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Item 1. Financial Statements

2023-05-02 compared with 2022-11-01 · 91 added, 145 removed, 439 unchanged (35% of the section changed)

4 unchanged sentences

(In thousands)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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 $ 925,839 and $ 937,395 at September 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 $ 909,344 and $ 909,344 at March 31, 2023 and December 31, 2022, respectively

3,005,740 3,003,907

1 unchanged sentence

Oil and natural gas properties, net 1,077,844 1,086,988

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

Other property and equipment, net of accumulated depreciation of $ 13,630 and $ 13,461 at March 31, 2023 and December 31, 2022, respectively

NET PROPERTY AND EQUIPMENT 1,078,955 1,088,247

17 unchanged sentences

MEZZANINE EQUITY

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

Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at March 31, 2023 and December 31, 2022, respectively

298,361 298,361

Partners' equity – general partner interest — —

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

Partners' equity – common units, 209,963 and 209,407 units outstanding at March 31, 2023 and December 31, 2022, respectively

939,867 911,451

6 unchanged sentences

(In thousands, except per unit amounts)

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

2022 2021 2022 2021

Three Months Ended March 31,

Oil and condensate sales $ 60,909 $ 75,831

11 unchanged sentences

Accretion of asset retirement obligations 245 202

(Gain) loss on sale of assets, net — ( 2,850 ) ( 17 ) ( 2,850 )

TOTAL OPERATING EXPENSE 39,379 42,172

23 unchanged sentences

(In thousands)

Common units Partners' equity — common units Total equity

Common units Partners' equity

BALANCE AT DECEMBER 31, 2022 209,407 $ 911,451

7 unchanged sentences

BALANCE AT MARCH 31, 2023 209,963 $ 939,867

Restricted units granted, net of forfeitures 7 — —

Equity–based compensation — 2,273 2,273

Distributions — ( 83,759 ) ( 83,759 )

Charges to partners' equity for accrued distribution equivalent rights — ( 513 ) ( 513 )

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

Net income (loss) — 131,788 131,788

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.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

Common units Partners' equity — common units Total equity

Common units Partners' equity

BALANCE AT DECEMBER 31, 2021 208,666 $ 765,268

7 unchanged sentences

BALANCE AT MARCH 31, 2022 209,392 $ 699,788

Issuance of common units for property acquisitions 1,088 10,766 10,766

Restricted units granted, net of forfeitures 7 — —

Equity–based compensation — 2,820 2,820

Distributions — ( 36,321 ) ( 36,321 )

Charges to partners' equity for accrued distribution equivalent rights — ( 180 ) ( 180 )

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

Net income (loss) — 15,429 15,429

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)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Equity-based compensation 2,118 4,551

Exploratory dry hole expense — 1,049

(Gain) loss on sale of assets, net ( 17 ) ( 2,850 )

Changes in operating assets and liabilities:

5 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisitions of oil and natural gas properties ( 132 ) ( 10,064 )

Additions to oil and natural gas properties ( 1,932 ) ( 3,658 )

Additions to oil and natural gas properties leasehold costs ( 32 ) ( 98 )

Purchases of other property and equipment ( 22 ) ( 31 )

Proceeds from the sale of oil and natural gas properties 17 317

Proceeds from farmouts of oil and natural gas properties — 3,593

31 unchanged sentences

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

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.

The results of operations for the three months ended March 31, 2023 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 2022 Annual Report on Form 10-K.

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

There have been no changes in such policies or the application of such policies during the three months ended March 31, 2023.

Accounts Receivable

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(in thousands)

4 unchanged sentences

NOTE 3 - OIL AND NATURAL GAS PROPERTIES

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.

Acquisitions that consist of all or substantially all unproved oil and natural gas properties are generally considered asset acquisitions and are recorded at cost.

In May 2021, the Partnership closed an acquisition of mineral and royalty acreage in the northern Midland Basin for total consideration of $ 20.8 million.

The purchase price consisted of $ 10.0 million in cash and $ 10.8 million in common units of the Partnership.

