Earnings call transcript: Black Stone Minerals Q3 2025 beats expectations

Black Stone Minerals LP reported robust financial results for the third quarter of 2025, surpassing both earnings and revenue forecasts. The company posted an earnings per share (EPS) of $0.40, exceeding the anticipated $0.30, marking a 33.33% surprise. Revenue reached $132.47 million, significantly higher than the forecasted $104.52 million, representing a 26.74% surprise. Following the announcement, the stock price rose by 1.6% to $13.31, reflecting positive investor sentiment.

Key Takeaways

• Black Stone Minerals exceeded both EPS and revenue forecasts for Q3 2025.
• The company reported a net income of $91.7 million and an adjusted EBITDA of $86.3 million.
• Stock price increased by 1.6% post-earnings announcement.
• Ongoing expansion in Haynesville and new development programs are underway.
• Positive outlook for 2026 with increased demand from LNG and power sectors.

Company Performance

Black Stone Minerals demonstrated strong performance in Q3 2025, with significant increases in both net income and production volumes. The company's strategic focus on expanding its operations in key areas like Haynesville and Shelby Trough is poised to drive future growth. The company's competitive positioning near LNG facilities and alignment with top Permian operators further strengthens its market presence.

Financial Highlights

• Revenue: $132.47 million, up from the forecasted $104.52 million.
• Earnings per share (EPS): $0.40, exceeding the forecast of $0.30.
• Net income: $91.7 million for Q3.
• Adjusted EBITDA: $86.3 million.
• Mineral and royalty production increased to 34,700 BOE per day.

Earnings vs. Forecast

Black Stone Minerals' Q3 2025 EPS of $0.40 surpassed the forecasted $0.30 by 33.33%. Revenue also exceeded expectations by 26.74%, reaching $132.47 million against a forecast of $104.52 million. This performance highlights the company's ability to capitalize on its strategic initiatives and market opportunities.

Market Reaction

Following the earnings announcement, Black Stone Minerals' stock price rose by 1.6% to $13.31. This increase reflects investor confidence in the company's strong financial performance and positive outlook. The stock remains within its 52-week range, with a high of $15.66 and a low of $11.78.

Outlook & Guidance

Looking forward, Black Stone Minerals remains optimistic about its growth prospects for 2026, driven by increased demand from the LNG and power sectors. The company plans to double its annual drilling rate in the Shelby Trough over the next five years and is actively pursuing additional acquisition opportunities to enhance its asset base.

Executive Commentary

Chairman Tom Carter expressed enthusiasm about the company's strategic transactions, stating, "We really are excited about the slow, methodical, thoughtful, early stages of some of these new transactions." CFO Taylor DeWaltz highlighted robust activity from key partners, reinforcing the company's strong market position.

Risks and Challenges

• Potential slowdown in U.S. development activity could impact future production.
• Fluctuations in gas pricing may affect revenue streams.
• Macroeconomic pressures and regulatory changes could pose challenges.
• The success of expansion efforts in new geographic areas remains uncertain.

Q&A

During the earnings call, analysts inquired about ongoing negotiations for additional acreage and potential gas pricing strategies. Executives emphasized their focus on long-term value creation and the importance of strategic acquisitions to drive future growth.

Full transcript - Black Stone Minerals (BSM) Q3 2025:

Van, Conference Operator: Thank you for standing by. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to Blackstone Minerals' Third Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Thank you. I will now turn the call over to Mark Moe, Director of Finance. You may now begin, sir.

Mark Moe, Director of Finance, Blackstone Minerals: Thank you. Good morning to everyone. Thank you for joining us either by phone or online for Blackstone Minerals' third quarter twenty twenty five earnings conference call. Today's call is being recorded and will be available on our website along with the earnings release, which was issued last night. Before we start, I'd like to advise you that we will be making forward looking statements during this call about our plans, expectations and assumptions regarding our future performance.

These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward looking statements. For a discussion of these risks, you should refer to the cautionary information about forward looking statements in our press release from yesterday and the Risk Factors section of our twenty twenty four ten ks. We may refer to certain non GAAP financial measures that we believe are useful in evaluating our performance. Reconciliation of those measures to the most directly comparable GAAP measure and other information about these non GAAP metrics are described in our earnings press release from yesterday, which can be found on our website at www.blackstoneminerals.com. Joining me on the call from the company are Tom Carter, Chairman, CEO and President Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer Steve Putman, Senior Vice President and General Counsel Ballard Carter, Senior Vice President, Corporate Development and Chris Bonner, Vice President and Chief Accounting Officer.

