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]

Core Points - Black Stone Minerals, L.P. has declared a cash distribution of $0.30 per common unit for the third quarter of 2025, maintaining the same level as the previous quarter [1] Distribution Details - The distribution is attributed to the third quarter of 2025 and has been approved by the Board of Directors of the Partnership's general partner [1] - The announcement also includes the date for the third quarter 2025 earnings call [1]

Core Insights - LVMH has unexpectedly returned to growth in the third quarter, driven by increased traffic and volume rather than price effects [1][2] - The Wines and Spirits division, which had been declining for two and a half years, is now experiencing growth due to champagne restocking in the US and solid demand for rosé wine [2] - The luxury sector may benefit from LVMH's turnaround, with competitors like Zenyatta and Prada also showing positive movements in the market [4][5] Company Performance - All divisions of LVMH showed improvement, although the key fashion and leather goods division remained negative [1] - The CFO noted that the growth was not influenced by price increases, indicating a focus on volume and customer traffic [2] - The Wines and Spirits division's recovery is notable, particularly in the US market, despite ongoing struggles in the cognac segment [2] Regional Insights - The European market has seen a decline in tourism spending, attributed to a weaker dollar against a stronger euro, impacting sales negatively [3] - Conversely, the mainland China market has returned to growth, which could have significant implications for the broader luxury sector [3][4] - Hong Kong and Macao are still down but showing signs of improvement, indicating a potential recovery in these regions [3] Market Implications - The positive performance of LVMH could uplift the entire luxury market, as indicated by the rising stock prices of competitors [4][5] - Upcoming results from other luxury brands, including Kering and Gucci, are anticipated, which may further reflect the industry's recovery [5] - The market sentiment appears encouraging, suggesting a potential turnaround for the luxury sector as a whole [5]

Core Points - The presentation is part of Black Stone Minerals' September 2025 Investor Presentation, indicating ongoing communication with investors [1][2] - The Director of Finance, Mark Meaux, is leading the presentation, highlighting the company's commitment to transparency and investor relations [2] - Forward-looking statements will be made regarding the company's future performance, which may involve risks that could lead to actual results differing from expectations [3][4] Financial Measures - The company may refer to non-GAAP financial measures that are considered useful for evaluating performance, with reconciliations provided in the appendix of the presentation [5]

Core Insights - The market conditions remain challenging for the company, but there is positive momentum in certain segments, particularly in the U.S., Middle East, and Asia markets [1][2] - The company has experienced a modest sequential improvement in group net fee performance, driven by strong extension rates, although challenges persist in its largest markets, Germany and the Netherlands [2][3] - The TIP technology improvement program is nearing completion, with 10 out of 11 markets now onboarded globally, and the rollout is expected to be completed in Q4 [3][4] - The transition to a digital-first STEM workforce consultancy is seen as a strategic move that is already yielding early signs of scalability and efficiencies [4]

Core Insights - The company is focused on the development of transcript-related projects, indicating a commitment to enhancing their offerings in this area [1] - The publication of thousands of quarterly earnings calls per quarter suggests a significant volume of content being generated and shared with readers [1] - The ongoing growth and expansion of coverage highlight the company's strategic direction towards increasing its market presence in transcript services [1]

Core Insights - Ellipsis U.S. Onshore Holdings LLC has completed two significant transactions to enhance its position in key U.S. onshore basins through the acquisition of non-operated working interests and a large-scale farmout agreement [1] Group 1: Transactions Overview - The first transaction involves the acquisition of non-operated oil and gas assets in the Permian Basin, which includes current net production of approximately 4,000 barrels of oil equivalent per day and over 600 gross remaining drilling locations [2] - The second transaction is a Farmout Agreement with Black Stone Minerals, L.P. covering approximately 270,000 gross acres in East Texas, providing Ellipsis with the exclusive right to earn non-operated working interests in BSM's Haynesville acreage [3] Group 2: Strategic Implications - The Permian acquisition strengthens Ellipsis' Delaware Basin foundation and aligns with its strategy of building scale through high-margin, low-cost, non-operated assets, with an expected daily average production of 20,000 barrels of oil equivalent for the remainder of 2025 [2] - The Farmout Agreement includes a tiered commitment structure that escalates over five years, starting with a minimum of six wells in 2026 and increasing to 25 wells annually by year five, allowing for disciplined and capital-efficient scaling of exposure to Haynesville [3] Group 3: Company Background - Ellipsis, founded in 2023, is focused on acquiring and developing large-scale, producing oil and gas assets across the U.S., targeting non-operated working interest acquisitions exceeding $100 million [5] - Westlawn Group, founded in 2021, is a private investment firm that invests in both operated and non-operated upstream assets, maintaining a broad investment mandate across various regions including the U.S., Canada, and Latin America [6]

Company Overview - Black Stone Minerals (NYSE: BSM) has reduced its quarterly distribution by 20% and lowered its 2025 production guidance by approximately 14% at the guidance midpoint [2]. Financial Actions - The company has invested $172 million since September 2023 to acquire primarily non-producing and natural gas-focused minerals and royalty interests [2]. Analyst Insights - Aaron Chow, known as Elephant Analytics, has over 15 years of analytical experience and is a top-rated analyst on TipRanks. He co-founded a mobile gaming company that was acquired by PENN Entertainment and has expertise in designing in-game economic models for mobile apps with over 30 million combined installs [2]. Investment Focus - The investing group Distressed Value Investing, authored by Aaron Chow, emphasizes both value opportunities and distressed plays, with a significant focus on the energy sector [2].

