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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM10-Q
  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _______________ to _______________
Commission File Number: 001-37362
Black Stone Minerals, L.P.
(Exact name of registrant as specified in its charter)
 
Delaware 47-1846692
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
   
1001 Fannin Street, Suite 2020 77002
Houston,Texas
(Address of principal executive offices) (Zip code)

(713) 445-3200
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Units Representing Limited Partner InterestsBSMNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer Accelerated filer
Non-accelerated filer(Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 
As of October 30, 2019, there were 205,959,790 common units and 14,711,219 Series B cumulative convertible preferred units of the registrant outstanding.




TABLE OF CONTENTS
 
  Page
 
 
 
 
 
 





ii


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements 


BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
 September 30, 2019December 31, 2018
ASSETS  
CURRENT ASSETS  
Cash and cash equivalents$1,966  $5,414  
Accounts receivable84,842  113,148  
Commodity derivative assets33,054  37,970  
Prepaid expenses and other current assets1,472  1,001  
TOTAL CURRENT ASSETS121,334  157,533  
PROPERTY AND EQUIPMENT  
Oil and natural gas properties, at cost, using the successful efforts method of accounting, includes unproved properties of $1,091,660 and $1,063,883 at September 30, 2019 and December 31, 2018, respectively
3,403,485  3,441,188  
Accumulated depreciation, depletion, amortization, and impairment(1,948,866) (1,865,692) 
Oil and natural gas properties, net1,454,619  1,575,496  
Other property and equipment, net of accumulated depreciation of $11,450 and $11,048 at September 30, 2019 and December 31, 2018, respectively
2,435  385  
NET PROPERTY AND EQUIPMENT1,457,054  1,575,881  
DEFERRED CHARGES AND OTHER LONG-TERM ASSETS17,425  16,710  
TOTAL ASSETS$1,595,813  $1,750,124  
LIABILITIES, MEZZANINE EQUITY, AND EQUITY 
CURRENT LIABILITIES 
Accounts payable$4,574  $4,149  
Accrued liabilities17,384  60,089  
Other current liabilities1,058  528  
TOTAL CURRENT LIABILITIES23,016  64,766  
LONG–TERM LIABILITIES 
Credit facility413,000  410,000  
Accrued incentive compensation1,750  1,813  
Commodity derivative liabilities    
Asset retirement obligations15,584  14,948  
Other long-term liabilities6,781  55,973  
TOTAL LIABILITIES460,131  547,500  
COMMITMENTS AND CONTINGENCIES (Note 8)
MEZZANINE EQUITY  
Partners' equity – Series B cumulative convertible preferred units, 14,711 units outstanding at September 30, 2019 and December 31, 2018
298,361  298,361  
EQUITY 
Partners' equity – general partner interest    
Partners' equity – common units, 205,952 and 108,363 units outstanding at September 30, 2019 and December 31, 2018, respectively
837,321  714,823  
Partners' equity – subordinated units, zero and 96,329 units outstanding at September 30, 2019 and December 31, 2018, respectively
  189,440  
TOTAL EQUITY837,321  904,263  
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY$1,595,813  $1,750,124  
The accompanying notes are an integral part of these unaudited consolidated financial statements.

