What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-02 · 79 added, 62 removed, 505 unchanged (22% of the section changed)

4 unchanged sentences

(In thousands)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

CURRENT ASSETS

5 unchanged sentences

PROPERTY AND EQUIPMENT

Oil and natural gas properties, at cost, using the successful efforts method of accounting, includes unproved properties of $ 925,707 and $ 937,395 at June 30, 2022 and December 31, 2021, respectively

Oil and natural gas properties, at cost, using the successful efforts method of accounting, includes unproved properties of $ 925,839 and $ 937,395 at September 30, 2022 and December 31, 2021, respectively

3,001,540 3,001,627

1 unchanged sentence

Oil and natural gas properties, net 1,097,246 1,131,896

Other property and equipment, net of accumulated depreciation of $ 13,150 and $ 12,931 at June 30, 2022 and December 31, 2021, respectively

Other property and equipment, net of accumulated depreciation of $ 13,299 and $ 12,931 at September 30, 2022 and December 31, 2021, respectively

NET PROPERTY AND EQUIPMENT 1,098,228 1,133,336

17 unchanged sentences

MEZZANINE EQUITY

Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at June 30, 2022 and December 31, 2021, respectively

Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at September 30, 2022 and December 31, 2021, respectively

298,361 298,361

Partners' equity – general partner interest — —

Partners' equity – common units, 209,399 and 208,666 units outstanding at June 30, 2022 and December 31, 2021, respectively

Partners' equity – common units, 209,402 and 208,666 units outstanding at September 30, 2022 and December 31, 2021, respectively

823,227 765,268

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,

2022 2021 2022 2021

55 unchanged sentences

BALANCE AT JUNE 30, 2022 209,399 $ 744,327 $ 744,327

Restricted units granted, net of forfeitures 3 — —

Equity–based compensation — 4,084 4,084

Distributions — ( 87,949 ) ( 87,949 )

Charges to partners' equity for accrued distribution equivalent rights — ( 460 ) ( 460 )

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

Net income (loss) — 168,475 168,475

BALANCE AT SEPTEMBER 30, 2022 209,402 $ 823,227 $ 823,227

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

21 unchanged sentences

BALANCE AT JUNE 30, 2021 208,637 $ 725,693 $ 725,693

Restricted units granted, net of forfeitures 23 — —

Equity–based compensation — 2,903 2,903

Distributions — ( 52,165 ) ( 52,165 )

Charges to partners' equity for accrued distribution equivalent rights — ( 275 ) ( 275 )

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

Net income (loss) — 16,178 16,178

BALANCE AT SEPTEMBER 30, 2021 208,660 $ 687,084 $ 687,084

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

54 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, 2022 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, 2022 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 2021 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, 2022.

There have been no changes in such policies or the application of such policies during the nine months ended September 30, 2022.

Accounts Receivable

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands)

11 unchanged sentences

The assets acquired consisted of $ 4.9 million of proved oil and natural gas properties, $ 15.6 million of unproved oil and natural gas properties, and $ 0.3 million of net working capital.

The Partnership had no acquisition activity during the six months ended June 30, 2022.

The Partnership had no material acquisition activity during the nine months ended September 30, 2022.

In the third quarter of 2021, the Partnership closed on the divestiture of its wholly owned subsidiary, TLW Investments, L.L.C.

2 unchanged sentences

TLW's assets and liabilities consisted of oil and natural gas properties with a net book value of $ 3.0 million and asset retirement obligations with a book value of $ 5.7 million at the time of sale.

The Partnership had no material divestiture activity during the six months ended June 30, 2022.

The Partnership had no material divestiture activity during the nine months ended September 30, 2022.

Farmout Agreements

13 unchanged sentences

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

The agreement calls for a minimum of five wells to be drilled in the initial program year, which began in the third quarter of 2021, increasing to a minimum of twelve wells per year beginning with the fourth program year.

