Black Stone Minerals, L.P. Announces Fourth Quarter and Full Year 2017 Results; Provides Guidance for 2018 and Updated Long-Term Production Outlook

Black Stone Minerals, L.P. (NYSE:BSM) (“Black Stone Minerals,” “Black
Stone,” or “the Partnership”) today announces its financial and
operating results for the fourth quarter and full year of 2017, provides
detailed guidance for 2018, and presents an updated five-year production
forecast.

Fourth Quarter 2017 Highlights

• Reported a new quarterly production record in the fourth quarter of
  38.1 Mboe/d, representing a 3% increase from the third quarter and a
  28% increase from the fourth quarter of last year.
• Increased mineral and royalty volumes by 15% over the third quarter.
• Recognized net income and Adjusted EBITDA for the quarter of $19.4
  million and $79.5 million, respectively.
• Reported distributable cash flow of $69.4 million, resulting in
  distribution coverage for all units of 1.3x.
• Announced and closed the acquisition of a diverse set of mineral and
  royalty assets from subsidiaries of Noble Energy, Inc. for $335
  million, funded primarily by the private placement of $300 million in
  convertible preferred units.
• Entered into farmout agreement covering substantially all of Black
  Stone's remaining working interests in the Shelby Trough area of East
  Texas targeting the Haynesville and Bossier shales for the next
  several years.
• Reconfirmed the credit facility borrowing base at $550 million and
  extended the credit agreement maturity date to November 1, 2022.

Other Financial and Operational Highlights

• Achieved full year 2017 production, net income, and Adjusted EBITDA of
  37.0 MBoe/d, $157.2 million, and $309.8 million, respectively.
• Reported estimated proved reserves at year-end 2017 of 67.9 MMBoe (74%
  natural gas and 82% proved developed producing), an increase of 7%
  over year-end 2016.
• Anticipate average daily production for 2018 growing approximately 14%
  to 41 - 43 MBoe/d, driven by expected mineral and royalty production
  growth of 24% year over year.
• Updated long-term forecast provides compound annual growth of
  approximately 16% and 7% for mineral and royalty production volumes
  and total production volumes, respectively, over the next five years.
• Based on the improved commodity outlook and the strength of the
  current forecast, management anticipates converting all the
  subordinated units to common units on a one-to-one basis in mid-2019
  while still allowing for distribution growth and healthy distribution
  coverage following conversion.

Management Commentary

“2017 was a standout year for Black Stone Minerals,” stated Thomas L.
Carter, Jr., Black Stone Minerals’ President, Chief Executive Officer,
and Chairman. “Operationally, we posted very strong results for the year
with total average daily production growing 17% year over year. Perhaps
more importantly, we enhanced our growth prospects through organic
initiatives and strategic acquisitions. We added an agreement with a
major operator that will drive development of large portions of our
Shelby Trough acreage in East Texas. We also lived up to our reputation
as an active acquirer by purchasing approximately $500 million in assets
during the year, bolstering both our Haynesville and Permian footprints.”

Mr. Carter continued, “Last year at this time, I outlined our goal to
de-emphasize our working interest participation program and replace
those volumes with mineral and royalty production in a way that would
allow us to grow production and cash flow over the long-term. Today, our
updated five-year production forecast delivers on that commitment and
provides line of sight for the conversion of subordinated units into
common units on a one-to-one basis, while growing distributions and
maintaining healthy coverage ratios following conversion. This is a
testament to the strength of our team and the value of actively managing
our assets. I am extremely proud of what our team accomplished in 2017
and how we are positioned to continue building value for our
unitholders.”

Quarterly Financial and Operating Results

Production and Realized Prices

Black Stone Minerals reported average production of 38.1 MBoe/d for the
fourth quarter of 2017, representing an increase of 28% from the
corresponding period in 2016. Mineral and royalty volumes made up 65% of
the Partnership’s total reported volumes in the fourth quarter of 2017
and natural gas volumes represented 73%.

