Q2 2025 Black Stone Minerals LP Earnings Call
Thank you for standing by. My name is Bailey, and I will be your conference operator today.
At this time, I would like to welcome everyone. To the Blackstone minerals second quarter 2025 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers are marked, there will be a question-and-answer session.
If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad,
If you would like to withdraw your questions again, press star and 1.
Thank you. Good morning to everyone. Thank you for joining us either by phone or online for Blackstone minerals, second 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 10K.
We may refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. A 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.blackstone.com. Joining me on the call from the company are Tom Carter, Chairman, CEO and President; Taylor DeWalch, Senior Vice President and Chief Financial Officer; Steve Putman, Senior Vice President and General Counsel; Valor Carter, Senior Vice President, Corporate Development; and Chris Bonner, Vice President and Chief Accounting Officer. I'll now turn the call over to Tom.
Thank you, Mark.
Uh, good morning and thanks to all for joining our quarterly earnings call before we discuss results. Uh, for the second quarter, I'd like to highlight the excellent work done by the team over the last 2 years, which ultimately has led to the recent announcements announced development agreement with revenant
as well as ongoing marketing efforts in the Shelby trough
through our subsurface evaluation. We've determined that the sub the substantial expansion of the Shelby trough and extension towards the Western hanesville.
We're excited for Revenant to begin development and we're actively marking marketing and an additional 180,000 gross acre area to well known and well capitalized.
Operators.
These new developments coupled with their existing Agreements are expected to more than double our drilling obligations in the area.
Over the next 5 years, providing significant natural gas. Growth for the partnership amid a strong demand, Outlook in the region.
Our Grassroots acquisition program supporting these expansion areas. Also continues to progress. Well, we've added 31 million in minerals and royalty Acquisitions during the quarter, bringing our total Acquisitions since September of 23 to about 172 million
During the second half of 2025, we're confident that we will continue to identify and execute on a creative opportunities, which enhance our existing asset position and add long-term value for our shareholders.
A distribution of 30 cents per unit for the quarter.
The reduction was driven by slower natural gas production growth in 2025, primarily in the Haynesville Boer. However, we have a line of sight
to production growth in 2026 and Beyond through our various development agreements and high interest activity growth as outlined in our earnings release.
Ultimately our expectation for increased activity combined with strong demand Outlook provide a clear path to Future distribution increases.
We remain encouraged about the outlook for the partnership, maintaining a clean balance sheet and ample liquidity. This enables us to continue our commercial strategy, including targeted grassroots acquisitions and working with operators to achieve full field development across our aspects.
The outlook for natural gas is constructive reinforced by growing Global demand for LNG.
In addition, our robust oil portfolio across multiple basins provides a solid foundation for for long term as well.
With that, I'll turn it over to Taylor to walk through the financial details of the quarter.
Thanks Tom. Good morning, everyone.
Mineral royalty production was 33.200 Bowie per day. In the second quarter, in total production volumes were 34.6 thousand B per day.
Net income was $20 million for the second quarter, with adjusted EVA coming in at $8.4 million.
55% of oil and gas Revenue in the quarter, came from oil and condensate production.
As mentioned previously, we declared a distribution of 30 cents per unit for the quarter or 120 cents on an annualized basis.
Distributable cash flow for the quarter was 74.8 Million which represents 1.18 times coverage for the period.
In conjunction with the earnings release. We provide a revised 2025 production guidance yesterday.
As we look at realized production for the first half of 2025 combined with our forecast for the second half of the year, we expect production for the full year to average between 33,000 and 35,000 barrels per day.
Our new guidance, reflects slower than expected, natural gas production growth, particularly in the Shelby trough and Hazel Boer play.
However, as Tom mentioned earlier, the outlook for natural, gas remains robust. And we remain confident that our Diversified asset base. Highlighted by our high high interest acreage in development agreements in the expanding Shelby. Trough provides a path to increase production and distributions.
Therefore, we forecast production growth in 2026 of an incremental 3 to 5000 bu per day. Over 2025 provides guidance.
