[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents Black Stone Minerals, L.P.'s unaudited consolidated financial statements as of June 30, 2022, reflecting significant revenue and net income growth driven by higher commodity prices and a slight increase in total assets to **$1.27 billion** [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (thousands of dollars) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $155,500 | $107,974 | | **Net Property and Equipment** | $1,109,878 | $1,133,336 | | **Total Assets** | **$1,272,693** | **$1,247,921** | | **Total Current Liabilities** | $124,817 | $77,140 | | **Total Liabilities** | $230,005 | $184,292 | | **Total Equity** | $744,327 | $765,268 | | **Total Liabilities, Mezzanine Equity, and Equity** | **$1,272,693** | **$1,247,921** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Highlights (thousands of dollars, except per unit) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $180,372 | $58,442 | $216,796 | $120,010 | | **Income from Operations** | $133,067 | $17,026 | $127,319 | $34,239 | | **Net Income** | $131,788 | $15,429 | $124,786 | $31,615 | | **Net Income Attributable to Common Units** | $126,538 | $10,179 | $114,286 | $21,115 | | **Net Income Per Common Unit (basic)** | $0.60 | $0.05 | $0.55 | $0.10 | | **Net Income Per Common Unit (diluted)** | $0.59 | $0.05 | $0.55 | $0.10 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flow Highlights (thousands of dollars) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $160,139 | $125,579 | | **Net Cash Used in Investing Activities** | ($145) | ($12,754) | | **Net Cash Used in Financing Activities** | ($156,712) | ($113,578) | | **Net Change in Cash and Cash Equivalents** | $3,282 | ($753) | | **Cash and Cash Equivalents - End of Period** | $12,158 | $1,043 | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) - The Partnership's primary business is owning and managing oil and natural gas mineral and royalty interests across **41 states** in the continental U.S.[25](index=25&type=chunk) - The Partnership entered into farmout agreements with Canaan, Azul, and JWM to fund development of its working interests in San Augustine County, Texas, retaining overriding royalty interests[46](index=46&type=chunk) - As of June 30, 2022, the Partnership held open fixed-price swap contracts for oil and natural gas, with a net fair value liability of **$107.2 million**, to mitigate commodity price risk[55](index=55&type=chunk)[56](index=56&type=chunk)[63](index=63&type=chunk) - The Partnership's credit facility has a borrowing base of **$400.0 million**, with **$86.0 million** outstanding as of June 30, 2022, maturing in November 2024[82](index=82&type=chunk)[86](index=86&type=chunk) - On July 25, 2022, the Board approved a distribution of **$0.42 per common unit** for the second quarter of 2022[111](index=111&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant increase in revenue and profitability for the second quarter and first half of 2022, driven by strong commodity prices, while highlighting development activities and strong liquidity with **$314.0 million** unused borrowing capacity [Overview and Recent Developments](index=21&type=section&id=Overview%20and%20Recent%20Developments) - The company's principal business is maximizing the value of its mineral and royalty assets through active management and acquisitions[119](index=119&type=chunk) - Development activity is progressing in the Shelby Trough, with Aethon turning eight wells to sales in Angelina County and commencing operations on six additional wells; Aethon is also actively drilling and completing wells in San Augustine County[122](index=122&type=chunk) - In the Austin Chalk play, seven operators are actively engaged in redevelopment, with four rigs running; twelve wells with modern completions are producing, and an additional six are being drilled or completed[123](index=123&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q2 2022 vs Q2 2021 Performance | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | **Total Production (MBoe/d)** | 33.5 | 38.2 | (12.3)% | | Natural Gas Production (MMcf) | 12,895 | 15,676 | (17.7)% | | **Realized Oil Price ($/Bbl)** | $104.89 | $62.72 | 67.2% | | **Realized Natural Gas Price ($/Mcf)** | $8.62 | $3.60 | 139.4% | | **Total Revenue ($ thousands)** | $180,372 | $58,442 | 208.6% | - The increase in Q2 2022 revenue was primarily due to significantly higher realized commodity prices for both oil and natural gas, which more than offset a **17.7% decrease** in natural gas production volumes[161](index=161&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk) - For the six months ended June 30, 2022, total revenue increased **80.6%** to **$216.8 million** compared to the prior year, driven by higher commodity prices, partially offset by a **$60.0 million** increase in losses on commodity derivative instruments[175](index=175&type=chunk)[176](index=176&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary sources of liquidity are cash from operations and borrowings under the Credit Facility; as of June 30, 2022, the company had **$86.0 million** in borrowings outstanding[188](index=188&type=chunk) - Cash from operating activities increased to **$160.1 million** for the first six months of 2022, up from **$125.6 million** in the same period of 2021, mainly due to higher commodity prices[192](index=192&type=chunk)[196](index=196&type=chunk) - The 2022 capital expenditure budget for non-operated working interests is approximately **$4.5 million**, net of farmout reimbursements[195](index=195&type=chunk) - The Credit Facility has a borrowing base of **$400.0 million**, providing **$314.0 million** of unused borrowing capacity as of June 30, 2022[86](index=86&type=chunk)[199](index=199&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is commodity price volatility, mitigated by derivatives, alongside counterparty credit risk and interest rate risk on its **$86.0 million** variable-rate credit facility - The company's major market risk exposure is the pricing of oil, natural gas, and NGLs; it uses commodity derivative instruments to reduce exposure to price volatility[207](index=207&type=chunk) - As of June 30, 2022, the company had **seven derivative counterparties**, all rated **Baa1 or better by Moody's** and are lenders under the Credit Facility, mitigating counterparty risk[209](index=209&type=chunk) - The company is exposed to interest rate risk on its **$86.0 million** of outstanding borrowings under its Credit Facility; a **1% increase** in interest rates would have increased interest expense by **$0.4 million** for the first six months of 2022[211](index=211&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[213](index=213&type=chunk) - No changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[214](index=214&type=chunk) [PART II – OTHER INFORMATION](index=37&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation, but management anticipates no material adverse effect on its financial condition or operations from these pending matters - The Partnership is involved in routine litigation from time to time, but management does not expect any pending claims to have a material adverse effect on its financial condition or operations[217](index=217&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section highlights a new risk factor concerning rising inflation, which could lead to