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

Financial Data and Key Metrics Changes - In Q4, mineral and royalty production was 30,900 BOE per day, a decrease of 11% from the prior quarter [11] - Total production for the quarter was 32,100 BOE per day, completing the year at the high end of updated guidance [11] - Net income for Q4 was $72.2 million, with adjusted EBITDA at $76.7 million [13] - Distributable cash flow for the quarter was $66.8 million, representing 1.05x coverage for the period [13] Business Line Data and Key Metrics Changes - The company signed development agreements with Revenant Energy and Katouris Energy, placing approximately 500,000 gross acres into development [4] - Minimum drilling commitments ramp up to 37 gross wells per year by 2031, with a total of 50 gross wells expected over the same period [4][5] - Aethon brought several new wells online in the Shelby Trough, producing about 25 MMcf-30 MMcf a day, with additional wells expected in Q1 [4] 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 [5] - The company is strategically increasing G&A in 2026 to support increased activity levels [9] Management's Comments on Operating Environment and Future Outlook - Management views 2026 as a turning point with new and increased development in the Shelby Trough and Haynesville expansion areas [11] - The company remains confident in its ability to fund distributions and grow throughout the year based on minimum commitments and ongoing activity [32][33] - Management is optimistic about long-term growth due to substantial industry-leading inventory and advantageous proximity to key demand centers [9] Other Important Information - The partnership is conducting two substantial 3D seismic surveys covering about 360,000 gross acres, which is expected to enhance subsurface evaluation and accelerate development [12] - The proprietary nature of these surveys may provide opportunities to license the data to the industry, potentially generating additional revenue [12][37] Q&A Session Summary Question: Guidance for production levels throughout 2026 - 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 [20][21] Question: Pipeline of potential new development agreements - Management welcomes both existing and new partners for development agreements and is focused on diversifying new developments [23] Question: Activity in the Permian and its priority - Management is excited about high-interest activity in the Permian and anticipates increased leasing and activity throughout 2026 and 2027 [28][29] 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 hedges in place for natural gas [32][33] Question: Seismic expenses and their impact on adjusted EBITDA - Management confirmed that the seismic expenses are expected to be primarily incurred in 2026, with the majority of costs related to two specific shoots to be completed in early 2027 [35][36]