Black Stone Minerals LP

Hello, everyone. Thank you for joining us and welcome to Blackstone Minerals first quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Natalie Liddell, Vice President, Corporate Planning. Natalie, please go ahead.

Thank you. Good morning to everyone. Thank you for joining us for Blackstone Minerals' first quarter 2026 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. the cautionary information about forward-looking statements in our press release from yesterday and the risk factors section of our 2025 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 www.blackstoneminerals.com. Joining me on the call from the company are Tom Carter, Executive Chairman, Taylor DeWalch, Co-CEO and President, Fowler Carter, Co-CEO and President, Steve Putman, Senior Vice President and General Counsel, and Chris Bonner, Senior Vice President, Chief Financial Officer and Treasurer. I'll now turn the call over to Taylor.

Thanks, Natalie. Good morning, everybody, and thank you for joining us. As detailed in our earnings release last night, we delivered a strong first quarter, highlighted by higher production across our middle position. Outperformance was driven by increased natural gas activity in the Louisiana Hainesville and Shelby Trough, along with strong oil production in the Permian. Looking ahead, we view 2026 as a year of production growth compared to 2025 as development across our core areas continues to ramp, and we maintain our production guidance outlined in February. Our multiple development agreements in the Hainesville and Bossier expansion play are progressing well, and we remain positioned for meaningful production growth over time. We are seeing continued delineation and also increased activity across the broader Shelby Trough, which reinforces confidence in our long-term inventory profile and growth outlook. This outlook is bolstered by our constructive view on the long-term natural gas backdrop. We are witnessing the industry react to this structural demand growth, which is supported by accelerating LNG export growth, increasing power demand, including data center driven load growth, and continued strength in US industrial activity. These demand drivers continue to highlight the Gulf Coast as a key market for natural gas, where we maintain a significant acreage position and development agreements with direct proximity to premium demand centers. Additionally, we continue to closely monitor the potential long-term implications of supply disruptions in the Middle East and how that could add incremental demand for secure U.S. molecules. We believe each of these drivers, coupled with premier natural gas assets in close proximity to the Gulf Coast and infrastructure projects to transport those molecules, positions us well to benefit from the structural demand over time and provide significant value to our unit holders. With that, I'll turn it over to Fowler to walk through additional details on the commercial front.

Thanks, Taylor. Well, it was a great quarter and we executed across our commercial initiatives building on the momentum established last year, including continued activity under our Haynesville expansion acquisition program. During the quarter, we acquired an additional 12 million of mineral and royalty acreage. This brings total development Excuse me, total deployment under the program since its inception in 23 to more than 250 million. Further strengthening our positioning across the Hainesville and expanding Shelby Trough area. Operators under our development agreements in the Shelby Trough continued to advance multiple programs during the period. Atomos spud four wells during the quarter and turned online seven wells. This included the Congo wells in southern St. Augustine County, which continue to push the historical extent of the Shelby Trough and delivered strong initial results, reaching 30 mm CF per day. Additionally, Catarist is preparing for their initial activity to begin in June with a pilot hole and several commitment wells. Revenant also spud two wells during the quarter, and as mentioned in the press release last night, one of those wells experienced a loss of well control inset. We are assessing the potential impact on their first-year development program. More broadly, we have continued to see an increase in activity within the legacy Shelby Trough area and the emerging Hainesville-Bossier expansion resource play, connecting the Shelby Trough to the western Hainesville. Currently, there are 13 active rigs across Angelina, Nacogdoches, and St. Augustine counties under Atomos, Apex, Exco, and Rockcliffe. Expand is also actively drilling in the southern Anderson County area, while Comstock continues drilling throughout the western Hainesville. Across the broader portfolio, we also saw strong leasing activity and remain encouraged by continued interest in the Permian. Building on that activity, we progressed the opportunity highlighted last quarter in our Shelby Trough expansion area, which includes another approximately 300,000 gross mineral acres. We are currently marketing this project to experienced Haynesville operators to secure an additional development agreement, which we believe would be comparable in scale to our other programs and provide meaningful incremental production growth of With that, I'll turn the call over to Chris to cover the financial results.

Thanks, Valorant. Good morning. As highlighted earlier, we saw strong production in the first quarter with mineral royalty production of 35.9 in beauty per day, which is up 16% from the prior quarter. Total production was 37 in beauty per day. The period was also marked by significant commodity price volatility. Natural gas pricing was impacted by extreme weather-driven swings, including winter storm Fern, which created regional pricing dislocations and temporarily pressured our realizations relative to Henry Hubbard in February before conditions moderated in March. Oil pricing, meanwhile, reflected broader geopolitical developments that intensified later in the quarter and remain ongoing. As we navigate this environment, we are actively managing our head's position as part of our broader risk management approach and monitoring pricing and operator activity across the portfolio. Turning to the quarter's financial results, net income was $13.3 million for the quarter, with adjusted EBITDA at $87 million. 54% of our oil and gas revenue in the quarter came from natural gas and natural gas liquids. As previously announced, we declared a distribution of 30 cents for the quarter, or $1.20 on an annualized basis. Distributable cash flow for the quarter was 76.5 million, which represents 1.2 times coverage for the period. In the first quarter, we continued to execute across the business, positioning the partnership well for the balance of 2026, and remain confident that our diversified portfolio across multiple basins, together with our commercial strategy and the expanded Shelby Trough, supports our ability to deliver sustainable, long-term value for unit holders. With that, we'll open it up for questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A rosters. Your first question comes from the line of Tim Rezvan with KeyBank Capital Markets. Tim, your line is now open.