The agreement calls for a minimum of five wells to be drilled in the initial program year, which began in the third quarter of 2021, ten wells to be drilled in the second and third program years, and, beginning with the fourth program year, a minimum of twelve wells per year thereafter.

The Partnership's development agreement with Aethon and related drilling commitments covering its San Augustine County acreage is independent of the development agreement and associated commitments covering Angelina County discussed below.

5 unchanged sentences

The Partnership will receive an overriding royalty interest ("ORRI") before payout and an increased ORRI after payout on all wells drilled under the farmout agreements.

As of June 30, 2022, six wells have been spud by Aethon in the contract area subject to the Canaan, Azul, and JWM Farmouts.

As of September 30, 2022, six wells have been spud by Aethon in the contract area subject to the Canaan, Azul, and JWM Farmouts.

The following tables present the working interests each farmout partner will earn within the contract area under the San Augustine farmout agreements:

16 unchanged sentences

The agreement provides for minimum well commitments by Aethon in exchange for reduced royalty rates and exclusive access to the Partnership's 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 began in the third quarter of 2020, increasing to a minimum of fifteen wells per year beginning with the third program year.

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, ten wells to be drilled in the second program year, and, beginning with the third program year, fifteen wells per year thereafter.

In November 2020, the Partnership entered into a new farmout agreement (the "Pivotal Farmout") with Pivotal.

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, 2022, fourteen wells have been spud by Aethon in the contract area subject to the Pivotal Farmout.

As of September 30, 2022, sixteen wells have been spud by Aethon in the contract area subject to the Pivotal Farmout.

Impairment of Oil and Natural Gas Properties

2 unchanged sentences

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.

The Partnership recognized no impairment of oil and natural gas properties for the three and six months ended June 30, 2022 and 2021, respectively.

The Partnership recognized no impairment of oil and natural gas properties for the three and nine months ended September 30, 2022 and 2021, respectively.

See Note 5 - Fair Value Measurements for further discussion.

7 unchanged sentences

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

As of June 30, 2022, the Partnership’s open derivative contracts consisted of fixed-price swap contracts.

As of September 30, 2022, the Partnership’s open derivative contracts consisted of fixed-price swap contracts.

The Partnership has not designated any of its contracts as fair value or cash flow hedges.

1 unchanged sentence

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, 2022 and December 31, 2021.

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, 2022, the Partnership had seven counterparties, all of which are rated Baa1 or better by Moody’s and are lenders under the Credit Facility.

As of September 30, 2022, the Partnership had seven counterparties, all of which are rated Baa1 or better by Moody’s and are lenders under the Credit Facility.

BLACK STONE MINERALS, L.P.

2 unchanged sentences

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, 2022

September 30, 2022

Classification Balance Sheet Location Gross

30 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 2022 2021 2022 2021

7 unchanged sentences

Ending fair value of commodity derivative instruments $ ( 43,073 ) $ ( 128,932 ) $ ( 43,073 ) $ ( 128,932 )

The Partnership had the following open derivative contracts for oil as of June 30, 2022:

The Partnership had the following open derivative contracts for oil as of September 30, 2022:

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

1 unchanged sentence

Oil Swap Contracts:

Second Quarter 220,000 66.47 55.29 83.91

Third Quarter 220,000 $ 66.47 $ 55.29 $ 83.91

7 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Partnership had the following open derivative contracts for natural gas as of June 30, 2022:

The Partnership had the following open derivative contracts for natural gas as of September 30, 2022:

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

1 unchanged sentence

Natural Gas Swap Contracts:

Second Quarter — $ — $ — $ —

Third Quarter 9,000,000 3.12 2.80 4.30

Fourth Quarter 9,000,000 $ 3.12 $ 2.80 $ 4.30

3 unchanged sentences

Fourth Quarter 8,280,000 5.15 3.28 6.59

The Partnership entered into the following derivative contracts for natural gas subsequent to June 30, 2022:

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

Period and Type of Contract Volume (MMBtu) Low High

Natural Gas Swap Contracts:

The Partnership entered into the following derivative contracts for oil subsequent to September 30, 2022:

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

Period and Type of Contract Volume (Bbl) Low High

Oil Swap Contracts:

First Quarter 60,000 $ 77.50 $ 77.50 $ 77.50

18 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, 2022 and December 31, 2021 approximated the fair value due to variable market rates of interest.

