What changed in this filing

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Item 1. Financial Statements

2020-11-03 compared with 2020-08-04 · 119 added, 105 removed, 518 unchanged (30% of the section changed)

4 unchanged sentences

(In thousands)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

CURRENT ASSETS

2 unchanged sentences

Commodity derivative assets 8,569 14,790

Assets held for sale 126,491 —

Prepaid expenses and other current assets 1,798 1,168

1 unchanged sentence

PROPERTY AND EQUIPMENT

Oil and natural gas properties, at cost, using the successful efforts method of accounting, includes unproved properties of $ 946,232 and $ 1,073,447 at June 30, 2020 and December 31, 2019, respectively

Oil and natural gas properties, at cost, using the successful efforts method of accounting, includes unproved properties of $ 947,229 and $ 1,073,447 at September 30, 2020 and December 31, 2019, respectively

3,158,203 3,302,340

1 unchanged sentence

Oil and natural gas properties, net 1,190,542 1,431,928

Other property and equipment, net of accumulated depreciation of $ 11,963 and $ 11,622 at June 30, 2020 and December 31, 2019, respectively

Other property and equipment, net of accumulated depreciation of $ 12,132 and $ 11,622 at September 30, 2020 and December 31, 2019, respectively

NET PROPERTY AND EQUIPMENT 1,192,347 1,434,228

17 unchanged sentences

MEZZANINE EQUITY

Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at June 30, 2020 and December 31, 2019

Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at September 30, 2020 and December 31, 2019

298,361 298,361

Partners' equity – general partner interest — —

Partners' equity – common units, 206,709 and 205,960 units outstanding at June 30, 2020 and December 31, 2019, respectively

Partners' equity – common units, 206,738 and 205,960 units outstanding at September 30, 2020 and December 31, 2019, respectively

764,633 798,443

6 unchanged sentences

(In thousands, except per unit amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

13 unchanged sentences

Accretion of asset retirement obligations 286 275 836 829

(Gain) loss on sale of assets, net ( 24,045 ) — ( 24,045 ) —

TOTAL OPERATING EXPENSE 18,514 62,136 164,902 194,300

45 unchanged sentences

BALANCE AT JUNE 30, 2020 206,709 $ 775,681 $ 775,681

Restricted units granted, net of forfeitures 29 — —

Equity–based compensation — 1,613 1,613

Distributions — ( 31,011 ) ( 31,011 )

Charges to partners' equity for accrued distribution equivalent rights — ( 133 ) ( 133 )

Distributions on Series B cumulative convertible preferred units — ( 5,250 ) ( 5,250 )

Net income (loss) — 23,733 23,733

BALANCE AT SEPTEMBER 30, 2020 206,738 $ 764,633 $ 764,633

The accompanying notes are an integral part of these unaudited consolidated financial statements.

24 unchanged sentences

BALANCE AT JUNE 30, 2019 205,956 — $ 845,654 $ — $ 845,654

Restricted units granted, net of forfeitures ( 4 ) — — — —

Equity–based compensation — — 3,385 — 3,385

Distributions — — ( 76,204 ) — ( 76,204 )

Charges to partners' equity for accrued distribution equivalent rights — — ( 511 ) — ( 511 )

Distributions on Series B cumulative convertible preferred units — — ( 5,250 ) — ( 5,250 )

Net income (loss) — — 70,247 — 70,247

BALANCE AT SEPTEMBER 30, 2019 205,952 — $ 837,321 $ — $ 837,321

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3 unchanged sentences

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

9 unchanged sentences

Exploratory dry hole expense — 3

(Gain) loss on sale of assets, net ( 24,045 ) —

Changes in operating assets and liabilities:

44 unchanged sentences

The unaudited interim consolidated financial statements include the consolidated results of the Partnership.

The results of operations for the six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year.

In the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for the fair presentation of the financial results for all periods presented have been reflected.

15 unchanged sentences

Significant accounting policies are disclosed in the Partnership’s 2019 Annual Report on Form 10-K.

