Core Insights - The article emphasizes the importance of evaluating potential equities in the power and energy industries for long-term investment opportunities [1] Group 1: Investment Strategy - The focus is on investing in income-producing equities and rental real estate properties to generate cash flow and achieve long-term appreciation [1] Group 2: Professional Background - The author is a Licensed Professional Engineer with a decade of experience in the Nuclear Power industry, which provides a strong foundation for analyzing investment opportunities [1]

Dec 2, 2025 7:04 PM Eastern Standard Time HOUSTON--(BUSINESS WIRE)--Black Stone Minerals, L.P. (NYSE: BSM) ("Black Stone,†"BSM,†or "the Partnership†) announced today it has entered into a 220,000 gross acre development agreement with an affiliate of Caturus Energy, LLC ("Caturus†) within the Shelby Trough and Haynesville Expansion. The agreement creates a multi-year drilling program designed to advance development of BSM's acreage under Caturus' operating expertise while supporting the growing demand ...

Production and Operations - As of September 30, 2025, the company holds mineral and royalty interests in 41 states, including approximately 71,000 producing wells[92] - Aethon Energy is operating one rig and has spud 3 out of 15 expected wells for the current program year, with 2 gross wells turned to sales in Q3 2025[94] - In the Louisiana Haynesville, 2 gross wells were turned to sales under Accelerated Drilling Agreements, bringing the total to 9 wells[95] - In the Permian Basin, 34 gross wells were spud, with 5 gross wells turned to sales in Q3 2025 and 13 gross wells expected to turn to sales in Q4 2025[96] - Aethon expects to drill a total of 15 wells in the current program year, having spud three wells as of September 30, 2025, with an inventory of 12 wells from the previous year expected to be turned to sales in Q4 2025 and early 2026[160] - Aethon has a total of 10 banked wells as of September 30, 2025, with one well from the previous program year replaced by a banked well[161] - The company is party to joint exploration agreements with Aethon, committing to a combined annual minimum drilling of 16 wells across both contract areas[159] - Under the Revenant Joint Exploration Agreement, Aethon has well commitments escalating over five years, starting with 6 wells in 2026 and reaching 25 wells in 2030 and beyond[163] Financial Performance - Total revenue for Q3 2025 decreased by 1.8% to $132.47 million compared to $134.86 million in Q3 2024, primarily due to decreased gains on commodity derivative instruments and lower oil and condensate sales[125] - Adjusted EBITDA for Q3 2025 was $86.28 million, slightly down from $86.44 million in Q3 2024[123] - Distributable cash flow for Q3 2025 was $76.76 million, compared to $78.62 million in Q3 2024, reflecting a decrease of 2.4%[123] - Total revenue for the nine months ended September 30, 2025, increased to $351.216 million, a 0.4% rise compared to $349.973 million in 2024[137] - Oil and condensate sales decreased by 22.1% to $162.991 million, down from $209.112 million, primarily due to lower production volumes and realized prices[138] - Natural gas and NGL sales increased by 27.7% to $147.510 million, up from $115.543 million, driven by higher realized prices despite lower production volumes[139] - Lease bonus and other income increased by 133.6% to $5.01 million in Q3 2025, driven by leasing activity in the Permian Basin and Haynesville/Bossier plays[129] - Lease bonus and other income rose by 58.8% to $16.645 million, compared to $10.480 million in the prior period, mainly from leasing activity in the Permian Basin[141] Commodity Prices and Market Conditions - Oil prices decreased to $63.17 per barrel in Q3 2025, down from $82.83 in Q3 2024, while natural gas prices increased to $3.12 per MMBtu from $1.54[101] - The realized price for oil and condensate decreased by 14.4% to $62.60 per Bbl in Q3 2025, while natural gas prices increased by 22.8% to $2.96 per Mcf[124] - Net natural gas exports averaged 14.5 Bcf per day in Q3 2025, a 22% increase from the 2024 average, with forecasts of 16.0 Bcf per day for the remainder of 2025[107] - Natural gas inventories concluded the injection season in October 2025 at 4.0 Tcf, which is 5% higher than the five-year average[105] - The U.S. rotary rig count for oil was 424 in Q3 2025, a decrease from 484 in Q3 2024, while natural gas rigs increased to 117 from 99[103] - Commodity prices for oil, natural gas, and NGLs are historically volatile, with a 10% discount applied to SEC commodity pricing resulting in an approximate 1.3% reduction in proved reserve volumes[170] Expenses and Cash Flow - Oil and condensate production increased by 4.2% to 912 MBbls in Q3 2025, while natural gas production decreased by 5.3% to 14,556 MMcf[124] - Interest expense rose significantly by 235.1% to $2.43 million in Q3 2025, attributed to higher average outstanding borrowings[135] - Operating expenses for Q3 2025 included a 13.7% increase in lease operating expenses to $2.75 million, primarily due to increased service-related expenses[130] - Interest expense increased by 207.9% to $6.093 million, compared to $1.979 million, due to higher average outstanding borrowings[147] - Cash flows provided by operating activities decreased to $245.067 million from $298.087 million, primarily due to reduced oil sales and lower realized prices[152] Capital Expenditures and Investments - Capital expenditures for non-operated working interests are expected to be approximately $2.3 million for 2025, with $0.6 million already invested[155] - During the nine months ended September 30, 2025, the company acquired mineral and royalty interests for $65.7 million, funded by $58.3 million in cash and $7.4 million in equity[156] Risk Management and Hedging - The company utilizes various derivative instruments to manage cash flow variability due to commodity price volatility[98] - The company hedged a portion of its expected future volumes for the remainder of 2025, 2026, and 2027, with a maximum of 90% hedged for the first 24 months[117] - The company intends to continuously monitor production and commodity prices to adjust hedging strategies accordingly[118] - Aethon evaluates the credit standing of its derivative contract counterparties, all rated Baa2 or better by Moody's as of September 30, 2025[171] - The company does not currently have any interest rate hedges in place but may use derivative instruments to hedge exposure to variable interest rates in the future[173] Debt and Compliance - The Credit Facility has a maximum credit amount of $1.0 billion, with a reaffirmed borrowing base of $580.0 million as of October 2025, and cash commitments maintained at $375.0 million[164] - Aethon was in compliance with all debt covenants as of September 30, 2025, with no material changes to contractual obligations or critical accounting policies[165][166][167] - Aethon had $82.5 million in weighted average outstanding borrowings under the Credit Facility at a weighted average interest rate of 7.16% for the nine months ended September 30, 2025[173] - The next semi-annual redetermination of the borrowing base under the Credit Facility is scheduled for April 2026[164]

