What changed in this filing

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Item 1. Financial Statements

2023-08-01 compared with 2023-05-02 · 77 added, 63 removed, 467 unchanged (23% of the section changed)

4 unchanged sentences

(In thousands)

March 31, 2023 December 31, 2022

June 30, 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 $ 909,344 and $ 909,344 at March 31, 2023 and December 31, 2022, respectively

Oil and natural gas properties, at cost, using the successful efforts method of accounting, includes unproved properties of $ 897,836 and $ 909,344 at June 30, 2023 and December 31, 2022, respectively

3,006,323 3,003,907

1 unchanged sentence

Oil and natural gas properties, net 1,068,183 1,086,988

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

Other property and equipment, net of accumulated depreciation of $ 13,807 and $ 13,461 at June 30, 2023 and December 31, 2022, respectively

NET PROPERTY AND EQUIPMENT 1,069,217 1,088,247

17 unchanged sentences

MEZZANINE EQUITY

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

Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at June 30, 2023 and December 31, 2022, respectively

298,361 298,361

Partners' equity – general partner interest — —

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

Partners' equity – common units, 209,968 and 209,407 units outstanding at June 30, 2023 and December 31, 2022, respectively

914,880 911,451

6 unchanged sentences

(In thousands, except per unit amounts)

Three Months Ended March 31,

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

2023 2022 2023 2022

Oil and condensate sales $ 61,551 $ 94,296 $ 122,460 $ 170,127

11 unchanged sentences

Accretion of asset retirement obligations 250 205 495 407

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

TOTAL OPERATING EXPENSE 38,239 47,305 77,618 89,477

33 unchanged sentences

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

Restricted units granted, net of forfeitures 5 —

Equity–based compensation — 2,076

Distributions — ( 99,734 )

Charges to partners' equity for accrued distribution equivalent rights — ( 471 )

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

Net income (loss) — 78,392

BALANCE AT JUNE 30, 2023 209,968 914,880

Common units Partners' equity

8 unchanged sentences

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

Restricted units granted, net of forfeitures 7 —

Equity–based compensation — 2,273

Distributions — ( 83,759 )

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

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

Net income (loss) — 131,788

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

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

3 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

7 unchanged sentences

Equity-based compensation 4,635 7,275

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

Changes in operating assets and liabilities:

6 unchanged sentences

Additions to oil and natural gas properties ( 2,503 ) ( 10,072 )

Additions to oil and natural gas properties leasehold costs ( 9 ) —

Purchases of other property and equipment ( 121 ) ( 41 )

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

Proceeds from farmouts of oil and natural gas properties — 9,951

31 unchanged sentences

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

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.

The results of operations for the six months ended June 30, 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 three months ended March 31, 2023.

There have been no changes in such policies or the application of such policies during the six months ended June 30, 2023.

Accounts Receivable

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in thousands)

5 unchanged sentences

Acquisitions and divestitures

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

The Partnership had no material acquisition or divestiture activity during 2022 or the six months ended June 30, 2023.

Farmout Agreements

8 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, 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 agreement calls for a minimum of five wells to be drilled in the initial program year, which began in the third quarter of 2021, 10 wells to be drilled in the second and third program years, and, thereafter, a minimum of 12 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.

4 unchanged sentences

In April 2022, the Partnership amended the Canaan Farmout and entered into a farmout agreement (the "JWM Farmout") with JWM Oil & Gas LLC ("JWM").

These agreements cover all of the Partnership's share of working interests under active development by Aethon in San Augustine County, Texas and continue for a ten year period, unless earlier terminated in accordance with the terms of the agreements.

These agreements cover all of the Partnership's share of working interests under active development by Aethon in San Augustine County, Texas and continue for a 10 year period, unless earlier terminated in accordance with the terms of the agreements.

Canaan, Azul, and JWM will each earn a percentage of the Partnership's working interest in wells drilled and operated by Aethon within the contract area subject to the agreements.

1 unchanged sentence

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 March 31, 2023, thirteen wells have been spud by Aethon in the contract area subject to the Canaan, Azul, and JWM Farmouts.

As of June 30, 2023, 15 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:

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

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, 10 wells to be drilled in the second program year, and, beginning with the third program year, 15 wells per year beginning 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 March 31, 2023, twenty-six wells have been spud by Aethon in the contract area subject to the Pivotal Farmout.

As of June 30, 2023, 34 wells have been spud by Aethon in the contract area subject to the Pivotal Farmout.

BLACK STONE MINERALS, L.P.

5 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 months ended March 31, 2023 and 2022, respectively.

