Black Stone Minerals, L.P. (BSM) is a leading owner and manager of oil and natural gas mineral interests in the United States. With a diverse portfolio of assets spanning 41 states, the partnership has established itself as a powerhouse in the exploration and production industry. Over the course of its storied history, Black Stone Minerals has navigated the ebbs and flows of the energy market, consistently delivering value to its unitholders through its strategic approach and unwavering commitment to operational excellence.
Business Overview A Legacy of Growth and Resilience
Black Stone Minerals, L.P. was formed as a publicly traded Delaware limited partnership in 2014, building upon a legacy of mineral and royalty ownership that spans decades. The company's primary focus is on maximizing the value of its extensive portfolio of mineral and royalty assets through active management.
As one of the largest owners and managers of oil and natural gas mineral interests in the United States, Black Stone Minerals boasts an impressive asset base. The company owns mineral interests in approximately 16.8 million gross acres, with an average 43.3% ownership interest. Additionally, it holds nonparticipating royalty interests in 1.8 million gross acres and overriding royalty interests in 1.6 million gross acres. These mineral and royalty interests, which are substantially non-cost-bearing, include ownership in approximately 71,000 producing wells located across 41 states in the continental U.S.
Black Stone Minerals has faced and overcome various challenges throughout its history. In 2020 and 2021, the company entered into joint exploration agreements with Aethon Energy to develop certain portions of its undeveloped acreage in East Texas. These agreements provided for minimum annual well commitments by Aethon in exchange for reduced royalty rates and exclusive access to BSM's mineral and leasehold acreage. However, in late 2023, BSM received notice that Aethon was exercising the time-out provisions under these agreements, temporarily suspending its drilling obligations. Demonstrating its adaptability and negotiation skills, BSM successfully renegotiated these agreements in 2024, withdrawing the time-out provisions and ensuring continued development of its assets.
The company's growth strategy has included targeted acquisitions of mineral and royalty interests. Since September 2023, Black Stone Minerals has executed approximately $130 million in acquisitions, focusing primarily on expanding its footprint in the Gulf Coast region. This approach has allowed the company to strategically enhance its portfolio and capitalize on emerging opportunities in key producing areas.
Financial Performance Navigating Volatility with Resilience
Despite the inherent volatility of the oil and natural gas industry, Black Stone Minerals has consistently delivered solid financial results. For the year ended December 31, 2024, the partnership reported total revenue of $439.43 million and net income of $271.33 million, with Adjusted EBITDA reaching $380.95 million. The partnership's distributable cash flow for the same period totaled $349.45 million, providing ample coverage for its $1.50 per unit annualized distribution.
The partnership's performance during the fourth quarter of 2024 was equally impressive, with revenue of $104.29 million and net income of $46.34 million. Distributable cash flow for the quarter came in at $81.9 million, representing a distribution coverage ratio of 1.03x.
Black Stone Minerals' ability to navigate the volatile commodity price environment is a testament to the resilience of its business model. The partnership's diverse asset base, which includes both oil and natural gas-weighted properties, helps to mitigate the impact of fluctuations in commodity prices. Additionally, the partnership's disciplined approach to risk management, which includes the use of commodity hedging strategies, has enabled it to smooth out the impact of price volatility on its financial results.
Operational Highlights Driving Growth Through Strategic Initiatives
Black Stone Minerals' operational success is rooted in its ability to identify and capitalize on opportunities for growth and optimization across its expansive asset base. The partnership's recent acquisition activity is a prime example of this, with the company acquiring $110.4 million in mineral and royalty interests during 2024, primarily in the Gulf Coast region.
These acquisitions have strengthened Black Stone Minerals' position in the prolific Haynesville Shale play, where the partnership has seen a significant uptick in development activity. In the East Texas portion of the play, the partnership's joint exploration agreement with Aethon Energy has yielded impressive results, with the operator turning 11 gross wells to sales in 2025 and an additional 17 wells expected to come online by the end of the year.
The partnership has also made strides in the Louisiana Haynesville, where it has entered into a series of accelerated drilling agreements with large, well-capitalized operators. These agreements, which provide near-term certainty and accelerated development on Black Stone Minerals' high-interest areas in exchange for a slightly reduced royalty burden, have already resulted in the turn-to-sales of two high-interest wells in the fourth quarter of 2024, with an additional 11 gross wells expected to come online during 2025.
