TXO Partners(TXO) - 2024 Q1 - Quarterly Report

Operations and Market Focus - The company operates primarily in the Permian Basin and San Juan Basin, focusing on the acquisition and development of oil and natural gas reserves[86]. - The company anticipates continued volatility in crude oil and natural gas markets, which will significantly impact revenue and profitability[90]. - The company faces risks from commodity price volatility, regulatory changes, and geopolitical issues, which could materially affect operations and financial results[80]. Financial Performance - Total revenues decreased by $91.0 million, or 57%, from $158.4 million in Q1 2023 to $67.4 million in Q1 2024, primarily due to a 78% decrease in the average selling price of natural gas[110]. - Net income for Q1 2024 was $10.3 million, compared to $83.8 million in Q1 2023, reflecting a significant decline in profitability[105]. - Operating income fell to $2.7 million in Q1 2024 from $78.8 million in Q1 2023, indicating a substantial drop in operational performance[105]. Cash Flow and Distribution - Cash available for distribution increased to $22.8 million in Q1 2024 from a negative $9.1 million in Q1 2023[105]. - The company declared a quarterly cash distribution of $0.65 per unit for Q1 2024, to be paid on May 29, 2024[122]. - Net cash provided by operating activities increased to $25.2 million in Q1 2024 from $17.1 million in Q1 2023[127]. Expenses and Cost Management - Production expenses decreased by $2.2 million, or 6%, from $35.3 million in Q1 2023 to $33.1 million in Q1 2024[111]. - General and administrative expenses rose by $0.4 million, or 19%, from $2.2 million in Q1 2023 to $2.7 million in Q1 2024, primarily due to higher personnel costs[116]. - The company is focused on maintaining operational efficiency and managing costs in a challenging economic environment, particularly in light of supply chain constraints[91]. Capital Expenditures and Investments - Capital expenditures, including acquisitions, were $3.0 million in Q1 2024, down from $12.4 million in Q1 2023[123]. - The company incurred approximately $4.8 million for drilling, completion, and recompletion activities in the three months ended March 31, 2024, with a budget of $20.0 million to $28.0 million for such costs in 2024[123]. - The company has budgeted for capital expenditures of $3.0 million for the three months ended March 31, 2024, down from $12.4 million in the same period of 2023[123]. Economic Environment and Inflation - Inflation has been a major concern, with the U.S. experiencing the highest inflation rate in 40 years, affecting costs related to salaries, materials, and energy[91]. - The company is implementing strategies to mitigate inflationary pressures, particularly focusing on securing supplies of critical materials like fuel and steel[92]. Debt and Financial Ratios - Outstanding borrowings under the Credit Facility decreased to $19.0 million at March 31, 2024, from $21.0 million at December 31, 2023[121]. - The company had $19.0 million in debt outstanding and $146.0 million available under its Credit Facility as of March 31, 2024[136]. - The weighted average interest rate on Credit Facility borrowings was 8.6% for the three months ended March 31, 2024[133]. - The company is required to maintain a current ratio greater than 1.0 to 1.0 and a total net debt-to-EBITDAX ratio not greater than 3.0 to 1.0[135].