During the quarter operators, continue to actively develop our acreage through existing agreements and the accelerated drilling agreements.
Additionally the large project or monitoring in the peryam Basin by kotera remains on track to add meaningful oil volumes to our production base.
These projects in addition to our agreement with Revenant and the expanded, Shelby trough provide BSM, a pathway to increase production ultimately enabling us to increase the distribution to its previous high water mark.
Although slower gas production and growth pose challenges in the first half of the year, we remain confident that our commercial strategy positions us well to deliver sustainable long-term value for our shareholders. With that, I'd like to open the call for questions.
at this time, I would like remind everyone in order to ask a question press star and the number 1 on your telephone keypad,
Your first question comes from the line of John Annis with Texas Capitol. Your line is open.
Good morning all and thanks for taking my questions.
For my first 1, we have been surprised as well by the subdued activity response and the first half um to higher natural gas prices. But with the recent pickup and gas directed rigs, I wanted to ask if you could provide any color on any green shoots you're seeing in terms of activity, increasing on your acreage and how you see this and the Revenant agreement starting in 26 and the puran development coming online setting up the production trajectory next year
Sure. John, thanks for the question. Um, you know, I think
the overall we you're seeing the same thing. A lot of folks are seeing with uh some subdued activity. I think some of that is probably boring uh from the response. We saw in 24 versus 2025 um of course across
Agreement, that we called out on our earnings release, uh, and, and talked about on the call a little bit earlier.
So we're excited to see Revenue, get to work um, with their first, well, as being Spud, uh, likely at the beginning of 2026. Um, and those 6 Wells that they're obligated to drill throughout 2026, as well as the ongoing activity from some of the other operators that we mentioned throughout the Shelby trough. Uh, and then also our agreements on some of the other acreage that we have line of sight to, uh, throughout the hanesville and the Boer. So, um, excited about the activity that we see, uh, here in kind of the coming quarters. Uh, and, and more to come from that.
Terrific. What my follow up. I wanted to dig into your comments in the release on the subsurface work. You've done to delineate new areas on the Shelby trough.
How does the geology compare to your understanding of what the Western Haynesville is today? Just in terms of depths, temperatures, and EURs?
Yeah, thanks John. That's a great question. So it's Tom mentioned, you know, the team is spent the last couple years really digging into how the Shelby trough expands outside of some of our uh existing development areas and we're getting excited about the uh really potential of that play to further. Expand kind of all around the Shelby trough as well as Westward towards the Western Hayesville. Uh, we do see some
Analogous subservice characteristics. As we think about kind of the western part of the Shelby trough and how that connects to uh some of the things that we're seeing going on in the western hanesville. Uh, the formations are getting thicker. Um, they are getting a bit deeper but in the Shelby trough we have
Quite a few different, uh, places for development at different depths and different temperatures. So, um, I think what we're most excited about is to see both the uh increasing productivity and euers in Western hanesville as well as the operational efficiencies and results that are being gained in the Western hanesville and how that can tie to further development of the Shelby trough. Uh, as we think about developing this expanded region within the area.
I I I'd like to add to that. Just a little industry color and some of the work that we're doing.
Talking with uh Capital providers and operators in this area of the what I would call the Western Shelby. Trough going towards the eastern part of the western mainsville. Sorry for all the uh uh Geographic uh directions there. But people are moving the Western hanesville to the East and there's been activity out there and a lot of buying of acreage and ours is our efforts have been moving the Shelby trough to the west and we're seeing a lot of commonality.
In subsurface.
and uh,
It's really hard to get people on the frontier edges of these things to talk much about what they're seeing in their in their step out drilling. But 1 of the uh, larger operators out there, the other day, we were in a conversation with him and we made some comments about what we're seeing moving West. In the Shelby, trough relative to what they may have been seeing moving East in the western hanesville.
And we we were pleased to get a response that was something like this that that they see uh the the comparison of those 2 areas the same way we do. In other words if they may Bridge across that area and ultimately be 1 and the same
I appreciate it. I'll leave it there. Thanks guys.