Financial Data and Key Metrics Changes - The company reported net income of $91.7 million for Q3 2025, with Adjusted EBITDA at $86.3 million [10] - Mineral and royalty production increased to 34.7 thousand BOE per day, a 5% increase from the previous quarter [10] - Distributable cash flow for the quarter was $76.8 million, representing a coverage ratio of 1.21 times [11] Business Line Data and Key Metrics Changes - The increase in production was primarily driven by strong volumes in the Permian Basin [10] - Total production volumes reached 36.3 thousand BOE per day, with 57% of oil and gas revenue coming from oil and condensate production [10][11] Market Data and Key Metrics Changes - The company is optimistic about the natural gas market outlook, particularly due to increasing demand from LNG and power sectors [11] - The company expects to see significant gas growth from the Shelby Trough, with over 50 wells anticipated to be drilled annually [5][6] Company Strategy and Development Direction - The company is pursuing acquisitions in the Haynesville expansion and is working on a development agreement covering 220,000 gross acres [4][5] - The focus remains on increasing production and distribution outlook through ongoing development agreements and new projects in the Permian [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the company, emphasizing the importance of focusing on a multi-year forecast rather than short-term fluctuations [27] - The company is well-positioned to benefit from the expected stability in natural gas markets, suggesting that now is an opportune time to invest in shares [28] Other Important Information - The company added $20 million in mineral and royalty acquisitions during the quarter, bringing total acquisitions since September 2023 to approximately $193 million [8] - Management highlighted the potential for significant inventory in the Shelby Trough and surrounding areas, indicating ongoing geological exploration [22][25] Q&A Session Summary Question: Update on KLX area discussions and interest following Expand's entry - Management indicated progress in discussions, now at the half-yard line, with expectations to finalize soon [18] - Interest in commitments remains robust, with operating partners able to exceed minimum annual commitments [20] Question: Volume trends for Q4 and 2026 - Management remains cautious about updating guidance but is optimistic about Aethon volumes and Permian developments coming online [26] Question: Natural gas differentials and hedging strategy - The company maintains a consistent hedging strategy and is focused on high-interest acreage to mitigate challenges related to Waha pricing [34][35]

