Black Stone Minerals (BSM) Q3 2026 Earnings Call Transcript

DATE

Tue, Nov. 3, 2026

CALL PARTICIPANTS

• Vice President Corporate Planning - Natalie Gentry Liddell
• Co-Chief Executive Officer and President - H. Taylor DeWalch
• Co-Chief Executive Officer and President - Fowler T. Carter
• Senior Vice President and General Counsel - Steve Putman
• Senior Vice President, Chief Financial Officer and Treasurer - Chris Bonner

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TAKEAWAYS

• Mineral and Royalty Production -- 34.5 MBoe/d, representing a 6% increase from the second quarter of 2026 driven by higher natural gas volumes in the Haynesville/Bossier and higher oil volumes in the Permian.
• Total Production -- 35.6 MBoe/d, including 1.1 MBoe/d of working-interest production.
• Net Income -- $52.4 million, which included a $29.8 million non-cash unrealized derivative loss.
• Adjusted EBITDA -- $104.1 million, compared to $91.3 million in the second quarter of 2026.
• Distributable Cash Flow -- $93.0 million, reflecting strong oil and natural gas revenues and supportive oil prices.
• Common Unit Distribution -- $0.35 per unit, representing a 9% increase from the second quarter and 17% from the first quarter of 2026.
• Distribution Coverage -- 1.25x for the third quarter of 2026.
• Average Realized Price -- $37.44 per Boe, excluding derivative settlements, representing a 1% decrease from the second quarter of 2026.
• Oil and Gas Revenue -- $122.7 million, with oil and condensate accounting for 63% of total revenues.
• Lease Bonus and Other Income -- $7.2 million, up from $6.7 million in the previous quarter.
• Total Debt -- $195.0 million as of Sept. 30, 2026, which increased to $197.0 million by Oct. 30, 2026, due to ongoing acquisition activity.
• Credit Facility Capacity -- $375.0 million in elected commitments against a reaffirmed borrowing base of $580.0 million.
• Caturus Agreement Expansion -- 730,000 additional gross acres added in October 2026, bringing the total contract area to 950,000 gross acres.
• Caturus Development Timeline -- An initial pilot well in the first expansion area is expected by the first quarter of 2028, with a projected ramp to 12 gross wells annually by 2034.
• Acquisition Spending -- $14.6 million in the third quarter of 2026, with an additional $32.7 million in cash and units for assets in the expanded Shelby Trough area during October 2026.
• Total Acquisition Program -- $335.5 million completed from Sept. 2023 through Oct. 2026.
• Adamas Development -- seven gross wells turned to sales during the third quarter, with 17 wells expected to be drilled in the program year ending June 30, 2027.
• Revenant Development -- A 4-well drilling commitment for 2026 is on track, with the first production expected by the end of 2026.
• Blue Arrow Development -- 10 gross wells turned to sales out of a planned 25-well program in the southern Delaware Basin.
• Shelby Trough Ownership Mix -- approximately 60% of net minerals will come from legacy holdings and 40% from the acquisition program at the conclusion of current plans.
• Oil Hedge Position -- 615 barrels per day swapped at $64.39 for the fourth quarter of 2026.
• Natural Gas Hedge Position -- 12,880 billion British thermal units swapped at $3.73 per million British thermal units for the fourth quarter of 2026.

SUMMARY

Black Stone Minerals, L.P. (NYSE:BSM) reported a sequential increase in production and distributable cash flow for the third quarter of 2026, supported by higher volumes and stable realized prices. Management stated that growth was driven by activity in the Haynesville/Bossier and Permian basins, enabling a 9% increase in the quarterly distribution. The company reported the expansion of its Caturus development agreement to cover 950,000 gross acres, which management indicated reinforces the long-term potential of the Shelby Trough position. Management noted that the partnership remains focused on balancing distributions with investments in mineral inventory to meet anticipated natural gas demand from Gulf Coast demand centers.

• Fowler Carter noted that strong industry interest during the marketing process reinforced confidence in the long-term potential of the Shelby Trough position.
• Taylor DeWalch stated that takeaway capacity projects, such as the deal between Williams and Momentum, are expected to support higher volumes moving south toward the LNG corridor.
• Management indicated that while oil activity in the Permian and Bakken remains strong, future development may be sensitive to operator capital expenditure budgets.
• Fowler Carter explained that approximately 60% of the expanded Shelby Trough net mineral will come from legacy holdings, while 40% is derived from the acquisition program.
• The company reported that the amended Caturus agreement includes a multi-year development program designed to ramp up to approximately 12 gross wells annually by 2034.

