Black Stone Minerals, L.P. (BSM): Business Model Canvas [11-2024 Updated]

In the dynamic world of energy, Black Stone Minerals, L.P. (BSM) stands out with a unique business model that leverages its extensive mineral and royalty interests. By focusing on stable cash flows and strategic partnerships, BSM navigates the complexities of the oil and gas industry while also exploring opportunities in renewable energy. Discover how their key activities, customer segments, and revenue streams come together to create a resilient framework for growth and sustainability.

Black Stone Minerals, L.P. (BSM) - Business Model: Key Partnerships

Joint Exploration Agreements with Aethon Energy

Black Stone Minerals has established Joint Exploration Agreements (JEAs) with Aethon Energy for the development of its undeveloped acreage in East Texas. These agreements stipulate minimum annual well commitments by Aethon in exchange for reduced royalty rates and exclusive access to BSM's mineral and leasehold acreage. Aethon can bank excess wells drilled beyond the minimum commitment, allowing for flexibility in future drilling programs. The JEAs cover areas in San Augustine County and Angelina County.

Collaborations with Various Oil and Gas Operators

BSM collaborates with multiple oil and gas operators to leverage their operational expertise and resources. This collaboration includes joint ventures and partnerships that facilitate the exploration and production of oil and gas across BSM's extensive land holdings. In 2024, BSM's revenue from contracts with customers was $335.1 million, reflecting its robust partnerships and operational synergies in the oil and gas sector.

Farmout Arrangements to Reduce Capital Expenditures

Black Stone Minerals utilizes farmout arrangements to mitigate capital expenditures associated with its exploration and production activities. These arrangements allow BSM to retain a portion of the revenue while transferring some of the operational risk to partners. For instance, the 2024 capital expenditure budget for non-operated working interests is approximately $2.3 million, net of farmout reimbursements.

Partnership Type	Partner	Key Benefits	Financial Impact (2024)
Joint Exploration Agreements	Aethon Energy	Reduced royalty rates, exclusive access	Revenue from contracts: $335.1 million
Collaborations	Various Operators	Operational expertise, resource sharing	Revenue from contracts: $335.1 million
Farmout Arrangements	Various Operators	Reduced capital expenditures	CapEx budget: $2.3 million (net of reimbursements)

Black Stone Minerals, L.P. (BSM) - Business Model: Key Activities

Managing mineral and royalty assets

Black Stone Minerals, L.P. (BSM) actively manages a diverse portfolio of mineral and royalty interests, primarily in oil and natural gas. As of September 30, 2024, BSM reported net property and equipment valued at $1.096 billion. The company focuses on optimizing the value of its assets through strategic acquisitions and management practices.

Leasing mineral interests for oil and gas extraction

BSM leases its mineral interests to various operators for oil and gas extraction. For the nine months ending September 30, 2024, lease bonus and other income increased to $10.48 million compared to $8.68 million for the same period in 2023. This uptick was primarily driven by leasing activity in key regions such as the Permian Basin and Bakken/Three Forks. Additionally, BSM received lease bonuses that can vary significantly based on individual transactions, which enhances the company's revenue streams.

Period	Lease Bonus Revenue (in thousands)	Key Regions
Q3 2024	$10,480	Permian Basin, Bakken/Three Forks
Q3 2023	$8,682	Bakken/Three Forks, Haynesville/Bossier

Marketing mineral assets to encourage drilling

BSM employs targeted marketing strategies to promote its mineral assets to operators, facilitating drilling activities. The company’s strategy includes acquiring mineral and royalty interests, which amounted to $65.2 million during the nine months ending September 30, 2024. This acquisition included primarily unproved oil and natural gas properties, which are critical for future drilling projects. BSM’s marketing efforts also focus on enhancing relationships with operators to maximize drilling activity on its leased lands.

Acquisition Type	Value (in millions)	Location
Mineral and Royalty Interests	$65.2	Gulf Coast Land Region

Black Stone Minerals, L.P. (BSM) - Business Model: Key Resources

Extensive portfolio of mineral and royalty interests

Black Stone Minerals, L.P. owns a substantial portfolio of mineral and royalty interests primarily located in the continental United States. As of September 30, 2024, the company has approximately 68,000 producing wells across various onshore producing basins in 41 states. These interests allow the company to generate revenue primarily through royalties from oil and natural gas production without bearing the operational costs associated with drilling and production activities.

