Mach Natural Resources (MNR) 14 Aug 242024 Q2 Earnings call transcript

Good morning, everyone. Thank you for joining today's call to discuss Mach Natural Resources Second Quarter 2024 Financial and Operational Results.

During this morning's call, the speakers will be making forward-looking statements that cannot be confirmed by reference to existing information, including statements regarding expectations, projections, future performance and the assumptions underlying such statements.

Please note, a number of factors will cause actual results to differ materially from the forward-looking statements, including the factors identified and discussed in our press release this morning and other SEC filings.

For a further discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements, please read the company's annual report on Form 10-K, which is available on the company's website or the SEC's website.

statements. as any law, should forward-looking undue on except duty undertake not that reliance update to statements, such recognize required they by no place Please and you measures They in may some refer non-GAAP today's to discussion. financial

the For XX-Q, directly GAAP most be which press which will measures, to Mach's on on their comparable is to also reconciliation available non-GAAP website reference website from measures release, the when financial filed. please and available their

Tom Ward, results Today's for an and call CEO; will speakers CFO. will financial give and White, Mach's will Tom and Kevin overview, are questions. up introduction Kevin the be discuss opened then

With that, Tom Mr. to the I'll call over Ward. Tom? turn

company pillars as follows: Resources being quarter Mach Thank you, company I to are a Kevin. X distribution maintain one, earnings second Welcome key pillars. or focused framework our describing on These start strength. financial Natural our Number update. each call

a less. ourselves low ratio is debt-to-EBITDA of to goal when markets or opportunities profile have leverage experience high Xx Our volatility. a long-term we maintaining By give

Number execution. We PDP assets to discount accretive disciplined that cash only are a our PV-XX of to flowing distribution. acquire two,

keeping we of a Number less reinvestment XX% of We flow. our our optimize low, By three, operating maintain reinvestment rate our than distribution cash unitholders. disciplined rate. reinvestment rate to

cash maximize distributions. This decisions. pillar target four, distributions. Number peer-leading our We drives all of

high production second our In Now This Mach averaged of quarter, on exceeded MBOE results. XX.X day to the second production. the per of guidance. quarter end

below our of efficiently. our barrel costs of been more successful initial Our of per operating and equivalent below Lease with invested dollars in well We drilling were cost expenses resulting drilling estimates. achieved another program continues be expense new the quarter guidance of perform projections, to have line end program in $X.XX our and low oil control.

Basin these a ideas lands by owned quarter. of has during years. divested Anadarko X acreage are prospects production. small land that held $XX responding controls and Western Anadarko Mach many existing several point that focal our new acres portion of attractive the programs. for have The also new of for And become we approximately a We million million drilling on

We our selling prices not asset near-term captured acres an while less be affecting of XX,XXX enhance drilling the as value by to area we that utilizing not in that some drilling. used in than distribution, lower inventory. from our times targeted the are land second this asset for of an in quarter had We can

large in the existing the future debt area of hold to Also cash million continue our first positions during to $XX quarter, we the loan. pay used lien on amortization land payment payment for We or down first term was divestiture. development This debt.

$X.XX active we to been Through investments declared a distribution. unit. Mach focuses is distribution XXXX. per our quarterly Lastly, that accretive company since acquirers on cash acquisition we've model, this an of

pay class. Over which the landholdings received of invested best capital become assets. but we've is X.Xx valuable we multiple in and believe XX%, past of we not acquisitions, cash now years, X we that the for, capital on invested have on Through vast a did acquired averaged XX actualized have

remainder. cash have uncertainty. become In in can acquisitions we or when than XX% cash of towards higher locations pivot only we then flow times this ability to cash the drilling Therefore, use times more many way, fact, In with our to sell or flow potential we satisfy. have grow more operating have we at more operating We operating through while drilling our lands to of of acquisitions. towards drill the distributing expensive acquisitions prices flow

we second our of quarter, realized In a $X.XX Mcf gas the the the we is for Natural production. price The for price per gas very natural largest driver to received our we distribution receive low and production the natural received important our forward gas quarters this is coming distributions. production in during to price than makes higher our quarter. up for we past projected to receiving of look we a Obviously, XX% produce.

Our our currently Mach achieve X drilling running. rigs in program expectations. results has line continues with to

the Kingfisher rig County, in to rigs continues Canadian and the the drill Oswego window Oklahoma. drilling of is County, One formation X condensate of Oklahoma,

the of This has locations XX with XX our Since cadence over Mach wells expectations mid-XXXX, brought is Mach drilling online wells the XXXX. in of be drilled the continues to a drilled. spread gross of wells Oswego to across large gross both XXX hold and areas. and inventory combination quarter, line through end In operated second

of rig than count point towards cash We reduction reinvestment during a Oswego the to guidance resulted in in rig X operating our CapEx flow to of a for of rigs less XXXX. quarter, by from the continues XX%. program XX% CapEx our which rate Our reduced X

operations to mentioned As continues lease adjusted expense earlier, operating completions by our expenses We X% on drilling, operating. and team per cut BOE. down lease guidance