The Partnership’s average realized price per Boe, excluding the effect
of derivative settlements, was $28.21 for the quarter ended December 31,
2017, an increase of 3% from $27.29 per Boe for the corresponding
quarter last year.

Financial Results

Black Stone Minerals reported oil and gas revenues of $99.0 million in
the fourth quarter of 2017, an increase of 32% from $74.9 million in the
fourth quarter of 2016. The increase reflects higher reported production
volumes as well as slightly higher commodity prices compared to the
corresponding period in 2016.

The Partnership reported a loss on commodity derivative instruments of
$8.5 million for the fourth quarter of 2017, composed of a $2.9 million
gain from realized settlements and a non-cash $11.4 million unrealized
loss due to the change in value of Black Stone’s derivative positions
during the quarter.

Lease bonus and other income was $5.0 million for the fourth quarter of
2017, compared to $6.0 million for the same period last year.

Most expenses for the fourth quarter of 2017 were in line with or below
the Partnership’s previously provided guidance, with the exception of
general and administrative expense. Based on Black Stone's updated
long-term forecast, the Partnership reinstated accruals for certain
performance-based units granted in 2015 as part of the Partnership’s IPO
which had previously been written off. These expense accruals made in
the fourth quarter capture the entire amount of non-cash expense that
would have been recognized from grant date through the end of 2017 for
those performance-based IPO awards.

The Partnership reported net income of $19.4 million for the quarter
ended December 31, 2017, compared to a net loss of $7.3 million in the
corresponding period in 2016. Adjusted EBITDA for the fourth quarter of
2017 was $79.5 million, as compared to $58.3 million for the fourth
quarter of 2016.

Acquisitions

As previously reported, Black Stone acquired a diverse mineral and
royalty package for $335 million in the fourth quarter of 2017 from
subsidiaries of Noble Energy, Inc. For the full year, the Partnership
acquired approximately $500 million worth of properties, which included
$72 million of asset acquisitions financed through the direct placement
of common units with the sellers.

2017 Proved Reserves

Estimated proved oil and natural gas reserves at year-end 2017 were 67.9
MMBoe, an increase of 7% from 63.4 MMBoe at year-end 2016, and were
approximately 74% natural gas and 82% proved developed producing. The
discounted net cash flow of proved reserves discounted at 10% (“PV-10”)
was $864.4 million at the end of 2017 as compared to $605.1 million at
year-end 2016.

Netherland, Sewell and Associates, Inc., an independent petroleum
engineering firm, evaluated Black Stone Minerals’ estimate of its proved
reserves and PV-10 at December 31, 2017. These estimates were prepared
using reference prices of $51.34 per barrel of oil and $2.98 per MMBTU
of natural gas in accordance with the applicable rules of the Securities
and Exchange Commission. These prices were adjusted for quality and
market differentials, transportation fees, and in the case of natural
gas, the value of natural gas liquids. A rollforward of proved reserves
is presented in the summary financial tables following this press
release.

Financial Position and Activities

As of December 31, 2017, Black Stone Minerals had $388.0 million
outstanding under its credit facility. Black Stone Minerals is in
compliance with all financial covenants associated with its credit
facility. The Partnership’s borrowing base at December 31, 2017 was $550
million. Black Stone’s regularly scheduled borrowing base
redetermination is set for April 2018. As of February 23, 2018, $371
million was outstanding under the credit facility.

As previously disclosed, Black Stone issued $300 million of Series B
Cumulative Convertible Preferred units during the fourth quarter of 2017
to an affiliate of The Carlyle Group at a price of $20.3926 per
preferred unit.

The Partnership established an at-the-market (“ATM”) offering program in
2017. During the fourth quarter of 2017, no units were sold under the
ATM program. Through the ATM program, Black Stone can sell common units
into the open market from time to time. As of December 31, 2017, the
Partnership had approximately $70 million of availability in the ATM
program.