Financial Data and Key Metrics Changes - The company reported net income of $91.7 million for Q3 2025, with Adjusted EBITDA at $86.3 million [10] - Mineral and royalty production increased by 5% quarter-over-quarter to 34,700 BOE per day, while total production volumes reached 36,300 BOE per day [10] - Distributable cash flow for the quarter was $76.8 million, representing a coverage ratio of 1.21x [11] Business Line Data and Key Metrics Changes - The increase in production was primarily driven by strong volumes in the Permian Basin [10] - The company expects to double the current annual drilling rate in the expanded Shelby Trough over the next five years due to new developments and existing agreements [7] Market Data and Key Metrics Changes - The company maintains production guidance for 2025 at 33,000-35,000 BOE per day, with a focus on monitoring activity levels and commodity price dynamics [10] - The outlook for natural gas is increasingly constructive, supported by rising demand from LNG and power sectors [11] Company Strategy and Development Direction - The company is pursuing acquisitions in the Haynesville expansion and is working on solidifying a development agreement covering 220,000 gross acres [4][5] - The management is optimistic about the ongoing development in the Permian and the potential for significant gas growth in the Shelby Trough [6][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the company, emphasizing the importance of focusing on a multi-year forecast rather than short-term fluctuations [27] - The company is well-positioned to benefit from the expected stability in natural gas markets, suggesting that now is an opportune time to invest in shares [28] Other Important Information - The company added $20 million in mineral and royalty acquisitions during the quarter, bringing total acquisitions since September 2023 to approximately $193 million [8] - Management highlighted the potential for additional accretive acquisition opportunities in the near term [8] Q&A Session Summary Question: Update on KLX area discussions and interest following Expand's entry into Western Haynesville - Management indicated progress in discussions, now at the half-yard line, with expectations to finalize soon [18] - Interest in commitments remains robust, with operating partners capable of exceeding minimum annual commitments [20] Question: Volume trends for Q4 and 2026 - Management remains cautious about updating guidance but is optimistic about Aethon volumes and Permian developments coming online [26] Question: Natural gas differentials and hedging strategy - The company maintains a consistent hedging strategy and is focused on high-interest acreage developments to mitigate challenges at Waha [34][35]

Financial Data and Key Metrics Changes - The company reported net income of $91.7 million for Q3 2025, with adjusted EBITDA at $86.3 million, representing a 5% increase in mineral and royalty production to 34,700 BOE per day compared to the prior quarter [12][13][14] - Distributable cash flow for the quarter was $76.8 million, which represents a coverage ratio of 1.21 times for the period [13] Business Line Data and Key Metrics Changes - Mineral and royalty production increased to 34,700 BOE per day, driven by strong volumes in the Permian Basin, while total production volumes reached 36,300 BOE per day [12][13] - The company expects to drill over 50 wells annually in the expanded Shelby Trough, contributing to significant gas growth [7][10] Market Data and Key Metrics Changes - The company noted that 57% of oil and gas revenue in the quarter came from oil and condensate production [13] - The outlook for natural gas is increasingly constructive due to rising demand from LNG and power sectors, positioning the company favorably for future supply calls [14] Company Strategy and Development Direction - The company is pursuing acquisitions in the Haynesville expansion and is optimistic about the development of Revenant starting in early 2026 [7][8] - A grassroots acquisition program added $20 million in mineral and royalty acquisitions during the quarter, totaling approximately $193 million since September 2023 [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential anchored by development agreements in high-interest acreage and core legacy assets [14] - The company is focused on a multi-year forecast, emphasizing the importance of long-term strategies over short-term fluctuations [25] Other Important Information - The company is working on assembling additional development packages in the Shelby Trough and Western Haynesville, indicating a strong pipeline of opportunities [21][22] Q&A Session Summary Question: Update on KLX area discussions and interest in Western Haynesville - Management indicated progress in KLX area discussions, now at the half-yard line, with expectations to finalize soon. Interest in commitments following the entry into Western Haynesville remains robust [18][19] Question: Volume trends for Q4 and 2026 - Management did not update full-year guidance but expressed excitement about Aethon volumes coming online and ongoing developments in the Permian, suggesting a positive outlook for the upcoming months [23][24] Question: Natural gas differentials and hedging strategy - Management confirmed that their hedging strategy remains consistent, with a focus on maintaining good exposure to Henry Hub despite challenges at Waha [31][34]

