Black Stone Minerals LP

joining us either by phone or online for Blackstone Minerals fourth quarter and full year 2024 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 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 2024 10k. We may refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliation of these 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 .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, Kerry Clark senior vice president chief commercial officer Steve Putman senior vice president and general counsel and Fowler Carter senior vice president corporate development. I'll now turn the call over to Tom.

Good morning to everyone on the call and thank you for joining us today to discuss our fourth quarter and full year 24 results. Before getting into those details I want to congratulate Fowler Carter on his recent promotion to SDP of corporate development where he will continue to lead our acquisition program and work with all of the team on our ongoing long-term initiatives. 2024 can be described in two halves. We started the year with additive oil production and revenue from our strong oil assets but weak natural gas pricing hindered production in the second half of the year. Despite the natural gas headwinds our robust portfolio of both oil and gas assets enabled us to remain within our production guidance and hold our distributions at 37.5 cents for the fourth quarter. We're encouraged by the stronger natural gas pricing fundamentals which coupled with our attractive oil assets put Blackstone in a solid position for 2025. In addition we continue to focus on our targeted acquisition strategy which further builds on our long runway of high-interest development opportunities. On the acquisition front we added another 43 million in minerals and royalty acquisitions during the quarter bringing our total acquisitions since September of 23 to around 130 million. In 2025 we're confident that we will continue to identify and execute on accretive opportunities which enhance our existing asset position, increase development opportunities and ultimately look at long-term value to the shareholders. Overall it was a solid quarter and a solid year despite a volatile pricing environment. We're pleased to hold our distribution flat during the year with excess coverage. Our clean balance sheet and ample liquidity position enable us to continue to execute on our commercial strategy including the targeted grassroots acquisitions and working with operators to achieve full field development across our assets. Constructive natural gas outlook buoyed by growth and LNG demand and robust oil production from multiple basins provides a solid outlook for 25 and long profitable runway for the company to ultimately drive strong long-term shareholder returns. With that I'll turn it over to Taylor to walk through the financial details of the quarter.

Thank you Tom and good morning everyone. As Tom pointed out we had a solid quarter despite continued commodity price volatility. Mineral and royalty production was 34.8 thousand BLE per day in the fourth quarter and total production volumes were 36.1 thousand BLE per day both of which are down from last quarter. For 2024 mineral and royalty production was 36.6 thousand BLE per day while total production volumes averaged 38.5 thousand BLE per day. Net income was 46.3 million for the fourth quarter with adjusted EBITDA being 90.1 million. 59% of oil and gas revenue in the quarter came from oil and condensate production. For the full year 2024 net income was 271.3 million with adjusted EBITDA totaling 380.9 million. We maintained our distribution at 37 and a half cents per unit for the quarter for a dollar fifty on an annualized basis. Distributable cash flow for the quarter was 81.9 million which represents 1.03 times coverage for the quarter. In conjunction with the earnings release we released our 2025 guidance yesterday. As we look forward to the full year 2025 we expect an increase in production from 2024 levels. In addition to activity across our broad acreage position this production increase is driven by our unique high interest development activity we highlighted in our press release last night. In East Texas we continue to work with multiple operators to promote development on our Shelby Trough acreage. Currently XCO is operating one rig and Aeson is operating three rigs on the company's acreage. Aeson has already turned to sales 11 gross wells in 2025 with another 17 expected for the remainder of the year. In addition the accelerated development agreements in Louisiana Hainesville are well underway with first production on two high interest wells during the fourth quarter of 2024 and another 11 gross wells expected to begin producing during 2025. Under these agreements the operators will provide near-term certainty and accelerated development on BSM's high interest areas in exchange for a slightly reduced royalty burden. In our permanent position we are tracking activity across our acreage including a large development in Culverston County. This development includes 37 gross wells on Blackstone's acreage. Currently 13 wells have been flood and we expect eight of the 37 wells to first production in 2025. These developments across different basins represent unique high interest assets within our portfolio and further demonstrate our strong diverse asset base covering growth opportunities in both oil and gas plays. We expect lease bonus operating expense and production costs for 2025 to be in line with 2024. G&A is expected to increase slightly in 2025 as a result of hiring and promotions during the last year as well some additional hiring expected in 2025. Again we had a solid quarter and year despite volatility and natural gas prices. When the strong start to 2025 we are confident in our long-term strategy and our ability to generate long-term value for our shareholders. With that I'd like to open up the call for questions.

At this time I'd like to remind everyone in order to ask a question simply press star followed by the number one on your telephone keypad. We'll take our first question from the line of John Anis with Texas Capitol. Please go ahead.

Hey good morning guys and thanks for taking my questions. For my first one I wanted to focus in on the acquisitions you made in Q4. Understanding you guys may prefer not to disclose specific locations at this time could you help frame whether recent acquisitions continue to be focused on the Gulf Coast region and whether it's oil and gas and then perhaps more broadly would you characterize or how would you characterize the current bid-ask spread for mineral opportunities for both oil and gas?

