Black Stone Minerals NYSE: BSM reported higher production, cash flow and distributable cash flow in the third quarter of 2026, supported by increased natural gas volumes from the Haynesville and Bossier formations, higher Permian oil volumes and elevated oil prices.
The company raised its quarterly distribution for the second consecutive quarter to $0.35 per unit, or $1.40 on an annualized basis. Management said the increase was supported by stronger cash flow while preserving 1.25x distribution coverage.
“We had a strong third quarter with growth in both oil and natural gas production,” Co-CEO and President Taylor DeWalch said. “Higher volumes, together with continued support from elevated oil prices, contributed to increased cash flow compared to the second quarter.”
Third-Quarter Financial and Operating Results
Mineral and royalty production averaged 34.5 thousand barrels of oil equivalent per day during the quarter, while total production averaged 35.6 MBoe per day. Mineral and royalty output increased 6% from the second quarter, driven by higher Haynesville and Bossier natural gas production and higher Permian oil production, Chief Financial Officer Chris Bonner said.
Oil and condensate accounted for nearly two-thirds of oil and gas revenue during the quarter. The company’s average realized commodity price, excluding derivative settlements, was roughly unchanged from the preceding quarter, according to Bonner.
- Net income was approximately $52 million.
- Net income included a roughly $30 million non-cash unrealized derivative loss.
- Adjusted EBITDA totaled $104 million.
- Distributable cash flow was $93 million.
Bonner said higher production helped lift oil and gas revenue and cash flow. Management said it intends to balance distributions with investments intended to support longer-term production and cash-flow growth while maintaining financial flexibility.
Shelby Trough Development Agreements Expand
A central focus of Black Stone’s growth strategy is development of its mineral acreage in the expanded Shelby Trough. During the quarter, the company amended and expanded its agreement with Caturus, adding 730,000 gross acres to the contract area.
Fowler Carter, co-CEO and president, said the expanded Caturus agreement, together with agreements involving Adamas and Revenant, brings the total acreage covered by the company’s development agreements to about 1.4 million gross acres. Black Stone also has approximately 50,000 gross acres under traditional leases in active parts of the Shelby Trough.
Management did not provide details about Caturus’ pilot well data. Carter said Caturus collected substantial data and that the agreement’s expansion itself reflects the parties’ confidence in the acreage.
Black Stone expects that, after completing its planned acquisition program, about 60% of its expanded Shelby Trough net mineral acreage will be from legacy holdings and about 40% will come from acquisitions. The company has spent about $335 million on its resource-capture effort to date, according to an analyst’s question on the call.
DeWalch said the company is more than halfway through its acquisition program and continues to identify opportunities to add acreage at the scale needed for development agreements. He also said the Caturus acreage marketing process was strong and competitive, reflecting broader interest in the Shelby Trough’s Haynesville-Bossier potential rather than being tied to a single well.
Development Activity and Production Outlook
Management said development activity is building across the Shelby Trough acreage. Adamas is bringing additional wells online, while Revenant’s initial production is expected by year-end. Caturus has spud its first two development wells under the original agreement, with production expected in the first half of 2027.
Elsewhere on Black Stone’s Shelby Trough position, EXCO, Apex, Rockcliff and BPX have a combined 10 wells drilling or awaiting completion on the company’s acreage. Additional permit filings point to potentially increased drilling in the coming months, Carter said.
Bonner said the company expects a steady natural-gas production ramp heading into 2027 as Adamas wells continue to come online, Revenant begins production and Caturus wells are brought into service. On the oil side, he cited increased development by Blue Arrow and said broader activity in the Permian and Bakken has benefited from operators completing drilled but uncompleted wells.
He noted, however, that oil-focused activity could be more sensitive to commodity prices and operators’ capital-spending decisions for next year.
Takeaway Capacity and Capital Flexibility
Responding to a question on infrastructure constraints, DeWalch said Black Stone, operators and midstream companies have been discussing gathering and long-haul pipeline needs in advance of expected Shelby Trough volume growth. He said additional capacity will be needed over time, but projects are underway.
DeWalch specifically cited the agreement between Williams and Momentum and said the company expects additional capacity moving south toward the LNG corridor and other Gulf Coast demand centers. Management does not expect major takeaway constraints as supply growth advances.
On funding, DeWalch said Black Stone’s priority is maintaining balance-sheet flexibility. He said the company is considering various potential uses of capital, including acquisitions and the preferred equity redemption window that opens in about a year. Bonner said the existing credit facility is sufficient to meet the company’s needs for the acquisition program.
Management said its distribution strategy has not changed. DeWalch said the latest increase reflected confidence in the company’s forecast, while future capital-allocation decisions will continue to emphasize financial flexibility.
About Black Stone Minerals (NYSE:BSM)
Black Stone Minerals, L.P. NYSE: BSM is a publicly traded master limited partnership that owns mineral and royalty interests in oil and natural gas properties across the United States. The company's interests entitle it to receive a portion of production or revenue from properties operated and developed by exploration and production companies, generally without bearing the same level of operating costs as working-interest owners.
Black Stone's portfolio includes mineral, royalty, overriding royalty and working interests in several major U.S.
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