higher interest rates and a recession, potentially impacting cash generation and distributions - A new risk factor has been identified related to rising inflation, which could lead to increased interest rates and a recession[219](index=219&type=chunk) - An economic slowdown or recession could result in decreased drilling activity by operators and reduced demand for oil and natural gas, which would adversely affect cash flow and distributions[222](index=222&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the reporting period, the company had no unregistered sales or repurchases of its equity securities - There were no unregistered sales of equity securities or repurchases of equity securities by the issuer during the period[223](index=223&type=chunk)[224](index=224&type=chunk) [Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No other information was reported for the period - No information was reported under this item[225](index=225&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including required officer certifications - A list of exhibits filed with the report is provided, including officer certifications pursuant to the Sarbanes-Oxley Act of 2002[227](index=227&type=chunk)

Black Stone Minerals, L.P. (NYSE:BSM) Q1 2022 Earnings Conference Call May 3, 2022 11:30 AM ET Company Participants Evan Kiefer – Vice President of Investor Relations Tom Carter – Chairman and Chief Executive Officer Jeff Wood – President and Chief Financial Officer Garrett Gremillion – Vice President of Engineering and Geology Thad Montgomery – Vice President of Land Conference Call Participants Leo Mariani – KeyBanc Derrick Whitfield – Stifel Ken Reese – Sagepoint TJ Schultz – RBC Capital Trafford Lamar – ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2022 [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for Black Stone Minerals, L.P. and its subsidiaries for the quarter ended March 31, 2022, including balance sheets, statements of operations, equity, and cash flows, along with detailed notes explaining business operations, accounting policies, property transactions, derivative instruments, fair value measurements, credit facility, commitments, incentive compensation, preferred units, earnings per unit, common units, and subsequent events [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | ASSETS / LIABILITIES, MEZZANINE EQUITY, AND EQUITY | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------------------------- | :---------------------------- | :------------------------------- | | **TOTAL ASSETS** | $1,238,569 | $1,247,921 | | **TOTAL LIABILITIES** | $240,420 | $184,292 | | **MEZZANINE EQUITY** | $298,361 | $298,361 | | **TOTAL EQUITY** | $699,788 | $765,268 | | **TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY**| $1,238,569 | $1,247,921 | - Total assets decreased by approximately **$9.35 million** from December 31, 2021, to March 31, 2022[10](index=10&type=chunk) - Total liabilities increased significantly by approximately **$56.13 million**, primarily driven by a rise in commodity derivative liabilities[10](index=10&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's financial performance over a period, including revenues, expenses, and net income or loss | Metric (in thousands, except per unit amounts) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | | **TOTAL REVENUE** | $36,424 | $61,568 | | **INCOME (LOSS) FROM OPERATIONS** | $(5,748) | $17,213 | | **NET INCOME (LOSS)** | $(7,002) | $16,186 | | **NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON UNITS** | $(12,252) | $10,936 | | **Per common unit (basic)** | $(0.06) | $0.05 | | **Per common unit (diluted)** | $(0.06) | $0.05 | - Total revenue decreased by **40.8%** from **$61.57 million** in Q1 2021 to **$36.42 million** in Q1 2022, primarily due to a significant increase in losses on commodity derivative instruments[14](index=14&type=chunk) - The company reported a net loss of **$7.00 million** in Q1 2022, a substantial decline from a net income of **$16.19 million** in Q1 2021[14](index=14&type=chunk) [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) This section outlines changes in the company's equity, reflecting transactions with owners and comprehensive income | Metric (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | **Total equity** | $699,788 | $765,268 | | Common units outstanding | 209,392 | 208,666 | - Total equity decreased by **$65.48 million** from December 31, 2021, to March 31, 2022, primarily due to distributions and net loss[17](index=17&type=chunk) - Common units outstanding increased from 208,666 to 209,392, despite repurchases, due to restricted units granted[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | **NET CASH PROVIDED BY OPERATING ACTIVITIES** | $82,576 | $55,686 | | **NET CASH USED IN INVESTING ACTIVITIES** | $(96) | $(214) |\ | **NET CASH USED IN FINANCING ACTIVITIES** | $(84,703) | $(53,479) |\ | **NET CHANGE IN CASH AND CASH EQUIVALENTS** | $(2,223) | $1,993 |\ | **CASH AND CASH EQUIVALENTS – end of the period** | $6,653 | $3,789 | - Net cash provided by operating activities increased by **$26.89 million**, from **$55.69 million** in Q1 2021 to **$82.58 million** in Q1 2022[20](index=20&type=chunk) - Net cash used in financing activities increased by **$31.22 million**, from **$53.48 million** in Q1 2021 to **$84.70 million** in Q1 2022, primarily due to higher distributions and credit facility repayments[20](index=20&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 disclosures supporting the unaudited consolidated financial statements [NOTE 1 - BUSINESS AND BASIS OF PRESENTATION](index=7&type=section&id=NOTE%201%20-%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) Black Stone Minerals, L.P. (BSM) is a publicly traded Delaware limited partnership primarily owning non-cost-bearing oil and natural gas mineral and royalty interests across 41 U.S. states, including major onshore basins. The company also holds non-operated working interests. Financial statements are prepared in accordance with GAAP and SEC rules, consolidating all controlled investments and reporting proportionate shares of undivided interests in oil and natural gas property rights. BSM operates as a single reportable segment - BSM's primary business involves owning and managing oil and natural gas mineral interests, which are substantially non-cost-bearing mineral and royalty interests[23](index=23&type=chunk) - The Partnership's mineral and royalty interests span **41 states** in the continental U.S., covering all major onshore producing basins[23](index=23&type=chunk) - BSM operates in a single operating and reportable segment, with the CEO acting as the chief operating decision maker[29](index=29&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) There have been no changes to Black Stone Minerals, L.P.'s significant accounting policies or their application during the three months ended March 31, 2022, as previously disclosed in the 2021 Annual Report on Form 10-K. Accounts receivable primarily consist of revenues from contracts with customers - No changes in significant accounting policies or their application occurred during the three months ended March 31, 2022[32](index=32&type=chunk) | Accounts receivable (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------------- | :------------- | :---------------- | | Revenues from contracts with customers | $94,691 | $93,005 | | Other | $4,772 | $4,137 | | **Total accounts receivable** | **$99,463** | **$97,142** | [NOTE 3 - OIL AND NATURAL GAS PROPERTIES](index=8&type=section&id=NOTE%203%20-%20OIL%20AND%20NATURAL%20GAS%20PROPERTIES) This note details BSM's activities related to oil and natural gas properties, including acquisitions, divestitures, and farmout agreements. In May 2021, BSM acquired mineral and royalty acreage in the Midland Basin for $20.8 million. The company divested TLW Investments, L.L.C. in Q3 2021 for $0.2 million. BSM has entered into farmout agreements in the Shelby Trough (San Augustine and Angelina Counties) to reduce capital expenditures, retaining value through overriding royalty interests. No impairment of oil and natural gas properties was recognized for the three months ended March 31, 2022 and 2021 - In May 2021, BSM acquired mineral and royalty acreage in the northern Midland Basin for **$20.8 million**, consisting of cash and common units[35](index=35&type=chunk) - BSM divested its wholly owned subsidiary, TLW Investments, L.L.C., in Q3 2021 for **$0.2 million**[36](index=36&type=chunk) - Farmout agreements in San Augustine and Angelina Counties (Shelby Trough) with partners like Aethon, Canaan, Azul, and JWM are designed to fund working interest development and provide BSM with overriding royalty interests[43](index=43&type=chunk)[44](index=44&type=chunk)[49](index=49&type=chunk) - No impairment of oil and natural gas properties was recognized for the three months ended March 31, 2022, or 2021[51](index=51&type=chunk) [NOTE 4 - COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS](index=10&type=section&id=NOTE%204%20-%20COMMODITY%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) Black Stone Minerals uses commodity derivative financial instruments, primarily fixed-price swap contracts, to mitigate exposure to oil and natural gas price volatility, not for speculative purposes. These contracts are not designated as hedges, so fair value changes are recognized in the consolidated statement of operations. Derivative liabilities significantly increased from December 31, 2021, to March 31, 2022, driven by unrealized losses due to changes in forward commodity price curves. The Partnership manages credit risk by evaluating counterparties, all of whom are rated Baa1 or better - BSM uses oil and natural gas commodity derivative financial instruments, such as fixed-price swap contracts, to mitigate price risk, not for speculation[52](index=52&type=chunk)[53](index=53&type=chunk) | Derivative Liabilities (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------------------ | :------------- | :---------------- | | Current commodity derivative liabilities | $138,028 | $51,544 | | Long-term commodity derivative liabilities | $4,293 | $2,001 | | **Total liabilities** | **$142,321** | **$53,545** | | Net Change in Fair Value of Commodity Derivative Instruments (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Beginning fair value | $(53,545) | $(20,017) | | Gain (loss) on oil derivative instruments | $(48,842) | $(24,854) | | Gain (loss) on natural gas derivative instruments | $(71,178) | $(3,028) | | Net cash paid (received) on settlements of oil derivative instruments | $15,892 | $4,502 | | Net cash paid (received) on settlements of natural gas derivative instruments | $15,352 | $21 |\ | **Net change in fair value** | **$(88,776)** | **$(23,359)** |\ | **Ending fair value** | **$(142,321)** | **$(43,376)** | - The Partnership recognized **$31.2 million** in realized losses and **$88.8 million** in unrealized losses from commodity contracts in Q1 2022, compared to **$4.5 million** and **$23.4 million**, respectively, in Q1 2021[161](index=161&type=chunk) [NOTE 5 - FAIR VALUE MEASUREMENTS](index=13&type=section&id=NOTE%205%20-%20FAIR%20VALUE%20MEASUREMENTS) Fair value measurements are categorized into a three-level hierarchy based on input observability. BSM's commodity derivative financial instruments are measured at fair value on a recurring basis using Level 2 inputs (observable market data). Nonfinancial assets like oil and natural gas properties are measured at fair value on a non-recurring basis using Level 3 inputs (unobservable, significant assumptions) for business combinations and impairment assessments. The carrying values of cash, receivables, payables, and debt approximate fair value - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[65](index=65&type=chunk)[66](index=66&type=chunk) - Commodity derivative financial instruments are measured at fair value on a recurring basis using Level 2 inputs[71](index=71&type=chunk)[72](index=72&type=chunk) - Oil and natural gas properties are measured at fair value on a non-recurring basis using Level 3 inputs for acquisitions and impairment assessments[74](index=74&type=chunk)[75](index=75&type=chunk) [NOTE 6 - CREDIT FACILITY](index=15&type=section&id=NOTE%206%20-%20CREDIT%20FACILITY) Black Stone Minerals maintains a $1.0 billion senior secured revolving credit facility, terminating November 1, 2024, with a borrowing base reaffirmed at $400.0 million in October 2021 and April 2022. Outstanding borrowings were $69.0 million at March 31, 2022, with a weighted-average interest rate of 2.94%. The facility includes financial covenants (current ratio ≥ 1.0:1.0, total debt to EBITDAX ≤ 3.5:1.0) and restrictions on distributions. The Partnership was in compliance with all covenants as of March 31, 2022. The facility includes provisions for transitioning from LIBOR to SOFR, which is not expected to have a material impact - The Credit Facility has an aggregate maximum credit amount of **$1.0 billion** and terminates on November 1, 2024[79](index=79&type=chunk) - The borrowing base was reaffirmed at **$400.0 million** in October 2021 and April 2022[79](index=79&type=chunk) - Outstanding borrowings were **$69.0 million** at March 31, 2022, with a weighted-average interest rate of **2.94%**[81](index=81&type=chunk)[83](index=83&type=chunk) - The Partnership was in compliance with all financial covenants (current ratio ≥ 1.0:1.0 and total debt to EBITDAX ≤ 3.5:1.0) as of March 31, 2022[82](index=82&type=chunk) [NOTE 7 - COMMITMENTS AND CONTINGENCIES](index=15&type=section&id=NOTE%207%20-%20COMMITMENTS%20AND%20CONTINGENCIES) Black Stone Minerals is subject to U.S. federal, state, and local environmental regulations. The Partnership does not consider potential remediation costs from environmental issues to be significant and has not recorded a provision for them. The company is also involved in routine litigation and claims, but management believes existing claims will be resolved without a material adverse effect on financial condition or operations - The Partnership's business is subject to U.S. federal, state, and local environmental regulations[85](index=85&type=chunk) - Potential environmental remediation costs are not considered significant, and no provision has been recorded[86](index=86&type=chunk) - Management believes current legal actions and claims will not have a material adverse effect on the Partnership's financial condition or operations[89](index=89&type=chunk) [NOTE 8 - INCENTIVE COMPENSATION](index=16&type=section&id=NOTE%208%20-%20INCENTIVE%20COMPENSATION) Total incentive compensation expense for the three months ended March 31, 2022, was $5.547 million, an increase from $4.847 million in the prior year. This includes cash, equity-based compensation (restricted common units and performance units), and Board of Directors incentive plan expenses. The Board approved Aspirational Awards in Q1 2022, including performance cash and equity awards tied to a 2025 production target and net debt to EBITDA ratio. As of March 31, 2022, no expense was recognized for these awards as achievement of performance conditions was not yet probable | Incentive Compensation Expense (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Cash—short and long-term incentive plans | $996 | $1,385 | | Equity-based compensation—restricted common units | $927 | $949 | | Equity-based compensation—restricted performance units | $3,093 | $2,161 | | Board of Directors incentive plan | $531 | $352 | | **Total incentive compensation expense** | **$5,547** | **$4,847** | - Aspirational Awards, approved in Q1 2022, include performance cash awards (**$4.7 million**) and performance equity awards (**$16.9 million** for 1,463,202 performance units) tied to a 2025 production target and net debt to EBITDA ratio[90](index=90&type=chunk) - No expense for Aspirational Awards was recognized as of March 31, 2022, because the achievement of performance conditions was not yet probable[90](index=90&type=chunk) [NOTE 9 - PREFERRED UNITS](index=16&type=section&id=NOTE%209%20-%20PREFERRED%20UNITS) Black Stone Minerals has 14,711,219 Series B cumulative convertible preferred units outstanding, issued in November 2017 for approximately $300.0 million. These units are entitled to a 7% annual distribution, payable quarterly, and are convertible into common units on a one-for-one basis. The carrying value was $298.4 million as of March 31, 2022, and December 31, 2021, and they are classified as mezzanine equity due to redemption provisions outside the Partnership's control - **14,711,219 Series B** cumulative convertible preferred units were issued in November 2017 for approximately **$300.0 million**[91](index=91&type=chunk) - These preferred units are entitled to a **7% annual distribution**, payable quarterly, and are convertible into common units on a one-for-one basis[92](index=92&type=chunk) - The carrying value of Series B preferred units was **$298.4 million** as of March 31, 2022, and December 31, 2021, classified as mezzanine equity[93](index=93&type=chunk)[95](index=95&type=chunk) [NOTE 10 - EARNINGS PER UNIT](index=17&type=section&id=NOTE%2010%20-%20EARNINGS%20PER%20UNIT) Black Stone Minerals calculates earnings per unit (EPU) using the two-class method, including restricted common units as participating securities. Net income (loss) is allocated to the general partner and common unitholders pro rata after preferred unit distributions. Diluted EPU considers Series B cumulative convertible preferred units on an as-converted basis and restricted performance unit awards. For Q1 2022, both basic and diluted EPU were $(0.06), compared to $0.05 in Q1 2021 - The Partnership applies the two-class method for calculating earnings per unit (EPU), including restricted common units as participating securities[96](index=96&type=chunk) | EPU Metric (in thousands, except per unit amounts) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | **NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON UNITS** | $(12,252) | $10,936 | | **Per common unit (basic)** | $(0.06) | $0.05 | | **Per common unit (diluted)** | $(0.06) | $0.05 | | **Weighted average common units outstanding (basic)** | 209,323 | 207,442 | | **Weighted average common units outstanding (diluted)** | 209,323 | 207,442 | - Potentially dilutive securities, such as Series B preferred units (**14,969 thousand units**), were anti-dilutive for the periods presented and thus excluded from diluted EPU calculation[99](index=99&type=chunk) [NOTE 11 - COMMON UNITS](index=18&type=section&id=NOTE%2011%20-%20COMMON%20UNITS) Common unitholders participate in distributions and have voting rights, though voting is restricted for persons or groups owning 15% or more of any class of units, with certain exceptions. Distributions are paid quarterly, first to Series B preferred unitholders, then to common unitholders. Distributions declared and paid per common unit increased to $0.2700 in Q1 2022 from $0.1750 in Q1 2021. The Board authorized a $75.0 million common unit repurchase program in November 2018, but no repurchases were made under this program in Q1 2022, with $4.2 million repurchased since inception - Common unitholders have distribution and voting rights, with voting restrictions for large ownership stakes (**15% or more**) subject to exceptions[102](index=102&type=chunk)[103](index=103&type=chunk) - Quarterly distributions are prioritized for Series B cumulative convertible preferred units (**7% per annum**) before common units[104](index=104&type=chunk) | Distributions per common unit | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Distributions declared and paid per common unit | $0.2700 | $0.1750 | - The Partnership has a **$75.0 million** common unit repurchase program, under which **$4.2 million** has been repurchased since inception, but no repurchases were made in Q1 2022[106](index=106&type=chunk) [NOTE 12 - SUBSEQUENT EVENTS](index=18&type=section&id=NOTE%2012%20-%20SUBSEQUENT%20EVENTS) On April 25, 2022, the Board approved a distribution of $0.40 per common unit for the three months ended March 31, 2022, payable on May 20, 2022, to unitholders of record on May 13, 2022 - The Board approved a distribution of **$0.40 per common unit** for Q1 2022 on April 25, 2022[107](index=107&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Black Stone Minerals' financial condition and operational results, including an overview of its business strategy, recent developments in key drilling areas, and the broader business environment. It details how the company evaluates its performance using operational and financial measures, discusses the impact of commodity prices and hedging, and reconciles non-GAAP financial measures. The analysis also covers the results of operations for Q1 2022 compared to Q1 2021, focusing on revenue, expenses, liquidity, and capital resources [Cautionary Note Regarding Forward-Looking Statements](index=19&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises readers about the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements identified by words like 'believe,' 'expect,' 'anticipate,' and 'plan,' which are based on current expectations and beliefs[110](index=110&type=chunk) - Actual results may differ materially due to significant risks and uncertainties, including the COVID-19 pandemic, the conflict in Ukraine, volatility of commodity prices, production levels, and general economic conditions[110](index=110&type=chunk)[112](index=112&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the company undertakes no obligation to update or revise them[114](index=114&type=chunk) [Overview](index=20&type=section&id=Overview) This section provides a high-level summary of Black Stone Minerals' business, strategic objectives, and asset base - Black Stone Minerals is one of the largest owners and managers of oil and natural gas mineral interests in the U.S[115](index=115&type=chunk) - The principal business involves maximizing the value of existing mineral and royalty assets through active management and expanding the asset base via acquisitions[115](index=115&type=chunk) - As of March 31, 2022, mineral and royalty interests were located