The cash consideration was funded with borrowings under the Credit Facility (as defined in Note 6 - Credit Facility) and funds from operating activities.

The transaction was accounted for as a business combination with the assets acquired recorded at their estimated fair values as of the acquisition date.

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 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.

("TLW"), effective September 1, 2021 for total proceeds of $ 0.2 million.

TLW holds non-operating working interests and overriding royalty interests primarily located in Oklahoma and Texas.

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 nine months ended September 30, 2022.

Acquisitions and divestitures

The Partnership had no material acquisition or divestiture activity during 2022 or the three months ended March 31, 2023.

Farmout Agreements

The Partnership has entered into farmout arrangements designed to reduce its working interest capital expenditures and thereby significantly lower its capital spending other than for mineral and royalty interest acquisitions.

The Partnership has entered into farmout arrangements designed to reduce its working interest capital expenditures and thereby significantly lowering its capital spending other than for mineral and royalty interest acquisitions.

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.

3 unchanged sentences

These farmout agreements were superseded and replaced by the new farmout agreements discussed below.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

San Augustine Farmout

In March 2021, BSM and XTO reached an agreement to partition jointly owned working interests in the Brent Miller development area in San Augustine County.

Under the partition agreement, BSM and XTO exchanged working interests in certain existing and proposed drilling units, resulting in each company holding 100 % of the working interests in their respective partitioned units.

In May 2021, BSM and Aethon Energy ("Aethon") entered into an agreement to develop certain of the Partnership's undeveloped acreage in San Augustine County, including the working interests resulting from the partition agreement discussed above.

In May 2021, BSM and Aethon Energy ("Aethon") entered into an agreement to develop certain of the Partnership's undeveloped acreage in San Augustine County.

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, 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 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, thereafter, a minimum of twelve wells per year beginning with the fourth program year.

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.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In May 2021, the Partnership entered into a new farmout agreement (the "Canaan Farmout") with Canaan and in December 2021, the Partnership entered into a farmout agreement (the "Azul Farmout") with Azul-SA, LLC ("Azul").

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

As of March 31, 2023, thirteen 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:

10 unchanged sentences

Total 100.0 % 25.0 %

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Angelina Farmout

1 unchanged sentence

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

As of March 31, 2023, twenty-six wells have been spud by Aethon in the contract area subject to the Pivotal Farmout.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 nine months ended September 30, 2022 and 2021, respectively.

The Partnership recognized no impairment of oil and natural gas properties for the three months ended March 31, 2023 and 2022, 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 September 30, 2022, the Partnership’s open derivative contracts consisted of fixed-price swap contracts.

As of March 31, 2023, 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 September 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 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.

As of March 31, 2023, 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:

September 30, 2022

March 31, 2023

Classification Balance Sheet Location Gross

20 unchanged sentences

Deferred charges and other long-term assets 797 ( 69 ) 728

$ 42,445 $ ( 10,245 ) $ 32,200

Current liability

8 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Derivatives not designated as hedging instruments 2023 2022

7 unchanged sentences

Ending fair value of commodity derivative instruments $ 67,927 $ ( 142,321 )

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

The Partnership had the following open derivative contracts for oil as of March 31, 2023:

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

1 unchanged sentence

Oil Swap Contracts:

First Quarter 210,000 $ 79.44 $ 73.00 $ 85.93

Second Quarter 540,000 80.80 73.00 89.50

Third Quarter 540,000 80.80 73.00 89.50

7 unchanged sentences

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

The Partnership had the following open derivative contracts for natural gas as of March 31, 2023:

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

1 unchanged sentence

Natural Gas Swap Contracts:

Second Quarter 8,190,000 $ 5.15 $ 3.28 $ 6.59

Third Quarter 8,280,000 5.15 3.28 6.59

Fourth Quarter 8,280,000 5.15 3.28 6.59

3 unchanged sentences

Fourth Quarter 5,520,000 3.64 3.57 3.76

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

The Partnership entered into the following derivative contracts for oil subsequent to March 31, 2023:

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

21 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 September 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 March 31, 2023 and December 31, 2022 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 September 30, 2022

As of March 31, 2023

Financial Assets

12 unchanged sentences

The Partnership has designated these measurements as Level 3.