Hi this is Tom. I'll take a shot at that. Our acquisition program is generally focused in the Gulf Coast region around expanding our relatively large Shelby trough footprint where we have had from many prior acquisitions a very solid footprint and in the natural gas environment LNG growth opportunity sets that we see in the future we are conservatively growing this footprint in that area to take advantage of long-term add to our long-term inventory and I don't remember the second half question if you could repeat that. We are we're not actively looking at acquisitions in other basins at this time. Got it that that

makes sense. For my follow-up shifting over to the accelerated drilling agreements entered into during 2024 in the Louisiana Hainesville how should we think about the duration of these agreements are they multi-year type agreements and then with the constructive outlook for natural gas especially the coal and grog from the Hainesville how does that backdrop impact your calculus of executing additional ADAs? I guess another way of asking it do you let activity naturally accelerate across your position while retaining a higher royalty or does the certainty of activity that ADAs bring still remain attractive.

Hi this is Carrie so on the ADAs they are not generally these multi-year you know like the contract that joint exploration are good we have with AATHON these are much more targeted opportunities that we've gone out and identified both based on you know how much opportunity is there from a first an interest perspective as far as you know where we might have interest already concentrated in a smaller area and then of course the resource and the location of it so in the aggregate these accelerated agreements add up quite a bit but they are typically much more limited than a contract like the joint a multi-year joint exploration agreement

and

then I think I think I answered question too in that response but just to be clear we do we are intentional in seeking out those opportunities to try to we call them accelerated it's accelerated development but it's really goes to the point of our whole strategy one of the tenets of our strategy to try to maintain some predict more predictability on the production side and consistency on volumes since we can't do anything about commodity price and as a mineral owner since we're not the one out there drilling the wells that's how this is one of the tools that we have to influence the activity without being in charge of actually the wells

one father Taylor to watch one follow-up John I just say is that while the agreement that we've entered into thus far are certainly targeted as Kerry mentioned we do still see other opportunities to potentially continue this type of a program into additional years so there are additional opportunities that we continue to look at thanks guys

again for any questions press star one on your telephone keypad and our next question will come from the line of Tim resmen with key bank capital markets please go ahead

good morning folks and thanks for taking my questions as a start I just wanted to say that we appreciated the the operational detail in the release it was a helpful sort of date as we think about this increasing line of sight and activity in the Hainesville do you think that the activity like now is in first half of 2025 is reflecting this increase or do you think this will be more of a back half in 2026 impact just trying to understand with the long cycle times because this this increase seems to be setting up for a pretty good kind of multi-year period of growth just because you can have any kind of context on when this would be reflected and should we get a little more constructive on 2026 from this news

Tim this is Tom I'll take a shot at that and maybe give you a little more information than normal in our in our Hainesville area especially in the Shelby trough we are hopeful for a very long cycle of modest to better than modest annual growth in activity in in in and around our properties specifically the the acquisition area that we're working on encompasses in the excess of 450,000 acres in various counties in East Texas and there's there's a Athon is the most active in that area but they only control about 40% of the acreage in that area and we are moving towards owning minerals and or in that area totaling almost half of the total acreage in the area and we see a you know very long runway with very large amounts of additional activity out there for many years to come with and we are also trying to meaningfully expand our operator subset out there to have multiple operators operating in that in that area of course all of this is considered it's no surprise to anybody it's considerably natural gas price sensitive and you know natural gas prices have been hard to predict forever we feel like the current environment is as not completely predictable but certainly relatively predictable and so we're optimistic that there's a fair amount of growth to come out here from expanding the areas that are being developed and expanding the number of operators.

Okay that's helpful context I appreciate that and then in your prepared comments you mentioned 43 million you know of that 110 was spent in the fourth quarter on acquisitions I understand you don't want to show you cards too much on the outlook but can you provide some context on kind of what is still out there in terms of the opportunity set and then just trying to think like how comfortable you would be putting debt on the balance sheet it looks like you could theoretically make another 300 million acquisitions and be less than one times levered so you know what's your kind of inclination to buy more and what's available you know any comments on that would be helpful thank

you. Well there is significant additional identified inventory available to be purchased there's as there's as much left to go as as it has been acquired previously if not more and we are taking a conservative but studied look at that we we do not want to I doubt that you would see us becoming three or four hundred million dollars levered but there are many different avenues that we could take to further expand our position out there but we're we're going at it conservatively trying to watch and monitor what's going on in the natural gas market and that's going to have as much to say about how long and fast we go after this as anything else.

Okay thanks for the context.

And that will conclude our question and answer session I'll hand the call back over to Tom Carter for any closing comments.

Okay well thanks very much for your interest and questions today in joining the call and we look forward to chatting with you further in the future.

This will conclude our call today thank you all for joining you may now disconnect.