There have been no changes in such policies or the application of such policies during the six months ended June 30, 2020.

There have been no changes in such policies or the application of such policies during the nine months ended September 30, 2020.

Accounts Receivable

The following table presents information about the Partnership's accounts receivable:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

(in thousands)

6 unchanged sentences

The adoption of this update had no impact on the Partnership's financial position, results of operations, or liquidity.

NOTE 3 - OIL AND NATURAL GAS PROPERTIES

Assets Held for Sale

In June 2020, the Partnership announced it had entered into two separate agreements to sell certain mineral and royalty properties in the Permian Basin.

These transactions subsequently closed in July 2020 for total proceeds, after closing adjustments, of $ 150.1 million.

One of these transactions, effective May 1, 2020, involved the sale of the Partnership's mineral and royalty interest in specific tracts in Midland County, Texas to a private buyer for gross proceeds of approximately $ 55 million ("Divestiture A").

The other transaction, effective July 1, 2020, involved the sale of an undivided interest across parts of the Partnership's Delaware Basin and Midland Basin positions to Pegasus Resources, LLC, a portfolio company of EnCap Investments, for gross proceeds of approximately $ 100 million ("Divestiture B").

The book value of the assets divested through these transactions are classified as held for sale in the consolidated balance sheet as of June 30, 2020.

Assets held for sale consisted of the following as of June 30, 2020:

Divestiture A Divestiture B Total

(in thousands)

Accounts Receivable $ 227 $ — $ 227

Oil and natural gas properties

Unproved properties 50,985 67,292 118,277

Proved properties, net 2,274 5,713 7,987

Total Assets Held for Sale $ 53,486 $ 73,005 $ 126,491

The assets held for sale as of June 30, 2020 do not qualify for discontinued operations as they do not represent a strategic shift that will have a major effect on the Partnership's operations or financial results.

BLACK STONE MINERALS, L.P.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - OIL AND NATURAL GAS PROPERTIES

In the third quarter of 2020, the Partnership closed two separate divestitures of certain mineral and royalty properties in the Permian Basin for total proceeds, after closing adjustments, of $ 150.2 million.

One of these transactions, effective May 1, 2020, involved the sale of the Partnership's mineral and royalty interest in specific tracts in Midland County, Texas for net proceeds of approximately $ 54.5 million.

The other transaction, effective July 1, 2020, involved the sale of an undivided interest across parts of the Partnership's Delaware Basin and Midland Basin positions for net proceeds of approximately $ 95.7 million.

The total book value of the assets divested through these transactions was $ 126.2 million at the time of sale.

The Partnership recognized a $ 24.0 million gain associated with the divestitures included in the (Gain) loss on sale of assets, net line item of the consolidated statement of operations for the three and nine months ended September 30, 2020.

Acquisitions of proved oil and natural gas properties and working interests are generally considered business combinations and are recorded at their estimated fair value as of the acquisition date.

1 unchanged sentence

2020 Acquisitions

The Partnership had no acquisition activity during the six months ended June 30, 2020.

The Partnership had no acquisition activity during the nine months ended September 30, 2020.

2019 Acquisitions

17 unchanged sentences

Under these agreements, the Partnership conveyed its rights to participate in certain non-operated working interest opportunities to external capital providers while retaining value from these interests in the form of additional royalty income or retained economic interests.

Canaan Farmout

On February 21, 2017, the Partnership announced that it had entered into a farmout agreement with Canaan Resource Partners ("Canaan") which covers certain Haynesville and Bossier shale acreage in San Augustine County, Texas operated by XTO Energy Inc., a subsidiary of Exxon Mobil Corporation.

The Partnership has an approximate 50 % working interest in the acreage and is the largest mineral owner.

A total of 20 wells were drilled over an initial phase, beginning with wells spud after January 1, 2017.

Canaan elected to participate in an additional phase that began in September 2018 and continues for the lesser of 2 years or until 20 wells have been drilled.

As of June 30, 2020, a total of 17 wells have been drilled during the second phase.