Group 1 - Black Stone Minerals (NYSE: BSM) reported second quarter earnings that provided sufficient distribution coverage to the adjusted distribution level [1] - The new distribution level enables the company to allocate capital towards increasing inventory levels while managing a decline [1]

PART I – FINANCIAL INFORMATION [Item 1. Condensed Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, statements of equity, and statements of cash flows, along with their accompanying notes, providing a snapshot of the Partnership's financial position, performance, and cash movements [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the Partnership's financial position at specific dates, detailing assets, liabilities, and equity Consolidated Balance Sheet Summary | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | TOTAL CURRENT ASSETS | $93,386 | $78,544 | | NET PROPERTY AND EQUIPMENT | $1,165,794 | $1,134,041 | | TOTAL ASSETS | $1,267,889 | $1,218,906 | | LIABILITIES, MEZZANINE EQUITY, AND EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | TOTAL CURRENT LIABILITIES | $28,981 | $30,423 | | Credit facility | $99,000 | $25,000 | | TOTAL LIABILITIES | $165,273 | $89,467 | | MEZZANINE EQUITY (Series B preferred units) | $300,478 | $300,478 | | TOTAL EQUITY | $802,138 | $828,961 | | TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $1,267,889 | $1,218,906 | - Total assets increased by **$48.98 million (4.0%)** from December 31, 2024, to June 30, 2025, primarily driven by an increase in oil and natural gas properties, net, and current assets - Total liabilities significantly increased by **$75.81 million (84.7%)** from December 31, 2024, to June 30, 2025, mainly due to a substantial increase in the credit facility balance from **$25.0 million to $99.0 million** [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the Partnership's financial performance over specific periods, including total revenue, income from operations, net income, and earnings per unit Consolidated Statements of Operations Summary | (in thousands, except per unit amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | TOTAL REVENUE | $159,494 | $109,624 | $218,746 | $215,117 | | INCOME FROM OPERATIONS | $122,281 | $68,490 | $139,442 | $132,464 | | NET INCOME | $120,028 | $68,322 | $135,976 | $132,249 | | NET INCOME ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON UNIT (Basic) | $0.53 | $0.29 | $0.57 | $0.56 | - Total revenue for the three months ended June 30, 2025, increased by **$49.87 million (45.5%)** compared to the same period in 2024, primarily driven by a significant gain on commodity derivative instruments[11](index=11&type=chunk)[117](index=117&type=chunk) - Net income for the three months ended June 30, 2025, increased by **$51.71 million (75.7%)** year-over-year, reaching **$120.03 million**[11](index=11&type=chunk) - Basic EPS for the three months ended June 30, 2025, rose to **$0.53** from **$0.29** in the prior year, reflecting improved profitability[11](index=11&type=chunk) [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) This section outlines changes in the Partnership's equity over time, including common units outstanding, partners' equity, and impacts from repurchases, issuances, distributions, and net income Consolidated Statements of Equity Summary | (in thousands) | Common units (count) | Partners' equity (value) | | :------------- | :------------------- | :----------------------- | | BALANCE AT DECEMBER 31, 2024 | 210,695 | $828,961 | | BALANCE AT JUNE 30, 2025 | 211,842 | $802,138 | | **Changes (Dec 31, 2024 to Jun 30, 2025):** | | | | Repurchases of common units | (257) | ($3,755) | | Issuance of common units for property acquisitions | 509 | $7,417 | | Equity–based compensation | — | $7,610 | | Distributions | — | ($158,540) | | Net income | — | $135,976 | - Partners' equity decreased from **$828.96 million** at December 31, 2024, to **$802.14 million** at June 30, 2025, primarily due to distributions exceeding net income and other equity adjustments[13](index=13&type=chunk) - Common units outstanding increased from **210,695 thousand** at December 31, 2024, to **211,842 thousand** at June 30, 2025, mainly due to issuances for property acquisitions and restricted units granted, partially offset by repurchases[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the Partnership's cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows Summary | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :----------------------------- | :----------------------------- | | CASH FLOWS FROM OPERATING ACTIVITIES | $145,311 | $204,845 | | CASH FLOWS USED IN INVESTING ACTIVITIES | ($42,687) | ($51,681) | | CASH