MNR Mach Natural Resources LP

Mach Natural Resources LP (NYSE: MNR) (“Mach” or the “Company”) today reported financial and operating results for the three months ended March 31, 2024. The Company also reiterated its full year 2024 outlook and announced its quarterly cash distribution.

First Quarter 2024 Highlights

• Averaged total net production of 89.0 thousand barrels of oil equivalent per day (“Mboe/d”)
• Produced an average of 20.6 thousand barrels of oil per day (“MBbl/d”)
• Lease operating expense of $5.03 per barrel of oil equivalent (“Boe”) was below low-end of guidance
• Reported net income and Adjusted EBITDA(1) of $42 million and $169 million, respectively
• Generated net cash provided by operating activities of $144 million
• Declared a quarterly cash distribution of $0.75 per unit

Tom L. Ward, Mach’s Chief Executive Officer, noted, “Our Company was founded on the principle of maximizing distributions through acquiring free cash flowing assets. We have achieved our results-to-date by adhering to low leverage while focusing on our reinvestment rate of under 50%. Our first quarter results mark a positive start to 2024 and the continuation of our plan. Over the years Mach has achieved strong rates on both return on capital employed and cash return on capital invested, revealing a focus on cash returns.”

First-Quarter 2024 Financial Results

Mach reported total revenue and net income of $239 million and $42 million in the first quarter of 2024, respectively. Also during the first quarter, the average realized price was $77.17 per barrel of oil, $2.35 per Mcf of natural gas, and $26.92 per barrel of natural gas liquids (“NGLs”). These prices exclude the effects of derivatives.

At the end of the first quarter, Mach had a cash balance of $151 million and a Pro Forma net-debt-to-Adjusted-EBITDA(1) ratio of 0.9x.

First-Quarter 2024 Operational Results

During the first quarter of 2024, Mach achieved average oil equivalent production of 89.0 Mboe/d, which consisted of 23% oil, 55% natural gas and 22% NGLs. Also for the first quarter of 2024, Mach’s revenues from oil, natural gas, and NGLs sales totaled $255 million, comprised of 57% oil, 24% natural gas, and 19% NGLs.

Also during the first quarter of 2024, the Company spud 22 gross (20 net) operated wells and brought online 22 gross (20 net) operated wells. As of March 31, 2024, the Company had 8 gross (7 net) operated wells in various stages of drilling and completion.

Mach’s lease operating expense in the first quarter of 2024 was $41 million, or $5.03 per Boe. Mach incurred $32 million, or $3.94 per Boe, of gathering and processing expenses in the first quarter of 2024. Also during the first quarter of 2024, production taxes as a percentage of oil, natural gas, and NGL sales were approximately 5.0%, midstream operating profit was approximately $5 million, general and administrative expenses—excluding equity-based compensation of $1 million—was $9 million, and interest expense was $26 million.

In the first quarter of 2024, Mach’s total capital expenditures—excluding acquisitions—were $80 million, including $75 million of upstream capital and $5 million of other capital (including midstream and land).

Distributions

Mach announced today that the board of directors of its general partner declared a quarterly cash distribution for the first quarter of 2024 of $0.75 per common unit. The quarterly cash distribution is to be paid on June 10, 2024, to common unitholders of record as of the close of trading on May 28, 2024.

2024 Guidance

Mach previously announced its operational and financial outlook for 2024 on February 15, 2024. The Company reaffirms its previously provided guidance.

Derivative Contracts (Unaudited)

The table below represents a summary of the Company’s derivative contracts as of May 1, 2024.

