Mach Natural Resources LP(MNR) - 2025 Q1 - Quarterly Report

Part I - Financial Information Financial Statements Unaudited statements show lower net income from a debt extinguishment loss, while a refinancing reshaped the balance sheet Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $7,790 | $105,776 | | Total current assets | $195,673 | $322,096 | | Oil and natural gas properties, net | $1,914,895 | $1,899,357 | | Total assets | $2,242,102 | $2,338,214 | | Liabilities & Equity | | | | Total current liabilities | $281,853 | $352,421 | | Long-term debt | $460,000 | $668,778 | | Total liabilities | $863,741 | $1,139,168 | | Partners' capital | $1,378,361 | $1,199,046 | | Total liabilities and partners' capital | $2,242,102 | $2,338,214 | Statement of Operations Summary (in thousands, except per unit data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenues | $226,768 | $239,155 | | Income from operations | $51,672 | $67,244 | | Loss on debt extinguishment | ($18,540) | $0 | | Net income | $15,886 | $41,702 | | Basic EPS | $0.14 | $0.44 | | Diluted EPS | $0.14 | $0.44 | - In Q1 2025, the company issued 14.8 million common units in a public offering, raising net proceeds of $221.1 million[42] - Distributions to unitholders in Q1 2025 amounted to $59.7 million, compared to $90.9 million in Q1 2024[42] - Financing activities in Q1 2025 included proceeds from an offering of $221.6 million, repayment of a $763.1 million term note, and proceeds from new credit facilities of $533.0 million[45] - On January 31, 2025, the company closed the Flycatcher Acquisition for consideration of $29.8 million in cash, funded by borrowings on its Revolving Credit Agreement[102][103] - On February 27, 2025, the company entered a new $750 million senior secured revolving credit facility, using the proceeds to repay and terminate its existing Term Loan and Revolving Credit Agreement, resulting in a debt extinguishment loss of $18.5 million[115][122] - In February 2025, the company completed a public offering of common units, resulting in net proceeds of $221.1 million, which were used to repay debt[164] - Subsequent to the quarter end, on April 30, 2025, the company closed the XTO Acquisition for $60.0 million, funded by borrowings and cash on hand[178] Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $142,519 | $143,953 | | Net cash used in investing activities | ($78,010) | ($54,720) | | Net cash used in financing activities | ($162,495) | ($90,725) | | Net decrease in cash | ($97,986) | ($1,492) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses flat revenues offset by higher gas prices, rising operating costs, and liquidity from a new credit facility - The company's business is focused on the acquisition, development, and production of oil, natural gas, and NGLs in the Anadarko Basin, complemented by its own midstream assets[184][185] - Management expects continued commodity price volatility influenced by the war in Ukraine, conflict in the Middle East, interest rate uncertainty, and global economic conditions[186] - As of March 31, 2025, the company had $460.0 million outstanding on its new revolving credit facility, with $285.0 million of remaining availability[209] - The 2025 capital budget is set between $260.0 million and $280.0 million, primarily for drilling Oswego, Woodford, Red Fork, and Mississippian wells[212][213] - In Q1 2025, capital expenditures included $42.8 million for drilling and completions, $8.2 million for workovers, and $26.3 million for acquisitions[213] - Adjusted EBITDA is defined as net income adjusted for interest, DD&A, unrealized derivative gains/losses, debt extinguishment loss, equity-based compensation, and asset sale gains/losses[226] Revenue and Production Comparison (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total oil, gas, and NGL sales ($ thousands) | $252,726 | $255,240 | (1%) | | Total Production (MBoe) | 7,283 | 8,098 | (10%) | | Average Oil Price ($/Bbl) | $70.75 | $77.17 | (8%) | | Average Natural Gas Price ($/Mcf) | $3.56 | $2.35 | 51% | Operating Expense Comparison (Q1 2025 vs Q1 2024) | Expense ($ thousands) | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Gathering and processing | $28,161 | $31,942 | (12%) | | Lease operating expense | $48,752 | $40,760 | 20% | | Production taxes | $12,774 | $12,752 | 0% | | DD&A – oil and natural gas | $61,185 | $65,372 | (6%) | Reconciliation of Net Income to Non-GAAP Measures (in thousands) | Measure | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $15,886 | $41,702 | | Adjusted EBITDA | $159,851 | $168,638 | | Cash available for distribution | $94,576 | $67,011 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include commodity prices, counterparty credit, and interest rates from variable-rate debt - The company uses commodity derivative instruments, primarily swaps, to hedge price risk associated with a portion of its anticipated production[236] - As of March 31, 2025, the company had $460.0 million of variable-rate debt outstanding, and a 1% (100 basis points) change in the interest rate would impact annual interest expense by approximately $4.6 million[240][241] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective as of March 31, 2025 - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[243] - No changes occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[245] Part II - Other Information Legal Proceedings The company is subject to ordinary course legal matters and has accrued $1.5 million for potential liabilities - The company is involved in ordinary course litigation such as title disputes, royalty disputes, and contract claims[246] - The company is not aware of any environmental claims existing as of March 31, 2025, that would materially impact its financial position[248] Risk Factors No material changes to risk factors were reported compared to the most recent Annual Report on Form 10-K - No material changes to the Company's "Risk Factors" were disclosed in this report compared to the Annual Report for the year ended December 31, 2024[249] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or specific use of proceeds during the period - None[250] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[251] Mine Safety Disclosures The company provided no mine safety disclosures for the period - None[252] Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the first quarter of 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[253] Exhibits Filed exhibits include the new Revolving Credit Agreement, partnership agreements, and required CEO/CFO certifications - Key exhibits filed include the Revolving Credit Agreement dated February 27, 2025, and various CEO/CFO certifications[254][255]