Black Stone Minerals(BSM) - 2025 Q3 - Quarterly Report

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