Ownership in approximately 68,000 producing wells

As of September 30, 2024, Black Stone Minerals holds interests in around 68,000 producing wells, which significantly contributes to its revenue generation. The company reported oil and condensate sales of $209.1 million for the nine months ended September 30, 2024, with these sales accounting for 95% of total oil and condensate volumes. The operational efficiency and production capacity of these wells are critical to the company’s financial performance.

Access to major onshore producing basins across 41 states

Black Stone Minerals has access to major onshore producing basins, including the Permian Basin, Bakken, and Eagle Ford, among others. The company’s mineral and royalty interests are strategically located to capitalize on production activities in these prolific regions. The company reported net income of $224.9 million for the nine months ended September 30, 2024, with significant contributions from its expansive acreage.

Key Metrics	As of September 30, 2024	As of September 30, 2023
Total Revenue	$349.973 million	$401.375 million
Net Income	$224.980 million	$274.902 million
Oil and Condensate Sales	$209.112 million	$208.184 million
Natural Gas Sales	$115.543 million	$147.857 million
Weighted Average Common Units Outstanding	210,688	209,991
Producing Wells	68,000	67,500
States with Interests	41	41

Black Stone Minerals, L.P. (BSM) - Business Model: Value Propositions

Stable cash flow from non-cost-bearing mineral interests

Black Stone Minerals, L.P. (BSM) generates stable cash flow primarily from its mineral and royalty interests, which are not burdened by the costs associated with operating wells. For the nine months ended September 30, 2024, BSM reported net income of $224.98 million, compared to $274.90 million for the same period in 2023. This indicates a robust revenue stream largely insulated from operational expenses.

As of September 30, 2024, BSM's total revenue reached $349.97 million, a decrease from $401.38 million in the prior year, attributed mainly to lower commodity prices. The company’s business model focuses on maximizing cash flow while minimizing operational risk through its mineral rights, allowing it to benefit from fluctuations in oil and gas prices without incurring direct production costs.

Expertise in maximizing value through active management

BSM leverages its expertise in active management to optimize the value derived from its mineral interests. The company has a sophisticated approach to managing its portfolio, focusing on strategic acquisitions and efficient leasing agreements. In the first nine months of 2024, BSM acquired mineral and royalty interests for approximately $65.2 million, enhancing its asset base.

The company’s operational strategy includes regular evaluations of market conditions and proactive engagement with operators to negotiate favorable lease terms. This strategic management has allowed BSM to maintain strong production levels, with mineral and royalty interest accounting for 95% of total oil and condensate volumes in the nine months ended September 30, 2024.

Opportunities in energy transition and renewable energy

BSM is well-positioned to capitalize on the ongoing energy transition towards renewable sources. The company is exploring opportunities in solar energy development, leveraging its mineral rights to support sustainable energy initiatives. For instance, BSM has received lease bonus income from surface use waivers that facilitate solar projects.

Financially, the company is diversifying its revenue streams in response to evolving market demands, with lease bonus and other income amounting to $10.48 million for the nine months ended September 30, 2024. This diversification is critical as it allows BSM to hedge against volatility in traditional fossil fuel markets while aligning with broader environmental goals.

Revenue Source	Q3 2024 ($ millions)	Q3 2023 ($ millions)	Variance (%)
Oil and condensate sales	63.99	85.72	-25.3
Natural gas and NGL sales	37.04	48.82	-24.1
Lease bonus and other income	2.14	2.18	-1.7
Total Revenue	134.86	109.80	22.8

In summary, Black Stone Minerals, L.P. provides a unique value proposition through its stable cash flow from non-cost-bearing mineral interests, expertise in maximizing asset value, and strategic positioning to leverage opportunities arising from the energy transition. These elements create a competitive advantage in the evolving energy landscape.

Black Stone Minerals, L.P. (BSM) - Business Model: Customer Relationships

Long-term partnerships with operators and lessees

Black Stone Minerals, L.P. (BSM) actively establishes long-term partnerships with various operators and lessees across its extensive mineral and royalty interests. As of September 30, 2024, BSM's mineral and royalty interests are located in 41 states, encompassing all major onshore producing basins. This diversified presence allows the company to engage with multiple operators, ensuring a consistent revenue stream.

Regular communication regarding production and leasing terms

BSM emphasizes regular communication with its operators to discuss production performance and leasing terms. For the nine months ended September 30, 2024, BSM reported net income of $224.98 million, showcasing the effectiveness of these partnerships. The total revenue during this period was $349.97 million, attributed largely to oil and natural gas sales, with oil and condensate sales contributing $209.11 million and natural gas sales contributing $115.54 million.

