MNR

Business Context and Reporting Period

Company: Mach Natural Resources LP (MNR)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2026
Business Overview: An independent upstream oil and gas company focused on the Anadarko, San Juan, and Permian Basins. The company operates as a single reportable segment (Exploration & Production) and is an emerging growth company. As of May 1, 2026, there were 168,224,213 common units outstanding.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 26% year-over-year, driven primarily by a 95% increase in net production volumes (14,179 MBoe vs. 7,283 MBoe) resulting from the IKAV and Sabinal acquisitions closed in September 2025.
• Net Loss: The company reported a net loss of $35.0 million compared to net income of $15.9 million in Q1 2025. This reversal was primarily due to a $96.9 million loss on oil and natural gas derivatives (unrealized losses of $103.8 million) and increased operating expenses.
• Production Volumes: Total production increased 95% to 157.54 MBoe/d. Natural gas production surged 159% due to the IKAV acquisition.
• Realized Prices: Average realized prices declined across all commodities: Oil ($69.73/Bbl vs. $70.75), Natural Gas ($2.74/Mcf vs. $3.56), and NGLs ($23.75/Bbl vs. $27.33).
• Operating Expenses: Lease operating expenses increased 107% and gathering/processing expenses increased 110%, largely attributable to the scale of acquired assets.

Guidance, Outlook, and Risks

• Capital Budget: The 2026 capital expenditure budget is projected between $315.0 million and $360.0 million, focusing on drilling in the Oswego, Woodford, Red Fork, and Mississippian formations.
• Liquidity: The company maintains a New Credit Agreement with $305.0 million in remaining availability as of March 31, 2026. Outstanding borrowings were $1.14 billion with an effective interest rate of 7.7%.
• Distributions: A quarterly distribution of $0.64 per common unit was declared on May 7, 2026, payable June 4, 2026. This represents an increase from the $0.53 per unit paid in Q1 2026.
• Derivative Exposure: Significant unrealized losses on derivatives impacted net income. The company has open fixed price swaps and costless collars hedging a portion of 2026-2029 production.
• Contractual Commitments: As part of the IKAV acquisition, the company is committed to selling natural gas at a fixed price of $1.72/MMBtu through 2030.
• Risks: Key risks include commodity price volatility, inflation impacting operational costs, and the ability to service indebtedness. The company notes that forward-looking statements are subject to uncertainties regarding global economic conditions and geopolitical events.

Investor Verification Checklist

• Derivative Impact: Verify the magnitude of unrealized derivative losses ($103.8 million) and their impact on GAAP net income versus Adjusted EBITDA.
• Acquisition Integration: Confirm the production contribution and cost profile of the IKAV and Sabinal acquisitions, which drove the 95% volume increase.
• Debt Covenants: Review compliance with the New Credit Agreement covenants, specifically the consolidated total net leverage ratio (max 3.00:1.00) and current ratio (min 1.00:1.00).
• Fixed Price Commitments: Assess the risk of the firm sales contract requiring natural gas delivery at $1.72/MMBtu through 2030 against current and projected market prices.
• Capital Discipline: Monitor actual capital expenditures against the $315M-$360M 2026 budget to ensure alignment with cash flow generation.