INDUSTRY GLOSSARY

• MBoe/d: Thousand barrels of oil equivalent per day.
• Shelby Trough: A hydrocarbon-producing geological area primarily located in East Texas.
• Haynesville/Bossier: Productive natural gas shale formations situated in the East Texas and Louisiana region.
• DUC: An acronym for a drilled but uncompleted well, which has been drilled but not yet stimulated for production.
• AOI: Area of Interest, a defined geographic region specified within a development agreement for targeted activity.
• Working Interest: A form of investment in oil and gas wells where the owner is responsible for a portion of the operating costs and capital expenditures.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us and welcome to the Blackstone Minerals Third Quarter 26 Earnings Conference call. After today's prepared remarks, we will host a question and answer session. To withdraw your question, press 1 again. I will now hand the conference over to Natalie Gentry Liddell, vice president corporate planning. Natalie, please go ahead.

Natalie Gentry Liddell: Good morning, everyone. Thank you for joining us by phone or online for Black Stone Minerals third quarter 26 earnings conference call. Today's call is being recorded and will be available on our website along with the earnings release issued last night. Before we start, I would 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.

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 30 ks. We may refer to certain non GAAP financial measures that we believe are 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 H. Taylor DeWalch, co CEO and president, Fowler T.

Carter, co CEO and president, Steve Putman, senior vice president and general counsel Chris Bonner, senior vice president, chief financial officer and treasurer. I will now turn the call over to Taylor.

H. Taylor DeWalch: Thanks, Natalie. Good morning, thank you all for joining us. We had a strong third quarter with growth in both oil and natural gas production. Higher volumes together with continued support from elevated oil prices, contributed to increased cash flow compared to the second quarter. With these results and continued progress toward natural gas production growth, we raised our distribution for the second consecutive quarter while maintaining prudent coverage. As we look ahead, we continue to monitor commodity market conditions, and what they may mean for operator activity and our production outlook. Also took an important step in advancing our Shelby Trough strategy, with the amendment and expansion of our Caturus agreement.

It brings a broader portion of our position into a contracted development program, and moves us closer to realizing the production potential of our mineral inventory. These successful results from the third quarter highlight the strength of Blackstone's unique and differentiated strategy. We are both actively managing the portfolio across the Lower 48 through current leasing, while also promoting significant growth through our development agreement on high interest acreage. The combination of these strategies, along with a significant unleased position across the country that we continue to explore provides a solid foundation with substantial growth opportunities. As we look to 2027, our focus is on continued execution under our existing agreements as these development programs progress and grow.

Together with ongoing activity across our broader portfolio, we expect these programs to drive higher production and support distribution growth over time. As we evaluate that progress, we will balance distributions and investment in growth in a way that preserves our financial flexibility. With that, I will turn it over to Fowler to discuss how we are advancing our growth strategy. and what the progress across these programs means for Blackstone.

Fowler T. Carter: Thanks, Taylor. A key focus of our growth strategy is advancing development of our substantial legacy mineral position in the expanded Shelby Trough. Targeted acquisitions and development agreements help us turn that inventory into natural gas production and cash flow. Together, these efforts go beyond any single transaction to build a portfolio of development programs that we expect will contribute to production growth over time. At the conclusion of our planned acquisition program, we expect approximately 60% of our expanded Shelby Trough net mineral will come from our legacy holdings, and approximately 40% from the acquisition program. This reflects how targeted additions build on our existing acreage position and enhance the overall development opportunity.

Our expanded Caterus agreement reflects our strategy of working with operators to move more of our acreage towards delineation, development, and ultimately production. Strong industry interest, during the marketing process reinforced our confidence in the long-term potential of the position. This amendment, combined with our other high interest development agreements brings the total area covered by our Caturus, Adamas, and Revenant agreements. To approximately 1.4 million gross acres. Additionally, we have approximately 50 thousand gross acres under traditional leases in active areas throughout the Shelby Trough. We are seeing development activity continue to build across the safe bridge. Adamas is bringing additional wells online Revenant's first production is expected by year end.