After the completion of the second phase, Canaan will have the option to elect to participate in a similar third phase.

During the first three phases of the agreement, Canaan commits on a phase-by-phase basis and funds 80 % of the Partnership's drilling and completion costs and is assigned 80 % of the Partnership's working interests in such wells ( 40 % working interest on an 8/8ths basis) as the wells are drilled.

After the third phase, Canaan can earn 40 % of the Partnership’s working interest ( 20 % working interest on an 8/8ths basis) in additional wells drilled in the area by continuing to fund 40 % of the Partnership's costs for those

BLACK STONE MINERALS, L.P.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

wells on a well-by-well basis.

Canaan Farmout

In February 2017, the Partnership entered into a farmout agreement with Canaan Resource Partners ("Canaan") which covers certain Haynesville and Bossier shale acreage in San Augustine County, Texas operated by XTO Energy Inc., a subsidiary of Exxon Mobil Corporation.

The Partnership has an approximate 50 % working interest in the acreage and is the largest mineral owner.

During the first three phases of the farmout agreement, Canaan commits on a phase-by-phase basis and funds 80 % of the Partnership's drilling and completion costs and is assigned 80 % of the Partnership's working interests in such wells ( 40 % working interest on an 8/8ths basis) as the wells are drilled.

The Partnership receives an overriding royalty interest (“ORRI”) before payout and an increased ORRI after payout on all wells drilled under the agreement .

Canaan has participated in a total of 37 wells under the farmout agreement through September 30, 2020 covering two election phases.

In 2019, XTO Energy Inc.

suspended its development activities in the area due to low natural gas prices.

Canaan has the right to elect to continue its participation in a third phase covering up to 20 future wells drilled under the farmout agreement should XTO Energy Inc.

resume drilling activity.

Pivotal Farmout

On November 21, 2017, the Partnership entered into a farmout agreement with Pivotal Petroleum Partners (“Pivotal”), a portfolio company of Tailwater Capital, LLC.

In November 2017, the Partnership entered into a farmout agreement with Pivotal Petroleum Partners (“Pivotal”), a portfolio company of Tailwater Capital, LLC.

The farmout agreement covers substantially all of the Partnership's remaining working interests under active development in the Shelby Trough area of East Texas, targeting the Haynesville and Bossier shale acreage (after giving effect to the Canaan Farmout), until November 2025.

3 unchanged sentences

Once Pivotal achieves a specified payout for a designated well group, the Partnership will obtain a majority of the original working interest in such well group.

As of June 30, 2020, a total of 68 wells have been drilled in the contract area.

As of September 30, 2020, a total of 68 wells have been drilled in the contract area.

The Partnership's development agreement with BPX Energy terminated in 2019 with respect to the majority of the Partnership's acreage covered by the farmout agreement with Pivotal.

2 unchanged sentences

The agreement provides for minimum well commitments by Aethon in exchange for reduced royalty rates and exclusive access to our mineral and leasehold acreage in the contract area.

The agreement calls for a minimum of four wells to be drilled in the initial program year, which begins in the third quarter of 2020, increasing to a minimum of 15 wells per year beginning with the third program year.

The Partnership remains engaged with Pivotal around farmout opportunities in the area forfeited by BPX Energy, including the acreage covered by the Aethon development agreement.

From the inception of the farmout agreements through June 30, 2020, the Partnership has received $ 90.3 million and $ 119.1 million from Canaan and Pivotal, respectively, under the agreements.

The agreement calls for a minimum of four wells to be drilled in the initial program year, which began in the third quarter of 2020, increasing to a minimum of 15 wells per year beginning with the third program year.

The Partnership expects to enter into a new farmout agreement with Pivotal to incorporate the Aethon development agreement on similar terms as in the original Pivotal farmout agreement.

From the inception of the farmout agreements through September 30, 2020, the Partnership has received $ 90.3 million and $ 119.2 million from Canaan and Pivotal, respectively, under the agreements.

When such reimbursements are received prior to assigning the wells to Canaan and Pivotal, the Partnership records the amounts as increases to Oil and natural gas properties and Other long-term liabilities.

