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

Financial Data and Key Metrics Changes - In the fourth quarter, 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 achieved significant commercial milestones, including development agreements with Revenant Energy and Caturus Energy, placing approximately 500,000 gross acres into development [4] - Aethon brought several new wells online in the Shelby Trough at about 25-30 MMcf a day, with additional wells expected to come online in the first quarter [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 the company's significant assets near Gulf Coast LNG facilities [15] Company Strategy and Development Direction - The company is focused on increasing production from existing assets and driving long-term value for unitholders, with a comprehensive commercial strategy that includes grassroots acquisitions and high-interest development agreements [9] - The company is strategically increasing G&A in 2026 to support the anticipated increase in activity [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that 2026 will be a turning point, with new and increased development in the Shelby Trough and Haynesville expansion areas [11] - The company is monitoring increasing activity levels in the Haynesville and commodity price dynamics as it looks towards 2026 production and distribution [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 invested about $240 million in its acquisition program since launching in 2023 [6] 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, primarily due to new development agreements and high-interest projects [20][21] Question: Pipeline of potential new development agreements - Management stated that they welcome both existing partners and newcomers for new developments, indicating a diverse approach to expanding their asset base [24] Question: Activity in the Permian and liquids guidance - Management highlighted excitement about high-interest activity in the Permian, with expectations for increased activity and volumes primarily in 2026 and 2027 [30][31] Question: Funding the distribution through cash flow - Management expressed confidence in funding the $0.30 distribution through distributable cash flow without relying on liquidity, supported by strong development commitments [34][35] 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 [37]