Financial Data and Key Metrics Changes - The company reported net income of $91.7 million for Q3 2025, with Adjusted EBITDA at $86.3 million [11] - Mineral and royalty production increased to 34.7 thousand BOE per day, a 5% increase over the prior quarter [11] - Distributable cash flow for the quarter was $76.8 million, representing 1.21 times coverage for the period [12] Business Line Data and Key Metrics Changes - The increase in production was driven by strong volumes in the Permian Basin, with total production volumes reaching 36.3 thousand BOE per day [11] - The company declared a distribution of $0.30 per unit for the quarter, or $1.20 on an annualized basis [12] Market Data and Key Metrics Changes - The company is optimistic about the natural gas market, expecting increasing demand from LNG and power sectors over the next decade [12] - The outlook for natural gas is constructive, with significant assets located near LNG facilities [12] Company Strategy and Development Direction - The company is pursuing acquisitions in the Haynesville expansion and is working on development agreements covering 220,000 gross acres [4][5] - The partnership expects to drive over 50 wells drilled annually in the expanded Shelby Trough, providing significant gas growth [5] - The company is focused on long-term contract development in high-interest acreage and core legacy assets across the U.S. [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the existing acreage positions and commercial strategy, which are expected to deliver sustainable long-term value [13] - The company is monitoring activity levels and commodity price dynamics as it looks towards Q4 2025 and full year 2026 [11] Other Important Information - The company added $20 million in mineral and royalty acquisitions during the quarter, bringing total acquisitions since September 2023 to approximately $193 million [9] - The company is excited about the ongoing development in the Permian and expects additional liquids volumes in the next 12 to 18 months [9] Q&A Session Summary Question: Update on KLX area discussions and interest following Expand's entry into Western Haynesville - The company is at the half-yard line in discussions and expects to finalize a deal soon, with robust interest in commitments following Expand's announcement [18][21] Question: Insights on the package being assembled - The company sees significant inventory potential in the Shelby Trough and is excited about the geological developments in the area [22][23] Question: Volume trends for Q4 and 2026 - The company is optimistic about Aethon volumes coming online and expects an interesting winter season for activity levels [28] Question: Natural gas differentials and hedging strategy - The company maintains a consistent hedging strategy and is focused on high-interest acreage to mitigate challenges at Waha [34][36]

Production and Sales - Mineral and royalty production for Q3 2025 was 34.7 MBoe/d, a 5% increase from the previous quarter, with total production at 36.3 MBoe/d[7] - Total revenue for Q3 2025 was $132.47 million, a slight decrease of 1.1% compared to $134.86 million in Q3 2024[33] - Oil and condensate sales amounted to $57.09 million in Q3 2025, down 10.5% from $63.99 million in Q3 2024[34] - Natural gas and natural gas liquids sales increased by 16.3% to $43.09 million in Q3 2025 from $37.04 million in Q3 2024[34] - Production of oil and condensate for Q3 2025 was 912 MBbls, an increase of 4.2% from 875 MBbls in Q3 2024[34] Financial Performance - Net income for Q3 2025 was $91.7 million, down from $120.0 million in the previous quarter, while Adjusted EBITDA was $86.3 million[14][15] - Distributable cash flow for Q3 2025 was $76.8 million, compared to $74.8 million in Q2 2025[15] - Total debt at the end of Q3 2025 was $95.0 million, reduced to $73.0 million by October 31, 2025[7][16] - Net income for Q3 2025 was $91.73 million, a decrease of 1.1% compared to $92.73 million in Q3 2024[39] - Adjusted EBITDA for the nine months ended September 30, 2025, was $252.59 million, down 13.1% from $290.81 million in the same period of 2024[39] - Distributable cash flow for Q3 2025 was $76.76 million, a decrease of 2.3% from $78.62 million in Q3 2024[39] Pricing and Distribution - The average realized price per Boe for Q3 2025 was $30.01, a 7% decrease from $32.40 in Q2 2025[11] - The realized price for oil and condensate decreased to $62.60 per Bbl in Q3 2025 from $73.15 per Bbl in Q3 2024, a decline of 14.1%[34] - Black Stone announced a distribution of $0.30 per unit for Q3 2025, maintaining a distribution coverage of 1.21x[18] Acquisitions and Investments - Black Stone acquired $20.3 million in additional mineral and royalty interests during Q3 2025, totaling $193.2 million in acquisitions since September 2023[25] - Aethon Energy is on track to drill 15 wells in the current program year, with 3 wells already spud[19] - Black Stone's agreement with Revenant Energy includes a commitment to drill a minimum of 6 wells in 2026, increasing to 25 wells annually over the next five years[21] Market Conditions - The partnership's ability to execute its business strategies remains influenced by factors such as oil and natural gas price volatility and competition in the industry[31] - The Partnership has a hedge position covering portions of its anticipated production for 2025-2027, including oil swaps at prices ranging from $59.90 to $71.22 per barrel[26]