FLOWS USED IN FINANCING ACTIVITIES | ($102,624) | ($196,777) | | NET CHANGE IN CASH AND CASH EQUIVALENTS | $0 | ($43,613) | | CASH AND CASH EQUIVALENTS – end of the period | $2,519 | $26,669 | - Net cash provided by operating activities decreased by **$59.53 million (29.1%)** for the six months ended June 30, 2025, compared to the same period in 2024, primarily due to reduced oil sales and lower cash received from derivative settlements[16](index=16&type=chunk)[145](index=145&type=chunk) - Net cash used in financing activities decreased by **$94.15 million (47.8%)** for the six months ended June 30, 2025, compared to the same period in 2024, driven by lower distributions and net borrowings under the Credit Facility[16](index=16&type=chunk)[147](index=147&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 - BUSINESS AND BASIS OF PRESENTATION](index=7&type=section&id=NOTE%201%20-%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) This note describes Black Stone Minerals, L.P.'s business, its primary assets, and the basis for presenting its financial statements - Black Stone Minerals, L.P. (BSM) is a publicly traded Delaware limited partnership primarily owning oil and natural gas mineral interests, nonparticipating royalty interests, and overriding royalty interests across **41** U.S. states[18](index=18&type=chunk) - The Partnership operates in a single reportable segment, with the CEO acting as the Chief Operating Decision Maker (CODM), allocating resources and assessing performance based on consolidated net income[24](index=24&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the Partnership's significant accounting policies and any recent accounting pronouncements - No changes in significant accounting policies or their application occurred during the six months ended June 30, 2025[25](index=25&type=chunk) Accrued Revenue and Accounts Receivable (in thousands) | Accrued Revenue and Accounts Receivable (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------- | :------------ | :---------------- | | Accrued revenue | $74,577 | $67,047 | | Accounts receivable | $5,448 | $4,046 | | Total accrued revenue and accounts receivable | $80,025 | $71,093 | - The FASB issued ASU 2024-03 in November 2024, enhancing expense disaggregation disclosures, effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and the Partnership is evaluating its impact[27](index=27&type=chunk) [NOTE 3 - OIL AND NATURAL GAS PROPERTIES](index=9&type=section&id=NOTE%203%20-%20OIL%20AND%20NATURAL%20GAS%20PROPERTIES) This note details the Partnership's activities related to oil and natural gas property acquisitions and asset exchange transactions - During the six months ended June 30, 2025, the Partnership acquired **$45.4 million** in mineral and royalty interests, primarily unproved oil and natural gas properties in the Gulf Coast, funded by **$38.0 million** cash and **$7.4 million** in common units[28](index=28&type=chunk) - The Partnership completed multiple asset exchange transactions in March and February 2025 to consolidate acreage in East Texas, involving the acquisition of net leasehold acres in exchange for undeveloped net mineral and royalty acres in Louisiana and net leasehold acres[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [NOTE 4 - COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS](index=9&type=section&id=NOTE%204%20-%20COMMODITY%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) This note describes the Partnership's use of commodity derivative instruments to manage price risk and their fair values - The Partnership uses fixed-price swap contracts to mitigate commodity price risk, not for speculative purposes, and has not designated them as fair value or cash flow hedges[34](index=34&type=chunk)[35](index=35&type=chunk) Fair Values of Derivative Instruments (in thousands) | Fair Values of Derivative Instruments (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total Assets | $2,477 | $1,824 | | Total Liabilities | $18,838 | $15,433 | Open Oil Swap Contracts (as of June 30, 2025) | Open Oil Swap Contracts (as of June 30, 2025) | Volume (Bbl) | Weighted Average Price ($/Bbl) | | :------------------------------------ | :----------- | :----------------------------- | | 2025 Third Quarter | 555,000 | $71.22 | | 2026 First Quarter | 480,000 | $64.80 | Open Natural Gas Swap Contracts (as of June 30, 2025) | Open Natural Gas Swap Contracts (as of June 30, 2025) | Volume (MMBtu) | Weighted Average Price ($/MMBtu) | | :------------------------------------------ | :------------- | :------------------------------- | | 2025 Third Quarter | 11,040,000 | $3.45 | | 2026 First Quarter | 