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DATE
Tuesday, Nov. 4, 2025 at 10 a.m. ET
CALL PARTICIPANTS
- Chairman, Chief Executive Officer, and President — Tom Carter
- Senior Vice President, Chief Financial Officer, and Treasurer — Taylor DeWalch
- Senior Vice President and General Counsel — Steve Putman
- Senior Vice President, Corporate Development — Fowler Carter
- Vice President and Chief Accounting Officer — Chris Bonner
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TAKEAWAYS
- Mineral and Royalty Production -- 34,700 BOE per day, up 5% sequentially from the previous quarter, driven by Permian Basin volumes.
- Total Production Volumes -- 36,300 BOE per day; guidance for 2025 remains at 33,000-35,000 BOE per day.
- Acquisitions -- $20 million deployed on mineral and royalty acquisitions this quarter, bringing cumulative acquisition spend since September 2023 to roughly $193 million.
- Net Income -- $91.7 million for the quarter.
- Adjusted EBITDA -- $86.3 million for the quarter.
- Distribution Declared -- $0.30 per unit, annualized at $1.20.
- Distributable Cash Flow -- $76.8 million, with a 1.21x coverage ratio; excess used to partially fund acquisitions and sustain leverage position.
- Revenue Mix -- 57% of oil and gas revenue from oil and condensate production.
- Haynesville Expansion -- New Shelby Trough development agreements could drive over 50 wells per year; framework agreement announced would add the equivalent of 12 additional wells annually by 2030.
- Permian Projects -- Large monitored project remains on track to add oil volumes, with further liquids production from new Permian initiatives anticipated within 12 to 18 months.
- Marketing Initiatives -- 220,000 gross acres under an emerging development agreement, with progress from “the 1 yard line” to “the half yard line.”
- Pipeline -- “multiple decades of development inventory” cited in the expanded Shelby Trough.
- Operational Activity Outlook -- Activity slowed for 2025, with improved development visibility and volume contributions expected in 2026 from Aethon and Permian projects.
- Natural Gas Exposure -- Hedge strategy maintained; significant Haynesville/Shelby Trough production with Henry Hub linkage mitigates some Waha exposure risk.
- Long-term Guidance -- Multiyear forecast encourages focus on 5-year asset growth runway over short-term volatility.
SUMMARY
Black Stone Minerals (BSM +0.00%) confirmed quarterly growth in production metrics, highlighted by increases in Permian Basin output, and provided strategic clarity on Haynesville expansion with firm development commitments and new acreage initiatives. Management emphasized progress on additional marketing packages, signaling upcoming deals that could impact future drilling activity. Capital allocation prioritized ongoing acquisitions designed to expand the company’s royalty and mineral asset base, while financial discipline was reflected in coverage ratios above declared distributions. The company’s outlook points toward increased future distributions fueled by new projects turning online and a deep development inventory, as well as exposure advantages tied to nearby LNG infrastructure and Henry Hub pricing. Executive transitions, including the CEO’s move to Executive Chair, were formally addressed and positioned as continuity in leadership and direction.
- Tom Carter said, “The time to buy our shares is now not 2 years from now” in reference to anticipated value from long-cycle reservoir development.
- Fowler Carter reported that operating partners “have the ability to flex up above and beyond their minimum annual commitments,” potentially exceeding well targets in developed areas.
- Management expects Aethon and Permian wells to contribute materially to volumes beginning in the coming quarter and into 2026.
- Significant geologic potential in underdeveloped acreage was explicitly referenced as a contributing factor to future inventory growth.
INDUSTRY GLOSSARY
- BOE: Barrels of oil equivalent — standard measurement to aggregate oil, condensate, and natural gas volumes on an energy-equivalent basis.
- Shelby Trough: A prolific natural gas development area within the Haynesville Shale region in East Texas, featuring high-interest mineral positions for Black Stone Minerals, L.P.
- Henry Hub: The pricing benchmark for natural gas futures traded on the New York Mercantile Exchange; often linked to supply contracts.