 

 

Oil Derivative Contracts

 

2024

Q1

Q2

Q3

Q4

Oil Volumes (MBbl)

1,094

1,099

719

660

Weighted Average Fixed Price (per Bbl)

$78.92

$74.15

$72.67

$73.16

 

 

 

 

 

2025

Q1

Q2

Q3

Q4

Oil Volumes (MBbl)

614

289

274

260

Weighted Average Fixed Price (per Bbl)

$72.36

$71.80

$71.80

$71.80

 

 

 

 

 

2026

Q1

Q2

Q3

Q4

Oil Volumes (MBbl)

245

-

-

-

Weighted Average Fixed Price (per Bbl)

$68.70

-

-

-

 

 

 

 

 

Natural Gas Derivative Contracts

 

 

 

 

2024

Q1

Q2

Q3

Q4

Natural Gas Volumes (Bbtu)

2,393

2,248

10,653

10,158

Weighted Average Fixed Price (per Mmbtu)

$3.10

$2.94

$2.96

$3.73

 

 

 

 

 

2025

Q1

Q2

Q3

Q4

Natural Gas Volumes (Bbtu)

4,860

4,680

4,510

4,360

Weighted Average Fixed Price (per Mmbtu)

$4.34

$3.69

$3.92

$4.36

Conference Call and Webcast Information

Mach will host a conference call and webcast at 8:00 a.m. Central (9:00 a.m. Eastern) on Tuesday, May 14, 2024, to discuss its first-quarter 2024 results. Participants can access the conference call by dialing 877-407-2984. A webcast link to the conference call will be provided on the Company’s website at www.ir.machnr.com. A replay will also be available on the Company’s website following the call.

About Mach Natural Resources LP

Mach Natural Resources LP is an independent upstream oil and gas Company focused on the acquisition, development and production of oil, natural gas and NGL reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas and the panhandle of Texas. For more information, please visit www.machnr.com.

Cautionary Note Regarding Forward-Looking Statements

This release contains statements that express the Company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results, in contrast with statements that reflect historical facts. All statements, other than statements of historical fact included in this release regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements When used in this release, words such as “may,” “assume,” “forecast,” “could,” “should,” “will,” “plan,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “budget” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current belief, based on currently available information as to the outcome and timing of future events at the time such statement was made. Such statements are subject to a number of assumptions, risk and uncertainties, many of which are beyond the control of the Company. These include, but are not limited to, commodity price volatility; the impact of epidemics, outbreaks or other public health events, and the related effects on financial markets, worldwide economic activity and our operations; uncertainties about our estimated oil, natural gas and natural gas liquids reserves, including the impact of commodity price declines on the economic producibility of such reserves, and in projecting future rates of production; the concentration of our operations in the Anadarko Basin; difficult and adverse conditions in the domestic and global capital and credit markets; lack of transportation and storage capacity as a result of oversupply, government regulations or other factors; lack of availability of drilling and production equipment and services; potential financial losses or earnings reductions resulting from our commodity price risk management program or any inability to manage our commodity risks; failure to realize expected value creation from property acquisitions and trades; access to capital and the timing of development expenditures; environmental, weather, drilling and other operating risks; regulatory changes, including potential shut-ins or production curtailments mandated by the Railroad Commission of Texas, the Oklahoma Corporation Commission and/or the Kansas Corporation Commission; competition in the oil and natural gas industry; loss of production and leasehold rights due to mechanical failure or depletion of wells and our inability to re-establish their production; our ability to service our indebtedness; any downgrades in our credit ratings that could negatively impact our cost of and ability to access capital; cost inflation; political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the war in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage; evolving cybersecurity risks such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insider or other with authorized access, cyber or phishing-attacks, ransomware, social engineering, physical breaches or other actions; and risks related to our ability to expand our business, including through the recruitment and retention of qualified personnel. Please read the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including “Risk Factors” in the Company’s Annual Report on Form 10-K, which is on file with the SEC, for a discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements.

