BSM — Black Stone Minerals, L.P.

Summary of Black Stone Minerals Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Production: Average mineral royalty production was 32.5 MBoe per day; total production averaged 33.5 MBoe per day, reflecting a decline from Q1 2026 primarily due to lower natural gas volumes in Haynesville.
• Commodity Prices: Average realized price increased by 7% to $37.82 per Boe, benefiting from higher oil prices.
• Financial Performance:
  • Net income: Approximately $106 million
  • Adjusted EBITDA: $91 million
  • Distributable cash flow: $80 million
• Distribution: Declared a quarterly distribution of $0.32 per unit, a 7% increase, with a coverage ratio of 1.18x.

2. Strategic Updates and Business Highlights

• Acquisition Activity: Completed $40 million in mineral and royalty acquisitions during the quarter, totaling nearly $300 million since the program's inception.
• Leasing and Asset Management: Generated $13 million in lease bonus and other income; $6.5 million in refunds from deduct-free lease provisions.
• Development Progress: Active development in Shelby Trough and Haynesville, with Adamas operating two rigs and planning to drill 17 wells in the new program year. Revenant spud two additional wells despite a prior incident.
• Operator Activity: Increased operator activity in Haynesville, with a notable rise in active rigs on Black Stone's acreage.

3. Forward Guidance and Outlook

• Management expressed confidence in production ramp-up due to ongoing development agreements and strong results from oil assets. They anticipate continued growth in production and distributions, supported by a diversified asset base and strategic positioning near Gulf Coast demand centers.

4. Bad News, Challenges, or Points of Concern

• Production Decline: Noted a decrease in production from Q1, particularly in natural gas volumes, which could impact future cash flow.
• Leverage Concerns: Leverage has increased slightly, now over half a turn, with $300 million of preferred equity on the balance sheet, raising questions about capital structure and future payments.
• Market Risks: Potential variability in production due to the timing of well completions and ongoing market conditions affecting gas prices.

5. Notable Q&A Insights

• Distribution Confidence: Management attributed the distribution increase to confidence in future oil volumes and gas activity, highlighting a balanced approach to capital allocation.
• Future Agreements: Discussions are ongoing with potential new operators in the Haynesville area, with marketing efforts yielding positive results.
• Production Drivers: Strong oil production was driven by price-driven activity and turning DUCs to sales, while gas production variability was noted due to the timing of well completions.
• Shelby Trough Activity: Increased rig activity in the Shelby Trough is attributed to operators seeking returns and fulfilling commitments under development agreements, with expectations of continued demand for natural gas.

Overall, Black Stone Minerals demonstrated solid financial performance and strategic progress in Q2 2026, while also acknowledging challenges related to production variability and leverage management.