Thanks.
Your next question.
The resident with keybanc capital markets, your line is open.
Good morning, folks. Thank you for taking my my question. I, I want to take a little different tact on the, on 1 of the first questions. Um, Tom you and the team have a pretty unique lens into, you know, broader hanesville activity. Uh, we've seen the rig County increase, you know, steadily throughout the year and production is up. You know, about over BCF a day from the recent trough,
So, we're trying to understand.
How to square that with the kind of um updated production guide, you know, which suggests even uh potentially another leg down in the back half of the year. So did something change further in your agreement with aeon? Or I just wonder if you could help kind of understand why um, you know, your your acreage is not really participating in this uplift, we're seeing
Let's start with late 23. Um, that is, uh, was a low stand, uh, a recent low stand in gas prices and Athan, uh, call for a time out, which allowed them to slow down their drilling activity.
Uh,
That.
Event takes about 18 to 24 months to show up.
in in,
Production volume decre declines, and that's what we saw in late, 24 and 25. We have restructured our agreement with aeon from
Mid 20s Wells per year to High Teens per year. But in addition to that, we also carved back some strategically, uh, important and, uh, close in development acreage that we have packaged with other acreage and our, uh, working to place with another operator. And when you add all these things up,
From having Athan, he is really a primary operator with drilling expectations of around mid-20s per year.
Uh, going to high teens and then you layer Revenant on top of that, with a, A buildup to 20 plus per year, and then you add on top of that.
Another operator coming in with maybe 20 Wells per year. It takes it takes time to school. That's that activity up. Because
you know, you've got infrastructure issues, you've got all sorts of things and and
These are.
These are projects that take 20 plus years to fully develop and so we're very excited about. Yes, there is a little bit less coming from aeon, but that's been by Design. We are trying to have 4 or 5 Active, operators out there and a cumulative. Uh, set of contractually required, Wells that are well. North of the mid 20s that aeon had a year and a half ago. Uh, so there we are. Constantly reshuffling and restructuring to add, uh, operators and capital and well, count out there. And and we
see, some really
Potentially staggering number of wells in in 2829 and 30 and it's just going to take a while for it to build up.
If I might just add on to when you're, when you're looking at the rest of the asville and some of the activity, I might just mention, you know, we've seen some activity, pick up some rigs, pick up from some of the private operators in the Haynesville um and then also certainly have seen a number of uh deferred tills or ducks that have come online from expand. And so um really when you just look at where that activity is relative to some of our higher interest acreage, we're going to see some of that activity um that comes through from production. Of course there's always a little bit of a a time delay right between uh first production and and royalty company, receiving that production. Um but really, it comes back to our high interest acreage and our line of sight to that development uh, to all the things Tom was just speaking to
Okay. That's that's very helpful with Insight. I appreciate that. And my follow-up is, is sort of related to that, um, with the second acreage position being being marketed, you know, you didn't mention it in in the, in the release, more than doubling the development obligation. So, you threw out some numbers here. Can you help us? Sort of understand it in marketing? Are you trying to get to kind of a 40 to 50 per year? Cadence. I'm just trying to, you know, get some numbers.
Around kind of how you're thinking about this ramp into the end of the decade. Thanks.
Uh, I I'll I'll answer that. And the answer is yes. And then some
Great question. Um, and the co-chair of volumes are certainly going to help uh, from an oil standpoint along with just uh the rest of our kind of oil weighted activity. Um, I really think that when you look at the rest of uh, 25 going into 26, so we're probably closer to kind of where we were in 24, um, as opposed to, where we were in in q125. So uh, probably more like, you know, 25 26%, uh, oil volumes. Um, as we're looking at,
thank you.
And there are no further questions at this time. Tom Carter, I will turn the call back over to you.
All right. Thank you very much. And uh we really appreciate everyone joining us today for the uh for the call. And uh we look forward to speaking with you in the future. As we move into these what we think are pretty exciting forward-looking times, thank you.
you may now disconnect