I'll now turn the call over to Tom.

Tom Carter, Chairman, CEO and President (transitioning to Executive Chair), Blackstone Minerals: Thank you very much, Mark. Good morning and thank you all for joining us on the third quarter earnings call. Before we discuss our financial and operating results, I'd like to congratulate Tyler Carter, Taylor DeWaltz and Chris Bonner on their announced upcoming promotions. I'm excited for and confident in their leadership as we look to the continued growth and success of Blackstone for many years to come. Looking forward to my new role as Executive Chair as well and will continue to provide strategic guidance to the management and lead the Board.

Thank you to all of our employees who continue to work very hard day in and day out to drive Blackstone's success and position us for exciting for an exciting future. We continue to pursue acquisitions through the Haynesville expansion around Shelby Trough, and we're looking forward to Revenant's development getting underway in early twenty twenty six. We also continue to work towards solidifying another development agreement covering 02/20000 gross acres in between Aethon's development in the Shelby Trough and expands development in the Western Haynesville. Unscripted, I also add, we are working on yet another package that we hope to assemble and market in the not too distant future. The recently announced expand energy horizontal well and successful pilot well in addition to the ongoing development throughout the Western Haynesville provide even further confidence in the Haynesville expansion play and long runway of inventory.

As mentioned previously, we expect these development agreements to ultimately drive over 50 wells drilled in the expanded Shelby Trough per year, providing significant gas growth for the partnership and a constructive outlook for demand in the region. And this is in conjunction with ongoing great opportunities coming up in other areas in our properties. We remain focused on this significant growth opportunity that results in the increasing production and distribution outlook for years ahead. With that, I'll hand it over to Fowler to walk through the operational updates.

Fowler, Senior Vice President, Blackstone Minerals: Thank you, Tom, Deb, and good morning to everyone. During the quarter, we progressed our commercial initiatives across the expanded Shelby Trough, including working with Revenant Energy on their inaugural development program beginning early next year. Our marketing efforts on an additional 220,000 gross acres is progressing well with a framework agreement that would add the equivalent of 12 additional wells annually to our acreage by 2030. We expect these new developments coupled with our existing agreements to more than double the current annual drilling rate in the expanded Shelby Trough in the next five years. There is also the opportunity for our operating partners to exceed their annual well commitments, and we are excited about the multiple decades of development inventory in this play.

Our Grassroots acquisition program also continues to progress well. We added $20,000,000 in mineral and royalty acquisitions during the quarter, bringing our total acquisitions since September 2023 to roughly $193,000,000 We have line of sight to an additional accretive acquisition opportunities in the near term, which we expect to enhance our existing asset position in the Shelby Trough and to add long term value for our unitholders. While 2025 development activity has slowed across The U. S, we are optimistic looking ahead to 2026 given our existing and pending development agreements across our high interest acreage in the Shelby Trough. Turning to the Permian, the large project we're monitoring remains on track to add meaningful oil volumes to our production base.

We're also tracking several new projects on our high interest acreage there that are expected to add additional liquids volumes in the next twelve to eighteen months. We believe that these projects in addition to our agreements with the Shelby Trough provide Blackstone a path to increase production and in turn higher distributions. With all of that, I'll turn it over to Taylor to walk through the financial details of the quarter. Thanks,

Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer, Blackstone Minerals: Valor, and good morning, everyone. We had a successful third quarter with mineral and royalty production of 34,700 BOE per day, an increase of 5% over the prior quarter. The increase in production quarter over quarter was driven by strong volumes in the Permian Basin. Total production volumes were 36,300 BOE per day. While we currently sit near the high end of the range, production guidance for 2025 is unchanged at 33,000 to 35,000 BOE per day.

