Investor interest in oil and gas is so robust that Black Stone Minerals Co. LP could easily raise twice the $400 million it is now set to close on for its Black Stone Natural Resources Fund III LP.

But properly spending a larger amount of money could be difficult, new president and chief operating officer Hallie A. Vanderhider told Houston Energy Finance Group members recently. She joined Black Stone in 2003 and was at EnCap Investments LP for 10 years.

Black Stone, based in Houston, acquires and exploits fee mineral interests, royalties and some nonoperated working interests throughout the U.S. It has made some $1 billion of acquisitions in 20 deals in the past decade. Its purchase of mineral interests from Pure Resources in 2004 doubled its size.

For many years, the firm, whose antecedents date back to the Texas timber business, operated out of cash flow from its mineral holdings and sought operators to drill on those. But it has become much more active—in 2007 it signed 660 individual leases and was paid $40 million in lease bonuses.

In 2002, its first institutional fund raised $150 million, and in 2004, its second fund raised $328 million.

The company now has interests in every major onshore producing basin. In 2007, it produced 5.2 million barrels of oil equivalent. For 2008, production will grow to an estimated 6.5 million barrels equivalent, and cash flow is projected to be $263 million, Vanderhider said.

In Fund III, Black Stone will be the general partner and largest limited partner and will hold about 40%. In addition to oil and gas, the fund will have the ability to acquire coal, timber and other non-oil resources.

“We are actively looking for working-interest packages and PDP (proved developed producing) assets,” she said. “But our favorite asset is fee mineral acreage with a large PUD (proved undeveloped) component.”

Last year, “we looked really hard at pulling the trigger on a public MLP of our own, in order to compete, but we determined that a lot of the transactions we look at aren’t suitable for an MLP because they show an incline in production.”

Fee mineral packages are getting harder to buy, she said, and therefore, Black Stone is sending more people into the field to search for smaller deals in a more concentrated grassroots effort.

“We historically have averaged $100- to $110 million annually on acquisitions but hope to do up to $200 million, and spend $50- to $70 million on capex, with the majority in the Austin Chalk play in central Texas.”