- Waha: A major natural gas trading hub in West Texas, typically subject to local market price differentials due to regional supply-demand and infrastructure constraints.
Full Conference Call Transcript
Tom Carter, Chairman, CEO and President; Taylor DeWalch, Senior Vice President, Chief Financial Officer and Treasurer; Steve Putman, Senior Vice President and General Counsel; Fowler Carter, Senior Vice President, Corporate Development; and Chris Bonner, Vice President and Chief Accounting Officer. I'll now turn the call over to Tom.
Tom Carter: Thank you very much, Mark. Good morning, and thank you all for joining us on the third quarter earnings call. Before we discuss our financial and operating results, I'd like to congratulate Fowler Carter, Taylor DeWalch; and Chris Bonner on their announced upcoming promotions. I'm excited for and confident in their leadership as we look to the continued growth and success of Black Stone for many years to come. Looking forward to my new role as Executive Chair as well and will continue to provide strategic guidance to the management and lead the board.
Thank you to all of our employees who continue to work very hard day in and day out to drive Black Stone's success and position us for an exciting future. We continue to pursue acquisitions through the Haynesville expansion around Shelby Trough, and we're looking forward to Revenant's development getting underway in early 2026. We also continue to work towards solidifying another development agreement covering 220,000 gross acres in between Aethon's development in the Shelby Trough and expand's development in the Western Haynesville. Unscripted, I also add, we are working on yet another package that we hope to assemble and market in the not-too-distant future.
The recently announced expand energy horizontal well and successful pilot well in addition to the ongoing development throughout the Western Haynesville provide even further confidence in the Haynesville expansion play and long runway of inventory. As mentioned previously, we expect these development agreements to ultimately drive over 50 wells drilled in the expanded Shelby trial per year providing significant gas growth for the partnership and a constructive outlook for demand in the region. And this is in conjunction with ongoing great opportunities coming up in other areas in our properties. We remain focused on the significant growth opportunity that result in the increasing production and distribution outlook for years ahead.
With that, I'll hand it over to Fowler to walk through the operational updates.
Fowler Carter: Thank you, Tom, [indiscernible], and good morning to everyone. During the quarter, we progressed our commercial initiatives across the expanded Shelby Trough, including working with Revenant Energy on their inaugural development program beginning early next year. Our marketing efforts on an additional 220,000 gross acres is progressing well with a framework agreement that would add the equivalent of 12 additional wells annually to our acreage by 2030. We expect these new developments, coupled with our existing agreements to more than double the current annual drilling rate in the expanded Shelby Trough in the next 5 years.
There is also the opportunity for our operating partners to exceed their annual well commitments, and we are excited about the multiple decades of development inventory in this play. Our grass-roots acquisition program also continues to progress well. We added $20 million in mineral and royalty acquisitions during the quarter bringing our total acquisitions since September 2023 to roughly $193 million. We have line of sight to an additional accretive acquisition opportunities in the near term which we expect to enhance our existing asset position in the Shelby Trough and to add long-term value for our unitholders.
While 2025 development activity has slowed across the U.S., we are optimistic looking ahead to 2026 given our existing and pending development agreements across our high-interest acreage in the Shelby Trough. Turning to the Permian. The large project we were monitoring remains on track to add meaningful oil volumes to our production base. We are also tracking several new projects on our high-interest acreage there that are expected to add additional liquids volumes in the next 12 to 18 months. We believe that these projects, in addition to our agreements in the Shelby Trough, provide Black Stone a path to increase production and, in turn, higher distributions.
With all of that, I'll turn it over to Taylor to walk through the financial details of the quarter.
Taylor DeWalch: Thanks, Fowler, and good morning, everyone. We had a successful third quarter with mineral and royalty production of 34,700 BOE per, an increase of 5% over the prior quarter. The increase in production quarter-over-quarter was driven by strong volumes in the Permian Basin. Total production volumes were 36, 300 BOE per day. While we currently sit here at the high end of the range, production guidance for 2025 is unchanged at 33,000 to 35,000 BOE per day. We continue to monitor activity levels and commodity price dynamics as we look towards the fourth quarter of 2025 and full year 2026 production and distributions. Net income was $91.7 million for the third quarter with adjusted EBITDA at $86.3 million.
