Mach Natural Resources LP(MNR) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2024, the company reported total net production of 86,700 BOE per day, with net income of $185 million and adjusted EBITDA of$ 601 million [21][35] - Average realized prices were $70.06 per barrel of oil,$ 2.31 per Mcf of gas, and $25.82 per barrel of NGLs [35] - The company generated$ 235 million in total revenues, with EBITDA of $162 million and operating cash flow of$ 134 million [36] - Free cash flow for the quarter was $81 million, leading to a distribution of$ 0.50 per unit [36][62] - The net debt-to-EBITDA ratio improved to 0.8x from 1.0x [23] Business Line Data and Key Metrics Changes - The company maintained a production mix of 24% oil, 52% natural gas, and 24% NGLs in Q4 2024 [35] - The company achieved a median payout period of 15 months for its wells, with Oswego D&C costs averaging $2.6 million [12][21] - The reinvestment rate for 2024 was 47%, with a projected PDP decline of 20% over the next 12 months [16] Market Data and Key Metrics Changes - The company noted that 2024 had the lowest natural gas prices since the early 1990s, impacting overall revenue [29] - The commodity mix by revenue in 2024 was 59% oil, 21% natural gas, and 20% NGLs, shifting to 54% natural gas in 2025 due to higher natural gas prices [30][31] Company Strategy and Development Direction - The company focuses on four strategic pillars: maintaining financial strength, disciplined execution, disciplined reinvestment rate, and maximizing cash distributions [3][4] - The company plans to add a third rig in 2025, focusing on high-return wells while keeping the reinvestment rate below 50% [10][11] - The company aims to continue making accretive acquisitions, having completed 20 acquisitions since its founding in 2017 [6][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand for natural gas, viewing it as a key fuel for the next decade [53] - The company anticipates a more favorable operating environment in 2025, with increased operating cash flow due to rising natural gas prices [10][31] - Management does not foresee a prolonged downturn similar to 2015-2020 and is prepared to capitalize on acquisition opportunities [26] Other Important Information - The company has a strong balance sheet, with total proved acreage coverage of 3.9% and net debt to enterprise value of 21% [16] - The company has distributed over$ 1 billion to unitholders since inception, maintaining a consistent distribution strategy [19] Q&A Session Summary Question: Expectations for gas and oil prices this year - Management expects to see better deals in both gas and oil, with a preference for crude oil acquisitions when prices are in the $60 range [42][43] Question: Value of infrastructure and potential monetization - Management views infrastructure as critical to operations and does not plan to sell it, as it generates more EBITDA than its purchase price [44][46] Question: Timing and focus of the third rig - The third rig will be operational shortly, initially focusing on the Oswego formation before moving to the deep Mississippian project [49] Question: Competitive landscape in the Mid-Con region - The Mid-Con region has seen increased competition, but the company focuses on smaller acquisitions that fit its criteria [74] Question: Organic leasing opportunities - The company has significant acreage held by production and plans to allocate around$ 30 million for leasing in 2025 [76] Question: Impact of non-op budget - The non-op budget remains low, with limited participation in non-operated wells [87] Question: Natural gas production guidance - Management expects natural gas production to trend towards the high end, with a stable range for NGLs [91]