The estimated carrying value of all debt as of September 30, 2022 and December 31, 2021 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.

7 unchanged sentences

(in thousands)

As of June 30, 2022

As of September 30, 2022

Financial Assets

18 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, 2022 or December 31, 2021.

There were no significant changes in valuation techniques or related inputs as of September 30, 2022 or December 31, 2021.

BLACK STONE MINERALS, L.P.

3 unchanged sentences

The Partnership maintains a senior secured revolving credit agreement, as amended (the “Credit Facility”).

The Credit Facility has an aggregate maximum credit amount of $ 1.0 billion and terminates on November 1, 2024.

The commitment of the lenders equals the lesser of the aggregate maximum credit amount and the borrowing base.

The Credit Facility has an aggregate maximum credit amount of $ 1.0 billion.

The commitment of the lenders equals the least of the aggregate maximum credit amount, the then-effective borrowing base, and the aggregate elected commitment, as it may be adjusted from time to time.

The amount of the borrowing base is redetermined semi-annually, usually in October and April, and is derived from the value of the Partnership’s oil and natural gas properties as determined by the lender syndicate using pricing assumptions that often differ from the current market for future prices.

2 unchanged sentences

The October 2021 and April 2022 borrowing base redeterminations reaffirmed the borrowing base at $ 400.0 million.

The next semi-annual redetermination is scheduled for October 2022.

In October 2022, the Partnership revised and amended the Credit Facility to extend the maturity date from November 1, 2024 to October 31, 2027.

Concurrent with the Credit Facility amendment, the borrowing base under the Credit Facility was increased to $ 550.0 million and the Partnership elected to lower commitments under the Credit Facility from $ 400.0 million to $ 375.0 million.

No other significant terms were changed as part of the amendment.

Please see Item 5 of Part II of this quarterly report for a more detailed description of the amendment to the Credit Facility.

The next semi-annual redetermination is scheduled for April 2023.

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.

As of December 31, 2021 and June 30, 2022, the applicable margin for the alternative base rate ranged from 1.50 % to 2.50 % and the applicable margin for LIBOR ranged from 2.50 % to 3.50 %, depending on the borrowings outstanding in relation to the borrowing base.

The weighted-average interest rate of the Credit Facility was 4.12 % and 2.61 % as of June 30, 2022 and December 31, 2021, respectively.

As of December 31, 2021 and September 30, 2022, the applicable margin for the alternative base rate ranged from 1.50 % to 2.50 % and the applicable margin for LIBOR ranged from 2.50 % to 3.50 %, depending on the borrowings outstanding in relation to the borrowing base.

In October 2022, the Credit Facility was amended to replace the LIBOR rate with the secured overnight financing rate published by the Federal Reserve Bank of New York ("SOFR").

The weighted-average interest rate of the Credit Facility was 5.50 % and 2.61 % as of September 30, 2022 and December 31, 2021, 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.

4 unchanged sentences

Distributions are not permitted if there is a default under the Credit Facility (including the failure to satisfy one of the financial covenants), if the availability under the Credit Facility is less than 10 % of the lenders' commitments, or if total debt to EBITDAX is greater than 3.0 .

As of June 30, 2022, the Partnership was in compliance with all financial covenants in the Credit Facility.

The aggregate principal balance outstanding was $ 86.0 million and $ 89.0 million at June 30, 2022 and December 31, 2021, respectively.

The unused portion of the available borrowings under the Credit Facility were $ 314.0 million and $ 311.0 million at June 30, 2022 and December 31, 2021, respectively.

The 1-week and 2-month U.S.

dollar LIBOR settings ceased to be published after December 31, 2021 and the U.K.

