Black Stone Minerals LP: Undervalued 10%-Yielder Reports Solid Q4
April 15, 2025
Outlook for Black Stone Remains Robust
Today’s income pick in focus is Black Stone Minerals LP (NYSE:BSM).
It’s pretty tough right now to be bullish on the stock market. In just a few days, President Donald Trump’s global tariffs have wiped out trillions of dollars from the stock market. And, with the president saying, “my policies will never change,” the near-term outlook will remain volatile as well.
The only silver lining is that the current stock market rout has put a lot of great stocks in a better position. However, now, more than at any time in recent history, investors need to be more diligent about how and where they invest.
Now is also an excellent time for investors to take a look at dividend stocks. While the roller coaster ride will persist, adding dividend-paying stocks could help ease the pain by providing reliable quarterly or monthly income. This strategy could also provide some income as you wait (hopefully) for the underlying share price to rebound.
Black Stone Minerals, the largest pure-play oil and gas mineral and royalty owner in the U.S., is one stock that provides a reliable dividend and has excellent long-term growth potential.
The fact that Black Stone is the largest player in its field is a particularly good thing. That’s because there’s a perfect storm brewing in the oil and gas exploration and production industry, and lower oil and gas prices might not make it feasible for smaller players to thrive and survive.
For example, blanket tariffs against our allies could easily result in a global recession, which would put a damper on demand for oil and gas. Moreover, the Organization of the Petroleum Exporting Countries Plus (OPEC+) and its partners, which includes Russia, surprised the markets in early April when it announced that it would be adding three times the expected amount of supply into the markets.
The decision was seen as a little suspect, with the cartel saying that it is the perfect time to increase output thanks to “continuing healthy market fundamentals and the positive market outlook.” (Source: “OPEC+ surprise output hikes highlight fading discipline: Bousso,” Reuters, April 4, 2025.)
In light of “Liberation Day” and the global economic slowdown, it’s hard to agree with that.
That’s why it’s imperative, at this juncture, to look at companies that can weather any near- and longer-term headwinds. And Black Stone Minerals LP fits that bill.
About Black Stone Minerals LP
Black Stone Minerals is, as noted above, the largest pure-play oil and gas mineral and royalty owner in the U.S., with over 20 million mineral and royalty acres with interests in over 40 states. (Source: “KeyBanc Capital Markets” Black Stone Minerals LP, March 25, 2025.)
Its positions are held in more than 60 productive basins, in both established and emerging plays, but its highest concentration positions are in the Permian, Haynesville, and Bakken basins.
As a minerals company, Black Stone has exposure to oil and gas but without the hassle of operating costs or capital spending requirements. And thanks to its scale, the company has opportunities to partner with operators to initiate or accelerate drilling, directly benefiting from their technology advancements, which helps increase recovery and well economics.
There are plenty of oil and gas reserves to keep Black Stone’s customers happy though. Estimated proved oil and natural gas reserves at year-end 2024 added up to 57.4 million barrels of oil equivalent (MMBoe), down 11% from 64.5 MMBoe at the end of 2023. These reserves consisted of approximately 70% natural gas and 88% proved developed producing.
Some of the companies operating rigs on Black Stone’s various properties include industry leaders such as ConocoPhillips, Hess Corp, XTO Energy Inc, and Occidental Petroleum Corp.
Solid Q4 & Full-Year 2024
For the fourth quarter ended December 31, 2024, Black Stone announced mineral and royalty volumes of 34.8 thousand barrels of oil equivalent per day (MBoe/d), 75% of which was natural gas, slightly lower than the 35.3 MBoe/d for the third quarter of 2024 and 38.9 MBoe/d for the fourth quarter of 2023. (Source: “Black Stone Minerals, L.P. Announces Fourth Quarter and Full Year 2024 Results; Provides Guidance for 2025,” Black Stone Minerals LP, August 5, 2024.)
The company’s total reported production averaged 36.1 MBoe/d, compared to 37.4 MBoe/d in the third quarter of 2024 and 41.1 MBoe/d for the fourth quarter of 2023.
Black Stone’s average realized price per barrel of oil equivalent (Boe) was $30.81 for the fourth quarter of 2024, up five percent from $29.40 per Boe for the third quarter of 2024 and a 12% decrease compared to $35.03 for the fourth quarter of 2023.
The company reported fourth-quarter net income of $46.3 million, compared to $92.7 million in the preceding quarter. For the fourth quarter of 2023, Black Stone reported net income of $147.6 million.
Distributable cash flow was $81.9 million, up from $78.6 million in the third quarter but down from $119.1 million in the fourth quarter of 2023.
Black Stone ended the quarter with $6.9 million in cash and $25.0 million in debt, but, by the time it announced its financial results in February, that debt had fallen to just $12.0 million.
Commenting on the results, Thomas L. Carter, Jr., the company’s chairman, chief executive officer, and president, commented, “We ended last year and started this year with stronger gas pricing and fundamentals, which when coupled with our solid oil assets, sets up for what we anticipate to be a positive 2025.
“Throughout 2024 we executed on our strategic, long-term focus by adding $110 million in grass-roots mineral acquisitions, while also working with partners solidifying development and managing our assets across all basins.”
Black Stone Minerals LP: 2025 Guidance
For 2025, Black Stone expects royalty production to increase by approximately two percent on an annual basis. This increase is primarily due to its customer Aethon turning in line 28 wells in the Shelby Trough and accelerating development in the Louisiana Haynesville and Permian basins. This is partially offset by some expected moderation of activity in Bakken/Three Forks, Eagle Ford, and Austin Chalk.
Distribution of $0.375/Unit Declared
Black Stone Minerals LP has a long history of returning cash to equity holders. Over the past five years, it has returned approximately $4.7 billion to unitholders. However, its payout will fluctuate based on earnings and distributable cash flow.
In 2023, Black Stone raised its cash distribution by nine percent to $1.90 per unit from $1.745 per share in 2022. Though, as you can see in the chart below, the company lowered it in 2024 to $0.375 per unit, or $1.50 per unit on an annual basis, for a forward yield of 10%.
BSM Units Tumble on Economic Uncertainties
BSM units were doing fairly well before President Trump announced his global tariffs. From January through April 2, BSM units were up 7.8% year to date. For comparison’s sake, over the same time period, the S&P 500 was down 3.6%.
Uncertainty about how a global trade war will impact the economy has sent stocks reeling. As of March 4, BSM units are now down 2.6% year to date, while the S&P 500 is down 13.5%. This is deep in correction territory, down 17% from the index’s February high.
Uncertainty is bound to remain, which is why BSM units may not be done taking a breather. Black Stone’s dividend could provide unitholders with some relief though.
Chart courtesy of StockCharts.com
The Lowdown on Black Stone Minerals LP
Black Stone Minerals is the largest pure-play oil and gas mineral and royalty owner in the U.S. Because of its massive geographic diversity, it’s been able to generate strong cash flow, report solid financial results, and provide shareholders with a reliable quarterly distribution.
Thanks to its strong balance sheet, it’s been able to reduce its outstanding debt from $394.0 million in the fourth quarter of 2019 to zero at the start of 2023. It has inched up to $12.0 million since then, an inconsequential number.
Even during the 2020 health crisis, Black Stone was able to reduce its outstanding debt from $388.0 in the first quarter of 2020 to $121.0 million by the end of the year.
While global uncertainty abounds right now and no one’s certain about how a global trade war will play out, Black Stone has a massive acreage position with blue-chip customers. This should help cushion the blow of what’s coming over the next few quarters, at least. Well, that and the company’s reliable, ultra-high-yield dividend.