In the Permian Basin, the partnership is tracking activity across its acreage, including a large development in Culberson County, Texas, which includes 37 gross wells on Black Stone Minerals' acreage. The company expects 8 of these 37 wells to come online in 2025, further bolstering its production and cash flow.
Risks and Challenges Navigating an Evolving Energy Landscape
As with any energy-focused business, Black Stone Minerals faces a range of risks and challenges that could impact its long-term performance. Chief among these is the inherent volatility of commodity prices, which can significantly affect the partnership's revenue and profitability. While Black Stone Minerals' diversified asset base and hedging strategies help to mitigate this risk, the partnership remains exposed to fluctuations in the prices of oil and natural gas.
Another key risk facing the partnership is the potential for changes in regulatory and environmental policies, which could increase the costs and complexity of operating in the oil and gas industry. Black Stone Minerals' mineral and royalty interests are subject to a wide range of federal, state, and local regulations, and any changes to these rules could have a material impact on the partnership's business.
Additionally, the partnership's reliance on its operators to develop and produce the resources underlying its mineral and royalty interests presents a degree of operational risk. While Black Stone Minerals has cultivated strong relationships with a diverse group of operators, any disruptions or delays in their activities could adversely affect the partnership's financial performance.
Financials
Revenue and Net Income For the year ended December 31, 2024, Black Stone Minerals reported total revenue of $439.43 million and net income of $271.33 million. This represents a slight decrease from the previous year due to lower commodity prices, offset partially by increased production volumes. The company's annual operating cash flow was $389.04 million, with free cash flow reaching $274.01 million.
EBITDA and Distributable Cash Flow The partnership's Adjusted EBITDA for 2024 reached $380.95 million, while distributable cash flow totaled $349.45 million. These figures demonstrate the company's ability to generate significant cash flow from its operations, even in a challenging price environment.
Quarterly Performance For the fourth quarter of 2024, Black Stone Minerals reported revenue of $104.29 million and net income of $46.34 million. The year-over-year decrease in revenue was primarily due to lower oil and gas sales and losses on commodity derivatives.
Geographic Performance Black Stone Minerals' assets are primarily located in the continental United States, including all major onshore producing basins. The company does not have significant operations outside the US, which helps to focus its strategy and operational expertise.
Liquidity
Cash and Credit Facility As of December 31, 2024, Black Stone Minerals had $2.52 million in cash and cash equivalents. The partnership also maintained a $375 million revolving credit facility, with only $25 million drawn as of the end of the year, providing ample liquidity for operations and potential acquisitions.
Debt and Leverage The partnership's total debt stood at $25 million at the end of 2024, resulting in a conservative debt-to-equity ratio of 0.022. This low leverage position provides Black Stone Minerals with significant financial flexibility and the ability to pursue growth opportunities as they arise.
Liquidity Ratios Black Stone Minerals maintains a strong liquidity position, with a current ratio of 2.58 and a quick ratio of 2.58 as of December 31, 2024. These ratios indicate the company's ability to meet its short-term obligations and fund its operations effectively.
Outlook and Conclusion Positioned for Continued Success
Despite the challenges facing the energy industry, Black Stone Minerals remains well-positioned for continued success. The partnership's guidance for 2025 points to an increase in production from 2024 levels, driven by the ongoing development activity across its asset base, including the unique high-interest opportunities in the Haynesville Shale and Permian Basin.
In the East Texas Shelby Trough area, EXCO is operating 1 rig and Aethon is operating 3 rigs on BSM's acreage. Aethon has already turned-to-sales 11 gross wells in 2025 with another 17 expected for the remainder of the year. In the Louisiana Haynesville, the accelerated development agreements are progressing well, with first production on 2 high-interest wells in Q4 2024 and another 11 gross wells expected to begin producing during 2025.
The company's Permian Basin assets are also showing promise, with a large development in Culberson County comprising 37 gross wells on BSM's acreage. Of these, 13 have been spud, and 8 are expected to reach first production in 2025.
BSM expects lease bonus, operating expense, and production costs for 2025 to be in line with 2024 levels. General and administrative expenses are anticipated to increase slightly in 2025 due to hiring and promotions, reflecting the company's commitment to maintaining a strong and capable workforce.
Moreover, the partnership's strong balance sheet and ample liquidity provide it with the financial flexibility to pursue strategic acquisitions and capital projects that can further enhance its position as a leading mineral and royalty owner. With a seasoned management team, a proven track record of value creation, and a clear vision for the future, Black Stone Minerals is poised to capitalize on the opportunities that lie ahead in the ever-evolving energy landscape.