1



BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per unit amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2019201820192018
REVENUE  
Oil and condensate sales$68,255  $82,712  $200,031  $232,920  
Natural gas and natural gas liquids sales41,340  63,080  156,622  170,179  
Lease bonus and other income3,484  12,440  15,846  28,616  
Revenue from contracts with customers113,079  158,232  372,499  431,715  
Gain (loss) on commodity derivative instruments24,290  (18,514) 12,294  (68,194) 
TOTAL REVENUE137,369  139,718  384,793  363,521  
OPERATING (INCOME) EXPENSE  
Lease operating expense4,356  4,229  13,497  12,767  
Production costs and ad valorem taxes15,877  17,641  44,919  46,939  
Exploration expense64  34  372  6,782  
Depreciation, depletion, and amortization27,375  29,273  84,933  88,135  
General and administrative14,189  22,083  49,750  60,416  
Accretion of asset retirement obligations275  278  829  820  
(Gain) loss on sale of assets, net      (2) 
TOTAL OPERATING EXPENSE62,136  73,538  194,300  215,857  
INCOME (LOSS) FROM OPERATIONS75,233  66,180  190,493  147,664  
OTHER INCOME (EXPENSE) 
Interest and investment income44  53  137  123  
Interest expense(5,395) (5,518) (16,572) (15,319) 
Other income (expense)365  60  293  (1,046) 
TOTAL OTHER EXPENSE(4,986) (5,405) (16,142) (16,242) 
NET INCOME (LOSS)70,247  60,775  174,351  131,422  
Net (income) loss attributable to noncontrolling interests  (22)   (1) 
Distributions on Series A redeemable preferred units       (25) 
Distributions on Series B cumulative convertible preferred units(5,250) (5,250) (15,750) (15,750) 
NET INCOME (LOSS) ATTRIBUTABLE TO THE GENERAL PARTNER AND COMMON AND SUBORDINATED UNITS$64,997  $55,503  $158,601  $115,646  
ALLOCATION OF NET INCOME (LOSS):   
General partner interest$  $  $  $  
Common units64,997  29,188  134,608  71,037  
Subordinated units  26,315  23,993  44,609  
 $64,997  $55,503  $158,601  $115,646  
NET INCOME (LOSS) ATTRIBUTABLE TO LIMITED PARTNERS PER COMMON AND SUBORDINATED UNIT:  
Per common unit (basic)$0.32  $0.27  $0.87  $0.67  
Weighted average common units outstanding (basic)205,957  106,706  155,513  105,254  
Per subordinated unit (basic)$  $0.27  $0.48  $0.46  
Weighted average subordinated units outstanding (basic)  96,329  50,458  96,021  
Per common unit (diluted)$0.32  $0.27  $0.87  $0.67  
Weighted average common units outstanding (diluted)205,957  106,706  155,513  105,254  
Per subordinated unit (diluted)$  $0.27  $0.48  $0.46  
Weighted average subordinated units outstanding (diluted)  96,329  50,458  96,021  
 The accompanying notes are an integral part of these unaudited consolidated financial statements.
2



BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
Common
units
Subordinated unitsPartners' equity — common unitsPartners' equity — subordinated unitsTotal equity
BALANCE AT DECEMBER 31, 2018108,363  96,329  $714,823  $189,440  $904,263  
Repurchases of common and subordinated units(588) —  (10,110) —  (10,110) 
Issuance of common units, net of offering costs—  —  (43) —  (43) 
Issuance of common units for property acquisitions57  —  943  —  943  
Restricted units granted, net of forfeitures1,545  —  —  —  —  
Equity–based compensation—  —  13,669  —  13,669  
Distributions—  —  (40,275) (35,642) (75,917) 
Charges to partners' equity for accrued distribution equivalent rights—  —  (1,044) —  (1,044) 
Distributions on Series B cumulative convertible preferred units—  —  (5,250) —  (5,250) 
Net income (loss)—  —  7,155  1,862  9,017  
BALANCE AT MARCH 31, 2019109,377  96,329  $679,868  $155,660  $835,528  
Conversion of subordinated units96,329  (96,329) 142,149  (142,149) —  
Repurchases of common and subordinated units(377) —  (6,164) —  (6,164) 
Restricted units granted, net of forfeitures627  —  —  —  —  
Equity–based compensation—  —  3,332  —  3,332  
Distributions—  —  (40,471) (35,642) (76,113) 
Charges to partners' equity for accrued distribution equivalent rights—  —  (766) —  (766) 
Distributions on Series B cumulative convertible preferred units—  —  (5,250) —  (5,250) 
Net income (loss)—  —  72,956  22,131  95,087  
BALANCE AT JUNE 30, 2019205,956    $845,654  $  $845,654  
Restricted units granted, net of forfeitures(4) —  —  —  —  
Equity–based compensation—  —  3,385  —  3,385  
Distributions—  —  (76,204) —  (76,204) 
Charges to partners' equity for accrued distribution equivalent rights—  —  (511) —  (511) 
Distributions on Series B cumulative convertible preferred units—  —  (5,250) —  (5,250) 
Net income (loss)—  —  70,247  —  70,247  
BALANCE AT SEPTEMBER 30, 2019205,952    $837,321  $  $837,321  
 The accompanying notes are an integral part of these unaudited consolidated financial statements.

