Black Stone Minerals (NYSE: BSM) raises payout 9% and expands Caturus drilling deal

What happened

Black Stone Minerals, L.P. (NYSE: BSM) raised its quarterly distribution 9% to $0.35 per common unit, or $1.40 a year. It is the second straight increase and leaves the payout 17% above the $0.30 per unit for the first quarter.

The partnership also widened its development agreement with an affiliate of Caturus Energy, LLC by 730,000 gross acres, to 950,000 gross acres. Caturus must drill a minimum amount each year, measured in completed lateral feet net to Black Stone's mineral ownership.

The distribution is payable Nov. 13 to unitholders of record Nov. 6. Distribution coverage was 1.25x.

Key numbers

Metric	Latest	Change	Source
Distribution per common unit (attributable to third quarter of 2026)	$0.35	+17% since the first quarter	SEC 8-K Exhibit 99.1
Oil and gas revenue	$122.7 million	from $100.2 million, +22.5%	Calculated from SEC 8-K Exhibit 99.1
Adjusted EBITDA	$104.1 million	from $88.1 million, +18.2%	Calculated from SEC 8-K Exhibit 99.1
Net income	$52.4 million	from $91.7 million, -42.9%	Calculated from SEC 8-K Exhibit 99.1
Outstanding under credit facility (Oct. 30, 2026)	$197.0 million		SEC 8-K Exhibit 99.1

Read more: Black Stone Minerals, L.P. (BSM) company research

Cash earnings rose, net income fell

Oil and gas revenue rose 6% to $122.7 million from $115.4 million in the second quarter. Oil and condensate made up 63% of it. That is a $7.3 million gain, by OptimistFi's calculation. Co-CEO Taylor DeWalch said the quarter reflected more development activity and higher oil production and revenue.

Adjusted EBITDA climbed to $104.1 million from $91.3 million in the second quarter. Distributable cash flow reached $93.0 million from $80.4 million. Net income fell to $52.4 million from $106.4 million.

The quarter had a $30.2 million loss on commodity derivatives. Of that, $29.8 million was a non-cash unrealized loss. The second quarter had a $26.8 million derivative gain. Adjusted EBITDA leaves out unrealized derivative gains and losses.

Against a year earlier, price did the work. The average realized price was $37.44 per Boe, up 25% from $30.01 in the third quarter of 2025. Total production averaged 35.6 MBoe per day, down from 36.3. Mineral and royalty production of 34.5 MBoe per day was up 6% from the second quarter but below the 34.7 a year earlier.

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What the Caturus expansion commits

The amended agreement adds two development areas, mainly in Houston, Trinity and Polk counties in Texas. In the first, a pilot well is due by the first quarter of 2028. If Caturus proceeds, 2 gross wells follow in 2029, rising to about 12 gross wells a year by 2034. Minimum annual commitments rise from 8,000 to 33,600 net lateral feet over that span.

The second area is an option. If Caturus chooses to start, it would begin with a pilot well by the end of 2031. The agreement also lets Caturus meet part of its commitment in each area by drilling in the other areas.

Activity under existing agreements is already running. Adamas Energy turned 7 gross (0.7 net) wells to sales in the quarter. It has spud 6 of the 17 wells expected in the program year ending June 30, 2027. Caturus spud its first 2 development wells under the original agreement in October. Revenant Energy's 2027 drilling commitment rose by 7,000 gross lateral feet in a September amendment.

Balance sheet and acquisitions

The borrowing base under the credit facility was reaffirmed at $580.0 million on Oct. 30. The partnership kept total commitments at $375.0 million. Black Stone says it complies with all financial covenants.

Borrowings were $197.0 million on Oct. 30, up from $195.0 million at Sept. 30. Cash was $5.4 million. That leaves $178.0 million of commitments undrawn, by OptimistFi's calculation.

The partnership keeps buying minerals. In October it paid $30.6 million in cash and $2.1 million in common units for interests and surface rights in the expanded Shelby Trough area. Third-quarter purchases were $14.6 million. Acquisitions from September 2023 through October 2026 total $335.5 million.

Why it matters

OptimistFi has argued that Black Stone can compound cash only if its acreage keeps drawing third-party drilling without the partnership taking operator-level capital risk. The quarter supports that view. Mineral and royalty interests made up 97% of total production. The Caturus commitments extend scheduled outside drilling on Black Stone acreage into the 2030s.

Two caveats limit the read. Both new Caturus areas start with pilot wells, and the second area is Caturus's option. The higher payout also rests on distributable cash flow, not net income, which fell after the derivative loss.

Acreage purchases use cash even without operator risk. So borrowings and the facility terms stay part of the story.

What's next

The next scheduled test is the borrowing base redetermination in April 2027. A lower base or smaller commitments would weaken the case. Another reaffirmation would extend it.

Before then, the distribution is payable Nov. 13, and management hosts a call Nov. 3 at 9:00 a.m. Central. The first Caturus development wells are expected to begin production in the first half of 2027.

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