Black Stone Minerals NYSE: BSM reported second-quarter results marked by lower overall production but stronger oil pricing, continued mineral acquisitions and expanding development activity across its Shelby Trough and Haynesville acreage.
The partnership said it increased its quarterly distribution by 7% to $0.32 per unit, or $1.28 on an annualized basis, citing confidence in its production outlook, oil-weighted asset performance and cash-flow generation. The distribution was covered 1.18 times during the quarter, according to Chief Financial Officer Chris Bonner.
“We do try to increase distributions when we have confidence that we're going to be able to maintain that distribution,” Co-CEO and President Taylor DeWalch said during the company’s earnings call. He said the increase reflects both strong results from oil assets and expectations for a coming production ramp from contracted development programs.
Quarterly Financial and Production Results
Mineral and royalty production averaged 32.5 thousand barrels of oil equivalent per day during the second quarter, while total production averaged 33.5 thousand BOE per day. Production declined from the first quarter, primarily because of lower Haynesville natural-gas mineral royalty volumes.
Bonner said production can be uneven as wells are brought online at different times during the year, particularly given the company’s higher-interest positions in the Shelby Trough. However, management said it remains confident that rising rig activity and progress under development agreements will support higher production over the medium and long term.
The partnership’s average realized price excluding derivative settlements rose 7% sequentially to $37.82 per BOE. Higher oil prices and production helped offset lower natural-gas volumes, Bonner said. Oil and condensate accounted for 65% of oil and gas revenue during the quarter.
- Net income was approximately $106 million.
- Adjusted EBITDA totaled $91 million.
- Distributable cash flow was $80 million.
Bonner said the company benefited from price-driven activity in oil-producing areas, including operators turning drilled but uncompleted wells to sales. Management also highlighted solid contributions from acreage in the Permian Basin and Bakken.
Haynesville and Shelby Trough Development Advances
Management described 2026 as an important inflection year as development advances across the Shelby Trough and Haynesville expansion area. DeWalch said activity across core areas is “moving in the right direction,” despite the quarter-over-quarter production decline.
Adamas had two rigs operating on Black Stone Minerals acreage at the end of the quarter and turned four wells to sales in July. The company expects another eight wells to begin production during the remainder of 2026, while Adamas plans to drill 17 wells during its program year that started in July.
Revenant spud two additional wells during the quarter, despite a reduction in its first-year drilling commitment following a previously disclosed well-control incident. Caturus began operations under its agreement with Black Stone Minerals, with a pilot well underway in Cherokee County and development drilling expected to begin in the second half of 2026.
The company also said it is in discussions with a prospective operator about a potential new development agreement that could expand its contracted development footprint. DeWalch said Black Stone Minerals has been marketing additional Shelby Trough acreage and is nearing the point at which it could disclose another formal agreement with a Haynesville operator.
Industry activity across the Haynesville increased during the quarter, including a significant rise in active rigs on the company’s Haynesville and Shelby Trough acreage. Management said results from Expand’s Bobby Yancey well in Houston County, along with drilling in Anderson County, support its view that the Shelby Trough is connected to the Western Haynesville.
DeWalch said operators are being drawn to the area by current returns, delineation needs and commitments under development agreements, as well as the need for additional natural-gas inventory as legacy Haynesville opportunities decline.
Acquisitions, Leasing and Portfolio Activity
Black Stone Minerals completed about $40 million in mineral and royalty acquisitions during the quarter. Since launching its acquisition program nearly three years ago, the partnership has deployed almost $300 million, primarily for acreage located within or adjacent to its core development areas.
Co-CEO and President Fowler Carter said the company continues to identify acquisition opportunities that complement its existing position and increase exposure to future development.
Leasing and asset-management initiatives also added to first-half results. Strong leasing activity generated approximately $13 million in lease bonus and other income, exceeding management’s expectations at the start of the year. In addition, a review of deduct-free lease provisions launched late last year resulted in about $6.5 million of refunds collected to date.
Management said leasing activity has been particularly notable across the Permian, Bakken and Woodford Barnett areas. DeWalch said this activity is producing leasing income today and could support future production and development.
Outside the Shelby Trough, Blue Arrow continued development in the Southern Delaware Basin. Three wells were turned to sales during the quarter, while the remaining 22 wells in the program are expected to come online in the second half of 2026 and into 2027.
Capital Allocation and Outlook
Management said debt has recently supported the company’s acquisition program in the Shelby Trough. During the question-and-answer session, DeWalch said Black Stone Minerals views its leverage as peer-leading and intends to remain disciplined as it considers future capital allocation.
The company also plans to evaluate options related to its preferred equity agreement with Apollo when the next open window arrives, while continuing to assess acquisition opportunities and other uses of capital.
Management said its diversified oil and natural-gas portfolio, growing development footprint and location near Gulf Coast demand centers position the partnership to pursue sustainable production growth, cash flow and long-term value for unitholders.
About Black Stone Minerals (NYSE:BSM)
Black Stone Minerals L.P. NYSE: BSM is a publicly traded limited partnership that acquires and manages oil and natural gas mineral interests and producing royalty interests across the United States. The company's business model centers on holding fractional ownership in subsurface mineral estates, which allows it to earn royalty income from hydrocarbon production without taking on the capital expenditures or operating risks associated with exploration and development.
Founded in 1876 and headquartered in Houston, Texas, Black Stone Minerals has built a diversified portfolio spanning key U.S.
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