As a result, these forward-looking statements are not a guarantee of our performance, and you should not place undue reliance on such statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

MACH NATURAL RESOURCES LP

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

 

 

March 31, 2024

 

December 31, 2023

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

151,300

 

 

$

152,792

 

Accounts receivable – joint interest and other, net

 

29,541

 

 

 

54,155

 

Accounts receivable – oil, gas, and NGL sales

 

127,714

 

 

 

78,051

 

Short-term derivative assets

 

10,855

 

 

 

24,802

 

Inventories

 

31,411

 

 

 

31,377

 

Other current assets

 

3,245

 

 

 

2,425

 

Total current assets

 

354,066

 

 

 

343,602

 

Oil and natural gas properties, using the full cost method:

 

 

 

Proved oil and natural gas properties

 

2,174,723

 

 

 

2,097,540

 

Less: accumulated depreciation, depletion and amortization

 

(329,560

)

 

 

(265,895

)

Oil and natural gas properties, net

 

1,845,163

 

 

 

1,831,645

 

Other property, plant and equipment

 

109,240

 

 

 

105,302

 

Less: accumulated depreciation

 

(17,529

)

 

 

(15,642

)

Other property, plant and equipment, net

 

91,711

 

 

 

89,660

 

Long-term derivative assets

 

6,035

 

 

 

15,112

 

Other assets

 

5,833

 

 

 

7,102

 

Operating lease assets

 

13,564

 

 

 

17,394

 

Total assets

$

2,316,372

 

 

$

2,304,515

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

60,198

 

 

$

44,577

 

Accounts payable – related party

 

3,234

 

 

 

2,867

 

Accrued liabilities

 

45,516

 

 

 

44,529

 

Revenue payable

 

143,655

 

 

 

110,296

 

Short-term derivative liabilities

 

9,601

 

 

 

—

 

Current portion of long-term debt

 

82,500

 

 

 

61,875

 

Current portion of operating lease liabilities

 

8,397

 

 

 

10,765

 

Total current liabilities

 

353,101

 

 

 

274,909

 

Long-term debt

 

725,557

 

 

 

745,140

 

Asset retirement obligations

 

87,132

 

 

 

85,094

 

Long-term derivative liabilities

 

598

 

 

 

—

 

Long-term portion of operating leases

 

5,200

 

 

 

6,705

 

Other long-term liabilities

 

1,100

 

 

 

943

 

Total long-term liabilities

 

819,587

 

 

 

837,882

 

Commitments and contingencies

 

 

 

Partners’ capital:

 

 

 

Partners’ capital

 

1,143,684

 

 

 

1,191,724

 

Total liabilities and partners’ capital

$

2,316,372

 

 

$

2,304,515

 

MACH NATURAL RESOURCES LP

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per common unit data)

 

 

Three Months Ended

March 31,

 

2024

 

2023

Revenue

 

 

 

Oil, natural gas, and NGL sales

$

255,240

 

 

$

162,448

 

(Loss) gain on oil and natural gas derivatives

 

(29,268

)

 

 

13,054

 

Midstream revenue

 

6,219

 

 

 

6,532

 

Product sales

 

6,964

 

 

 

10,139

 

Total revenues

 

239,155

 

 

 

192,173

 

 

 

 

 

Operating expenses

 

 

 

Gathering and processing

 

31,942

 

 

 

9,642

 

Lease operating expense

 

40,760

 

 

 

32,813

 

Production taxes

 

12,752

 

 

 

8,674

 

Midstream operating expense

 

2,559

 

 

 

2,969

 

Cost of product sales

 

6,100

 

 

 

9,112

 

Depreciation, depletion, amortization and accretion – oil and natural gas

 

65,372

 

 

 

29,567

 

Depreciation and amortization – other

 

2,098

 

 

 

1,357

 

General and administrative

 

8,478

 

 

 

3,576

 

General and administrative – related party

 

1,850

 

 

 

1,067

 

Total operating expenses

 

171,911

 

 

 

98,777

 

Income from operations

 

67,244

 

 

 

93,396

 

 

 

 

 

Other (expense) income

 

 

 

Interest expense

 

(26,285

)

 

 

(1,814

)

Other income (expense), net

 

743

 

 

 

112

 

Total other expense

 

(25,542

)

 

 

(1,702

)

Net income

$

41,702

 

 

$

91,694

 

Net income per common unit:

 

 

 

Basic

$

0.44

 