Financial Metric	2024 (9 Months)	2023 (9 Months)	Variance
Net Income	$224.98 million	$274.90 million	($49.92 million)
Total Revenue	$349.97 million	$401.38 million	($51.41 million)
Oil and Condensate Sales	$209.11 million	$208.18 million	$0.93 million
Natural Gas Sales	$115.54 million	$147.86 million	($32.32 million)

Focus on maintaining trust and transparency

BSM's commitment to maintaining trust and transparency with its partners is evident from its detailed reporting and open communication channels. For the third quarter of 2024, BSM's revenue from contracts with customers was $103.18 million, down from $136.72 million in the same quarter of 2023, indicating a focus on strategic adjustments to leasing agreements and operational efficiency. This transparency in operations helps to foster long-lasting relationships with lessees and operators.

The company also emphasizes sharing relevant operational data, which enhances collaboration and decision-making processes between BSM and its partners. In the nine months ending September 30, 2024, BSM's lease operating expenses decreased to $7.43 million from $8.15 million in the previous year, reflecting effective cost management and operational efficiency.

Operating Expense	2024 (9 Months)	2023 (9 Months)	Variance
Lease Operating Expense	$7.43 million	$8.15 million	($0.72 million)
Production Costs and Ad Valorem Taxes	$38.88 million	$41.95 million	($3.07 million)
General and Administrative Expenses	$40.29 million	$38.95 million	$1.34 million

Black Stone Minerals, L.P. (BSM) - Business Model: Channels

Direct leasing agreements with oil and gas operators

Black Stone Minerals, L.P. (BSM) primarily generates revenue through direct leasing agreements with oil and gas operators. These agreements allow operators to extract oil and gas from the mineral rights owned by BSM, in exchange for lease bonuses and royalties. In the nine months ended September 30, 2024, BSM reported lease bonus and other income of $10.48 million, reflecting a 20.7% increase compared to $8.68 million in the same period of 2023.

Industry conferences and networking events

BSM actively participates in industry conferences and networking events to strengthen relationships with existing operators and attract new partnerships. These engagements facilitate direct communication and collaboration opportunities, fostering long-term agreements that can lead to increased leasing activity and revenue generation.

Online platforms for marketing and information sharing

BSM utilizes online platforms for marketing and information dissemination, enhancing its visibility in the market. The company leverages digital channels to promote its mineral interests and share data with potential operators. This approach aids in building a robust online presence, allowing BSM to reach a wider audience and streamline communication with stakeholders.

Channel Type	Description	Financial Impact (2024)	Comparison to 2023
Direct Leasing	Revenue from agreements with operators for oil and gas extraction	$10.48 million (lease bonus and other income)	↑ 20.7% from $8.68 million
Conferences	Networking opportunities to secure partnerships and agreements	Not directly quantified	Ongoing engagement; impact on long-term agreements
Online Platforms	Digital marketing and information sharing to attract operators	Not directly quantified	Increasing focus on digital outreach

Black Stone Minerals, L.P. (BSM) - Business Model: Customer Segments

Oil and gas operators seeking mineral rights

Black Stone Minerals, L.P. (BSM) primarily serves oil and gas operators looking to acquire mineral rights. As of September 30, 2024, BSM reported mineral and royalty interests in 41 states across major producing basins in the United States. The Partnership's mineral and royalty interests, which are largely non-cost-bearing, comprise a significant portion of its asset base.

In the nine months ended September 30, 2024, BSM recognized revenue from oil and condensate sales amounting to $209.1 million, while natural gas and natural gas liquids sales were $115.5 million. This highlights the demand from operators for BSM's mineral rights as they seek to enhance their production capabilities.

Investors interested in stable cash flows from royalties

BSM attracts investors who are focused on stable cash flows generated from its royalty interests. The Partnership's strategy emphasizes the distribution of cash flows to its unitholders. In the nine months ended September 30, 2024, BSM reported a net income of $224.98 million, resulting in a distribution to common unitholders of approximately $257.92 million.

The per unit distribution for the common units was $0.41 for the three months ended September 30, 2024. This consistent cash flow model appeals to income-focused investors, reinforcing BSM's position in the market as a reliable investment opportunity.

Companies exploring renewable energy opportunities

BSM is also engaging with companies that are exploring renewable energy opportunities. The Partnership has been involved in leasing activities that support solar development on its mineral acreage in Texas. The lease bonus and other income for the nine months ended September 30, 2024, included significant contributions from renewable energy projects, particularly in the Permian Basin.

As of September 30, 2024, the total revenue from lease bonuses and other income was $10.48 million. This illustrates BSM's adaptability in catering to the evolving energy landscape, allowing it to attract a broader customer base focused on sustainable energy solutions.