We continue to monitor activity levels and commodity price dynamics as we look towards the 2025 and full year 2026 production and distributions. Net income was $91,700,000 for the third quarter with adjusted EBITDA at $86,300,000 57% of oil and gas revenue in the quarter came from oil and condensate production. As previously announced, we declared a distribution of $0.30 per unit for the quarter or 1.2 on an annualized basis. Distributable cash flow for the quarter was $76,800,000 which represents 1.21 times coverage for the period. The excess coverage was used to partially fund acquisitions and maintain a solid financial and leverage position.

As Tom mentioned earlier, the partnership's outlook remains strong anchored by long term contract development in our high interest Shelby Trough acreage as well as our core legacy assets across The U. S. In addition, with increasing demand from LNG and power, the outlook for natural gas is increasingly constructive over the next decade. With significant assets in close proximity to LNG facilities, Blackstone is in a prime position to benefit from the looming call on gas supply. In conclusion, we had a solid quarter bolstered by strong oil volumes from our Permian assets, which ultimately produced robust coverage of the announced distribution.

Going forward, we remain confident that our existing acreage positions, coupled with our commercial strategy and the expanded Shelby Trough, will provide a strong foundation to deliver sustainable long term value for unitholders. With that, we'd like to open the call for questions.

Van, Conference Operator: Our first question comes from the line of John Annes from Texas Capital. Please go ahead.

John Annes, Analyst, Texas Capital: Hey, good morning all and congratulations to everyone on their new roles. For my first question, on the acres currently being marketed in the KLX area, I think on the September update call, mentioned that you were on the one yard line with getting a deal across. I was hoping if you could provide a quick update on where those discussions currently sit? And secondly, if you've seen any increased interest in potential commitments to the development following expense entry into the Western Haynesville? And then maybe just building off of Tom's remark that you're also working on assembling another package.

Is there any additional color that you could share at this time?

Fowler, Senior Vice President, Blackstone Minerals: Well, I'll start with the one yard line comment. We were at the one yard line and now we're at the half yard line. So it's progressed and we expect to hopefully have that wrapped up here in the next couple of weeks. But we'll let you all know how that goes and we'll announce that information accordingly. Remind me your second part of your question before we go on to the expanded area that Dad mentioned.

John Annes, Analyst, Texas Capital: Yes. Just if you've been seeing any increased interest in potential commitments just following expanse announcement in their entry into the Western Haynesville?

Fowler, Senior Vice President, Blackstone Minerals: We think interest remains robust across this whole area and increased commitments. What I'm comfortable saying about that is that our operating partners have the ability to flex up above and beyond their minimum annual commitments. And so you can certainly see some relative outperformance there.

John Annes, Analyst, Texas Capital: Terrific. And is there any color that you could offer on the package that you're working on assembling that you mentioned in the prepared remarks?

Fowler, Senior Vice President, Blackstone Minerals: I'm going to let dad take that one because he's real excited about it. If you look at the

Tom Carter, Chairman, CEO and President (transitioning to Executive Chair), Blackstone Minerals: Shelby Trough in the Western Haynesville and now the expand well, the Yancey Well, which is about 20% to 30% further to the east than any of the wells that have been drilled so far moving back into almost North Central Houston County. And then you go into Trinity County, Cherokee County, Angelina County, Polk County, Tyler County, San Agustin County, Sabine County, there is so much inventory potential out there that really hasn't even been scratched yet. And folks keep putting blocks together and we've done a lot of homework on the subsurface all the way across to the Western Haynesville and everything that keeps happening thus far has been positive to more positive than what one could expect. We see some very, very interesting geologic things happening as you move further west from the traditional Shelby Trough where there is significant expansion between the base of the Knoll lines and the top of the Cotton Valley, if I'm saying that Smackover. Smackover, excuse me, Cotton Valley also, but Smackover.

And that phenomenon is what's been driving moving eastward into the Western Haynesville. So I think I've said this last time, these packages of shale that are commercial are thicker in that expanded area. And

Fowler, Senior Vice President, Blackstone Minerals: we have

Tom Carter, Chairman, CEO and President (transitioning to Executive Chair), Blackstone Minerals: existing acreage that we think is deeper than the traditional work that's been done in the Shelby Trough, but that is not inconsistent with what's been going on in the Western Haynesville. And it's in our inventory and we're working it hard and looking forward to taking it out to capital development in the future.

