Black Stone Minerals, L.P.BSM
Black Stone Minerals, L.P. Fair Value Disclosure
FAIR VALUE MEASUREMENTS
Fair value is defined as the amount at which an asset (or liability) could be sold (or settled) in an orderly transaction between market participants at the measurement date. Further, ASC 820, Fair Value Measurement, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and includes certain disclosure requirements. Fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk.
ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:
Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 — Quoted prices for similar assets or liabilities in non-active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 — Inputs that are unobservable and significant to the fair value measurement (including the Partnership’s own assumptions in determining fair value).
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers into, or out of, the three levels of the fair value hierarchy for the years ended December 31, 2025 and 2024.
The carrying value of the Partnership's cash and cash equivalents, receivables and payables approximate fair value due to the short-term nature of the instruments. The estimated carrying value of all debt as of December 31, 2025 and 2024 approximated the fair value due to variable market rates of interest.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Partnership estimated the fair value of commodity derivative financial instruments using the market approach via a model that uses inputs that are observable in the market or can be derived from, or corroborated by, observable data. See "Note 5 – Commodity Derivative Financial Instruments" for additional information.
The following table presents information about the Partnership’s assets and liabilities measured at fair value on a recurring basis:
| Fair Value Measurements Using | Effect of | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Counterparty Netting | Total | ||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||
| Commodity derivative instruments | $ | — | $ | 29,255 | $ | — | $ | (6,262) | $ | 22,993 | ||||||||||||||||||||||
| Financial Liabilities | ||||||||||||||||||||||||||||||||
| Commodity derivative instruments | — | 6,262 | — | (6,262) | — | |||||||||||||||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||
| Commodity derivative instruments | $ | — | $ | 5,634 | $ | — | $ | (3,810) | $ | 1,824 | ||||||||||||||||||||||
| Financial Liabilities | ||||||||||||||||||||||||||||||||
| Commodity derivative instruments | — | 19,243 | — | (3,810) | 15,433 | |||||||||||||||||||||||||||
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
Nonfinancial assets and liabilities measured at fair value on a non-recurring basis include certain nonfinancial assets and liabilities as may be acquired in a business combination and measurements of oil and natural gas property values when impaired.
The determination of the fair values of proved and unproved properties acquired in business combinations are estimated by discounting projected future cash flows. The factors used to determine fair value include estimates of economic reserves, future operating and development costs, future commodity prices, timing of future production, and a risk-adjusted discount rate. The Partnership has designated these measurements as Level 3. The Partnership had no business combinations for the years ended December 31, 2025 and 2024. See "Note 4 — Oil and Natural Gas Properties." The Partnership's fair value assessments for recent acquisitions are included in "Note 4 — Oil and Natural Gas Properties."
Oil and natural gas properties are measured at fair value on a non-recurring basis using the income approach when impaired. Proved and unproved oil and natural gas properties are reviewed for impairment when events and circumstances indicate a possible decline in the recoverability of the carrying value of those properties. This evaluation is performed on a depletable unit basis.
When assessing producing properties for impairment, the Partnership compares the undiscounted projected future cash flows expected in connection with a depletable unit to its unamortized carrying amount to determine recoverability. When the carrying amount of a depletable unit exceeds its estimated undiscounted future cash flows, the carrying amount is written down to its fair value, which is measured as the present value of the projected future cash flows of such properties. The factors used to determine future cash flows associated with those properties include estimates of proved reserves, future commodity prices, timing of future production, operating costs, future capital expenditures, and, with respect to estimating fair value, a risk-adjusted discount rate. When assessing unproved properties for impairment, an impairment loss is recognized to the extent the carrying value within a depletable unit exceeds the estimated recoverable value. The carrying value of unproved properties, including unleased mineral rights, is determined based on management’s assessment of fair value using factors similar to those previously noted for proved properties, as well as geographic and geologic data.
The Partnership’s estimates of fair value are determined at discrete points in time based on relevant market data. These estimates involve uncertainty and cannot be determined with precision. There were no significant changes in valuation techniques or related inputs for the years ended December 31, 2025 and 2024. There were no assets measured at fair value on a non-recurring basis, after initial recognition, for the years ended December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Mar 8, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.