57% oil and gas revenue in the quarter came from oil and condensate production. As previously announced, we declared a distribution of $0.30 per unit for the quarter, or $1.20 on an annualized basis. Distributable cash flow for the quarter was $76.8 million, which represents 1.21x coverage for the period. The excess coverage was used to partially fund acquisitions and maintain a solid financial and leverage position. As Tom mentioned earlier, the partnership's outlook remains strong, anchored by long-term contract development in our high-interest Shelby Trough acreage as well as our core legacy assets across the U.S. In addition, with increasing demand from LNG and power, the outlook for natural gas is increasingly constructive over the next decade.
With significant assets in close proximity to LNG facilities, Black Stone is in a prime position to benefit from the looming call on gas supply. In conclusion, we had a solid quarter, bolstered by strong oil volumes from our Permian assets which ultimately produced robust coverage of the announced distribution. Going forward, we remain confident that our existing acreage positions, coupled with our commercial strategy and the expanded Shelby Trough will provide a strong foundation to deliver sustainable long-term value for unitholders. With that, we'd like to open the call for questions.
Operator: [Operator Instructions] Our first question comes from the line of John Annis from Texas Capital.
John Annis: Congratulations to everyone on their new roles. For my first question, on the acreage currently being marketed in the KLX area, I think on the September update call, you mentioned that you were on the 1 yard line with getting a deal across. I was hoping if you could provide a quick update on where those discussions currently sit? And secondly, if you've seen any increased interest in potential commitment to the development following expand's entry into the Western Haynesville. And then maybe just building off of Tom's remarks that you're also working on assembling another package. Is there any additional color that you could share at this time?
Fowler Carter: Well, I'll start with the 1 yard line comment. We were at the 1 yard line and now we're at the half yard line. So it's progressed, and we expect to hopefully have that wrapped up here in the next couple of weeks. But we'll let you all know how that goes, and we'll announce that information accordingly. Remind me your second part of your question before we go on to the expanded area that [indiscernible] mentioned.
John Annis: Yes. Just if you've been seeing any increased interest in potential commitments just following expands announcement and their entry into the Western Haynesville?
Fowler Carter: We say interest remains robust across this whole area and increased commitments. What I'm comfortable saying about that is that our operating partners have the ability to flex up above and beyond their minimum annual commitments. And so you can certainly see some relative outperformance there.
John Annis: Terrific. Is there any color that you could offer on the package that you're working on assembling that you mentioned in the prepared remarks?
Fowler Carter: I'm going to let [indiscernible] take that one because he's really excited about it.
Tom Carter: If you look at the Shelby Trough in the Western Haynesville and now the expand well, the Yancey well, which is about 20% to 30% further to the east than any of the wells that have been drilled so far moving back into almost North Central Houston County. And then you go into Trinity County, Cherokee County, Angelina County, Polk County, Tyler County, San Augustine County, Sabine County. There is so much inventory potential out there that really hasn't even been scratched yet, and folks keep putting blocks together.
And we've done a lot of homework on the subsurface all the way across to the Western Haynesville and everything that keeps happening thus far has been positive to more positive than what one could expect. We see some very, very interesting geologic things happening as you move further west from the traditional Shelby Trough, where there is significant expansion between the base of the Knowles Lime and the top of the Cotton Valley if I'm saying that -- Smackover -- excuse me, Cotton Valley also. Smackover and that phenomenon is what's been driving moving Eastward into the Western Haynesville.
So I think I said this last time, these packages of shale that are commercial are thicker in that expanded area. And we have existing acreage that we think is deeper than the traditional work that's been done in the Shelby Trough, but that is not inconsistent with what's been going on in the Western Haynesville. And it's in our inventory, and we're working it hard and looking forward to taking it out to capital development in the future.
