Black Stone Minerals, L.P. Announces Shelby Trough Operational Update
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Insights
The announcement by Black Stone Minerals, L.P. regarding Aethon Energy exercising the 'time-out' provisions under their joint exploration agreements due to falling natural-gas prices is a significant development for stakeholders. It is crucial to analyze the financial implications of this decision, particularly as it pertains to Black Stone's revenue stream from drilling operations. The 'time-out' allows Aethon to suspend drilling for up to 18 months within a 48-month period, potentially impacting Black Stone's production output and financial results.
Despite the suspension not affecting the 30 Aethon wells currently in development, the long-term financial impact remains uncertain. Stakeholders should monitor natural-gas market trends, as prolonged low prices could lead to further suspensions. Black Stone's plan to issue 2024 guidance may provide insights into their strategic response to this volatility. It is imperative to consider the resilience of Black Stone's portfolio and its ability to withstand fluctuations in commodity prices.
The exercise of the 'time-out' provision by Aethon Energy, as reported by Black Stone Minerals, reflects broader industry dynamics. The oil and gas sector is inherently sensitive to commodity price swings and contractual provisions like 'time-outs' are risk mitigation strategies for exploration and production companies. This move by Aethon is a direct response to the current low natural-gas price environment.
While Black Stone anticipates no significant financial impact within the next twelve months, the uncertainty of the duration of the drilling suspension poses a risk to long-term revenue projections. Investors should consider the company's operational flexibility and the ability of its management to navigate through periods of market weakness. The active discussions between Black Stone and Aethon indicate a collaborative approach to minimize the suspension's impact, which could be a positive signal for the company's adaptability.
The invocation of 'time-out' provisions by Aethon Energy can be seen as a strategic response to the prevailing low natural-gas price environment. This decision is not isolated but reflects a trend where energy companies are forced to adapt to market conditions. For commodity market observers, the key takeaway is the direct correlation between commodity prices and exploration activities.
Black Stone's exposure to these market dynamics could have mixed outcomes. On one hand, the suspension of drilling obligations could lead to cost savings in the short term. On the other hand, if low gas prices persist, the long-term revenue potential and growth prospects could be adversely affected. Market participants should closely watch the price thresholds that trigger such contractual provisions, as they offer insights into the operational strategies of companies like Black Stone Minerals.
Black Stone does not expect the invocation of the time-out to affect the approximately 30 Aethon wells in various stages of development. We expect those wells to be turned in line and begin producing on schedule. Accordingly, the Company does not expect the suspension to have a meaningful financial impact in the next twelve months and plans to issue 2024 guidance in late February 2024, consistent with past practice. Black Stone and Aethon are in active discussions to determine the plan for the time-out. Black Stone will continue to assess the effect of the notice but cannot currently estimate the longer-term effects of a protracted suspension without knowing how long drilling will be suspended.
Thomas L. Carter, Jr., the Company’s CEO, President, and Chairman, noted, “Aethon has been a great partner in our Shelby Trough development program. Low gas prices are obviously challenging for operators and royalty owners in the area, but we look forward to working with Aethon to minimize downtime and get the best possible results for the Company’s unitholders.”
About Black Stone Minerals, L.P.
Black Stone Minerals is one of the largest owners of oil and natural gas mineral interests in
Forward-Looking Statements
This news release includes forward-looking statements. All statements, other than statements of historical facts, included in this news release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Terminology such as “will,” “may,” “should,” “expect,” “anticipate,” “plan,” “project,” “intend,” “estimate,” “believe,” “target,” “continue,” “potential,” the negative of such terms, or other comparable terminology often identify forward-looking statements. Except as required by law, Black Stone Minerals undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this news release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. All forward-looking statements are qualified in their entirety by these cautionary statements. These forward-looking statements involve risks and uncertainties, many of which are beyond the control of Black Stone Minerals, which may cause the Company’s actual results to differ materially from those implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
- the Company’s ability to execute its business strategies;
- the volatility of realized oil and natural gas prices;
- the level of production on the Company’s properties;
- overall supply and demand for oil and natural gas, as well as regional supply and demand factors, delays, or interruptions of production;
- conservation measures, technological advances, and general concern about the environmental impact of the production and use of fossil fuels;
- the Company’s ability to replace its oil and natural gas reserves;
- general economic, business, or industry conditions;
- cybersecurity incidents, including data security breaches or computer viruses;
- competition in the oil and natural gas industry; and
- the availability, high cost, or shortages of rigs, equipment, raw materials, supplies, or personnel to develop and operate our properties; and
- the level of drilling activity by the Company's operators, particularly in areas such as the Shelby Trough where the Company has concentrated acreage positions.
View source version on businesswire.com: https://www.businesswire.com/news/home/20231222913616/en/
Black Stone Minerals, L.P. Contact
Evan Kiefer
Chief Financial Officer and Treasurer
Telephone: (713) 445-3200
investorrelations@blackstoneminerals.com
Source: Black Stone Minerals, L.P.
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