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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This is great news for those of us in the Angeliina River Trend area.  BP had started our well and pulled out, so hoping they get to ours this year.  Seems Aethon has the most rigs out drilling in the Haynesville as of this time, so a major player like BP was. And a question for the experts, I was wondering how the wells they have been drilling in Angelina county stack up against the wells they are drilling in Nacogdoches and San Augustine counties?  

Good question.  Julie would be the best member to provide an answer.  If she doesn't get to it tomorrow, I'll send her a PM.

Aethon has not yet drilled any HA wells in Angelina Co. and they are the only operator still drilling HA in the Shelby Extension. Everything, so far, has been in Nacogdoches Co. (previously Samson Lone Star) or in San Augustine Co. (previously Crimson) with the exception of four wells drilled in Shelby Co. last year. Aethon and Covey Park both appeared on the scene after EnCana closed up in TX so some of their people likely came from EnCana. 

Excerpt Comments from Tom Carter, CEO Black Stone Minerals, Q2 2020 Earnings Call:

While it's been challenging to find many silver linings lately, one of them is a more constructive outlook for natural gas prices with several of our major equity research firms calling for gas prices well above the strip for 2021.

Follow-on Comment:

We (Black Stone Minerals) made significant progress in development activity in the Shelby Trough. In May, we signed a new development agreement with Aethon Energy covering the western side of the Shelby Trough (Angelina County). That arrangement is proceeding as planned and we expect the first well under the program to be spud in October. Aethon Energy has already devoted considerable land, geology and engineering resources to its development plan for the area.

Overall - Good News for Angelina County. No TXRRC permit filed yet on the Well to be spud in October.

Thanks for posting this. There are a select number of "gas players" who have a master plan to keep developing this area and set of assets. My biggest concern based on my limited overall knowledge of the local logistics is the pipeline capacity capabilities to take all this gas out of the field and to the end users / buyers.

Some very high volumes will be coming on line - how much will these wells need to be choked back?

The individual gas contracts for these operators are probably the most important paperwork that they have. I am sure there area some "priorities" listed as to who can produce when there is a conflict.

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