John Annis: I appreciate all the color. For my follow-up, with the strong volume growth this quarter, how should we think about volumes trending in the fourth quarter and into 2026 with the wells that are expected to be turned in line from Aethon and the Permian development project? And then maybe more broadly, just how would you compare what you're seeing in terms of gas-directed activity across your acreage relative to earlier in the year.
Taylor DeWalch: Yes. Thanks, John. So like I said in my prepared remarks, I mean, we didn't update full year guidance at this point. So we're still being pretty thoughtful about the activity that's going on across our assets, whether it's Aethon or larger developments out in the Permian, I'd say where we start to get excited is to see Aethon volumes coming online and then kind of throughout the fourth quarter into the beginning of next year, along with the large development in the Permian, which is Coterra and seeing their wells start to come online recently, but more completely as we think about kind of the beginning of next year.
So overall, I think it's going to be an interesting several months kind of winter season to watch activity levels, especially in the natural gas-focused basins and to see how that plays into full year '26 volumes.
Tom Carter: I would add also, recently, we put out a multiyear forecast, which is somewhat unusual for a publicly-traded company. And I would just encourage the marketplace to not focus so much on the next 6 to 12 months, but to focus on the next 5 years because as I said earlier, this is a massive reservoir, and it takes time to spool it up -- and evaluate it and spool it up. And we really are excited about the slow, methodic, thoughtful, early stages of some of these new transactions that we've done. But every one of those with success will grow in well counts by two to threefold as well as layering new projects in there.
I just -- when you talk about share value and share activity, that's a real good question because I don't know how much the average person wants to get out in front of the market. But if what we're seeing is valid and as I said before, if the natural gas markets are as everybody seems to think they're going to be, i.e., less volatile and more secure in the future. The time to buy our shares is now not 2 years from now.
Operator: Our next question comes from the line of Tim Rezvan from KeyBanc Capital Markets.
Timothy Rezvan: Congrats everybody on the new roles and Tom, on your transition. Some of my questions were addressed by the prior analysts. But I wanted to ask, you mentioned more Permian production coming. As a 2-stream reporter, we've noticed that your natural gas differentials have weakened. I'm guessing that's due to exposure to Waha. And as you think about -- I know the Haynesville is sort of the longer-term story, but a lot of producers are getting beaten up by the challenges at Waha that may not resolve until 2027. So can you talk about anything you're doing? I know you've been plain vanilla hedges in the past. Do you intend to just sort of ride this out?
Or is there anything you can do because gas is still over 70% of your production. Just curious on that.
Taylor DeWalch: Yes. Thanks, Tim. This is Taylor. I'd say, like you said, I mean, our hedging strategy remains consistent the way that we've been thinking about it. And I think when you think about our natural gas volumes so much of that is coming from the Haynesville and from the Shelby Trough, where we've got good exposure to Henry Hub, I think relative to -- as you mentioned, kind of some of the dynamics that are going on with Waha and the Permian.
I think when we think about Waha and we think about just general Permian production, really what gets us excited is to see the ongoing development on high-interest acreage and then ongoing development across the full suite of assets. I guess we touched on in the investor presentation in September, we're really well aligned with the top operators in the Permian. And so we continue to see robust activity from those folks. And then also just going back to some of these a little bit more bespoke high interest development that we have in the Permian. So excited to see those volumes come online. So overall, continuing to maintain our consistent strategy as we're thinking about pricing and activity levels.
Timothy Rezvan: Okay. So from a modeling perspective, do you think that on a 2-stream basis being at a discount to the benchmark Henry Hub is that going to be the reality over the next year if Waha sort of stays where it is? That's what I'm trying to get at.
Tom Carter: Yes. I mean that's -- like I said, that's what we're thinking about it, and that's what we've got a robust hedge strategy.
Operator: [Operator Instructions]
Tom Carter: All right. If there are no more questions, we sure thank you all for joining us today, and we look forward to speaking with you soon.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