When working interests in farmout wells are assigned to Canaan and Pivotal, the Partnership's Oil and natural gas properties and Other long-term liabilities are reduced by the reimbursed capital costs.

As of June 30, 2020 and December 31, 2019, $ 0.1 million and $ 1.7 million, respectively, was included in the Other long-term liabilities line item of the consolidated balance sheets for reimbursements received associated with farmed-out working interests not yet assigned to Canaan and Pivotal.

As of September 30, 2020 and December 31, 2019, $ 0.1 million and $ 1.7 million, respectively, was included in the Other long-term liabilities line item of the consolidated balance sheets for reimbursements received associated with farmed-out working interests not yet assigned to Canaan and Pivotal.

Impairment of Oil and Natural Gas Properties

1 unchanged sentence

When assessing producing properties for impairment, the Partnership compares the expected undiscounted projected future cash flows of the producing properties to the carrying amount of the producing properties to determine recoverability.

When the carrying amount exceeds its estimated undiscounted future cash flows, the carrying amount is written down to its fair value, which is measured as the present value of the projected future cash flows of such properties.

When the carrying amount exceeds its estimated undiscounted future cash flows, the carrying amount is written down to its fair value, which is measured as the present value of

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

the projected future cash flows of such properties.

There was a collapse in oil prices during the first quarter of 2020 due to geopolitical events that increased supply at the same time demand weakened due to the impact of the COVID-19 pandemic.

The Partnership determined these events and circumstances indicated a possible decline in the recoverability of the carrying value of certain proved properties and recoverability testing determined that certain depletable units consisting of mature oil producing properties were impaired as of March 31, 2020.

The Partnership recognized no impairment of oil and natural gas properties for the three months ended June 30, 2020 and $ 51.0 million of impairment of oil and natural gas properties for the six months ended June 30, 2020.

The Partnership recognized no impairment of oil and natural gas properties for the three months ended September 30, 2020 and $ 51.0 million of impairment of oil and natural gas properties for the nine months ended September 30, 2020.

No impairment of oil and natural gas properties was recognized during 2019.

See Note 5 - Fair Value Measurements for further discussion.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - COMMODITY DERIVATIVE FINANCIAL INSTRUMENTS

4 unchanged sentences

The Partnership does not enter into derivative instruments for speculative purposes.

As of June 30, 2020, the Partnership’s open derivative contracts consisted of fixed-price swap contracts and costless collar contracts.

As of September 30, 2020, the Partnership’s open derivative contracts consisted of fixed-price swap contracts and costless collar contracts.

A fixed-price swap contract between the Partnership and the counterparty specifies a fixed commodity price and a future settlement date.

3 unchanged sentences

All derivative gains and losses from the Partnership’s derivative contracts have been recognized in revenue in the Partnership's accompanying consolidated statements of operations.

Derivative instruments that have not yet been settled in cash are reflected as either derivative assets or liabilities in the Partnership’s accompanying consolidated balance sheets as of June 30, 2020 and December 31, 2019.

See Note 5 - Fair Value Measurements for further discussion.

2 unchanged sentences

This evaluation includes reviewing a counterparty’s credit rating and latest financial information.

As of June 30, 2020, the Partnership had nine counterparties, all of which are rated Baa1 or better by Moody’s and are lenders under the Credit Facility.

As of September 30, 2020, the Partnership had nine counterparties, all of which are rated Baa1 or better by Moody’s and are lenders under the Credit Facility.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The tables below summarize the fair values and classifications of the Partnership’s derivative instruments, as well as the gross recognized derivative assets, liabilities, and amounts offset in the consolidated balance sheets as of each date:

June 30, 2020

September 30, 2020

Classification Balance Sheet Location Gross

12 unchanged sentences

$ 21,757 $ ( 11,366 ) $ 10,391

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

14 unchanged sentences

Changes in the fair values of the Partnership’s derivative instruments (both assets and liabilities) are presented on a net basis in the accompanying consolidated statements of operations and consolidated statements of cash flows and consist of the following for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Derivatives not designated as hedging instruments 2020 2019 2020 2019