in **41 states**, including over **70,000 producing wells**, providing stable production and reserves[116](index=116&type=chunk) [Recent Developments](index=21&type=section&id=Recent%20Developments) This section highlights key operational updates and drilling activities in the company's primary asset areas - In the Shelby Trough, Aethon has turned **six wells** to sales (four in April 2022) and commenced operations on **four additional wells** in Angelina County, while drilling two and completing two in San Augustine County[118](index=118&type=chunk) - XTO Energy has resumed drilling **three wells** on Shelby Trough acreage in San Augustine County, originally spud in 2019[118](index=118&type=chunk) - In the Austin Chalk, agreements with multiple operators are in place, with **seven wells** using modern completion technology now producing and **five more** being drilled or completed[119](index=119&type=chunk) [Business Environment](index=21&type=section&id=Business%20Environment) This section describes the external factors influencing the company's operations, including commodity prices and market trends - The COVID-19 pandemic's operational impact is minimal, with flexible work arrangements and health safety measures in place[120](index=120&type=chunk)[121](index=121&type=chunk) | Benchmark Prices | Q1 2022 ($) | Q1 2021 ($) | | :--------------- | :---------- | :---------- | | WTI spot oil price ($/Bbl) | 100.53 | 59.19 | | Henry Hub spot natural gas ($/MMBtu) | 5.46 | 2.52 | - U.S. LNG exports averaged **11.5 Bcf per day** in Q1 2022, an **18% increase** from 2021, with forecasts for continued high demand[126](index=126&type=chunk) | U.S. Rotary Rig Count | Q1 2022 | Q1 2021 | | :-------------------- | :------ | :------ | | Oil | 531 | 324 | | Natural gas | 137 | 92 | | Other | 2 | 1 | | **Total** | **670** | **417** | - Natural gas inventories are estimated to conclude the injection season in October 2022 at **3.5 Tcf**, **4% lower** than the previous five-year average[131](index=131&type=chunk) [How We Evaluate Our Operations](index=24&type=section&id=How%20We%20Evaluate%20Our%20Operations) This section explains the key operational and financial metrics management uses to assess the company's performance - Management assesses performance using production volumes, commodity prices (including derivative effects), Adjusted EBITDA, and Distributable cash flow[134](index=134&type=chunk) - Realized commodity prices are influenced by global/regional supply/demand, product quality (API gravity, impurities), and location differentials (transportation costs)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - The Partnership uses derivative instruments (fixed-price swap contracts) to mitigate commodity price volatility, hedging up to **90%** of available volumes for the first **24 months**[143](index=143&type=chunk)[147](index=147&type=chunk) | Non-GAAP Financial Measures (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------------------------- | :-------------------------------- | :-------------------------------- | | **Net income (loss)** | $(7,002) | $16,186 | | Adjustments to reconcile to Adjusted EBITDA: | | | | Depreciation, depletion, and amortization | 10,917 | 15,632 | | Interest expense | 1,209 | 1,210 | | Income tax expense (benefit) | 103 | (157) | | Accretion of asset retirement obligations | 202 | 292 | | Equity–based compensation | 4,551 | 3,462 | | Unrealized (gain) loss on commodity derivative instruments | 88,776 | 23,359 | | **Adjusted EBITDA** | **$98,756** | **$59,984** | | Adjustments to reconcile to Distributable cash flow: | | | | Change in deferred revenue | (9) | (9) |\ | Cash interest expense | (862) | (953) |\ | Preferred unit distributions | (5,250) | (5,250) |\ | **Distributable cash flow** | **$92,635** | **$53,772** | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance for the period, comparing revenues and expenses to the prior year | Metric (in thousands, except per unit amounts) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Variance ($) | Variance (%) | | :--------------------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | :----------- | | **Production:** | | | | | | Oil and condensate (MBbls) | 831 | 829 | 2 | 0.2% | | Natural gas (MMcf) | 12,759 | 14,911 | (2,152) | (14.4)% | | Equivalents (MBoe) | 2,958 | 3,314 | (356) | (10.7)% | | Equivalents/day (MBoe) | 32.9 | 36.8 | (3.9) | (10.6)% | | **Realized prices, without derivatives:** | | | | | | Oil and condensate ($/Bbl) | $91.25 | $53.29 | $37.96 | 71.2% | | Natural gas ($/Mcf) | $5.94 | $2.88 | $3.06 | 106.3% | | Equivalents ($/Boe) | $51.25 | $26.27 | $24.98 | 95.1% | | **Revenue:** | | | | | | Oil and condensate sales | $75,831 | $44,176 | $31,655 | 71.7% | | Natural gas and natural gas liquids sales | $75,754 | $42,889 | $32,865 | 76.6% | | Lease bonus and other income | $4,859 | $2,385 | $2,474 | 103.7% | | Revenue from contracts with customers | $156,444 | $89,450 | $66,994 | 74.9% | | Gain (loss) on commodity derivative instruments | $(120,020) | $(27,882) | $(92,138) | 330.5% | | **Total revenue** | **$36,424** | **$61,568** | **$(25,144)**| (40.8)% | | **Operating expenses:** | | | | | | Lease operating expense | $3,161 | $2,664 | $497 | 18.7% | | Production costs and ad valorem taxes | $13,949 | $11,842 | $2,107 | 17.8% | | Exploration expense | $180 | $1,073 | $(893) | (83.2)% | | Depreciation, depletion, and amortization | $10,917 | $15,632 | $(4,715) | (30.2)% | | General and administrative | $13,763 | $12,852 | $911 | 7.1% | | **Other expense:** | | | | | | Interest expense | $1,209 | $1,210 | $(1) | (0.1)% | - Total revenue decreased by **40.8%** primarily due to increased unrealized losses from commodity derivative instruments, despite higher oil and natural gas sales and lease bonus income[158](index=158&type=chunk) - Oil and condensate sales increased by **71.7%** due to higher realized commodity prices, while natural gas and NGL sales increased by **76.6%** due to higher prices, partially offset by lower production volumes[156](index=156&type=chunk)[160](index=160&type=chunk) - Operating expenses saw increases in lease operating expense (**18.7%**) and production costs/ad valorem taxes (**17.8%**), while depreciation, depletion, and amortization decreased by **30.2%**[163](index=163&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations and fund its operations - Primary liquidity sources are cash from operations, Credit Facility borrowings, and equity/debt issuances; primary uses are distributions, debt reduction, and acquisitions[171](index=171&type=chunk) - As of March 31, 2022, outstanding borrowings under the Credit Facility were **$69.0 million**[171](index=171&type=chunk) | Cash Flows (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change ($) | | :------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Operating activities | $82,576 | $55,686 | $26,890 | | Investing activities | $(96) | $(214) | $118 | | Financing activities | $(84,703) | $(53,479) | $(31,224) | - The 2022 capital expenditure budget for non-operated working interests is approximately **$4.5 million**, net of farmout reimbursements, with **$0.1 million** invested in Q1 2022[178](index=178&type=chunk) - The Credit Facility's borrowing base was reaffirmed at **$400.0 million** in April 2022, and the Partnership was in compliance with all debt covenants as of March 31, 