through cutting. on and days Our cost due improved gained efficiencies drilling location costs have to

compares the predecessor locations our cost our million $X.X per coming We have well. of and million $X.X first in well. per window deeper spending per condensate projected This to well at to been costs $X.X in million

our cycle moved XX.X well We've overall down performance. to We total location. per time days lateral to added $X.X million length per further Oswego and our spend enhance

per the X,XXX X,XXX cost lateral the lowered by Our during overall from feet length feet $XX average lateral and quarter, foot. was extended to was

continue expenses ways those to goal convert our for distributions molecules accretive look and unitholders. purchase cheapest maintaining to lower Mach's while well. our expected results find into molecules to then to We the to is per

the dollar past, the most area the In found per where the be was Mid-Con value spent. could

other has sought production us time is has for after to the to become Mid-Con expensive basins Now a cash flowing less assets. expand for where come drilling highly area. Therefore, the

projects will the look next portfolio the outside distributions Mid-Con of and as per well are in actively reviewing our opportunities. to quarters continuing add We all as We to we substantially few unit. believe Mid-Con at

results. the now call to Kevin our turn discuss I'll over to financial

cash second for all and year-to-date reflect and of Natural the entity predecessor last the whereas both the a with open and of like I'd reminder flow for income comparative quick year results to that of entities only XXXX Resources. quarter capture Mach the X, results the Tom. statements assets Mach the Thanks,

the XX% our quarter, natural oil, per NGLs. XX% day BOE gas and XX,XXX of was production For XX%

average Mcf $X.XX total $XX.XX gas and Our XX%, for for of gas of prices oil, NGLs. barrel oil in were gas per the barrel and contribution the relative realized for XX% million and $XX.XX of NGLs. per oil was per Of $XXX XX% revenues,

and Tom LOE us lease has the to On lower BOE, a catalyst $XX.X or side, of came predicted as $X.XX again, our operating expense than million mentioned, in was for lower year guidance. full per expense

slightly or only BOE. million $XXX per $X cash. million $X.XX quarter the We in ended was Cash over G&A with

Our was $XX first lien million term million. revolver loan was principal $XXX undrawn, and our approximately

totaled $XX.X Adjusted loan generated cash revenues, million of in per million paid EBITDA remainder first $XXX acreage to million gives $XX from including lien was million, $X.XX holders the the principal quarter of as August be September distribution, of received total and million to This cash $XX.X the of the plus After flow. the XXth million $XXX or and record our sale term million of activities, $XX.X available $XXX we used Total for hedges distribution unit. proceeds of our and operating will earlier us on XXth. a we of mentioned $XX which million. midstream for CapEx pay

the we'll back to field over questions. to you call turn Kevin,

today Johnson question Meade first Our Instructions] Rice. coming is from from Charles [Operator

you back ask down, wanted in the you about drop with I the had at this Tom, did -- the a earlier drop maybe It a Oswego. in your that to to guidance guide some CapEx looks little in the than but point rig contemplating plan like that February. year, it

So give into -- me it why decision you in a as on little opposed your insight longer? if or your to I process could the whether about and characterize read wonder the run that right whether plan in change drop the rig tell XQ that's

operating to want simple stay flow. very It's cash our Sure. that CapEx to XX% under we

Oswego get Oswego X so I'd we the cash had X operating flow. at running us once up. the operating rig, year Oswego moved X it have And of cut, rigs to cash with love rigs running our that or XX% running for rigs then under flow we

That's from how that versus acquisition those D&C talk days then of it. if versus could side you Got your talked on performance the about producing are your acquired wonder case case? those other assets you wells the coin, simple. I And the the pretty Paloma. early about you follow-up: acquisition in

[ Yes, in drill new we our line really, anything others, Enverus And interior been should those drills line at wells our have that with acquisition we with in drill we if case. usually or we be outperforming ] look acquire you on drilled. be projections other to or just shouldn't that

we did do step-outs, the thus Cherokee of new. selling don't wells the we first are those fairly because that So part acreage

fairly a and in shouldn't those us. around that So really drilling is anything we're area, we known outperform

have risk depletion. we would In fact, the be that

so well how careful very spacing. come that's And we're with

Freeman Your from James. next question Raymond John is coming from

what topic. kind Last And to package. is increased First you're were undeveloped kind that divesting then kind Western all that saying reiterating of mentioned Oklahoma competition of pay of others premium on of advantage you willing of a And some comments this about by call. like heightened and it those you're you competition you've divestiture did substantial that sounds locations. been Anadarko Tom, you this took obviously, seeing quarter, the for again where those in

massive be opportunities be not to position read? future in that, Is take acreage of additionally there like given just may the that that that going just right sounds the your that It forward. one-off could advantage a

Yes.

