell. And that's really it, man. I'm really sorry, I can't give you more color. But as we get information back, we will be updating folks.

Timothy Rezvan: Okay. Okay. I guess we'll stay tuned on that. And then as a follow-up, you had a very strong start to the year on the production front, and you laid out a pretty granular kind of cadence for your partnerships and their activity. So I know you're not a company that adjust guidance on a quarterly basis and you sort of reiterated it. But can you give us a little more color on maybe what the shape of 2026 production will look like? Does this Revenant potentially temper your enthusiasm on the outlook? I'm just trying to get a little more color on that.

Fowler Carter: Sorry. I wouldn't say our enthusiasm is tempered in any way, shape or form. But again, since this just happened, we are actively discussing these things and what that profile will look like this year. And as you said, Tim, we don't adjust guidance quarter-to-quarter, but we will get back to you once we have something firmly in place and can understand the situation more clearly. Without putting anything of real substance out there, it might be a bit of a speed bump. But over, I'm going to say, a 2-year period, you won't see any difference.

Taylor DeWalch: Yes. Tim, this is Taylor. I'll just add to that a little bit. I think when we look back at our original guidance, which contemplated quite a bit of production growth kind of throughout the year, even if it was flat compared to 2025, certainly, starting out the year with a pretty nice production number helps. And as we think about the rest of the year, I would go back to, kind of, what we thought from just a production growth standpoint, given we're getting these development programs off the ground and excited about what that means for production, especially as it looks to the end of 2026 and going into 2027.

I think the other piece of the equation that we're really trying to understand right now is, kind of, operators' reaction to pricing right now with, kind of, geopolitical events going on in the commodity strip. So I think more to come on that. Certainly, trying to guide within a pretty volatile environment can be difficult, but we're excited about where we think we're headed for the rest of the year.

Operator: [Operator Instructions] Our next question comes from the line of Derrick Whitfield with Texas Capital.

Derrick Whitfield: With the change in ownership at Aethon and now Adamas Energy, could you speak to what changes, if any, you're seeing in behavior around the desire to grow?

Taylor DeWalch: Derrick, this is Taylor. I'll jump in first and just say, I think that given our contractual commitments there, we certainly have at least some expectations on their cadence of operations and excited about them continue to move forward in developing the area. I think to be determined on excess growth beyond the commitments, that's a conversation we're having, and we'll continue to, kind of, update as that becomes available. But overall, excited about the transaction and the team and continuing to move forward with our contract.

Derrick Whitfield: Great. And then with respect to the well control incident, and it feels like the market today is treating this as an issue that impacts a swath of your acreage. As I understand, this is more isolated in nature, is that a fair characterization?

Taylor DeWalch: Yes. Yes. Thanks, Derrick. What I would say is when you look at that area and where the well is, it's fully surrounded by development by the likes of Adamas, EXCO and historically others. So I think that the area is pretty well delineated from a subsurface standpoint. And we certainly look forward to kind of further development in that overall area.

Derrick Whitfield: Great. And maybe just one last, if I could. So as you guys think about the broader expansion from Shelby Trough to Western Haynesville, could you speak to midstream egress for this region and if it's adequate to meet the needs of where you think growth is headed?

Taylor DeWalch: Good question. There's certainly plenty of -- there's quite a bit of infrastructure out there. But as you think about the area growing by potentially several more gross Bcf a day over the coming years, there's a number of other midstream projects that I think are in the queue and probably more to come on exactly what those projects look like. But I'd say there's existing plus additional infrastructure kind of underway.

Operator: There are no further questions at this time. I will now turn the call back to Taylor for closing remarks.

Taylor DeWalch: Thanks so much. Once again, thanks, everybody, for joining us this morning. It was a great quarter and look forward to the rest of 2026. Talk to you all again soon. Thanks.

Operator: This concludes today's call. Thank you for attending. 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.