Customer Segment	Description	Financial Impact (Q3 2024)
Oil and Gas Operators	Seeking mineral rights across major U.S. basins	Oil and condensate sales: $209.1 million
Investors	Looking for stable cash flows from royalties	Net income: $224.98 million; Distributions: $257.92 million
Renewable Energy Companies	Exploring solar and other renewable energy opportunities	Lease bonus income: $10.48 million

Black Stone Minerals, L.P. (BSM) - Business Model: Cost Structure

Lease Operating Expenses for Mineral Properties

Lease operating expenses (LOE) for the nine months ended September 30, 2024, amounted to $7.43 million, a decrease from $8.15 million for the same period in 2023, reflecting an 8.8% reduction. For the quarter ended September 30, 2024, LOE was reported at $2.42 million compared to $2.62 million in the prior year, marking a 7.4% decrease.

General and Administrative Costs Including Salaries and Consulting Fees

General and administrative expenses for the nine months ended September 30, 2024, totaled $40.29 million, compared to $38.95 million for the same period in 2023, which represents a 3.4% increase. For the third quarter of 2024, these expenses were $12.80 million, down from $14.45 million in 2023, indicating an 11.4% decrease.

Key components of these expenses include:

• Salaries and wages: Increased due to adjustments in compensation structures.
• Consulting fees: Decreased primarily due to reduced consulting projects.
• Equity-based compensation: $6.77 million for the nine months ended September 30, 2024, down from $8.41 million in 2023.

Exploration Expenses and Capital Expenditures for Acquisitions

Exploration expenses for the nine months ended September 30, 2024, were $2.58 million, up from $1.72 million in the prior year, reflecting a 50.0% increase. For the third quarter of 2024, exploration expenses were reported at $2.56 million compared to $1.71 million in the same quarter of 2023.

Capital expenditures for acquisitions during the nine months ended September 30, 2024, totaled approximately $65.2 million, primarily for unproved oil and natural gas properties. This included capitalized direct transaction costs, with $64.2 million paid in cash and $1.0 million in equity.

Expense Category	Q3 2024 (in millions)	Q3 2023 (in millions)	Change (%)
Lease Operating Expense	2.42	2.62	-7.4%
General and Administrative	12.80	14.45	-11.4%
Exploration Expense	2.56	1.71	+49.7%
Capital Expenditures for Acquisitions	65.20	N/A	N/A

Black Stone Minerals, L.P. (BSM) - Business Model: Revenue Streams

Oil and Natural Gas Sales from Mineral Interests

For the nine months ended September 30, 2024, Black Stone Minerals reported oil and condensate sales of $209,112,000, representing a slight increase of 0.4% compared to $208,184,000 in the same period of 2023. The realized price for oil and condensate was $76.01 per barrel, a marginal decrease from $76.23 per barrel in the previous year.

Natural gas and natural gas liquids sales for the same period totaled $115,543,000, down 21.9% from $147,857,000 in 2023, primarily due to lower realized prices, which averaged $2.40 per Mcf, down from $3.07 per Mcf in 2023.

Lease Bonuses and Other Income from Leasing Agreements

Lease bonuses and other income amounted to $10,480,000 for the nine months ended September 30, 2024, representing an increase of 20.7% from $8,682,000 in the same period of 2023. This income is derived from upfront cash payments received when leasing mineral interests.

The leasing activity during this period was primarily driven by transactions in the Permian Basin and Bakken/Three Forks areas.

Revenue Source	2024 Revenue (in $000s)	2023 Revenue (in $000s)	Change (%)
Oil and Condensate Sales	209,112	208,184	0.4
Natural Gas and NGL Sales	115,543	147,857	-21.9
Lease Bonus and Other Income	10,480	8,682	20.7
Total Revenue	349,973	401,375	-12.8

Gains from Commodity Derivative Instruments

For the nine months ended September 30, 2024, Black Stone Minerals recognized a gain of $14,838,000 from commodity derivative instruments. This represents a 59.5% decrease compared to a gain of $36,652,000 in the previous year.

During the third quarter of 2024, the partnership reported a gain of $31,675,000 on commodity derivatives, a significant turnaround from a loss of $26,922,000 in the same quarter of 2023. This highlights the volatility and the impact of market conditions on derivative settlements.

Updated on 16 Nov 2024

Resources:

1. Black Stone Minerals, L.P. (BSM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Black Stone Minerals, L.P. (BSM)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Black Stone Minerals, L.P. (BSM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.