inside Cherokee area area that acres overall proven and then inside shale the play, another of of to XXX,XXX the probably have the Oklahoma and total, Mach in including XX,XXX Cherokee of XX,XXX. closer So we

in. XX,XXX the XX,XXX acres-or-so proven of are that and So area outside

drilled we with can So then that watch only locations. we as those and other wells can wells so small determine drilled, compete a if are sold portion being are they

have flow order increase drill, get fact to need to that The to locations. operating of those we amount cash get and locations to a large is we to in

crude to locations these with have continue producing cash areas fill to ways flow or increase to look can we return. production find in that in wells bring we of rates for known proven so we good So PDP

we And so the try it our don't our program drilling use grow our declines. to stabilize use reminder production, is we to to that

you've Tom, with LNG, over it. the bullish kind years power cetera. on gas the et burn, then And past, talked Got coming in natural about outlook the of increase your

And gas start of at think that flexibility you you've kind allocation from certain sort some kind as in to look gas of of of and gassier maybe shift about properties more a roll of kind into, into you we your the is assets? your there insight talk can you As got XXXX, just perspective? a price through where might level some strip capital the you

Sure. just It's all a driven. rate-of-return

that way, window amount -- tremendous acreage been deep choose the So in areas drilled. the -- a we of move also there's have gas into we we If have keep then condensate that it's to window. proven in and

So have we closely. issue pretty only we watch rigs. X different The of that have is we types

deep a the condensate gas in rigs then on deep have be rig that also up more the the would and in the We that shelf. work window the smaller works and Oswego

say looking -- make areas, that's, near-term I have that so at. of out are think got not fortunate we let's like enough XXXX I some maybe that we'd but X for rigs a think, if those running a to we're -- And goal to place in interchangeable, example, were we've both we to acquisitions ultimately, that in

Scialla from [Operator coming next from is question Michael Instructions] Stephens. Our

And wells due try to year turn that in you expect the to similar drilling line? in change second of that least of it you second the the your XX production the Is guidance quarter. half wells a think, good rate as little for activity the was bit same for for better. quarter? I each strictly had and fourth levels? Is going a Is quarter and to guidance on wanted Tom, at kind you be activity run that new third the the to mentioned expect understand forward I the to net

quarter. spot yes, Kevin, turned the to drilling we on And is production the in had with This then line, And guidance. to the regard Yes. far it in as pretty I expect reduction as second of consistent you're the and wells in Michael. stay oil the rate with what

first Just of in as combined is we're deeper quarter that Oswego down the lower. of and bit then in some things online just to essentially of we Rig drop driven a couple in little in guidance going with -- the wells has the a delays coming what that. late

Okay.

you surprised was So gas, nothing oil really activity mix just with that performance versus the well level? were the it

That's correct.

can the least Got assets Tom, opportunities looking basin have or you without, away competition you. for And may you of to mentioned for? acreage the be where increased much, undeveloped kind then, characterize seeing you within what pay for too or giving you say at basins, the thinking outside deals be you might looking about where don't you got of

Yes.

cash So assets. we're flowing looking for just

of drilling have We the all opportunities need. we

we if that discount at operating Oklahoma PDP is put and we than cash can we're less we money can really, PV-XX So to what line than that searching. have, that into that's flow something where a drilling work buy back that think of -- in find I the steeper

So dislocated a anywhere number that's for be of could reasons.

You or in second look at. we'll lower of the out Permian, to be so those would any Eagle or are PDP might is look their opportunities environment, that what second-tier regulatory considered types tier, things because of of PDP of California favor discounts Ford

next is from from Jay Partners. coming Our question Geoff Energy

been lot very, long curveball, the if might Ford, Eagle you an to attention there but a PDP your acreage? Bakken, of term. assets do Barnett, of there's a think your kind the years, and Obviously, of over next it's I on some if several Just be thinking about think refracs wonder you kind refrac to very opportunity

do Rick I've with head. any don't never had is see? you it. his shaking No? know. I Rick, luck

doesn't we if of Maybe it other here. instigator people and in led not the came really refrac. be could looks the way, refracking Our acreage like will

from question Robertson Water's Jeff Your ] is [ next from coming Research.

do Tom, the competition in some then also valuations? to competition anticipate do more of just have causes their and taking rationalize consolidation that bring the that's think you place in XXXX-XXXX on an would on as impact increased portfolios? secondly, people And question, opportunity you

last the Yes. The of outside kind to X months. is area the Mid-Con now X just that there Permian. It right hottest for changed has second is quickly exploration the very in

different Something good acreage that and that our of here for as in of proves up It's -- areas, held lot people surprised us of drill more it we how because production. acreage we have have a us. by ours much

more the I consolidation a other people upside. question the area the other the looking the areas are drilling of the because go, happens Mid-Con at part think to same cheaper was then with industry, type But areas of is looking it new in than they're as

zagging with the ability are that are and into zig So leaves areas maybe our I think left us to being that when move behind, and back-end that's others goal.

or floor back session. to any end I'd like turn to We closing of management reached question-and-answer the for our over the further comments.

No more comments.

Thanks. interest in look So forward to we company appreciate soon. everybody's and speaking the

Thank does webcast. That and conclude today's you. teleconference

you You a and may your line participation for disconnect at this time, your have wonderful day. We thank today.