 

 

Diluted

$

0.44

 

 

 

Weighted average common units outstanding:

 

 

 

Basic

 

95,000

 

 

 

Diluted

 

95,005

 

 

 

MACH NATURAL RESOURCES LP

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

Three Months Ended

March 31,

 

2024

 

2023

Cash flows from operating activities

 

 

 

Net income

$

41,702

 

 

$

91,694

 

Adjustments to reconcile net income to cash provided by operating activities

 

 

 

Depreciation, depletion, amortization and accretion

 

67,470

 

 

 

30,924

 

Loss (gain) on derivative instruments

 

29,268

 

 

 

(13,054

)

Cash receipts (payments) on settlement of derivative contracts, net

 

6,557

 

 

 

2,703

 

Debt issuance costs amortization

 

1,268

 

 

 

122

 

Equity based compensation

 

1,182

 

 

 

647

 

Credit losses

 

454

 

 

 

—

 

(Gain) loss on sale of assets

 

(11

)

 

 

(1

)

Settlement of asset retirement obligations

 

(28

)

 

 

(71

)

Changes in operating assets and liabilities (decreasing) increasing cash:

 

 

 

Accounts receivable

 

(32,758

)

 

 

45,240

 

Revenue payable

 

33,359

 

 

 

(2,449

)

Accounts payable and accrued liabilities

 

(5,014

)

 

 

(8,189

)

Other

 

504

 

 

 

(417

)

Net cash provided by operating activities

 

143,953

 

 

 

147,149

 

 

 

 

 

Cash flows from investing activities

 

 

 

Capital expenditures for oil and natural gas properties

 

(49,879

)

 

 

(79,868

)

Capital expenditures for other property and equipment

 

(4,277

)

 

 

(2,623

)

Acquisition of assets

 

(1,151

)

 

 

(1,506

)

Proceeds from sales of oil and natural gas properties

 

447

 

 

 

—

 

Proceeds from sales of other property and equipment

 

140

 

 

 

36

 

Net cash used in investing activities

 

(54,720

)

 

 

(83,961

)

 

 

 

 

Cash flows from financing activities

 

 

 

Distributions to unitholders

 

(90,250

)

 

 

—

 

Distributions to members

 

—

 

 

 

(59,000

)

Payment of other financing fees

 

(475

)

 

 

(404

)

Net cash used in financing activities

 

(90,725

)

 

 

(59,404

)

Net increase (decrease) in cash and cash equivalents

 

(1,492

)

 

 

3,784

 

Cash and cash equivalents, beginning of period

 

152,792

 

 

 

29,417

 

Cash and cash equivalents, end of period

$

151,300

 

 

$

33,201

 

(1) Adjusted EBITDA is a non-GAAP measure. Mach has defined this measure and provided reconciliations of this non-GAAP measure to its most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”) at the conclusion of this press release under “Non-GAAP Financial Measures.”

Non-GAAP Financial Measures

Pursuant to regulatory disclosure requirements, Mach is required to reconcile non-GAAP financial measures to the related GAAP information (GAAP refers to generally accepted accounted principles). Such non-GAAP measures are not alternatives to GAAP measures. We include in this press release the supplemental non-GAAP financial performance measures Adjusted EBITDA and Cash Available for Distribution.

These non-GAAP measures should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. Such non-GAAP measures are used as a supplemental financial performance measure by our management and by external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others, to more effectively evaluate our operating performance and our results of operation from period to period and against our peers without regard to financing methods, capital structure or historical cost basis. Such non-GAAP measures are not alternatives to GAAP measures. These non-GAAP measures should not be considered in isolation or as a substitute for analysis of results as reported under GAAP.

Adjusted EBITDA

We include in this press release the supplemental non-GAAP financial performance measure Adjusted EBITDA and provide our calculation of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, our most directly comparable financial measures calculated and presented in accordance with GAAP. We define Adjusted EBITDA as net income before (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized (gain) loss on derivative instruments, (4) equity-based compensation expense, (5) credit losses, and (6) (gain) loss on sale of assets.