11,700,000 | $3.67 | [NOTE 5 - FAIR VALUE MEASUREMENTS](index=12&type=section&id=NOTE%205%20-%20FAIR%20VALUE%20MEASUREMENTS) This note explains the methodology for fair value measurements, categorizing financial instruments into a three-level hierarchy - The Partnership categorizes fair value measurements into a three-level hierarchy based on input observability, with commodity derivative financial instruments measured at Level **2** using market-observable inputs[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[44](index=44&type=chunk) Fair Value Measurements (in thousands) | Fair Value Measurements (in thousands) | Level 2 (June 30, 2025) | Level 2 (December 31, 2024) | | :----------------------------------- | :---------------------- | :-------------------------- | | Financial Assets (Commodity derivative instruments) | $16,481 | $5,634 | | Financial Liabilities (Commodity derivative instruments) | $32,842 | $19,243 | [NOTE 6 - CREDIT FACILITY](index=14&type=section&id=NOTE%206%20-%20CREDIT%20FACILITY) This note provides details on the Partnership's Credit Facility, including its maximum amount, borrowing base, interest rates, and compliance with covenants - The Credit Facility has a maximum credit amount of **$1.0 billion**, terminating on October 31, 2027, with a reaffirmed borrowing base of **$580.0 million** as of April 2025[51](index=51&type=chunk) - The weighted-average interest rate for the Credit Facility was **7.10%** during the six months ended June 30, 2025[54](index=54&type=chunk) - As of June 30, 2025, the aggregate principal balance outstanding was **$99.0 million**, with **$276.0 million** of unused available borrowings, and the Partnership was in compliance with all financial covenants[55](index=55&type=chunk)[56](index=56&type=chunk) [NOTE 7 - COMMITMENTS AND CONTINGENCIES](index=15&type=section&id=NOTE%207%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses the Partnership's environmental regulations, legal actions, and potential liabilities - The Partnership's business is subject to U.S. federal, state, and local environmental regulations, but potential remediation costs are not considered material[57](index=57&type=chunk)[58](index=58&type=chunk) - Management believes existing legal actions and claims as of June 30, 2025, will be resolved without material adverse effect on the Partnership's financial condition or operations[59](index=59&type=chunk) [NOTE 8 - INCENTIVE COMPENSATION](index=15&type=section&id=NOTE%208%20-%20INCENTIVE%20COMPENSATION) This note details the Partnership's incentive compensation plans, including cash and equity-based awards, and related expenses Incentive Compensation Expense (in thousands) | Incentive Compensation Expense (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :----------------------------- | | Cash—short and long-term incentive plans | $1,235 | $2,521 | | Equity-based compensation—restricted common units | $1,172 | $2,135 | | Equity-based compensation—restricted performance units | $238 | $1,780 | | Board of Directors incentive plan | $550 | $1,100 | | Total incentive compensation expense | $3,195 | $7,536 | - Total incentive compensation expense for the six months ended June 30, 2025, was **$7.54 million**, an increase from **$6.97 million** in the prior year[60](index=60&type=chunk) - The Partnership repurchased **256,771** common units for **$3.75 million** to satisfy tax withholding obligations upon the vesting of equity awards during the six months ended June 30, 2025[60](index=60&type=chunk)[13](index=13&type=chunk) [NOTE 9 - PREFERRED UNITS](index=15&type=section&id=NOTE%209%20-%20PREFERRED%20UNITS) This note describes the Series B cumulative convertible preferred units, their distribution rights, conversion options, and redemption terms - The Series B cumulative convertible preferred units, with a carrying value of **$300.5 million**, are entitled to quarterly distributions, with the rate adjusted to **9.8%** per annum on November 28, 2023, and readjusted every two years thereafter[61](index=61&type=chunk)[62](index=62&type=chunk)[65](index=65&type=chunk) - Holders can convert preferred units to common units on a one-for-one basis, and the Partnership has the option to redeem them during biennial **90-day** windows, with the next window opening on November 28, 2025[63](index=63&type=chunk)[64](index=64&type=chunk) [NOTE 10 - EARNINGS PER UNIT](index=16&type=section&id=NOTE%2010%20-%20EARNINGS%20PER%20UNIT) This note explains the calculation of basic and diluted earnings per unit using the two-class method - The Partnership uses the two-class method for EPU calculation, including restricted common units as participating