TXO Partners(TXO) - 2025 Q1 - Quarterly Report

Financial Performance - Total revenues increased by $16.9 million, or 25%, from $67.4 million in Q1 2024 to $84.3 million in Q1 2025, primarily due to a 282 MBoe increase in production and a 19% increase in average selling price of natural gas [123]. - Net income for Q1 2025 was $2.4 million, a decrease from $10.3 million in Q1 2024, impacted by increased expenses and lower oil prices [119]. - Cash available for distribution was $29.3 million in Q1 2025, compared to $22.8 million in Q1 2024, reflecting improved operational cash flow [119]. Production and Expenses - Production expenses rose by $9.2 million, or 28%, from $33.1 million in Q1 2024 to $42.3 million in Q1 2025, with $8.5 million attributed to production from Williston Basin acquisitions [124]. - Depreciation, depletion, and amortization increased by $10.9 million, or 104%, from $10.5 million in Q1 2024 to $21.4 million in Q1 2025, mainly due to higher production rates from Williston Basin acquisitions [129]. - General and administrative expenses decreased by $0.2 million, or 8%, from $2.7 million in Q1 2024 to $2.4 million in Q1 2025, primarily due to lower personnel costs [131]. - Interest expense increased by $2.6 million, or 271%, from $1.0 million in Q1 2024 to $3.6 million in Q1 2025, primarily due to increased borrowings [134]. Market Conditions - The company reported a high of $86.91 per Bbl for crude oil and $4.49 per MMBtu for natural gas during the period from January 1, 2024, to March 31, 2025, with a low of $65.75 per Bbl and $1.58 per MMBtu respectively [102]. - The company anticipates continued volatility in crude oil and natural gas markets, which will significantly impact revenue and profitability [103]. - Inflationary pressures have increased operating costs, particularly for steel, chemicals, transportation, and wages, with no short-term reversal expected [104]. - The company is taking actions to mitigate inflationary pressures by ensuring the availability of critical supplies [106]. Leadership and Governance - Leadership changes include the appointment of Brent W. Clum and Gary D. Simpson as Co-Chief Executive Officers effective April 1, 2025 [99]. - The company has appointed Lawrence S. Massaro to the board of directors and the Audit Committee effective April 1, 2025 [100]. Cash Flow and Financing - Net cash provided by operating activities increased by $5.4 million to $30.6 million for the three months ended March 31, 2025, compared to $25.2 million for the same period in 2024 [144]. - Net cash used by investing activities increased by $3.8 million to $6.8 million for the three months ended March 31, 2025, primarily due to an increase in development costs of $5.5 million [145]. - Net cash used in financing activities decreased by $1.9 million to $20.2 million for the three months ended March 31, 2025, compared to $22.1 million for the same period in 2024 [145]. - Proceeds from long-term debt increased significantly to $36.0 million in Q1 2025 from $10.0 million in Q1 2024 [145]. - The weighted average interest rate on Credit Facility borrowings was 8.0% for the three months ended March 31, 2025 [148]. - As of March 31, 2025, the company had $155.0 million in debt outstanding and $120.0 million available under its Credit Facility [152]. - The company entered into Amendment No. 4 of its Credit Facility, increasing the borrowing base from $165 million to $275 million and extending the maturity date to August 30, 2028 [146]. Obligations and Future Plans - The company budgeted approximately $30.0 - $50.0 million for drilling, completion, and recompletion activities in 2025 [139]. - The company expects to fund its distributions, meet debt obligations, and finance its 2025 capital development programs from cash flow from operations and borrowings under its Credit Facility [141]. - The current liability related to derivative contracts was $25.6 million and the long-term liability was $8.5 million as of March 31, 2025 [154]. - Asset retirement obligations totaled $193.4 million, including a current portion of $3.0 million as of March 31, 2025 [155].