7 unchanged sentences

Ending fair value of commodity derivative instruments $ ( 1,822 ) $ 42,012 $ ( 1,822 ) $ 42,012

The Partnership had the following open derivative contracts for oil as of June 30, 2020:

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Partnership had the following open derivative contracts for oil as of September 30, 2020:

Weighted Average Price (Per Bbl) Range (Per Bbl)

1 unchanged sentence

Oil Swap Contracts:

Second Quarter 210,000 $ 57.32 $ 54.92 $ 58.65

Third Quarter 210,000 $ 57.32 $ 54.92 $ 58.65

4 unchanged sentences

Fourth Quarter 480,000 36.18 32.64 37.92

BLACK STONE MINERALS, L.P.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Weighted Average

3 unchanged sentences

Oil Collar Contracts:

Second Quarter 70,000 $ 56.43 $ 67.14

Third Quarter 70,000 $ 56.43 $ 67.14

Fourth Quarter 210,000 56.43 67.14

The Partnership had the following open derivative contracts for natural gas as of June 30, 2020:

The Partnership had the following open derivative contracts for natural gas as of September 30, 2020:

Weighted Average Price (Per MMBtu) Range (Per MMBtu)

1 unchanged sentence

Natural Gas Swap Contracts:

Fourth Quarter 10,120,000 $ 2.69 $ 2.55 $ 2.74

First Quarter 9,000,000 $ 2.65 $ 2.52 $ 2.85

Second Quarter 9,100,000 2.65 2.52 2.85

Third Quarter 9,200,000 2.65 2.52 2.85

Fourth Quarter 9,200,000 2.65 2.52 2.85

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Partnership entered into the following derivative contracts for natural gas subsequent to September 30, 2020:

Weighted Average Price (Per MMBtu) Range (Per MMBtu)

Period and Type of Contract Volume (MMBtu) Low High

Natural Gas Swap Contracts:

First Quarter 900,000 $ 3.08 $ 3.08 $ 3.08

15 unchanged sentences

The carrying value of the Partnership's cash and cash equivalents, receivables, and payables approximate fair value due to the short-term nature of the instruments.

The estimated carrying value of all debt as of June 30, 2020 and December 31, 2019 approximated the fair value due to variable market rates of interest.

These debt fair values, which are Level 3 measurements,

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

were estimated based on the Partnership’s incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available.

The estimated carrying value of all debt as of September 30, 2020 and December 31, 2019 approximated the fair value due to variable market rates of interest.

These debt fair values, which are Level 3 measurements, were estimated based on the Partnership’s incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available.

The estimated fair values of the Partnership’s financial instruments are not necessarily indicative of the amounts that would be realized in a current market exchange.

2 unchanged sentences

See Note 4 - Commodity Derivative Financial Instruments for further discussion.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents information about the Partnership’s assets and liabilities measured at fair value on a recurring basis:

2 unchanged sentences

(in thousands)

As of June 30, 2020

As of September 30, 2020

Financial Assets

23 unchanged sentences

(in thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Impaired oil and natural gas properties $ — $ — $ — $ —

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Impaired oil and natural gas properties $ — $ — $ — $ —

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Impaired oil and natural gas properties $ — $ — $ 2,044 $ 51,031

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Impaired oil and natural gas properties $ — $ — $ — $ —

2 unchanged sentences

Changes to these estimates, particularly related to economic reserves, future commodity prices, and timing of future production could result in additional impairment charges in the future.

There were no significant changes in valuation techniques or related inputs as of June 30, 2020 or December 31, 2019.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

There were no significant changes in valuation techniques or related inputs as of September 30, 2020 or December 31, 2019.

NOTE 6 - CREDIT FACILITY

6 unchanged sentences

Effective July 21, 2020, in connection with the closing of the Partnership's two asset sales in the Permian Basin, the borrowing base was further reduced to $ 430.0 million.