securities[66](index=66&type=chunk) Earnings Per Unit | EPU (per common unit) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | $0.53 | $0.29 | $0.57 | $0.56 | | Diluted | $0.53 | $0.29 | $0.57 | $0.56 | - Potentially dilutive Series B cumulative convertible preferred units (**15,072 thousand** units) were excluded from diluted EPU computation for the six months ended June 30, 2025 and 2024, as their inclusion would be anti-dilutive[70](index=70&type=chunk) [NOTE 11 - COMMON UNITS](index=17&type=section&id=NOTE%2011%20-%20COMMON%20UNITS) This note outlines the rights of common unitholders, distribution policies, and details of the unit repurchase program - Common unitholders are entitled to distributions after preferred unitholders receive their **9.8%** per annum distribution[73](index=73&type=chunk) Distributions Declared and Paid Per Common Unit | Distributions Declared and Paid Per Common Unit | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Per common unit | $0.3750 | $0.3750 | $0.7500 | $0.8500 | - The Board authorized a **$150.0 million** unit repurchase program on October 30, 2023, but no repurchases were made under this program for the six months ended June 30, 2025[75](index=75&type=chunk) [NOTE 12 - SUBSEQUENT EVENTS](index=18&type=section&id=NOTE%2012%20-%20SUBSEQUENT%20EVENTS) This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - On July 16, 2025, the Board approved a distribution of **$0.30** per common unit for the three months ended June 30, 2025, payable on August 14, 2025[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Partnership's financial condition and results of operations, highlighting key business developments, the prevailing business environment, and how performance is evaluated [Cautionary Note Regarding Forward-Looking Statements](index=19&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises that the report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements based on current expectations, but actual results may differ materially due to significant risks and uncertainties, including commodity price volatility, production levels, and economic conditions[78](index=78&type=chunk) [Overview](index=20&type=section&id=Overview) This section provides an overview of Black Stone Minerals' business as a major owner and manager of oil and natural gas mineral interests in the U.S. - Black Stone Minerals is a major owner and manager of oil and natural gas mineral interests in the U.S., focusing on maximizing value from its existing portfolio through active management, leasing, and structuring terms to encourage drilling[81](index=81&type=chunk) - As of June 30, 2025, the Partnership's non-cost-bearing mineral and royalty interests were located in **41** states, including all major onshore producing basins, with ownership in approximately **71,000** producing wells[82](index=82&type=chunk) [Recent Developments](index=20&type=section&id=Recent%20Developments) This section highlights recent operational activities, including drilling results, accelerated drilling agreements, and new joint exploration agreements - Aethon Energy operated **two** rigs in the Shelby Trough, turning **2** gross (**0.10** net) wells to sales in Q2 2025, with **15** gross (**0.93** net) wells expected to turn to sales in late 2025/early 2026[83](index=83&type=chunk) - In the Louisiana Haynesville, **3** gross (**0.09** net) wells were turned to sales under Accelerated Drilling Agreements (ADAs) in Q2 2025, bringing the total to **seven**, with **two** more expected in Q3 2025[84](index=84&type=chunk)[86](index=86&type=chunk) - The Partnership entered a Joint Exploration Agreement (JEA) with Revenant Energy in May 2025, covering **270,000** gross acres in East Texas, with escalating annual well commitments from **6** in 2026 to **25** in 2030 and beyond[88](index=88&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - An amendment to the Aethon JEAs in May 2025 reduced the contract area by over **50,000** gross acres and lowered the combined annual well commitment to **16** wells[89](index=89&type=chunk) [Business Environment](index=21&type=section&id=Business%20Environment) This section analyzes the prevailing market conditions for oil and natural gas, including price trends, rig counts, and export forecasts - Oil prices decreased in H1 2025 compared to H1 2024 due to weakening global demand, trade policy changes, and an oversupplied market, while natural gas prices increased due to cold weather and higher wholesale power pricing[92](index=92&type=chunk) Benchmark Prices | Benchmark Prices | Second Quarter 2025 | First Quarter 2025 | Second Quarter 2024 | First Quarter 2024 | | :--------------- | :------------------ | :----------------- | :------------------ | :----------------- | | WTI spot oil price ($/Bbl) | $66.30 | $71.87 | $82.83 | $83.96 | | Henry Hub spot natural gas ($/MMBtu) | $3.26 | $4.11 | $2.42 | $1.54 | U.S. Rotary Rig Count | U.S. Rotary Rig Count | Second Quarter 2025 | First Quarter 2025 | Second Quarter 2024 | First Quarter 2024 | | :-------------------- | :------------------ | :----------------- | :------------------ | :----------------- | | Oil | 432 | 484 | 479 | 506 | | Natural gas | 109 | 103 | 97 | 112 | | Total | 547 | 592 | 581 | 621 | - Net natural gas exports averaged **14.2 Bcf** per day in H1 2025, a **19%** increase from 2024, with EIA forecasting further increases to **15.1 Bcf/day** for the remainder of 2025 and **16.0 Bcf/day** for 2026[99](index=99&type=chunk) [How We Evaluate Our Operations](index=23&type=section&id=How%20We%20Evaluate%20Our%20Operations) This section explains the key metrics and non-GAAP financial measures used by the Partnership to assess its operational performance and manage commodity price risk - The Partnership evaluates its operations based on volumes of oil and natural gas produced, commodity prices (including derivative effects), and non-GAAP financial measures like Adjusted EBITDA and Distributable cash flow[100](index=100&type=chunk)[104](index=104&type=chunk) - The Partnership uses fixed-price swap contracts to hedge up to **90%** of expected future volumes for the first **24** months, **70%** for months **25-36**, and **50%** for months **37-48**, without entering into speculative derivative instruments[109](index=109&type=chunk)[110](index=110&type=chunk) Non-GAAP Financial Measures (in thousands) | Non-GAAP Financial Measures (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $120,028 | $68,322 | $135,976 | $132,249 | | Adjusted EBITDA | $84,151 | $100,247 | $166,318 | $204,364 | | Distributable cash flow | $74,789 | $92,522 | $148,466 | $188,910 | - Adjusted EBITDA decreased by **$16.1 million (16.1%)** for the three months ended June 30, 2025, and by **$38.05 million (18.6%)** for the six months ended June 30, 2025, compared to the respective prior periods[115](index=115&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the Partnership's revenues and operating expenses for the reported periods [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=26&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the Partnership's production, revenue, and operating expenses for the three months ended June 30, 2025, against the same period in 2024 Production (Three Months Ended June 30) | Production (Three Months Ended June 30) | 2025 | 2024 | Variance | | :-------------------------------------- | :------ | :------ | :------- | | Oil and condensate (MBbls) | 863 | 953 | (90) (9.4%) | | Natural gas (MMcf) | 13,710 | 16,350 | (2,640) (16.1%) | | Equivalents (MBoe) | 3,148 | 3,678 | (530) (14.4%) | Revenue (Three Months Ended June 30, in thousands) | Revenue (Three Months Ended June 30, in thousands) | 2025 | 2024 | Variance | | :--------------------------------------- | :------- | :------- | :------- | | Oil and condensate sales | $55,807 | $73,889 | ($18,082) (24.5%) | | Natural gas and natural gas liquids sales | $46,189 | $36,493 | $9,696 (26.6%) | | Gain (loss) on commodity derivative instruments | $52,784 | ($5,547) | $58,331 (NM) | | Total revenue | $159,494 | $109,624 | $49,870 (45.5%) | - Oil and condensate sales decreased by **24.5%** due to lower production volumes (down **9.4%**) and realized commodity prices (down **16.6%**)[116](index=116&type=chunk)[118](index=118&type=chunk) - Natural gas and NGL sales increased by **26.6%** due to higher realized commodity prices (up **51.1%**), partially offset by decreased production volumes (down **16.1%**)[116](index=116&type=chunk)[120](index=120&type=chunk) - A significant gain of **$52.78 million** on commodity derivative instruments in Q2 2025, compared to a **$5.55 million** loss in Q2 2024, was primarily driven by changes in forward oil price curves[116](index=116&type=chunk)[121](index=121&type=chunk) Operating Expenses (Three Months Ended June 30, in thousands) | Operating Expenses (Three Months Ended June 30, in thousands) | 2025 | 2024 | Variance | | :-------------------------------------------- | :------ | :------ | :------- | | Lease operating expense | $2,990 | $2,579 | $411 (15.9%) | | Production costs and ad valorem taxes | $9,026 | $13,469 | ($4,443) (33.0%) | | Exploration expense | $1,749 | $14 | $1,735 (NM) | | Depreciation, depletion, and amortization | $9,187 | $11,356 | ($2,169) (19.1%) | | General and administrative | $13,924 | $13,395 | $529 (3.9%) | | Interest expense | $2,270 | $626 | $1,644 (262.6%) | - Production costs and ad valorem taxes decreased by **33.0%** due to lower production taxes from decreased oil prices and reduced production volumes, as well as lower ad valorem tax estimates[124](index=124&type=chunk) - Exploration expense significantly increased to **$1.75 million** from **$14 thousand**, primarily due to costs related to seismic data acquisition projects in the Shelby Trough area[125](index=125&type=chunk) - Interest expense surged by **262.6%** to **$2.27 million** due to higher average outstanding borrowings under the Credit Facility[128](index=128&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=28&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the Partnership's production, revenue, and operating expenses for the six months ended June 30, 2025, against the same period in 2024 Production (Six Months Ended June 30) | Production (Six Months Ended June 30) | 2025 | 2024 | Variance | | :------------------------------------ | :------ | :------ | :------- | | Oil and condensate (MBbls) | 1,579 | 1,876 | (297) (15.8%) | | Natural gas (MMcf) | 28,563 | 32,820 | (4,257) (13.0%) | | Equivalents (MBoe) | 6,340 | 7,346 | (1,006) (13.7%) | Revenue (Six Months Ended June 30, in thousands) | Revenue (Six Months Ended June 30, in thousands) | 2025 | 2024 | Variance | | :--------------------------------------- | :------- | :------- | :------- | | Oil and condensate sales | $105,900 | $145,113 | ($39,213) (27.0%) | | Natural gas and natural gas liquids sales | $104,424 | $78,504 | $25,920 (33.0%) | | Gain (loss) on commodity derivative instruments | ($3,217) | ($16,837) | $13,620 (80.9%) | | Total revenue | $218,746 | $215,117 | $3,629 (1.7%) | - Total revenue for the six months ended June 30, 2025, increased by **1.7%** to **$218.75 million**, primarily due to higher natural gas and NGL sales and a reduced loss on commodity derivatives, partially offset by decreased oil sales[130](index=130&type=chunk) - Lease bonus and other income increased by **39.6%** to **$11.64 million**, driven by leasing activity in the Permian Basin and proceeds from surface use waivers for solar development[129](index=129&type=chunk)[134](index=134&type=chunk) Operating Expenses (Six Months Ended June 30, in thousands) | Operating Expenses (Six Months Ended June 30, in thousands) | 2025 | 2024 | Variance | | :-------------------------------------------- | :------ | :------ | :------- | | Lease operating expense | $5,152 | $5,011 | $141 (2.8%) | | Production costs and ad valorem taxes | $19,211 | $26,507 | ($7,296) (27.5%) | | Exploration expense | $6,859 | $17 | $6,842 (NM) | | Depreciation, depletion, and amortization | $18,317 | $22,995 | ($4,678) (20.3%) | | General and administrative | $29,096 | $27,485 | $1,611 (5.9%) | | Interest expense | $3,667 | $1,255 | $2,412 (192.2%) | - Exploration expense increased significantly to **$6.86 million**, primarily due to a **$4.0 million** seismic data purchase and additional acquisition project costs[137](index=137&type=chunk) - General and administrative expenses increased by **5.9%** due to higher cash compensation (salaries, one-time personnel costs) and increased equity-based compensation from fewer award forfeitures[138](index=138&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Partnership's sources and uses of cash, capital expenditure plans, and compliance with debt covenants - Primary liquidity sources are cash from operations and Credit Facility borrowings; primary uses are distributions, debt reduction, and business investments[141](index=141&type=chunk) - The Board's distribution policy aims to pay quarterly common unit distributions from operating cash flow after preferred unit distributions and cash reserves, but there is no legal obligation or guarantee[142](index=142&type=chunk) - Cash flows provided by operating activities decreased by **$59.53 million (29.1%)** for the six months ended June 30, 2025, compared to the same period in 2024, mainly due to reduced oil sales and lower cash from derivative settlements[145](index=145&type=chunk) - Net cash used in investing activities decreased by **$8.99 million** for the six months ended June 30, 2025, primarily due to reduced acquisitions of oil and natural gas properties[146](index=146&type=chunk) - The 2025 capital expenditure budget for non-operated working interests is approximately **$2.3 million** (net of farmout reimbursements), with **$0.3 million** invested in H1 2025, mainly for workovers and recompletions[148](index=148&type=chunk) - The Partnership acquired **$45.4 million** in mineral and royalty interests in H1 2025, funded