Fourth Quarter 2017 Distributions

As previously announced, the Board of Directors of the general partner
approved a cash distribution of $0.3125 per common unit and $0.20875 per
subordinated unit attributable to the fourth quarter of 2017. These
distributions will be paid on February 27, 2018 to unitholders of record
as of the close of business on February 20, 2018.

In determining the amount of distributions to common and subordinated
unitholders, the Board takes into account numerous factors, including
the level of distribution coverage. In addition to the industry-accepted
method of calculating distribution coverage, the Partnership also
evaluates distribution coverage after deducting net working interest
capital expenditures with a goal over the long-term of funding recurring
working interest capital expenditures with retained cash flow. The
quarterly distribution coverage attributable to the fourth quarter of
2017 for all units was approximately 1.3x before net working interest
capital expenditures and approximately 1.2x after net working interest
capital expenditures. The Partnership expects the farmout agreements
entered into during 2017 will eliminate the substantial majority of its
working interest capital expenditures by mid-2018, and accordingly the
Partnership does not expect to continue using distributable cash flow
after net working interest capital expenditures as a supplemental
non-GAAP financial measure in 2018.

No acquisitions are assumed in the guidance above; however, consistent
with its stated strategy, the Partnership expects to remain active in
the acquisition market.

2018 Capital Expenditures

Black Stone Minerals expects to invest between $15 million and $25
million in working interest participation capital in 2018 related
primarily to Haynesville and Bossier Shale wells in East Texas that
pre-date the Partnership’s working interest farmouts in the Shelby
Trough. Substantially all of this capital is expected to be spent in the
first quarter of 2018 as these wells are completed and brought online.
As a result of the aforementioned farmout arrangements, Black Stone
expects working interest participation capital to be negligible
following the first quarter of 2018.

In addition, Black Stone expects to invest approximately $10 million to
$12 million in the evaluation of its PepperJack prospect in Hardin and
Liberty counties, Texas. The previously disclosed PepperJack A#1 well
targeting the Lower Wilcox formation has been drilled and was logged in
mid-February of 2018. Based on the encouraging results from that well,
Black Stone plans to drill a step-out well to further delineate the
prospect. The Partnership believes these wells substantially improve its
ability to structure a deal with an operating partner to aggressively
develop the field to the benefit of Black Stone’s retained mineral and
royalty position.

Black Stone Minerals has a long history of being an active acquirer of
mineral and royalty assets and contemplates making acquisitions over the
outlook period in the amount of $150 million per year. Including
production from modeled acquisitions, the five-year production forecast
would increase as follows:

Black Stone’s subordinated units first become eligible for conversion
into common units following the payment of the distribution with respect
to the quarter ending March 31, 2019. Based on the updated
pre-acquisition production forecast above and the improved commodity
price environment, Black Stone's management and Board of Directors now
expect that the Partnership will be in a position to convert the
subordinated units on a one-to-one basis while achieving the overarching
goal of continued growth in the common distributions with healthy levels
of distribution coverage. As a result, management intends to recommend
increasing the subordinated unit distribution attributable to the second
quarter of 2018 to parity with the common unit distribution. Black Stone
will continue to monitor both market conditions and business performance
over the conversion period when determining the level of subordinated
distributions.

Hedge Position

The Partnership has commodity derivative contracts in place covering
portions of anticipated production for 2018 and 2019. For 2018,
approximately 74% of expected oil volumes are hedged at prices averaging
$54.32 per barrel and approximately 80% of expected gas volumes are
hedged at prices averaging $3.02 per Mcf. For 2019, approximately 17% of
expected oil volumes are hedged at prices averaging $53.58 per barrel
and approximately 19% of expected gas volumes are hedged at prices
averaging $2.91 per Mcf. More detailed information regarding the
Partnership’s existing hedge position can be found in the Annual Report
on Form 10-K for 2017, which is expected to be filed on or around
February 27, 2018.

Conference Call

Black Stone Minerals will host a conference call and webcast for
investors and analysts to discuss its results for the fourth quarter and
full year of 2017 on Tuesday, February 27, 2018 at 9:00 a.m. Central
Time. To join the call, participants should dial (877) 447-4732 and use
conference code 7447648. A live broadcast of the call will also be
available at http://investor.blackstoneminerals.com.
A recording of the conference call will be available at that site
through March 7, 2018.