Effective November 3, 2020, the most recent borrowing base redetermination reduced the borrowing base to $ 400.0 million.

Outstanding borrowings under the Credit Facility bear interest at a floating rate elected by the Partnership equal to an alternative base rate (which is equal to the greatest of the Prime Rate, the Federal Funds effective rate plus 0.50 %, or 1-month LIBOR plus 1.00 %) or LIBOR, in each case, plus the applicable margin.

The applicable margin for the alternative base rate ranges from 0.75 % to 1.75 % and the applicable margin for LIBOR ranges from 1.75 % to 2.75 %, depending on the borrowings outstanding in relation to the borrowing base.

The weighted-average interest rate of the Credit Facility was 2.43 % and 4.05 % as of June 30, 2020 and December 31, 2019, respectively.

Effective November 3, 2020, the LIBOR margin was increased to between 2.00 % and 3.00 % and the alternative base rate margin was increased to between 1.00 % and 2.00 %.

The weighted-average interest rate of the Credit Facility was 2.15 % and 4.05 % as of September 30, 2020 and December 31, 2019, respectively.

Accrued interest is payable at the end of each calendar quarter or at the end of each interest period, unless the interest period is longer than 90 days, in which case interest is payable at the end of every 90 -day period.

3 unchanged sentences

Additionally, the Credit Facility requires the Partnership to maintain a current ratio of not less than 1.0 :1.0 and a ratio of total debt to EBITDAX (Earnings before Interest, Taxes, Depreciation, Amortization, and Exploration) of not more than 3.5 :1.0.

As of June 30, 2020, the Partnership was in compliance with all financial covenants in the Credit Facility.

The aggregate principal balance outstanding was $ 323.0 million and $ 394.0 million at June 30, 2020 and December 31, 2019, respectively.

The unused portion of the available borrowings under the Credit Facility were $ 137.0 million and $ 256.0 million at June 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020, the Partnership was in compliance with all financial covenants in the Credit Facility.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The aggregate principal balance outstanding was $ 147.0 million and $ 394.0 million at September 30, 2020 and December 31, 2019, respectively.

The unused portion of the available borrowings under the Credit Facility were $ 283.0 million and $ 256.0 million at September 30, 2020 and December 31, 2019, respectively.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

The Partnership does not consider the potential remediation costs that could result from issues identified in any environmental site assessments to be significant to the consolidated financial statements, and no provision for potential remediation costs has been recorded.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Put Option Related to Noble Acquisition

By acquiring 100 % of the issued and outstanding securities of Samedan Royalty, LLC, now NAMP Holdings, LLC, on November 28, 2017 from Noble Energy US Holdings, LLC, the Partnership acquired a 100 % interest in Comin-Temin, LLC, now NAMP GP, LLC ("Holdings"), Comin 1989 Partnership LLLP, now NAMP 1, LP ("Comin"), and Temin 1987 Partnership LLLP, now NAMP 2, LP ("Temin").

Pursuant to certain co-ownership agreements, various co-owners hold undivided beneficial ownership interests in 45.33 % and 42.63 % of the mineral interests obtained by the Partnership through the acquisition of Holdings and Temin, respectively as of June 30, 2020.

Based on the terms of the co-ownership agreements, the co-owners each have an unconditional option to require Comin or Temin, as applicable, to purchase their beneficial ownership interest in these mineral interests, as applicable, at any time within 30 days of receiving such repurchase notice.

The purchase price of the beneficial ownership interest shall be based on an evaluation performed by Comin or Temin, as applicable, in good faith.

As of June 30, 2020, the Partnership had not received notice from any co-owners to exercise their repurchase option, and as such, no liability was recorded.

As of September 30, 2020, the Partnership had not received notice from any co-owners to exercise their repurchase option, and as such, no liability was recorded.

On August 14, 2020, the Partnership notified the co-owners that it expected to terminate the co-ownership agreement effective December 31, 2020.

From time to time, the Partnership is involved in legal actions and claims arising in the ordinary course of business.