The Partnership’s fair value assessments for recent acquisitions are included in Note 3 - Oil and Natural Gas Properties.

The Partnership had no business combinations for the three months ended March 31, 2023 or the year ended December 31, 2022.

See Note 3 - Oil and Natural Gas Properties.

Oil and natural gas properties are measured at fair value on a non-recurring basis using the income approach when assessing for impairment.

3 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 September 30, 2022 or December 31, 2021.

There were no significant changes in valuation techniques or related inputs as of March 31, 2023 or December 31, 2022.

There were no assets measured at fair value on a non-recurring basis for the three months ended March 31, 2023 or the year ended December 31, 2022.

BLACK STONE MINERALS, L.P.

8 unchanged sentences

The Partnership also has the right to request a redetermination following the acquisition of oil and natural gas properties in excess of 10 % of the value of the borrowing base immediately prior to such acquisition.

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

The borrowing base is also adjusted if we terminate our hedge positions or sell oil and natural gas property interests that have a combined value exceeding 5 % of the current borrowing base.

In these circumstances, the borrowing base will be adjusted by the value attributed to the terminated hedge positions or the oil and natural gas property interests sold in the most recent borrowing base.

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

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 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.

The April 2023 borrowing base redetermination reaffirmed the borrowing base at $ 550.0 million with cash commitments at $ 375.0 million.

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

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.

Outstanding borrowings under the Credit Facility bear interest at a floating rate elected by the Partnership equal to a base rate (which is a rate per annum equal to the highest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50 %, and (c) Adjusted Term SOFR for a one month tenor in effect on such day plus 1.00 %) or Adjusted Term SOFR, in each case, plus the applicable margin.

As of December 31, 2022 and March 31, 2023, the applicable margin for the alternative base rate ranged from 1.50 % to 2.50 % and the Adjusted Term SOFR margin 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 6.65 % during the quarter ended March 31, 2023 and the weighted-average interest rate was 6.92 % as of December 31, 2022.

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 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.

As of March 31, 2023, the Partnership was in compliance with all financial covenants in the Credit Facility.

The aggregate principal balance outstanding was zero and $ 10.0 million at March 31, 2023 and December 31, 2022, respectively.

The unused portion of the available borrowings under the Credit Facility were $ 375.0 million and $ 365.0 million at March 31, 2023 and December 31, 2022, respectively.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

federal, state, and local environmental regulations with regard to air, land, and water quality and other environmental matters.

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.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 September 30, 2022 will be resolved without material adverse effect on the Partnership’s financial condition or operations.

The Partnership believes existing claims as of March 31, 2023 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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

(in thousands)

5 unchanged sentences

$ 3,197 $ 5,547

In the first quarter of 2023, the Partnership repurchased 357,761 common units at an average price of $ 15.36 per unit for the purpose of satisfying tax withholding obligations upon the vesting of certain long-term incentive equity awards held by our executive officers and certain other employees.

Specifically, when an employee's equity award vests, the Partnership withholds a portion of the shares to cover the employee's tax liability.

In the first quarter of 2022, the board of directors of the Partnership's general partner (the "Board") approved a grant of awards to all employees dependent on the achievement of an aspirational production target to be measured in the fourth quarter of 2025 (the "Aspirational Awards").

6 unchanged sentences

Total compensation expense to be recognized over the life of the Aspirational Awards consists of $ 5.1 million for the performance cash awards and $ 14.2 million for the performance equity awards ( 1,212,360 performance units with a weighted-average grant date fair value of $ 11.72 per unit).

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

As of March 31, 2023, the Partnership determined achievement of the performance condition was not yet probable and no expense was recognized.