2022[182](index=182&type=chunk)[185](index=185&type=chunk) [Contractual Obligations](index=32&type=section&id=Contractual%20Obligations) This section outlines the company's significant contractual commitments and payment obligations - There have been no material changes to contractual obligations previously disclosed in the 2021 Annual Report on Form 10-K as of March 31, 2022[188](index=188&type=chunk) [Critical Accounting Policies and Related Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Related%20Estimates) This section describes the accounting policies that require significant judgment and estimation by management - No significant changes to critical accounting policies and related estimates were made as of March 31, 2022, compared to those disclosed in the 2021 Annual Report on Form 10-K[189](index=189&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) Black Stone Minerals is exposed to commodity price risk for oil, natural gas, and NGLs, which it mitigates using commodity derivative instruments. A hypothetical 10% reduction in SEC commodity pricing would result in an approximate 1% reduction of proved reserve volumes. The company also faces counterparty credit risk from derivative contracts and operators, which is managed through credit evaluations, with all six derivative counterparties rated Baa1 or better. Interest rate risk exists on its floating-rate Credit Facility, where a 1% interest rate increase would result in a $0.2 million increase in interest expense for Q1 2022 - Major market risk exposure is the pricing of oil, natural gas, and NGLs, which is mitigated using commodity derivative instruments[190](index=190&type=chunk) - A **10% reduction** in SEC commodity pricing would lead to an approximate **1% reduction** in proved reserve volumes[191](index=191&type=chunk) - Credit risk from derivative counterparties is managed by evaluating credit standing; all **six counterparties** are rated Baa1 or better by Moody's[192](index=192&type=chunk) - A **1% increase** in the interest rate on the **$69.0 million** outstanding Credit Facility debt would increase interest expense by **$0.2 million** for Q1 2022[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Black Stone Minerals' management, including the principal executive and financial officers, evaluated the effectiveness of its disclosure controls and procedures as of March 31, 2022, concluding they were effective in providing reasonable assurance for timely and accurate financial reporting. There were no material changes in internal control over financial reporting during the quarter ended March 31, 2022 - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022, providing reasonable assurance for timely and accurate reporting[196](index=196&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2022[197](index=197&type=chunk) [PART II – OTHER INFORMATION](index=34&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section includes additional disclosures not covered in the financial information, such as legal proceedings and risk factors [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Black Stone Minerals is routinely involved in legal actions and claims arising from its business activities. Management believes that none of the pending litigation, disputes, or claims as of March 31, 2022, if decided adversely, will have a material adverse effect on the Partnership's financial condition, cash flows, or results of operations - The Partnership is involved in routine litigation and claims in the ordinary course of business[200](index=200&type=chunk) - Management believes that existing claims will be resolved without a material adverse effect on the Partnership's financial condition, cash flows, or results of operations[200](index=200&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) Readers should consider the risk factors detailed in Black Stone Minerals' 2021 Annual Report on Form 10-K. There have been no material changes to these risk factors, except for any updates provided within this Quarterly Report on Form 10-Q. The company acknowledges that additional unknown or immaterial risks could adversely affect its business - Readers should refer to the 'Risk Factors' section in the 2021 Annual Report on Form 10-K[201](index=201&type=chunk) - No material changes to risk factors have occurred, except as updated in this report[201](index=201&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) Black Stone Minerals reported no unregistered sales of equity securities during the period. The company's common unit repurchases for the three months ended March 31, 2022, were solely for satisfying tax withholding obligations upon the vesting of restricted common units, totaling 261,520 units. No repurchases were made under the publicly announced $75.0 million repurchase program during this quarter - No unregistered sales of equity securities occurred during the period[202](index=202&type=chunk) | Period | Total Number of Common Units Purchased | Average Price Paid Per Unit | | :------------------------- | :------------------------------------- | :-------------------------- | | January 1 - January 31, 2022 | 101,081 | $11.17 | | February 1 - February 28, 2022 | 160,439 | $11.61 | - Common units purchased were for satisfying tax withholding obligations upon the vesting of restricted common units[204](index=204&type=chunk) - No repurchases were made under the **$75.0 million** publicly announced repurchase program during the three months ended March 31, 2022[106](index=106&type=chunk)[205](index=205&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report for the period - No other information is reported in this section[206](index=206&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q, including various certificates of limited partnership, amendments to the partnership agreement, a registration rights agreement, long-term incentive award agreements, and certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act - The exhibits include organizational documents (Certificates of Limited Partnership, Amendments to Agreement of Limited Partnership), a Registration Rights Agreement, and LTI Award Grant Notices[208](index=208&type=chunk) - Certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) are also included[208](index=208&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Label, Presentation, Definition Linkbase Documents) and the Cover Page Interactive Data File are furnished[208](index=208&type=chunk) [Signatures](index=36&type=section&id=Signatures) This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming that the report has been duly caused to be signed on behalf of Black Stone Minerals, L.P. by its general partner, Black Stone Minerals GP, L.L.C. The report is signed by Thomas L. Carter, Jr., Chief Executive Officer and Chairman, and Jeffrey P. Wood, President and Chief Financial Officer, both dated May 3, 2022 - The report is signed by Thomas L. Carter, Jr., Chief Executive Officer and Chairman (Principal Executive Officer)[213](index=213&type=chunk) - The report is also signed by Jeffrey P. Wood, President and Chief Financial Officer (Principal Financial Officer)[213](index=213&type=chunk) - Both signatures are dated May 3, 2022[212](index=212&type=chunk)

