Black Stone Minerals(BSM) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, mineral and royalty production was 30.9 thousand BOE per day, a decrease of 11% from the prior quarter, while total production for the quarter was 32.1 thousand BOE per day [11] - Net income for the fourth quarter was $72.2 million, with adjusted EBITDA at $76.7 million [13] - Distributable cash flow for the quarter was $66.8 million, representing 1.05 times coverage for the period [13] Business Line Data and Key Metrics Changes - The company signed development agreements with Revenant Energy and Caturus Energy, placing approximately 500,000 gross acres into development, with commitments ramping up to 37 gross wells per year by 2031 [4] - Aethon brought several new wells online in the Shelby Trough at about 25-30 MMcf a day, with additional wells expected in Q1 2026 [4][5] Market Data and Key Metrics Changes - The company anticipates significant increases in natural gas production and distributions for unitholders over the coming years, driven by growing demand from LNG and electric power generation [14] - The outlook for natural gas is increasingly constructive over the next decade, supported by significant assets near Gulf Coast LNG facilities [14] Company Strategy and Development Direction - The company is focused on increasing production from existing assets and driving long-term value for unitholders through strategic acquisitions and development agreements [6][9] - A new opportunity is being built in the Haynesville expansion area, expected to add significant inventory and scale to current developments [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth for unitholders, citing substantial industry-leading inventory and advantageous proximity to key demand centers [9] - The company expects 2026 to be a turning point with new and increased development in the Shelby Trough and Haynesville expansion areas [11] Other Important Information - The partnership is conducting two substantial 3D seismic surveys covering about 360,000 gross acres, which are expected to enhance subsurface evaluation and accelerate development [12] - The company has updated the presentation of adjusted EBITDA and distributable cash flow to exclude seismic acquisition costs [13] Q&A Session Summary Question: Guidance for the year and production cadence - Management indicated that production is expected to start at the end of 2025 levels and increase materially throughout 2026 due to new development agreements and high-interest projects [19][20] Question: Pipeline of potential new development agreements - Management stated they welcome both existing and new partners for development agreements, emphasizing diversification in their approach [22][23] Question: Activity in the Permian and leasing outside Coterra - Management highlighted excitement about high-interest developments in the Permian, with increased activity expected in 2026 and 2027 [29][30] Question: Funding the distribution through distributable cash flow - Management expressed confidence in funding the $0.30 distribution through distributable cash flow without relying on liquidity, supported by strong hedges in place for natural gas [32][34] Question: Seismic expenses and adjusted EBITDA - Management confirmed that the seismic expenses are expected to be primarily incurred in 2026, with the majority of costs related to the seismic shoots completed by early 2027 [36][38]