• Production: 82,000 Boe per day (23% oil, 53% natural gas, 24% NGLs).
• Average Realized Prices: $74.55 per barrel of oil, $1.73 per Mcf of gas, $22.61 per barrel of NGLs.
• Total Oil and Gas Revenues: $209 million (60% oil, 20% gas, 20% NGLs).
• Lease Operating Expense (LOE): $44 million or $5.85 per Boe.
• Cash G&A Expense: $8 million or $1.08 per Boe.
• Total Revenues (including hedges and midstream activities): $256 million.
• Adjusted EBITDA: $134 million.
• Operating Cash Flow: $111 million.
• Capital Expenditures (CapEx): $53 million.
• Free Cash Flow: $52 million.
• Distribution: $62 million or $0.60 per unit, payable on December 10.
• Cash Balance: $184 million.
• First-Lien Term Loan Principal: Approximately $784 million.

• Warning! GuruFocus has detected 3 Warning Signs with MNR.

Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Mach Natural Resources LP (NYSE:MNR) maintains a strong financial position with a long-term debt-to-EBITDA ratio target of 1x or less, allowing flexibility during market volatility.
• The company focuses on acquiring cash-flowing assets at a discount to PDP PV-10, which are accretive to distributions.
• MNR has a disciplined reinvestment rate of less than 50% of operating cash flow, optimizing distributions to unitholders.
• The company successfully completed a follow-on public offering, generating $129 million to fund acquisitions while keeping leverage low.
• MNR's lease operating expense for the third quarter was $5.85 per Boe, at the low end of guidance, indicating efficient cost management.

Negative Points

• Realized average prices for oil and natural gas in the third quarter were lower compared to the previous quarter, with oil prices down by 6%.
• The company's distributions are variable and can decrease in quarters of lower pricing, impacting unitholder returns.
• Mach Natural Resources LP (NYSE:MNR) has significant exposure to commodity price fluctuations, which could affect financial performance.
• The company has hedged only 50% of its next 12 months' production, leaving it partially exposed to potential price declines.
• There is a potential for increased lease operating expenses in the future due to the flush production from newly acquired assets with steeper decline profiles.

Q & A Highlights

Q: What is the 2025 drilling program plan, and how does it compare to 2024? A: The 2025 plan assumes a 3-rig program, with over 40 gross wells expected to be turned online. Unlike 2024, which was front-end heavy, the 2025 program is expected to be more evenly distributed, though subject to change based on pricing and reinvestment rates. The third rig will start in February in the Ardmore Basin, with plans to maintain it throughout the year.

Q: Can you provide insights on the expected LOE per Boe for the fourth quarter and 2025? A: The higher LOE per Boe guidance for 2025 is due to flush production from newly acquired assets with a steeper decline profile. The Paloma wells, which were high-producing with low lifting costs, influenced the 2024 metrics.

Q: How are the recent acquisitions performing, and what impact will they have on fourth-quarter production? A: The recent acquisitions in the Ardmore Basin and Kansas added about 5,000 Boe a day. This production level is not expected to push fourth-quarter results out of the guidance range.

Q: What is the outlook for refinancing the term loan, and what factors are being considered? A: The company is exploring refinancing options, considering the robust RBL high-yield market. Factors include interest rates, covenants, and fees. The goal is to potentially eliminate amortization in 2025.

Q: How does the company view potential M&A opportunities, particularly in gas versus oil assets? A: The company is exploring both gas and oil acquisitions, looking beyond the Mid-Con region. They are interested in areas like ArkLaTex and Southern Delaware for gas, and are open to oil opportunities, especially with oil prices in the 60s and a backwardated curve.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.