Black Stone Minerals(BSM) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Mineral royalty production was 33,200 BOE per day in Q2 2025, with total production volumes at 34,600 BOE per day [9] - Net income for Q2 was $120 million, with adjusted EBITDA at $84.2 million [9] - Distributable cash flow for the quarter was $74.8 million, representing 1.18 times coverage [10] - A distribution of $0.30 per unit was declared for the quarter, equating to $1.20 on an annualized basis [9][10] Business Line Data and Key Metrics Changes - 55% of oil and gas revenue in the quarter came from oil and condensate production [9] - The company added 31 million in royalty acquisitions during the quarter, bringing total acquisitions since September 2023 to approximately $172 million [6] Market Data and Key Metrics Changes - The company expects production growth in 2026 of an incremental 3,000 to 5,000 BOE per day over the revised guidance for 2025 [10][11] - The outlook for natural gas remains robust, supported by growing global demand for LNG [7] Company Strategy and Development Direction - The company is focused on expanding its drilling obligations in the Shelby Trough, which is expected to more than double over the next five years [6] - The grassroots acquisition program is progressing well, with ongoing marketing efforts in the Shelby Trough [5][6] - The company aims to maintain a clean balance sheet and ample liquidity to support its commercial strategy, including targeted grassroots acquisitions [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in production growth in 2026 and beyond, despite slower natural gas production growth in 2025 [10][11] - The company is optimistic about the outlook for the partnership, citing strong demand and ongoing development agreements [7][11] Other Important Information - The company has restructured its agreement with Aethon, reducing the number of wells from mid-20s to high teens per year, which is expected to impact production volumes [27] - The company is actively working to place strategically important acreage with other operators [27] Q&A Session Summary Question: Activity response to higher natural gas prices and production trajectory - Management noted subdued activity in the first half of the year but is excited about upcoming development agreements and ongoing activity in the Shelby Trough [14][15][17] Question: Comparison of geology in Shelby Trough and Western Haynesville - Management highlighted analogous subsurface characteristics and increasing productivity in the Western Haynesville, which could benefit the Shelby Trough [18][19] Question: Updated production guidance and activity in Haynesville - Management explained that the restructuring of agreements and strategic decisions have led to a slower production ramp-up, but they anticipate significant well activity in the coming years [27][29] Question: Production outlook and oil volumes - Management indicated that oil volumes are expected to be around 25% to 26% as they look towards 2026, with contributions from various projects [35]