Financial Data and Key Metrics Changes - The company reported realized prices in Q4 2021 of over $73 per barrel of oil and $5.40 per Mcf gas, with prices up 14% from Q3 and doubling from Q4 2020 levels [8][9] - Adjusted EBITDA for Q4 was $77.6 million, slightly up from the previous quarter, while distributable cash flow was $71.3 million, also an increase from the last quarter [26] - For the full year, adjusted EBITDA totaled $292 million from 38,000 Boe per day of total production, with distributions paid amounting to $0.945 per unit [27] Business Line Data and Key Metrics Changes - Royalty volumes in Q4 totaled 35.2 MBoe per day, up 7% from Q3, driven by increases in Bakken, Louisiana, Haynesville, and Midland, Delaware production [9][22] - Working interest volumes continued to trend down in Q4 due to the decline of legacy production from Shelby Trough wells, with royalty volumes now representing 90% of total production [10][11] Market Data and Key Metrics Changes - The company had 95 rigs operating on its acreage at the end of the year, up over 60% from 59 rigs at the end of Q3 and more than doubling from 38 rigs at the end of 2020 [9] - The average spot price for gas in Q4 was $4.75 compared to an average settlement price of $5.83, with realized gas prices at $5.40 being 114% of the daily spot average [24][25] Company Strategy and Development Direction - The company is focusing on organic growth strategies, prioritizing new drilling activity on existing acreage rather than acquisitions, which is seen as providing higher returns to shareholders [16][17] - The company is optimistic about the Haynesville play benefiting from continued growth in LNG export volumes and is actively seeking to enhance drilling activity across its mineral portfolio [15][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the upcoming years, citing a strong balance sheet and a robust portfolio of growth opportunities [21] - The company expects royalty production in 2022 to be relatively flat compared to 2021 levels, with anticipated production gains in the Permian and Louisiana Haynesville plays offset by declines in legacy wells [28] Other Important Information - The company ended the year with $89 million drawn under its revolver, with a $400 million borrowing base, and reduced its debt balance to $58 million [31] - Management indicated that G&A expenses are expected to increase slightly due to normal cost inflation and selective hires to drive organic growth initiatives [30] Q&A Session Summary Question: Can you quantify the impact of prior period adjustments in Q4? - Management indicated that approximately 4,000 Boe per day was impacted through new well activity in Q4 due to timing of checks received [33] Question: What is the outlook for 2022 guidance regarding production? - Management clarified that while they expect a step down in production initially, they anticipate a slight increase in oil volumes throughout the year, particularly in the second half as new wells come online [46][47] Question: What are the plans regarding undeveloped acreage and payout ratios? - Management stated there are no divestiture plans, focusing instead on maximizing cash flow from existing assets, with expectations for payout ratios to increase as debt levels decrease [49][50]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 001-37362 Black Stone Minerals, L.P. (Exact Name of Registrant As Specified in its charter) Delaware 47-1846692 (State o ...

Black Stone Minerals, L.P. (NYSE:BSM) Q3 2021 Earnings Conference Call November 2, 2021 10:00 AM ET Company Participants Evan Kiefer – Vice President, Finance and Investor Relations Tom Carter – Chairman and Chief Executive Officer Jeff Wood – President and Chief Financial Officer Conference Call Participants Steve Decker – KeyBanc Derrick Whitfield – Stifel Operator Good morning, ladies and gentlemen, and welcome to the Black Stone Minerals Third Quarter Earnings Conference Call. [Operator Instructions] As ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Common Units Representing Limited Partner Interests BSM New York Stock Exchange Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period _______________ to _______________ | --- | --- | |--------------------------- ...

Black Stone Minerals, L.P. (NYSE:BSM) Q2 2021 Results Conference Call August 3, 2021 10:00 AM ET Company Participants Evan Kiefer - VP, Finance and IR Tom Carter - Chairman and CEO Jeff Wood - President and CFO Conference Call Participants Brian Downey - Citigroup Pearce Hammond - Piper Sandler Operator Good day and thank year for standing by. Welcome to the Black Stone Minerals Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presen ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q2 2021 financial statements reflect a shift to net income from higher commodity prices, increased liabilities from derivatives, and decreased operating cash flow [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets remained stable at **$1.24 billion** as of June 30, 2021, while total liabilities significantly increased to **$218.2 million** due to higher commodity derivative liabilities | (In millions) | June 30, 2021 ($M) | December 31, 2020 ($M) | | :--- | :--- | :--- | | **Total Assets** | **$1,242.2** | **$1,244.0** | | Total Current Assets | $71.5 | $66.5 | | Net Property and Equipment | $1,163.1 | $1,172.1 | | **Total Liabilities** | **$218.2** | **$185.0** | | Total Current Liabilities | $95.1 | $39.9 | | Credit Facility | $96.0 | $121.0 | | Commodity derivative liabilities (Current + Long-term) | $85.5 | $21.2 | | **Total Equity** | **$725.7** | **$760.6** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2021 saw **net income of $15.4 million** driven by a **104% increase in contract revenue** from higher commodity prices, despite derivative losses, while H1 net income decreased due to derivative impacts | (In millions, except per unit) | Three Months Ended June 30, 2021 ($M) | Three Months Ended June 30, 2020 ($M) | Six Months Ended June 30, 2021 ($M) | Six Months Ended June 30, 2020 ($M) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | **$58.4** | **$38.5** | **$120.0** | **$221.6** | | Revenue from contracts | $117.9 | $57.7 | $207.4 | $150.7 | | Gain (loss) on derivatives | $(59.5) | $(19.2) | $(87.4) | $70.8 | | **Income (Loss) from Operations** | **$17.0** | **$(5.3)** | **$34.2** | **$75.2** | | **Net Income (Loss)** | **$15.4** | **$(8.4)** | **$31.6** | **$67.7** | | Net Income (Loss) per common unit (basic) | $0.05 | $(0.07) | $0.10 | $0.28 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2021 net cash from operations decreased to **$125.6 million** due to derivative settlements, with **$12.8 million** used in investing and **$113.6 million** in financing activities | (In millions) | Six Months Ended June 30, 2021 ($M) | Six Months Ended June 30, 2020 ($M) | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | **$125.6** | **$158.0** | | Net Cash Provided by (Used in) Investing Activities | $(12.8) | $0.4 | | Net Cash Used in Financing Activities | $(113.6) | $(164.9) | | **Net Change in Cash and Cash Equivalents** | **$(0.8)** | **$(6.5)** | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) The notes detail key accounting policies and events, including a **$20.8 million** Midland Basin acquisition, derivative positions, reaffirmed **$400 million** credit facility, and a **$0.25** per common unit quarterly distribution - In Q2 2021, the Partnership acquired mineral and royalty acreage in the northern Midland Basin for **$20.8 million**, consisting of **$10.0 million** in cash and **$10.8 million** in