Adjusted EBITDA is used as a supplemental financial performance measure by our management and by external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others, to more effectively evaluate our operating performance and our results of operation from period to period and against our peers without regard to financing methods, capital structure or historical cost basis. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as indicators of our operating performance. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax burden, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our results will be unaffected by unusual items. Our computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.

Cash Available for Distribution

Cash available for distribution is not a measure of net income or net cash flow provided by or used in operating activities as determined by GAAP. Cash available for distribution is a supplemental non-GAAP financial performance measure used by our management and by external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others, to assess our ability to internally fund our exploration and development activities, pay distributions, and to service or incur additional debt. We define cash available for distribution as net income less (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized (gain) loss on derivative instruments, (4) equity-based compensation expense, (5) credit losses, (6) (gain) loss on sale of assets, (7) settlement of asset retirement obligations, (8) cash interest expense, net (9) development costs, and (10) change in accrued realized derivative settlements. Development costs include all of our capital expenditures, other than acquisitions. Cash available for distribution will not reflect changes in working capital balances. Cash available for distribution is not a measurement of our financial performance or liquidity under GAAP and should not be considered as an alternative to, or more meaningful than, net income or net cash provided by or used in operating activities as determined in accordance with GAAP or as indicators of our financial performance and liquidity. The GAAP measures most directly comparable to cash available for distribution are net income and net cash provided by operating activities. Cash available for distribution should not be considered as an alternative to, or more meaningful than, net income or net cash provided by operating activities.

Reconciliation of Adjusted EBITDA and Cash Available for Distribution to GAAP Financial Measures (Unaudited)

The following tables summarize the reconciliation of the applicable GAAP financial measures to the non-GAAP financial measures Adjusted EBITDA and Cash Available for Distribution.

 

Three Months Ended

March 31,

($ in thousands)

2024

 

2023

Net Income Reconciliation to Adjusted EBITDA:

 

 

 

Net income

$

41,702

 

 

$

91,694

 

Interest expense, net

 

25,072

 

 

 

1,724

 

Depreciation, depletion, amortization and accretion

 

67,470

 

 

 

30,924

 

Unrealized loss (gain) on derivative instruments

 

33,223

 

 

 

(10,309

)

Equity-based compensation expense

 

1,182

 

 

 

647

 

Credit losses

 

454

 

 

 

—

 

Gain on sale of assets

 

(11

)

 

 

(1

)

Adjusted EBITDA

$

169,092

 

 

$

114,679

 

 

Net Income Reconciliation to Cash Available for Distribution:

 

 

 

Net income

$

41,702

 

 

$

91,694

 

Interest expense, net

 

25,072

 

 

 

1,724

 

Depreciation, depletion, amortization and accretion

 

67,470

 

 

 

30,924

 

Unrealized loss (gain) on derivative instruments

 

33,223

 

 

 

(10,309

)

Equity-based compensation expense

 

1,182

 

 

 

647

 

Credit losses

 

454

 

 

 

—

 

Gain on sale of assets

 

(11

)

 

 

(1

)

Settlement of asset retirement obligations

 

(28

)

 

 

(71

)

Cash interest expense, net

 

(23,804

)

 

 

(1,602

)

Development costs

 

(80,425

)

 

 

(104,591

)

Change in accrued realized derivative settlements

 

2,602

 

 

 

(42

)

Cash available for distribution

$

67,437

 

 

$

8,373

 

Net Cash Provided by Operating Activities Reconciliation to Cash Available for Distribution:

 

 

 

Net cash provided by operating activities

$

143,953

 

 

$

147,149

 

Changes in operating assets and liabilities

 

3,909

 

 

 

(34,185

)

Development costs

 

(80,425

)

 

 

(104,591

)

Cash available for distribution

$

67,437

 

 

$

8,373

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240513378446/en/

Mach Natural Resources LP Investor Relations Contact: ir@machnr.com