NOTE 9 - PREFERRED UNITS

2 unchanged sentences

The Series B cumulative convertible preferred units are entitled to an annual distribution of 7.0 %, payable on a quarterly basis in arrears;

The Series B cumulative convertible preferred units may be converted by each holder at its option, in whole or in part, into common units on a one -for-one basis at the purchase price of $ 20.3926 , adjusted to give effect to any accrued but unpaid accumulated distributions on the applicable Series B cumulative convertible preferred units through the most recent declaration date.

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 September 30, 2022 and December 31, 2021.

The Series B cumulative convertible preferred units are

provided that the distribution rate will be adjusted as follows:

commencing on November 28, 2023 and readjusting every two years thereafter (each, a "Readjustment Date"), the rate will equal the greater of (i) the distribution rate in

BLACK STONE MINERALS, L.P.

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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.

effect immediately prior to the relevant Readjustment Date and (ii) the 10-year Treasury Rate as of such Readjustment Date plus 5.5 % per annum;

provided, however, that for any quarter in which quarterly distributions are accrued but unpaid, the then-distribution rate shall be increased by 2.0 % per annum for such quarter.

The Partnership has the option to redeem all or a portion (equal to or greater than $ 100 million) of 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, which is equal to 105 % of par value.

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.

The Series B cumulative convertible preferred units had a carrying value of $ 298.4 million, including accrued distributions of $ 5.3 million, as of March 31, 2023 and December 31, 2022.

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.

NOTE 10 - EARNINGS PER UNIT

7 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 unit:

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

2022 2021 2022 2021

Three Months Ended March 31,

(in thousands, except per unit amounts)

6 unchanged sentences

$ 129,193 $ ( 12,252 )

Numerator for basic EPU - Net income (loss) attributable to common unitholders $ 129,193 $ ( 12,252 )

Effect of dilutive securities 5,250 —

Numerator for diluted EPU - net income (loss) attributable to common unitholders after the effect of dilutive securities $ 134,443 $ ( 12,252 )

Denominator for basic EPU - weighted average common units outstanding (basic) 209,941 209,323

Effect of dilutive securities

Denominator for diluted EPU - weighted average number of common units outstanding after the effect of dilutive securities 224,910 209,323

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

1 unchanged sentence

Per common unit (diluted) $ 0.60 $ ( 0.06 )

$ 0.75 $ 0.05 $ 1.31 $ 0.15

WEIGHTED AVERAGE COMMON UNITS OUTSTANDING:

Weighted average common units outstanding (basic) 209,402 208,653 209,374 208,018

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 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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

(in thousands)

1 unchanged sentence

Series B cumulative convertible preferred units on an as-converted basis

— 14,969 — 14,969

NOTE 11 - COMMON UNITS

2 unchanged sentences

The partnership agreement restricts unitholders’ voting rights by providing that any units held by a person or group that owns 15 % or more of any class of units then outstanding, other than the limited partners in Black Stone Minerals Company, L.P.

prior to the IPO, their transferees, persons who acquired such units with the prior approval of the Board, holders of Series B cumulative convertible preferred units in connection with any vote, consent or approval of the Series B cumulative convertible preferred units as a separate class, and persons who own 15 % or more of any class as a result of any redemption or purchase of any other person's units or similar action by the Partnership or any conversion of the Series B cumulative convertible preferred units at the Partnership's option or in connection with a change of control, may not vote on any matter.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

purchase of any other person's units or similar action by the Partnership or any conversion of the Series B cumulative convertible preferred units at the Partnership's option or in connection with a change of control, may not vote on any matter.

The partnership agreement generally provides that any distributions are paid each quarter in the following manner:

2 unchanged sentences

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

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

2022 2021 2022 2021

Three Months Ended March 31,

Distributions declared and paid per common unit $ 0.4750 $ 0.2700

Common Unit Repurchase Program

On November 5, 2018, the Board authorized the repurchase of up to $ 75.0 million in common units.

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 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.

Any repurchased units are canceled.

NOTE 12 - SUBSEQUENT EVENTS

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.

On April 19, 2023, the Board approved a distribution for the three months ended March 31, 2023 of $ 0.475 per common unit.

Distributions will be payable on May 19, 2023 to unitholders of record at the close of business on May 12, 2023.

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