common units[35](index=35&type=chunk) - The Partnership uses fixed-price swap contracts to mitigate commodity price risk, with a net fair value liability of **$85.5 million** as of June 30, 2021[52](index=52&type=chunk)[53](index=53&type=chunk)[60](index=60&type=chunk) - The credit facility's borrowing base was reaffirmed at **$400.0 million** in April 2021, with **$96.0 million** outstanding and **$304.0 million** unused capacity as of June 30, 2021[78](index=78&type=chunk)[84](index=84&type=chunk) - On July 26, 2021, the Board approved a Q2 2021 distribution of **$0.25** per common unit, comprising a **$0.20** base and **$0.05** special distribution[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes improved Q2 2021 performance to higher commodity prices offsetting lower production and derivative losses, highlighting strategic acquisitions and strong liquidity despite ongoing COVID-19 uncertainty [Overview and Recent Developments](index=23&type=section&id=Overview%20and%20Recent%20Developments) The Partnership focuses on maximizing its mineral and royalty asset base, with recent activities including a **$20.8 million** Midland Basin acquisition, new development agreements, and a sustainability initiative - Closed a **$20.8 million** acquisition of mineral and royalty acreage in the northern Midland Basin, funded with **$10.0 million** cash and **$10.8 million** in common units[116](index=116&type=chunk) - Entered new development agreements with Aethon in the Shelby Trough and with operators to test the Austin Chalk formation in East Texas[119](index=119&type=chunk)[121](index=121&type=chunk) - Announced a sustainability initiative to use proceeds from solar development waivers to purchase carbon credits, offsetting mineral production emissions[124](index=124&type=chunk) [Business Environment](index=25&type=section&id=Business%20Environment) The business environment improved significantly in 2021 with commodity prices recovering to 2018 levels by July, and the U.S. rig count increasing, though COVID-19 uncertainty persists | Benchmark Prices | Q2 2021 ($) | Q2 2020 ($) | | :--- | :--- | :--- | | WTI spot oil price ($/Bbl) | $73.52 | $39.27 | | Henry Hub spot natural gas ($/MMBtu) | $3.79 | $1.76 | | U.S. Rotary Rig Count | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Oil | 372 | 188 | | Natural gas | 98 | 75 | | **Total** | **470** | **265** | - Commodity prices improved in late 2020 and fully recovered to 2018 levels by July 2021, reflecting rising demand and ongoing OPEC+ crude oil production limits[133](index=133&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q2 2021 total revenue increased **51.7%** to **$58.4 million** due to higher realized commodity prices, offsetting lower production, while H1 total revenue decreased **45.8%** due to negative derivative impacts Q2 2021 vs Q2 2020 Performance | Metric | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Production (MBoe/d) | 38.2 | 42.6 | (10.3)% | | Realized Oil Price ($/Bbl) | $62.72 | $29.42 | 113.2% | | Realized Gas Price ($/Mcf) | $3.60 | $1.68 | 114.3% | | Revenue from contracts ($M) | $117.9 | $57.7 | 104.4% | | Gain (loss) on derivatives ($M) | $(59.5) | $(19.2) | 210.2% | | **Total Revenue ($M)** | **$58.4** | **$38.5** | **51.7%** | H1 2021 vs H1 2020 Performance | Metric | H1 2021 | H1 2020 | % Change | | :--- | :--- | :--- | :--- | | Production (MBoe/d) | 37.5 | 44.7 | (16.1)% | | Realized Oil Price ($/Bbl) | $58.09 | $38.24 | 51.9% | | Realized Gas Price ($/Mcf) | $3.25 | $1.82 | 78.6% | | Revenue from contracts ($M) | $207.4 | $150.7 | 37.6% | | Gain (loss) on derivatives ($M) | $(87.4) | $70.8 | NM | | **Total Revenue ($M)** | **$120.0** | **$221.6** | **(45.8)%** | - For the six months ended June 30, 2020, the company recognized a **$51.0 million** impairment on oil and natural gas properties due to sharp oil price decline, with no impairment in 2021[191](index=191&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources are cash from operations and the credit facility, with **$304.0 million** available capacity and a **$5.0 million** capital expenditure budget for 2021, despite decreased operating cash flow - As of June 30, 2021, the company had **$96.0 million** outstanding on its credit facility, with an available borrowing capacity of **$304.0 million**[195](index=195&type=chunk)[84](index=84&type=chunk) - The 2021 capital expenditure budget for non-operated working interests is approximately **$5.0 million**, net of farmout reimbursements[202](index=202&type=chunk) - The decrease in operating cash flow for H1 2021 compared to H1 2020 was primarily due to net cash paid on derivative settlements versus net cash received in the prior year period[199](index=199&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Partnership manages commodity price volatility through derivatives, while also addressing counterparty credit risk and interest rate risk on its variable-rate credit facility - The company's major market risk is the pricing of oil, natural gas, and NGLs, mitigated by commodity derivative instruments to reduce price volatility[214](index=214&type=chunk) - As of June 30, 2021, the company had seven derivative counterparties, all rated Baa1 or better by Moody's[216](index=216&type=chunk) - The company is exposed to interest rate risk on its **$96.0 million** of outstanding variable-rate debt; a hypothetical **1%** increase would raise interest expense by **$0.5 million** for H1 2021[218](index=218&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2021[219](index=219&type=chunk) - No material changes occurred in internal control over financial reporting during Q2 2021[221](index=221&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine litigation, but management believes no pending legal matters will materially adversely affect its financial condition or operations - Management believes no pending litigation, disputes, or claims will have a material adverse effect on the company's financial condition or operations[224](index=224&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the company's risk factors from those previously disclosed in the 2020 Annual Report on Form 10-K - No material changes have occurred in the company's risk factors from those described in the 2020 Annual Report on Form 10-K[225](index=225&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On May 28, 2021, the company issued **1,087,498** common units valued at **$10.8 million** as partial consideration for a mineral interest acquisition, exempt from registration - On May 28, 2021, the company issued **1,087,498** common units valued at **$10.8 million** to partially fund a mineral interest acquisition[226](index=226&type=chunk) - The issuance was exempt from registration requirements under Section 4(a)(2) of the Securities Act, as it was made to accredited investors for investment purposes[227](index=227&type=chunk)

Black Stone Minerals LP (NYSE:BSM) Q1 2021 Earnings Conference Call May 4, 2021 10:00 AM ET Company Participants Evan Kiefer - Director, Finance & IR Thomas Carter - Chairman & CEO Jeffrey Wood - President & CFO Conference Call Participants Leo Mariani - KeyBanc Capital Markets Brian Downey - Citigroup Derrick Whitfield - Stifel Harry Halbach - Raymond James & Associates Pearce Hammond - Simmons Energy Operator Good morning, ladies and gentlemen, and welcome to the Black Stone Minerals First Quarter 2021 Ea ...