The Partnership believes existing claims as of June 30, 2020 will be resolved without material adverse effect on the Partnership’s financial condition or operations.

The Partnership believes existing claims as of September 30, 2020 will be resolved without material adverse effect on the Partnership’s financial condition or operations.

NOTE 8 - INCENTIVE COMPENSATION

The table below summarizes incentive compensation expense recorded in the General and administrative line item of the consolidated statements of operations for the periods presented:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

1 Compensation expense related to the restricted performance awards is determined using the measurement-date (i.e., the last day of each reporting period date) fair value of the Partnership's common units.

Downward cost revisions recognized in the six months ended June 30, 2020 are due to the decrease in the Partnership's common unit price period over period.

Downward cost revisions recognized in the nine months ended September 30, 2020 are due to the decrease in the Partnership's common unit price period over period.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - PREFERRED UNITS

4 unchanged sentences

However, the Partnership shall not be obligated to honor any request for such conversion if such request does not involve an underlying value of common units of at least $ 10.0 million based on the closing trading price of common units on the trading day immediately preceding the conversion notice date, or such lesser amount to the extent such exercise covers all of a holder's Series B cumulative convertible preferred units.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Series B cumulative convertible preferred units had a carrying value of $ 298.4 million, including accrued distributions of $ 5.3 million, as of June 30, 2020 and December 31, 2019.

The Series B cumulative convertible preferred units had a carrying value of $ 298.4 million, including accrued distributions of $ 5.3 million, as of September 30, 2020 and December 31, 2019.

The Series B cumulative convertible preferred units are classified as mezzanine equity on the consolidated balance sheets since certain provisions of redemption are outside the control of the Partnership.

8 unchanged sentences

The Partnership assesses the number of units that would be issuable, if any, under the terms of the arrangement if the end of the reporting period were the end of the contingency period.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the computation of basic and diluted earnings per common and subordinated unit:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

16 unchanged sentences

Weighted average subordinated units outstanding (basic)

— 56,104 — 76,105

Effect of dilutive securities

Weighted average subordinated units outstanding (diluted)

— 56,104 — 76,105

NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT:

4 unchanged sentences

Per subordinated unit (diluted) — — — 0.48

1 For the three months ended June 30, 2019, diluted net income (loss) attributable to common units included distributions on Series B cumulative convertible preferred units of $5.3 million.

BLACK STONE MINERALS, L.P.

2 unchanged sentences

The following units of potentially dilutive securities were excluded from the computation of diluted weighted average units outstanding because their inclusion would be anti-dilutive:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

17 unchanged sentences

The following table provides information about the Partnership's per unit distributions to common and subordinated unitholders:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

8 unchanged sentences

The repurchase program authorizes the Partnership to make repurchases on a discretionary basis as determined by management, subject to market conditions, applicable legal requirements, available liquidity, and other appropriate factors.

The Partnership made no repurchases under this program for the six months ended June 30, 2020.

As of June 30, 2020, the Partnership has repurchased $ 4.2 million in common units under the repurchase program since inception.

The Partnership made no repurchases under this program for the nine months ended September 30, 2020.

As of September 30, 2020, the Partnership has repurchased $ 4.2 million in common units under the repurchase program since inception.

The repurchase program is funded from the Partnership's cash on hand or availability on the Credit Facility.

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NOTE 12 - SUBSEQUENT EVENTS

On July 27, 2020, the Board approved a distribution for the three months ended June 30, 2020 of $ 0.15 per common unit.

Distributions will be payable on August 21, 2020 to unitholders of record at the close of business on August 14, 2020.

On October 21, 2020, the Board approved a distribution for the three months ended September 30, 2020 of $ 0.15 per common unit.

Distributions will be payable on November 20, 2020 to unitholders of record at the close of business on November 13, 2020.

Effective November 3, 2020, the borrowing base of the Credit Facility was reduced to $ 400.0 million from $ 430.0 million and the applicable margin rates were increased, as discussed in Note 6 - Credit Facility.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements