Black Stone Minerals (BSM) risk factors, FY2024 10-K

Other

1. 01The amount of cash we distribute to holders of our units depends primarily on our cash generated from operations and not our profitability, which may prevent us from making cash distributions during periods when we record net income
2. 02The volatility of oil and natural gas prices due to factors beyond our control greatly affects our financial condition, results of operations, and cash distributions to unitholders
3. 033 Low prices for WTI and Henry Hub were in 2020 and 2024, respectively. Excludes the period in April 2020 when WTI briefly traded in negative territory
4. 04New trade policies, such as tariffs, could adversely affect our operations, costs, and business
5. 05Unless we replace the oil and natural gas produced from our properties, our cash generated from operations and our ability to make distributions to our common unitholders could be adversely affected
6. 06We either have little or no control over the timing of future drilling with respect to our mineral and royalty interests and non-operated working interests
7. 07Project areas on our properties, which are in various stages of development, may not yield oil or natural gas in commercially viable quantities
8. 08The unavailability, high cost, or shortages of rigs, equipment, raw materials, supplies, or personnel may restrict or result in increased costs for operators related to developing and operating our properties
9. 09Our estimated reserves are based on many assumptions that may turn out to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves
10. 10The results of exploratory drilling in shale plays will be subject to risks associated with drilling and completion techniques and drilling results may not meet our expectations for reserves or production
11. 11Cessation or protracted slowdown of activity in the Shelby Trough area could adversely affect our results of operations
12. 12We may experience delays in the payment of royalties and be unable to replace operators that do not make required royalty payments, and we may not be able to terminate our leases with defaulting lessees if any of the operators on those leases declare bankruptcy
13. 13Our Credit Facility has substantial restrictions and financial covenants that may restrict our business and financing activities and our ability to pay distributions
14. 14We expect to distribute a substantial majority of the cash we generate from operations each quarter, which could limit our ability to grow and make acquisitions
15. 15Our operators’ development activities on our leases, funding our non-operated working interests, and acquisitions will require substantial capital, and we and our operators may be unable to obtain needed capital or financing on satisfactory terms or at all
16. 16Any acquisitions of additional mineral and royalty interests will be subject to substantial risks
17. 17Conservation measures, technological advances, and general concern about the environmental impact of the production and use of fossil fuels could materially reduce demand for oil and natural gas and adversely affect our results of operations and the trading market for our common units
18. 18Oil and natural gas operations are subject to various governmental laws and regulations. Compliance with these laws and regulations can be burdensome and expensive, and failure to comply could result in significant liabilities, which could reduce cash distributions to our unitholders
19. 19Louisiana mineral servitudes are subject to reversion to the surface owner after ten years’ nonuse
20. 20Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs, additional operating restrictions or delays, and fewer potential drilling locations
21. 21Operating hazards and uninsured risks may result in substantial losses to us or our operators, and any losses could adversely affect our results of operations and cash distributions to unitholders
22. 22Increased attention to environmental, social and governance (ESG) matters may impact our business
23. 23We rely on a few key individuals whose absence or loss could adversely affect our business
24. 24Title to the properties in which we have an interest may be impaired by title defects
25. 25Risks to Unitholders under Our Partnership Agreement
26. 26Our partnership agreement eliminates the fiduciary duties that might otherwise be owed to the partnership and its partners by our general partner and its directors and executive officers under Delaware law
27. 27Our partnership agreement restricts the situations in which remedies may be available to our unitholders for actions taken that might constitute breaches of duty under applicable Delaware law and breaches of the contractual obligations in our partnership agreement
28. 28Our partnership agreement restricts the voting rights of unitholders owning 15% or more of our units, subject to certain exceptions
29. 29Our partnership agreement includes exclusive forum, venue, and jurisdiction provisions. By purchasing a common unit, a limited partner is irrevocably consenting to these provisions regarding claims, suits, actions, or proceedings, and submitting to the exclusive jurisdiction of Delaware courts
30. 30Actions taken by our general partner may affect the amount of cash generated from operations that is available for distribution to unitholders
31. 31The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets
32. 32Increases in interest rates may cause the market price of our common units to decline
33. 33Unitholders may have liability to repay distributions
34. 34The NYSE does not require a publicly traded partnership like us to comply with certain of its corporate governance requirements
35. 35If a unitholder is not an Eligible Holder, the common units of such unitholder may be subject to redemption

Tax-Related Risks

1. 36The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal income tax purposes
2. 37The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial, or administrative changes and differing interpretations, possibly applied on a retroactive basis
3. 38taxable years beginning after December 31, 2025
4. 39the Treasury Department's interpretation of the qualifying income rules in a manner that could impact our ability to qualify as a partnership in the future
5. 40If the IRS were to contest the U.S. federal income tax positions we take, it may adversely affect the market for our common units, and the costs of any such contest would reduce cash available for distribution to our common unitholders
6. 41You, as a common unitholder, are required to pay taxes on your share of our income, even if you do not receive any cash distributions from us
7. 42Tax gain or loss on the disposition of our common units could be more or less than expected
8. 43Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us
9. 44Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them
10. 45Moreover, the transferee of an interest in a partnership that is engaged in a U.S. trade or business is generally required to withhold 10% of the "amount realized" by the transferor unless the transferor certifies that it is not a foreign person
11. 46We treat each purchaser of common units as having the same tax benefits without regard to the common units actually purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units
12. 47You, as a common unitholder, may be subject to state and local taxes and return filing requirements in jurisdictions where you do not live as a result of investing in our common units
13. 48Although we believe our common unitholders are entitled to a 20% deduction related to qualified business income, application of the deduction to royalty income is not free from doubt
14. 49If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our units
15. 50Various security risks, including cybersecurity threats, data breaches, and other disruptions, could significantly affect us