The Partnership did not recognize any impairment of oil and natural gas properties for the three and six months ended June 30, 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 March 31, 2023, the Partnership’s open derivative contracts consisted of fixed-price swap contracts.

As of June 30, 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 March 31, 2023 and December 31, 2022.

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 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.

As of June 30, 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:

March 31, 2023

June 30, 2023

Classification Balance Sheet Location Gross

31 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 March 31,

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

Derivatives not designated as hedging instruments 2023 2022 2023 2022

7 unchanged sentences

Ending fair value of commodity derivative instruments $ 51,046 $ ( 107,218 ) $ 51,046 $ ( 107,218 )

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

The Partnership had the following open derivative contracts for oil as of June 30, 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 180,000 $ 80.80 $ 73.00 $ 89.50

5 unchanged sentences

Fourth Quarter 450,000 68.98 67.00 72.82

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

4 unchanged sentences

Fourth Quarter 10,120,000 3.57 3.48 3.76

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

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

Period and Type of Contract Volume (Bbl) Low High

Oil Swap Contracts:

First Quarter 90,000 $ 72.82 $ 72.82 $ 72.82

Second Quarter 90,000 72.82 72.82 72.82

Third Quarter 90,000 72.82 72.82 72.82

Fourth Quarter 90,000 72.82 72.82 72.82

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - FAIR VALUE MEASUREMENTS

10 unchanged sentences

The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

BLACK STONE MINERALS, L.P.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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 March 31, 2023 and December 31, 2022 approximated the fair value due to variable market rates of interest.

The estimated carrying value of all debt as of June 30, 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.

3 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 March 31, 2023

As of June 30, 2023

Financial Assets

12 unchanged sentences

The Partnership has designated these measurements as Level 3.

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

The Partnership had no business combinations for the six months ended June 30, 2023 or the year ended December 31, 2022.

See Note 3 - Oil and Natural Gas Properties.

4 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 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.

There were no significant changes in valuation techniques or related inputs as of June 30, 2023 or December 31, 2022.

There were no assets measured at fair value on a non-recurring basis for the six months ended June 30, 2023 or the year ended December 31, 2022.

BLACK STONE MINERALS, L.P.

17 unchanged sentences

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.

As of December 31, 2022 and June 30, 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 7.30 % during the quarter ended June 30, 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 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.

As of June 30, 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 June 30, 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 June 30, 2023 and December 31, 2022, 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 March 31, 2023 will be resolved without material adverse effect on the Partnership’s financial condition or operations.

The Partnership believes existing claims as of June 30, 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 March 31,

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

2023 2022 2023 2022

(in thousands)

5 unchanged sentences

$ 3,371 $ 4,687 $ 6,568 $ 10,234

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.

For the six months ended June 30, 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.

7 unchanged sentences

Total compensation expense to be recognized over the life of the Aspirational Awards consists of $ 5.2 million for the performance cash awards and $ 14.5 million for the performance equity awards ( 1,221,891 performance units with a weighted-average grant date fair value of $ 11.83 per unit).

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

As of June 30, 2023, the Partnership determined achievement of the performance condition was not yet probable and no expense was recognized.

NOTE 9 - PREFERRED UNITS

13 unchanged sentences

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 had a carrying value of $ 298.4 million, including accrued distributions of $ 5.3 million, as of June 30, 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.

12 unchanged sentences

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

Three Months Ended March 31,

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

2023 2022 2023 2022

(in thousands, except per unit amounts)

11 unchanged sentences

Effect of dilutive securities

— 14,969 14,969 —

Denominator for diluted EPU - weighted average number of common units outstanding after the effect of dilutive securities 209,967 224,366 224,923 209,360

3 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 March 31,

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

2023 2022 2023 2022

(in thousands)

1 unchanged sentence

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

14,969 — — 14,969

NOTE 11 - COMMON UNITS

1 unchanged sentence

The holders of common units are entitled to participate in distributions and exercise the rights and privileges provided to limited partners holding common units under the partnership agreement.

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.

BLACK STONE MINERALS, L.P.

1 unchanged sentence

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.

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.

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 March 31,

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

2023 2022 2023 2022

Distributions declared and paid per common unit $ 0.4750 $ 0.4000 $ 0.9500 $ 0.6700

NOTE 12 - SUBSEQUENT EVENTS

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.

On July 25, 2023, the Board approved a distribution for the three months ended June 30, 2023 of $ 0.475 per common unit.

Distributions will be payable on August 18, 2023 to unitholders of record at the close of business on August 11, 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