John Annes, Analyst, Texas Capital: I appreciate all the color. For my follow-up, with the strong volume growth this quarter, how should we think about volumes trending in the fourth quarter into 2026 with the wells that are expected to be turned in line from Ethon and the Permian development project? And then maybe more broadly, just how would you compare what you're seeing in terms of gas directed activity across your acreage relative to earlier in the year?

Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer, Blackstone Minerals: Yes. Thanks, John. So like I said in my prepared remarks, I mean, we didn't update full year guidance at this point. So we're still being pretty thoughtful about the activity that's going on across our assets, whether it's Aethon or larger developments out in the Permian. I'd say where we start to get excited is to see Aethon volumes coming online and then kind of throughout the fourth quarter into the beginning of next year, along with the large development in the Permian, which is Cotera and seeing their wells start to come online recently, but more completely as we think about kind of beginning of next year.

So overall, I think it's going be an interesting several months kind of winter season to watch activity levels, especially in the natural gas focused basins and to see how that plays into full year 2026 volumes.

Tom Carter, Chairman, CEO and President (transitioning to Executive Chair), Blackstone Minerals: I would add also, recently we put out a multiyear forecast, which is somewhat unusual for a publicly traded company. And I would just encourage the marketplace to not focus so much on the next six to twelve months, but to focus on the next five years, because as I said earlier, this is a massive reservoir and it takes time to spool it up and evaluate it and spool it up. And we really are excited about the slow, methodical, thoughtful, early stages of some of these new transactions that we've done. But every one of those with success will grow in well counts by two to three fold as well as layering new projects in there. So I just when you talk about share value and share activity, that's a real good question because I don't know how much the average person wants to get out in front of the market.

But if what we're seeing is valid and as I said before, if the natural gas markets are as everybody seems to think they're going to be, I. E. Less volatile and more secure in the future, the time to buy our shares is now, not two years from now.

John Annes, Analyst, Texas Capital: Terrific. Thanks for the time.

Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer, Blackstone Minerals: Thanks, John.

Van, Conference Operator: Our next question comes from the line of Tim Rezvan from KeyBanc Capital Markets. Please go ahead.

Tim Rezvan, Analyst, KeyBanc Capital Markets: Good morning, folks. And congrats everybody on the new roles and Tom on your transition. Some of my questions were addressed by the prior analysts, but I wanted to ask, you mentioned more Permian production coming. As a two stream reporter, we've noticed that your natural gas differentials have weakened. I'm guessing that's due to exposure to Waha.

And as you think about, I know the Haynesville is sort of the longer term story, but a lot of producers are getting beaten up by the challenges at Waha that may not resolve until 2027. So can you talk about anything you're doing? I know you've been playing vanilla hedgers in the past. Do you intend to just sort of ride this out? Is there anything you can do because gas is still over 70% of your production?

Just curious on that.

Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer, Blackstone Minerals: Yes. Thanks, Tim. This is Taylor. I'd say like you said, I mean our hedging strategy remains consistent the way that we've been thinking about it. And I think when you think about our natural gas volumes, so much of that is coming from the Haynesville and from the Shelby Trough, where we've got good exposure to Henry Hub, I think, relative to, as you mentioned, kind of some of the dynamics that are going on with Waha and the Permian.

And I think when we think about Waha and we think about just general Permian production, really what gets us excited is to see the ongoing development on high interest acreage and then ongoing development across the full suite of assets. I guess we touched on in the investor presentation in September, we're really well aligned with the top operators in the Permian. And so we continue to see robust activity from those folks. And then also just going back to some of these a little bit more bespoke high interest developments that we have in the Permian, so excited to see those volumes come online. So overall, continuing to maintain our consistent strategy as we're thinking about pricing and activity levels.

Tim Rezvan, Analyst, KeyBanc Capital Markets: Okay. So from a modeling perspective, do you think that on a two stream basis, being at a discount to Benchmark Henry Hub is that going to be the reality over the next year if Waha sort of stays where it is? That's what I'm trying to get at.

Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer, Blackstone Minerals: Yes. I mean, that's like I said, that's what we're thinking about it and that's why we've got a robust hedge strategy.

Van, Conference Operator: Okay. Okay. I'll leave it there. Thank you.

Taylor DeWaltz, Senior Vice President, Chief Financial Officer and Treasurer, Blackstone Minerals: Thanks.

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