Black Stone Minerals, L.P. (BSM), mcap=$3.3bn, price $15.54 vs $14.68

$BSM pitch:
– Natural-gas weighted mineral royalty MLP with well-protected downside and potential upside coming in for free.
– Currently generates 11.5% distribution yield despite production hedged at $66 oil and $3 gas, hedges for 2023 protect from fall in commodity prices.
– Upside from expected 15-20% production growth over the next 6 quarters.
– Potential for significant upside should the “higher-for-longer” thesis on natural gas prices come to pass.
– Significantly reduced debt over the last 3 years from $400m to <$100m.

$BSM valuation:
– The downside scenario is breakeven-ish given the current 11.5% distribution yield, aggressive hedging program, and reduced leverage.
– Free upside from production growth and/or ‘higher for longer’ commodity prices.

Exp. gain: 10-20% return on top of 11.5% distribution yield.

Full BSM write-up (free guest account required):

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