3



BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
Common unitsSubordinated unitsPartners' equity — common unitsPartners' equity — subordinated unitsNon-Controlling InterestsTotal equity
BALANCE AT DECEMBER 31, 2017103,456  95,388  $603,116  $164,138  $867  $768,121  
Conversion of Series A redeemable preferred units736  964  10,498  13,750  —  24,248  
Repurchases of common and subordinated units(451) (23) (8,099) (342) —  (8,441) 
Issuance of common units, net of offering costs8  —  138  —  —  138  
Restricted units granted, net of forfeitures1,177  —  —  —  —  —  
Equity–based compensation1
—  —  18,075  219  —  18,294  
Distributions—  —  (32,581) (19,912) (52) (52,545) 
Charges to partners' equity for accrued distribution equivalent rights—  —  (661) —  —  (661) 
Distributions on Series A redeemable preferred units—  —  (13) (12) —  (25) 
Distributions on Series B cumulative convertible preferred units—  —  (5,250) —  —  (5,250) 
Net income (loss)—  —  29,592  12,338  27  41,957  
BALANCE AT MARCH 31, 2018104,926  96,329  $614,815  $170,179  $842  $785,836  
Repurchases of common and subordinated units(35) —  (630) —  —  (630) 
Issuance of common units, net of offering costs509  —  8,929  —  —  8,929  
Restricted units granted, net of forfeitures94  —  —  —  —  —  
Equity–based compensation1
—  —  8,521  —  —  8,521  
Distributions—  —  (33,011) (20,109) (62) (53,182) 
Charges to partners' equity for accrued distribution equivalent rights—  —  (643) —  —  (643) 
Distributions on Series B cumulative convertible preferred units—  —  (5,250) —  —  (5,250) 
Net income (loss)—  —  22,798  5,941  (49) 28,690  
BALANCE AT JUNE 30, 2018105,494  96,329  $615,529  $156,011  $731  $772,271  
Issuance of common units, net of offering costs1,604  —  29,302  —  —  29,302  
Issuance of common units for property acquisitions1,227  —  22,530  —  —  22,530  
Restricted units granted, net of forfeitures5  —  —  —  —  —  
Equity–based compensation1
—  —  8,991    —  8,991  
Distributions—  —  (36,052) (32,511) (47) (68,610) 
Charges to partners' equity for accrued distribution equivalent rights—  —  (1,061) —  —  (1,061) 
Distributions on Series B cumulative convertible preferred units—  —  (5,250) —  —  (5,250) 
Net income (loss)—  —  34,410  26,342  23  60,775  
BALANCE AT SEPTEMBER 30, 2018108,330  96,329  $668,399  $149,842  $707  $818,948  

1 The change in Partners' equity for equity-based compensation during the nine-month period ended September 30, 2018 was incorrectly allocated between Partners' equity - common units and Partners' equity - subordinated units in the Partnership's prior reports. The Partnership concluded that this error was not material to any of the prior reporting periods. As such, the revision for this correction has been made to the prior periods presented.
The accompanying notes are an integral part of these unaudited consolidated financial statements.

4



BLACK STONE MINERALS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended September 30,
 20192018
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income (loss)$174,351  $131,422  
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
Depreciation, depletion, and amortization84,933  88,135  
Accretion of asset retirement obligations829  820  
Amortization of deferred charges779  653  
(Gain) loss on commodity derivative instruments(12,294) 68,194  
Net cash (paid) received on settlement of commodity derivative instruments18,320  (20,461) 
Equity-based compensation16,906  24,947  
Exploratory dry hole expense3  6,784  
Deferred rent—  802  
(Gain) loss on sale of assets, net  (2) 
Changes in operating assets and liabilities:
Accounts receivable28,454  (29,989) 
Prepaid expenses and other current assets(471) 7  
Accounts payable, accrued liabilities, and other(5,172) 18,515  
Settlement of asset retirement obligations(328) (108) 
NET CASH PROVIDED BY OPERATING ACTIVITIES306,310  289,719  
CASH FLOWS FROM INVESTING ACTIVITIES  
Acquisitions of oil and natural gas properties(42,969) (106,390) 
Additions to oil and natural gas properties(63,606) (119,676) 
Additions to oil and natural gas properties leasehold costs(933) (4,639) 
Purchases of other property and equipment(2,452) (15) 
Proceeds from the sale of oil and natural gas properties550  8,390  
Proceeds from farmouts of oil and natural gas properties60,577  78,605  
NET CASH USED IN INVESTING ACTIVITIES(48,833) (143,725) 
CASH FLOWS FROM FINANCING ACTIVITIES  
Proceeds from issuance of common units, net of offering costs(43) 38,369  
Distributions to common and subordinated unitholders(228,234) (174,348) 
Distributions to Series A redeemable preferred unitholders  (690) 
Distributions to Series B cumulative convertible preferred unitholders(15,750) (12,425) 
Distributions to noncontrolling interests  (161) 
Distribution equivalents paid(2,982)   
Redemptions of Series A redeemable preferred units  (2,115) 
Repurchases of common and subordinated units(16,916) (9,071) 
Borrowings under credit facility252,500  264,500  
Repayments under credit facility(249,500) (250,500) 
Debt issuance costs and other  (754) 
NET CASH USED IN FINANCING ACTIVITIES(260,925) (147,195)