Upcoming Investor Relations Events

Members of management from Black Stone Minerals will also be
participating in the following investor events:

• 2018 Bernstein Energy & MLP Conference - March 13, 2018 in Boston,
  Massachusetts. Management will be participating in one-on-one meetings
  throughout the day, in addition to participating in a panel discussion.
• Scotia Howard Weil 46^th Annual Energy Conference - March 27
  & 28, 2018 in New Orleans, Louisiana. Management will present on
  Wednesday, March 28 and will also participate in one-on-one meetings.

Updated presentation materials, if any, for the aforementioned events
will be made available on the Black Stone Minerals website the day of
the respective event.

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 Partnership owns mineral
interests and royalty interests in 41 states and 64 onshore basins in
the continental United States. The Partnership also owns and selectively
participates as a non-operating working interest partner in established
development programs, primarily on its mineral and royalty holdings. The
Partnership expects that its large, diversified asset base and
long-lived, non-cost-bearing mineral and royalty interests will result
in production and reserve growth, as well as increasing quarterly
distributions to its unitholders.

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 Partnership
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 Partnership’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 Partnership’s ability to execute its business strategies;
• the volatility of realized oil and natural gas prices;
• the level of production on the Partnership’s properties;
• overall supply and demand for oil and natural gas, as well as regional
  supply and demand factors, delays, or interruptions of production;
• the Partnership’s ability to replace its oil and natural gas reserves;
  and
• the Partnership’s ability to identify, complete, and integrate
  acquisitions.

The following table shows the Partnership’s production, revenues,
realized prices, and expenses for the periods presented.

Non-GAAP Financial Measures

Adjusted EBITDA, distributable cash flow, and distributable cash flow
after net working interest capital expenditures are supplemental
non-GAAP ("GAAP" is defined as generally accepted accounting principles)
financial measures used by management and external users of the
financial statements such as investors, research analysts, and others,
to assess the financial performance of the Partnership's assets and its
ability to sustain distributions over the long term without regard to
financing methods, capital structure, or historical cost basis.

Black Stone defines Adjusted EBITDA as net income (loss) before interest
expense, income taxes, and depreciation, depletion, and amortization
adjusted for impairment of oil and natural gas properties, accretion of
asset retirement obligations, unrealized gains and losses on commodity
derivative instruments, and non-cash equity-based compensation. The
Partnership defines distributable cash flow as Adjusted EBITDA plus or
minus amounts for certain non-cash operating activities, estimated
replacement capital expenditures, cash interest expense, and
distributions to noncontrolling interests and preferred unitholders.
Distributable cash flow after net working interest capital expenditures
is defined as distributable cash flow less net working interest capital
expenditures. Net working interest capital expenditures consists of all
capital expenditures related to working interest wells less the
recoupment of working interest expenditures under farmout agreements.
Black Stone expects the farmout agreements entered into during 2017 will
eliminate the substantial majority of its working interest capital
expenditures by mid-2018.

Adjusted EBITDA, distributable cash flow, and distributable cash flow
after net working interest capital expenditures should not be considered
an alternative to, or more meaningful than, net income (loss), income
(loss) from operations, cash flows from operating activities, or any
other measure of financial performance presented in accordance with GAAP
in the United States as measures of Black Stone's financial performance.

Adjusted EBITDA, distributable cash flow, and distributable cash flow
after net working interest capital expenditures have important
limitations as analytical tools because they exclude some but not all
items that affect net income (loss), the most directly comparable GAAP
financial measure. The Partnership's computation of Adjusted EBITDA,
distributable cash flow, and distributable cash flow after net working
interest capital expenditures may differ from computations of similarly
titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDA,
distributable cash flow, and distributable cash flow after net working
interest capital expenditures to net income (loss), the most directly
comparable GAAP financial measure, for the periods indicated.

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