Good morning, folks, and thank you for taking our questions. For my first question, I was hoping you could provide maybe a little more context on what exactly the outcome is with the loss of well control incident from one of Revenant's wells. Does that well eventually get abandoned, or is there still a hope of salvaging it? you know, when you talked about assessing the potential impact, can you talk about what that means? Does that mean some sort of like deferral or delay? Just any more context would be helpful. Thank you.

Tim, this is Fowler. I'll tackle that. Right now, it just happened. So the truth is we don't know. There is an investigation currently ongoing. Right now, I'd say there is potential for going back into that well, and there may be potential for not going back into that well. We just don't know yet. It is too early to tell. And that's really it, man. I'm really sorry I can't give you more color, but as we get information back, we will be updating folks.

Okay. Okay. I guess we'll have to stay tuned on that. And then as a follow-up, you had a very strong start to the year on the production front, and you laid out a, you know, pretty granular kind of cadence for, you know, your partnerships and their activity. So I know you're not a company that adjusts guidance on a quarterly basis, and you sort of reiterated it. But can you give us a little more color on maybe what the shape of 2026 production will look like? This is Revenant, you know, potentially, you know, temper your enthusiasm on the outlook.

I wouldn't say. Hold on. Sorry. Sorry. I wouldn't say our enthusiasm is tempered in any way, shape, or form. But again, since this just happened, we are actively discussing these things and what that profile will look like this year. And as you said, Tim, we don't adjust guidance quarter to quarter, but... We will get back to you once we have something firmly in place and can understand the situation more clearly. Without putting anything of real substance out there, it might be a bit of a speed bump, but over, I'm going to say, a two-year period, you won't see any difference.

Tim, this is Taylor. I'll just add to that a little bit. I think when we look back at our original guidance, which contemplated quite a bit of production growth kind of throughout the year, even if it was flat compared to 2025, certainly starting out the year with a pretty nice production number. helps. And as we think about the rest of the year, I would go back to kind of what we thought from just a production growth standpoint, given we're getting these development programs off the ground and excited about what that means for production, especially as it looks to the end of 2026 and going into 2027. I think the other piece of the equation that we're really trying to understand right now is kind of operators' reaction to pricing right now with kind of geopolitical events going on in the commodity strip. So I think more to come on that. Certainly trying to guide within a pretty volatile environment can be difficult, but we're excited about where we think we're headed for the rest of the year.

Okay. I appreciate the context. Thank you.

Thanks, Tim.

Just a reminder, if you would like to ask a question, please press star one to raise your hand. Our next question comes from the line of Derek Whitfield with Texas Capitol. Derek, your line is now open.

Good morning and thanks for your time. With the change in ownership at Atheon and now Adamus Energy, could you speak to what changes, if any, you're seeing in behavior around desire to grow?

This is Taylor. I'll jump in first and just say I think that given our contractual commitments there, we certainly have at least some expectations on their cadence of operations and excited about them continuing to move forward in developing the area. I think to be determined on excess growth beyond the commitments, that's a conversation we're having and we'll continue to kind of update as that becomes available. But overall excited about the transaction and the team and continuing to move forward with our contract.

Great. And then with procedures, Back to the well control incident, and it feels like the market today is treating this as an issue that impacts a swath of your acreage. I understand this is more isolated in nature. Is that a fair characterization?

Yes. Yeah. Thanks, Derek. What I would say is when you look at that area and where the well is, it's fully surrounded by development by the likes of Adamas, Exco, and historically others. So I think that the area is pretty well delineated from a subsurface standpoint. And we certainly look forward to kind of further development in that overall area.

Great. And maybe just one last, if I could. So as you guys think about the broader expansion from Shelby Trough to Western Hainesville, could you speak to midstream egress for this region and if it's adequate to meet the needs of where you think growth is headed?

Good question. There's certainly plenty of, there's quite a bit of infrastructure out there, but as you think about the area growing by potentially several more gross BCF a day over the coming years, there's a number of other midstream projects that I think are in the queue and probably more to come on exactly what those projects look like, but I'd say there's existing plus additional infrastructure kind of underway.

Great. Thanks for your time, guys. Yeah, thanks, Derek.

There are no further questions at this time. I will now turn the call back to Taylor for closing remarks.

Thanks so much. Once again, thanks everybody for joining us this morning. It was a great quarter and look forward to the rest of 2026. Talk to you all again soon. Thanks.

This concludes today's call. Thank you for attending.