BSM

ANALYST NOTE: BLACK STONE MINERALS, L.P. (BSM) DATE: 2026-06-13 CURRENT PRICE: $14.01

1. Structural Readiness

State: Context-Only (Forming Coil) Breakout Level: Pending confirmation. Extension: None (Price is currently in the consolidation range, not extended above the breakout). ATR Context: Current ATR is 2.0% (sub-threshold). This indicates lower volatility than the historical "sweet spot" (4–6%), suggesting the market is currently in a low-volatility consolidation phase rather than an active trend expansion.

2. Thesis Layer

Thesis Classification: TACTICAL / Setup-Led. Macro Thesis Status: There is no named secular thesis attached to this specific setup at this date. The investment case is not driven by a broad, named macro narrative (e.g., "Global LNG Supercycle" or "AI Power Demand") in the current setup framework. Judgment Basis: The conviction must be derived strictly from the quality of the technical setup (the forming coil) and the underlying business fundamentals (production growth, acreage expansion, and reserve strength) as reported by management. We are judging the name on its operational execution and structural positioning, not on an external macro thesis.

3. Business Overview

Company Profile: Black Stone Minerals, L.P. is a primary owner and manager of oil and natural gas mineral interests in the United States. The company operates a non-operated model, holding working interests and royalty interests across 41 states. Business Model: The company generates revenue through production volumes and commodity prices from its extensive portfolio of mineral and royalty interests. It does not operate the wells itself but manages the development agreements with operators. Key Operational Highlights (as of Q1 2026 / May 2026):

• Acreage & Portfolio: As of March 31, 2026, the company holds approximately 16.8 million gross acres of mineral interests, 1.8 million gross acres of nonparticipating royalty interests, and 1.7 million gross acres of overriding royalty interests. It owns interests in approximately 71,000 producing wells.
• Production Growth: Management views 2026 as a year of production growth compared to 2025. In Q1 2026, the "Adamas" program turned 7 wells online, including the "Congo" wells in the Shelby Trough, which delivered strong initial results of 30 MMcf per day.
• Development Agreements:
• Caturus Energy: Entered a 220,000 gross acre agreement in November 2025 to expand the Shelby Trough westward. Activity is scheduled to begin in the second half of 2026 with ~2 gross wells, ramping to ~12 gross wells annually by 2031.
• Revenant: Obligated to drill a minimum of 6 wells in 2026, increasing to 25 wells annually by 2030.
• Aethon: Expects to drill 14 wells in the program year ending June 30, 2026.
• Capital Deployment: The company has deployed over $250 million under its development program since its inception in 2023, including an additional $12 million acquisition in the quarter.
• Reserves: As of December 31, 2025, total estimated proved reserves were 54,845 MBoe.
• Revenue Mix: In the most recent quarter, 54% of oil and gas revenue came from natural gas and natural gas liquids (NGLs).

4. Archetype and Conviction

Archetype: Cyclical Recovery. Fit Analysis: The name fits the "Cyclical Recovery" archetype due to its exposure to accelerating LNG export growth and industrial demand, combined with a specific operational ramp-up in 2026. Management explicitly cites "structural demand growth" supported by LNG exports (averaging 17.5 Bcf/day in Q1 2026, up 16% from 2025) and data center-driven power demand. The company is positioned to benefit from this demand through its proximity to Gulf Coast demand centers and its expanding production base in the Haynesville and Shelby Trough. Valuation Context: The financial spine indicates a forward consensus EPS of $0.71 for FY1 and $1.13667 for FY2. This implies a significant earnings growth trajectory expected by the market, aligning with the management's production guidance. Conviction Stack:

• Thesis Strength: Moderate (Tactical, no named macro thesis).
• Evidence Quality: High. Multiple primary sources (earnings transcripts, SEC filings) confirm production ramp, acreage expansion, and reserve strength.
• Structural Quality: Strong. The company has a diversified portfolio across 41 states and significant proved reserves.
• Setup Readiness: Partial. The "Forming Coil" state suggests the market is digesting the positive fundamentals, but the lack of a confirmed breakout and sub-threshold ATR (2.0%) indicates the trend has not yet been validated by price action.

5. Invalidations, Strengtheners, and Gaps

Invalidation Triggers:

• Fundamental: A significant deviation from the 2026 production guidance (e.g., failure to turn online the expected 12 gross wells in the remainder of 2026) or a sharp deterioration in commodity prices that impacts the economics of the Shelby Trough expansion.
• Operational: Delays in the Caturus or Revenant development agreements.

Strengtheners:

• Fundamental: Confirmation of the "Congo" well results scaling up or the marketing of the new project to secure a comparable development agreement (as stated in E5).
• Macro: Continued acceleration in LNG export volumes beyond the EIA forecasts (18.6 Bcf/day for 2027).

Evidence Gaps:

• Detailed Capex Guidance: While total deployment is mentioned, specific 2026 capex guidance numbers are not detailed in the provided evidence, only the total since 2023.
• Commodity Price Sensitivity: While oil prices are noted to have increased due to geopolitical conflict (Strait of Hormuz closure), the specific sensitivity of BSM's margins to a potential price correction is not quantified in the provided text.

PRIVATE ANALYST CALL

Judgment: Speculative Confidence: medium Key evidence: Management views 2026 as a year of production growth with 12 gross wells expected in the remainder of the year; 220,000 gross acre agreement with Caturus Energy to expand Shelby Trough; 54% of revenue from natural gas/NGLs benefiting from LNG export growth. Sizing hint: Position size should be conservative given the "forming" state and lack of confirmed breakout; treat as a watch-list candidate for confirmation. Expected horizon: 3 to 6 months for the setup to resolve (breakout or invalidation).