IPO Report: Black Stone Minerals, L.P. (BSM)

Francis Gaskins  |

Black Stone Minerals, L.P. (BSM) is one of the largest owners of oil and natural gas mineral interests in the United States.

Four other companies are scheduled for the week of April 27. The full IPO calendar is available at IPO Premium.

BSM is locatedin Houston, TX and planned a $450 million IPO on NYSE. The one market cap is $1.9 billion at a price range midpoint of $20. The IPO is scheduled for Friday, May 1, 2015.  

SEC filings

The manager & joint-managers are Barclays, BofA Merrill Lynch, Citigroup, Credit Suisse, Wells Fargo Securities. The co-managers are J.P. Morgan, Morgan Stanley, Raymond James, Scotia Howard Weil, Simmons & Company International.

Black Stone Minerals, L.P. Valuation


Per share dilution







Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Black Stone Minerals, L.P. (BSM)








March 16 projections


Four Quarters Ending March 31,

Minimum Quarterly Distribution (per unit)





Per Quarter



Yield at $20







price range mid-point






















2019 and thereafter








Black Stone Minerals, L.P. Conclusion

Neutral slightly plus

Heavily dependent on oi/gas commodity prices:

·         Oil & condensants, 42%

·         Gas & natural gas liquids, 36%

Minimum  distribution for March '16 expected to be 5.25%

Going up to 6.75% for March '19 yr

Black Stone Minerals, L.P. Business

BSM is one of the largest owners of oil and natural gas mineral interests in the United States.

BSM’s principal business is maximizing the value of its existing portfolio of mineral and royalty assets through active management and expanding its asset base through acquisitions of additional mineral and royalty interests.

BSM maximizes value through the marketing of its mineral assets for lease, creative structuring of those leases to encourage and accelerate drilling activity, and selectively participating alongside its lessees on a working-interest basis.

BSM’s primary business objective is to grow its reserves, production, and cash generated from operations over the long term, while paying, to the extent practicable, a growing quarterly distribution to its unitholders.

Black Stone Minerals, L.P. Mineral & Royalty Interests

BSM’s mineral and royalty interests consist of mineral interests in approximately 14.5 million acres, with an average 48.1% ownership interest in that acreage, NPRIs in 1.2 million acres, and ORRIs in 1.4 million acres.

These non-cost-bearing interests include ownership in approximately 40,000 producing wells.

BSM also own non-operated working interests.

BSM recognizes oil and natural gas revenue from its mineral and royalty and non-operated working interests in producing wells when the oil and natural gas production from the associated acreage is sold.

BSM’s other sources of revenue include mineral lease bonus and delay rentals, which are recognized as revenue according to the terms of the lease agreements.

Black Stone Minerals, L.P. Commodity Prices

Oil and natural gas prices have been historically volatile based upon the dynamics of supply and demand. In the second half of 2014, oil prices began a rapid decline as global supply outpaced demand.

In addition, in late November 2014, OPEC announced that it would not adjust its production targets.

The oil price decline continued into 2015, but WTI benchmark prices appear to have stabilized in the range of $45-$50 per Bbl during the period of January 2015 through March 2015.

If WTI remained at the midpoint of this range throughout 2015, our realized oil price, excluding the effects of hedges, would decrease approximately 50% compared to 2014. Although natural gas prices improved in 2014 compared to 2013, natural gas continues to also be impacted by an imbalance between supply and demand across North America.

During the three months ended March 31, 2015, Henry Hub spot natural gas prices ranged from $2.62 per MMBtu to $3.32 per MMBtu.

However, more recently, Henry Hub spot prices have settled on the lower end of that range. If natural gas prices remained depressed, at around $2.60 per MMBtu, our realized natural gas price, excluding the effect of hedges, would decrease by approximately 40% compared to 2014.

Black Stone Minerals, L.P. Intellectual Property


Black Stone Minerals, L.P. Competition

The oil and natural gas business is highly competitive in the exploration for and acquisition of reserves, the acquisition of minerals and oil and natural gas leases and personnel required to find and produce reserves.

Many of these companies not only explore for and produce oil and natural gas, but also carry on midstream and refining operations and market petroleum and other products on a regional, national, or worldwide basis.

Certain of BSM’s competitors may possess financial or other resources substantially larger than BSM possesses.

BSM’s ability to acquire additional minerals and properties and to discover reserves in the future will be dependent upon its ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment.

Oil and natural gas products compete with other forms of energy available to customers, primarily based on price.

These alternate forms of energy include electricity, coal, and fuel oils.

Changes in the availability or price of oil and natural gas or other forms of energy, as well as business conditions, conservation, legislation, regulations, and the ability to convert to alternate fuels and other forms of energy may affect the demand for oil and natural gas.

Black Stone Minerals, L.P. 5% Shareholders Pre-IPO

Camden Energy Limited Partnership       8.1%

Thomas L. Carter, Jr.     8.6%    

Black Stone Minerals, L.P. Dividends

Cash Distribution Policy

The partnership agreement generally provides that BSM will pay any distributions each quarter during the subordination period in the following manner:

•  first, to the holders of preferred units in an amount of approximately $25.00 per preferred unit;

•  second, to the holders of common units, until each common unit has received the applicable minimum quarterly distribution in the amounts specified below plus any arrearages from prior quarters; and

•  third, to the holders of subordinated units, until each subordinated unit has received the applicable minimum quarterly distribution.

Black Stone Minerals, L.P. Use of Proceeds

BSM expects to receive $422 million from its IPO and use it for the following:

to repay all of the indebtedness outstanding under its credit facility, which was $389.0 million as of March 31, 2015. BSM expects that at the time of completion of the offering, the outstanding balance on its credit facility will approximately equal the net proceeds of this offering. If the net proceeds should exceed the outstanding balance, this excess will be used to fund future capital expenditures.


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