Black Stone Minerals, L.P. Announces Agreement with Aethon Energy to Restart Development of Shelby Trough Acreage


May 05, 2020 07:30 AM Eastern Daylight Time

HOUSTON--(BUSINESS WIRE)--Black Stone Minerals, L.P. (NYSE: BSM) (“Black Stone Minerals,” “Black Stone,” or “the Company”) today announced that it has entered into a development agreement with affiliates of Aethon Energy (“Aethon”) with respect to the Company’s undeveloped Shelby Trough Haynesville and Bossier shale acreage in Angelina County, Texas. The agreement provides for minimum well commitments by Aethon in exchange for reduced royalty rates and exclusive access to Black Stone’s mineral and leasehold acreage in the contract area. The agreement calls for a minimum of four wells to be drilled in the initial program year, which begins in the third quarter of 2020, increasing to a minimum of 15 wells per year beginning with the third program year.

“We are excited to partner with Aethon, one of the most experienced operators in the Haynesville Shale, to restart development of this important, high-net interest area for Black Stone,” stated Thomas L. Carter, Jr., Black Stone Minerals’ Chairman and Chief Executive Officer. “The Shelby Trough holds enormous resource potential, and our deal with Aethon positions both companies to benefit from decades of attractive development opportunities.”

About Black Stone Minerals, L.P.

Black Stone Minerals is one of the largest owners of oil and natural gas mineral interests in the United States. The Company owns mineral interests and royalty interests in 41 states in the continental United States. Black Stone believes its large, diversified asset base and long-lived, non-cost-bearing mineral and royalty interests provide for stable to growing production and reserves over time, allowing the majority of generated cash flow to be distributed to unitholders.

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There are many reasons for continuing development besides the current price.

You might be looking at the begining of the downward trend. The political and economic pressures have yet to really shift into gear. That is something Fed funny money cannot counter. We are not talking DJIA here; it is demand for a commodity

There are a number of potential reasons for companies to drill wells besides commodity price and economic and political pressures.  The article is clear that there is a "drilling commitment" as part of the deal.

The agreement calls for a minimum of four wells to be drilled in the initial program year, which begins in the third quarter of 2020, increasing to a minimum of 15 wells per year beginning with the third program year.

Black Stone knows full well that natural gas prices will be depressed for the foreseeable future and they have reasons to continue development.  Only the company knows but some of the usual reasons are cash flow to cover overhead, debt service and un-drilled leasehold that must be developed to hold the leases in force before the lease term expires.  I suspect that Aethon can get out of the deal by paying a penalty but Black Stone would just sign up another operator to take their place.

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