by **$38.0 million** cash and **$7.4 million** in common units, as part of its strategy for targeted acquisitions[149](index=149&type=chunk) - The Credit Facility's borrowing base was reaffirmed at **$580.0 million** in April 2025, with elected cash commitments maintained at **$375.0 million**, and the Partnership was in compliance with all debt covenants as of June 30, 2025[157](index=157&type=chunk)[158](index=158&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Partnership's exposure to various market risks, including commodity price risk, counterparty and customer credit risk, and interest rate risk, explaining how these risks are managed and their potential impact - The Partnership's primary market risk is the volatile pricing of oil, natural gas, and NGLs, which is partially mitigated by commodity derivative financial instruments (fixed-price swap contracts)[161](index=161&type=chunk) - A **10%** discount to SEC commodity pricing for Q2 2025 would result in an approximate **1.3%** reduction of proved reserve volumes[163](index=163&type=chunk) - Credit risk from derivative counterparties is managed by evaluating their credit standing; as of June 30, 2025, all **seven** counterparties were rated Baa2 or better by Moody's and are lenders under the Credit Facility[164](index=164&type=chunk) - Interest rate risk on indebtedness is present, with a **1%** increase in the interest rate on the average outstanding borrowings of **$71.6 million** (H1 2025) potentially increasing interest expense by **$0.4 million**[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the Partnership's disclosure controls and procedures and any changes in internal control over financial reporting - Management concluded that the Partnership's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting[167](index=167&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[168](index=168&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses the Partnership's involvement in legal actions and claims - Management believes that none of the pending routine litigation, disputes, or claims will have a material adverse effect on the Partnership's financial condition, cash flows, or results of operations[170](index=170&type=chunk) [Item 1A. Risk Factors](index=34&type=page&id=Item%201A.%20Risk%20Factors) This section refers readers to the comprehensive list of risk factors detailed in the Partnership's Annual Report on Form 10-K, noting any material updates - No material changes to the risk factors from those described in the 2024 Annual Report on Form 10-K have occurred, but additional unknown or immaterial risks could still adversely affect the business[171](index=171&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on recent unregistered sales of equity securities and the Partnership's common unit repurchase activities - During Q2 2025, the Partnership issued **253,158** common units valued at **$3.5 million** for property acquisitions, relying on a Section **4(a)(2)** exemption from registration[172](index=172&type=chunk) Purchases of Common Units (June 1 - June 30, 2025) | Purchases of Common Units (June 1 - June 30, 2025) | Total Number of Common Units Purchased | Average Price Paid Per Unit | | :----------------------------------------- | :----------------------------------- | :-------------------------- | | Units withheld for tax withholding | 35,721 | $13.05 | - The **$150.0 million** unit repurchase program authorized on October 30, 2023, remains active, with no repurchases made under this specific program during June 2025[173](index=173&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) This section provides additional information not covered elsewhere in the report - No directors or executive officers adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[174](index=174&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including partnership agreements, registration rights, incentive plans, and certifications - The exhibits include various amendments to the Certificate of Limited Partnership and the First Amended and Restated Agreement of Limited Partnership, reflecting governance changes[175](index=175&type=chunk) - Key exhibits include the Black Stone Minerals, L.P. 2025 Long-Term Incentive Plan and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act[175](index=175&type=chunk) [Signatures](index=38&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q filing - The report was signed on August 5, 2025, by Thomas L. Carter, Jr., President, CEO, and Chairman (Principal Executive Officer), and H. Taylor DeWalch, Senior Vice President, CFO, and Treasurer (Principal Financial Officer)[180](index=180&type=chunk)