Core Insights - Black Stone Minerals, L.P. reported its financial and operational results for the third quarter of 2025, highlighting a focus on leadership succession and continued growth strategies [1][3][5]. Financial and Operational Highlights - Mineral and royalty production for Q3 2025 was 34.7 MBoe/d, a 5% increase from the previous quarter, while total production was 36.3 MBoe/d [5][9]. - Net income for the quarter was $91.7 million, with Adjusted EBITDA at $86.3 million and distributable cash flow of $76.8 million [5][14][15]. - The partnership declared a distribution of $0.30 per unit for Q3 2025, maintaining the same level as the prior quarter, with a distribution coverage ratio of 1.21x [5][18]. Leadership Changes - A leadership succession plan was announced, effective January 1, 2026, with Tom Carter becoming Executive Chairman, and Fowler Carter and Taylor DeWalch appointed as co-CEOs [3][4]. - The board expressed confidence in the new leadership team to continue the company's focus on organic growth and financial discipline [4]. Production and Revenue Details - The average realized price per Boe for Q3 2025 was $30.01, a 7% decrease from the previous quarter but a 2% increase year-over-year [10]. - Oil and gas revenue for the quarter was $100.2 million, a slight decrease from $102.0 million in Q2 2025 [11]. - The partnership reported a gain on commodity derivative instruments of $27.3 million for Q3 2025 [12]. Development and Acquisition Activities - Black Stone continues to engage in development activities, with Aethon Energy operating one rig and plans for 15 wells in the current program year [19][20]. - The partnership acquired $20.3 million in additional mineral and royalty interests during Q3 2025, contributing to a total of $193.2 million in acquisitions since September 2023 [26]. Financial Position and Credit Facility - As of the end of Q3 2025, total debt was $95.0 million, reduced to $73.0 million by October 31, 2025, with approximately $3.6 million in cash on hand [5][16]. - The credit facility's maturity date was extended to October 31, 2030, with a reaffirmed borrowing base of $580.0 million [17].

Core Insights - The AI investment landscape is experiencing a significant influx of capital, with notable investments such as NVIDIA's $100 billion into OpenAI and a broader $500 billion initiative [2][3] - Identifying undervalued AI stocks is challenging in a market where many technology stocks are perceived as overvalued, yet opportunities still exist [3][4] Company Overview: Black Stone Minerals L.P. (BSM) - Black Stone Minerals is positioned to benefit from the increasing energy demand driven by AI data centers, with strong profitability and a favorable valuation compared to other tech stocks [4][5] - The company has a unique business model that allows it to generate revenue through leasing mineral and royalty interests without bearing the operational risks associated with drilling [24][25] Energy Demand and Natural Gas - The demand for energy from data centers is projected to surge, with McKinsey estimating $6.7 trillion in capital expenditures needed by 2030 to meet compute power demands [9] - Natural gas is becoming a preferred energy source for data centers due to its reliability and efficiency, with capacity factors for natural gas combined cycle systems averaging 60% to 80% [10][13] Natural Gas Production and Market Position - Black Stone Minerals holds mineral rights across 20+ million gross acres in the U.S., with significant exposure to major producing basins [19] - The company is expanding its natural gas production capacity through development agreements, aiming to double its drilling obligations over the next five years [21][22] Financial Performance - Black Stone Minerals generated $245 million in Core Earnings in the TTM ended 2Q25, with a consistent growth trajectory in revenue and earnings since 2015 [26] - The company has maintained strong free cash flow, totaling $1.9 billion since 2020, which supports capital returns to shareholders [28][29] Profitability and Shareholder Returns - Black Stone Minerals boasts industry-leading profitability metrics, with a NOPAT margin improvement from 48% in 2019 to 64% in the TTM [27][33] - The company has increased its regular distribution from $0.08/unit in 2Q20 to $0.30/unit in 3Q25, providing a yield of approximately 9.3% [34][35] Market Outlook and Valuation - Despite lower oil prices impacting sales, rising natural gas prices have offset these declines, with projections indicating further increases in natural gas prices [38][39] - The current stock price implies a significant margin deterioration, yet historical growth rates suggest potential for a 50%+ increase in share value [41][42]