Financial Conduct Authority intends to stop persuading or compelling banks to submit LIBOR rates for the remaining U.S.

dollar settings after June 30, 2023.

Our Credit Facility uses the 1-month LIBOR setting and includes provisions to determine a replacement rate for LIBOR if necessary during its term, based on the secured overnight financing rate published by the Federal Reserve Bank of New York (“SOFR”).

We currently do not expect the transition from LIBOR to have a material impact on us.

As of September 30, 2022, the Partnership was in compliance with all financial covenants in the Credit Facility.

The aggregate principal balance outstanding was $ 60.0 million and $ 89.0 million at September 30, 2022 and December 31, 2021, respectively.

The unused portion of the available borrowings under the Credit Facility were $ 340.0 million and $ 311.0 million at September 30, 2022 and December 31, 2021, respectively.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

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, 2022 will be resolved without material adverse effect on the Partnership’s financial condition or operations.

The Partnership believes existing claims as of September 30, 2022 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,

2022 2021 2022 2021

14 unchanged sentences

Total compensation expense to be recognized over the life of the Aspirational Awards consists of $ 5.0 million for the performance cash awards and $ 16.4 million for the performance equity awards ( 1,412,008 performance units with a weighted-average grant date fair value of $ 11.58 per unit).

As of June 30, 2022, the Partnership determined achievement of the performance condition was not yet probable and no expense was recognized.

As of September 30, 2022, the Partnership determined achievement of the performance condition was not yet probable and no expense was recognized.

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.

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, 2022 and December 31, 2021.

The Series B cumulative convertible preferred units are classified

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, 2022 and December 31, 2021.

The Series B cumulative convertible preferred units are

BLACK STONE MINERALS, L.P.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

as mezzanine equity on the consolidated balance sheets since certain provisions of redemption are outside the control of the Partnership.

classified as mezzanine equity on the consolidated balance sheets since certain provisions of redemption are outside the control of the Partnership.

The Partnership has the option to redeem the Series B cumulative convertible preferred units for a 90-day period beginning on November 28, 2023 at a redemption price of $ 21.41 per Series B cumulative convertible preferred unit.

Thereafter, the Partnership may redeem the Series B cumulative convertible preferred units at par within a 90-day period on each second anniversary following November 28, 2023.

NOTE 10 - EARNINGS PER UNIT

8 unchanged sentences

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

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

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

2022 2021 2022 2021

14 unchanged sentences

Effect of dilutive securities

14,969 — 14,969 —

Weighted average common units outstanding (diluted) 224,371 208,653 224,343 208,018

1 For the Three Months Ended June 30, 2022, diluted net income (loss) attributable to common units included distributions on Series B cumulative convertible preferred units of $ 5.3 million.

1 For the Three Months Ended September 30, 2022 and the Nine Months Ended September 30, 2022, diluted net income (loss) attributable to common units included distributions on Series B cumulative convertible preferred units of $ 5.3 million and $ 15.8 million, respectively.

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,

2022 2021 2022 2021

12 unchanged sentences

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

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

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

2022 2021 2022 2021

3 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, 2022.

As of June 30, 2022, 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, 2022.

As of September 30, 2022, 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.

1 unchanged sentence

NOTE 12 - SUBSEQUENT EVENTS

On July 25, 2022, the Board approved a distribution for the three months ended June 30, 2022 of $ 0.42 per common unit.

Distributions will be payable on August 19, 2022 to unitholders of record at the close of business on August 12, 2022.

On October 19, 2022, the Board approved a distribution for the three months ended September 30, 2022 of $ 0.45 per common unit.

Distributions will be payable on November 17, 2022 to unitholders of record at the close of business on November 10, 2022.

In October 2022 the Partnership revised and amended the Credit Facility to extend the maturity date from November 1, 2024 to October 31, 2027.

No other significant terms were changed as part of the amendment.

Please see Item 5 of Part II of this quarterly report for a more detailed description of the amendment to the 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