And Catarus has spud its first 2 development wells under the original agreement. With production expected in the first half of 27. Across our broader Shelby Trough position, Exco, Apex, Rockcliffe, and BDX currently have 10 combined wells drilling or awaiting completion on our acreage. An additional drilling permit filing suggests increased drilling activity in the coming months. We continue to actively market acreage and work with operators throughout our mineral portfolio to put more of our position into play. Strong leasing activity and higher lease bonus revenues reflect those efforts. Generating revenue today while creating opportunities for future drilling and production. At the core of our growth outlook, are our Shelby Trough development programs.

With these agreements now in place and development advancing, we expect significant growth in natural gas production and cash flow. We believe this expected growth together with opportunities elsewhere in our mineral portfolio provides a strong foundation for growing returns to unitholders in the years ahead. With that, I will turn the call over to Chris to cover the financial results.

Chris Bonner: Thanks, Fowler, and good morning. Mineral and royalty production during the third quarter averaged 34 and a half MBE per day while total production averaged 35.6 MMBoe per day. Mineral and royalty production increased 6% from the second quarter driven by both higher natural gas volumes from the Haynesville/Bossier and higher oil volumes from the Permian. Commodity prices remained supportive during the quarter, particularly for oil. Our average realized price excluding the impact of derivative settlements, was roughly in line with last quarter. Higher production contributed to stronger oil and gas revenues and cash flow, with oil and condensate accounting for nearly 2-thirds of our oil and gas revenues.

Net income was approximately $52 million for the quarter, which included a noncash unrealized derivative loss of about $30 million Adjusted EBITDA was $104 million and distributable cash flow was $93 million As previously announced, we declared a distribution of $0.35 per unit for the quarter, or $1.40 on an annualized basis. Stronger cash flow supported our second consecutive quarterly distribution increase, while allowing us to maintain 1.25x coverage for the quarter. Maintaining that balance allows us to pursue accretive growth opportunities while supporting our objective of sustainable distribution growth.

As Taylor and Fowler discussed, programs under our development agreements including the expansion of our Caturus program, is positioning more of our acreage to help meet anticipated natural gas demand growth from LNG exports, power generation, industrial uses. Our proximity to Gulf Coast demand centers reinforces that opportunity. Our focus remains on advancing development with the goal of growing production, cash flow, and distributions for unitholders. With that, we will open it up for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Annis with Texas Capital. John, your line is open. Please go ahead.

John: Hey. Good morning, all, and thanks for taking my questions. My first 1 is on the expanded Caturus agreement. What did the pilot work or subsurface data show that gave both parties the confidence to expand the contract area by 730 thousand gross acres.

Fowler T. Carter: Hi, John. Fowler here. Caturus collected a lot of data on that well. And as we have said, we are excited to expand the contract area with them and we are not going to jump in front of them on comments to that. But I think the expansion of the contract speaks to answer the question.

John: That makes sense. For my follow-up, production showed some nice growth sequentially. Can you walk us through kind of the main drivers of that growth and how we should think about volumes over the next couple quarters as the remaining Adamas and Blue Arrow wells come online?

H. Taylor DeWalch: Yeah. I can start with that. So, looking at the Shelby Trough, Adamas continues to turn wells on, and we expect that to continue, and then are looking forward, as we mentioned, to the first Revenant wells coming on and Caturus wells in early 27. So, generally, on the gas side, we expect that to just be a steady ramp as we go into next year. On the oil side, certainly encouraged by the high interest development, with Blue Arrow and that will continue to show, growth in oil volumes. And then we have also just seen broadly across the Permian and Bakken more wells coming online as operators work through DUCs.

I think there it is a little bit more price sensitive, and we will see what operators decide to do with their CapEx budgets going into next year. But we are certainly expecting that to continue to be a strong driver of our volumes and revenue.

John: Got it. If I could sneak 1 last 1 in, maybe more on the macro side. With several operators advancing programs, across the Shelby Trough, are you guys seeing any constraint around takeaway capacity services or anything else that could limit the pace of development as activity scales?

H. Taylor DeWalch: Yeah. Thanks, John. This is Taylor. I will touch on that. You know, I think when we look at takeaway capacity on the Shelby Trough, that is been a conversation that is been had between us, the operators, and potential midstream gatherers and long haul pipes for quite some time now, trying to get ready ahead of volumes coming online from the Shelby Trough. I think we are all excited about the potential of the size and volumes that we are all forecasting to come out of that area. But over the long haul, we are going to need some additional capacity, and I would say those projects are well underway.

Especially, I think if we specifically call out the deal between Williams and Momentum. I certainly think there is capital being injected into that area. And we are excited to have some more capacity that goes south towards the LNG corridor and other demand centers. Kind of towards some of the other LNG facilities such as Venture Global and other projects underway. So I think that, you know, those projects are well on the way, and we should not see any takeaway or large scale takeaway constraints as we move forward with the supply curve.

John: I appreciate the time. I will turn it back.

Operator: Thanks, Sean. Your next question comes from the line of Timothy Rezvan with KeyBanc Capital Markets. Timothy, your line is open. Please go ahead.

Tim: Good morning, folks. Thank you for taking our questions. We appreciated the detailed update about your operating agreements in the release. So I just wanted to ask kind of with that Caturus expansion, where do you stand with resource capture at this point? You have spent about $335 million. You have a number of agreements lined up Are you done? Is there more to do? Just kinda trying to understand your appetite at this point.

Fowler T. Carter: Timothy, I think the best way to answer that is stay tuned. that is all I am gonna say about it.

H. Taylor DeWalch: Yeah. I think, Timothy, this is Taylor. I will just add on to that a little bit too. I mean, We continue to move forward with our acquisition program. We have talked about it in the past that you know, I think we said a couple quarters ago, we are about halfway through it. So we are more than halfway through at this point, but we are still seeing opportunities to continue to bolt on to get to the type of scale that, you know, we really desire in order to place the acreage into these development agreements to also help incentivize the operators.

So, you know, we are over halfway through and continue to move forward with acquisitions in that area. 1 other comment I might just make, and this goes back to 1 of the previous questions as well. On Caturus. We had a pretty strong competitive marketing process on these expanded areas. So I do not think that it is tied to any specific well, but more thinking about the broader area and just general excitement on the expanding Shelby Trough and Haynesville/Bossier play. And that covering, like Fowler said in his prepared remarks, well over 1 million gross acres that we have now got in these contract agreements.

Tim: Okay. I think I understand your body language pretty clearly on that. If we think about the capital structure at this point, it looks like you are about a little over half drawn on your credit facility. I think the next redetermination is in the spring. How should we think about sources of capital for any, you know, incremental acquisitions? I know you have the preferred that is sort of out there. You think about capital structure to support this growth that is clearly underway?

H. Taylor DeWalch: Yeah. I will maybe just touch on it quickly, Timothy, and then Chris can jump in as well. 1 of the keys for us, is to stay flexible from a balance sheet perspective. I think we have continued to do that. And I think when we look at the current cycle that we are in, think about how do we utilize this elevated oil price cycle to make the business better? And we think we can do that through both, you know, 2 consecutive quarters of distributions, but also focusing on maintaining a clean balance sheet and then growing the business for the long haul. that is really what we have been focused on.

And I think there are agreements and continuing to bring in new agreements, continues to kind of fortify that strategy. And as we think about the sort of financial flexibility, you know, there are other uses of capital that are out there an acquisition or a preferred standpoint. The redemption window comes up. About a year from now. So I think we will continue to weigh those different uses of capital as we progress over the next 12 months.

Chris Bonner: Yeah. I think the only thing I will I will add to that is we do feel that our credit facility is sufficient to meet our needs when it comes to the acquisition program.

Tim: Okay. that is that is that is good context. And if I could just sneak 1 more in. You surprised us with the distribution increase this quarter, and it looks like, you know, ample coverage for that payment. In the past, you know, the board has tried to maintain a fixed distribution despite volatile gas markets. But is your expectation to try to keep that $0.35 distribution? Or is the board maybe going to be more tactical as prices ebb and flow? Thanks.

Fowler T. Carter: Thanks, Timothy. I think our strategy around the distribution stays the same. We raised it because we felt comfortable about where our forecast stands. Which is what we have signaled to you guys in the past. So we are happy to be able to recommend and get the approval for the distribution growth. And like I said, we continue to look out to the forecast for just maintaining kind of flexibility related to all of our financials.

Tim: Okay. Appreciate all the comments. Thank you.

Operator: Thanks, Timothy. We have reached the end of the Q&A session. I will now turn the call back to H. Taylor DeWalch, co chief executive officer and president for closing remarks.

H. Taylor DeWalch: Thank you all for joining us this morning. Really excited to both announce continued growth in the Shelby Trough as well as strong quarterly results and look forward to speaking to you all again next quarter.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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