Mach Natural Resources LP — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Mach is an upstream oil and gas producer with complementary midstream assets focused on the Anadarko Basin. The 2023 comparison is with BCE-Mach III, the accounting predecessor; acquisitions and the October 2023 reorganization make period-to-period results less comparable.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $239.2 million | $192.2 million |
| Oil, gas and NGL sales | $255.2 million | $162.4 million |
| Operating income | $67.2 million | $93.4 million |
| Net income | $41.7 million | $91.7 million |
| Operating margin | 28.1% | 48.6% |
| Net margin | 17.4% | 47.7% |
| Adjusted EBITDA (non-GAAP) | $169.1 million | $114.7 million |
| Cash available for distribution (non-GAAP) | $67.4 million | $8.4 million |
| Cash from operating activities | $144.0 million | $147.1 million |
| Capital expenditures, excluding acquisitions | $80.4 million | $104.6 million |
Production rose 94% to 8.10 million Boe (89.0 MBoe/d), primarily reflecting acquisitions, the reorganization and drilling. Total oil, gas and NGL sales increased 57%; average realized price before derivative effects fell 19% to $31.52/Boe. Oil averaged $77.17/Bbl, natural gas $2.35/Mcf and NGLs $26.92/Bbl. Derivatives recorded a $29.3 million loss, including $33.2 million of unrealized losses, versus a $13.1 million gain a year earlier.
Operating expenses increased to $171.9 million from $98.8 million. Notable increases included gathering and processing ($31.9 million versus $9.6 million), oil and gas DD&A ($65.4 million versus $29.6 million), and G&A ($10.3 million versus $4.6 million). LOE per Boe improved to $5.03 from $7.85. No oil and gas property impairment was recorded in either period.
Liquidity, debt and distributions
At March 31, 2024, cash was $151.3 million and current assets and liabilities were $354.1 million and $353.1 million, respectively. Term-loan principal was $825.0 million; the balance sheet reports debt carrying value of $808.1 million, including current and long-term portions. The loan matures December 31, 2026, bears a floating rate and had a 13.0% effective rate. The $75 million revolver was undrawn, with $5 million of letters of credit and $70 million remaining availability. The term loan requires principal repayments of $61.9 million in 2024, $82.5 million in 2025 and $680.6 million in 2026.
Operating cash flow nearly matched the prior-year period despite lower net income; management attributed the decrease mainly to working-capital changes, offset by acquisition-related earnings. Investing cash use declined to $54.7 million, principally due to lower oil and gas capital spending. Financing cash use was $90.7 million, including $90.3 million of distributions to unitholders. The partnership agreement generally requires distribution of available cash, subject to reserves; distributions may vary or be suspended.
Outlook, risks and notable items
- Management’s 2024 development-cost budget is $250 million–$275 million. It spent about $80.4 million in Q1; planned activity is expected to focus on Oswego wells. Capital spending is discretionary and may be deferred.
- Commodity-price volatility, production and reserve uncertainty, Anadarko Basin concentration, inflation and operating costs, transportation capacity, regulatory and environmental matters, and access to capital are key risks. A 100-basis-point change in variable borrowing rates would change annual interest expense by approximately $8.3 million at the reported debt balance.
- Open swaps at quarter-end covered oil volumes of 2.478 million barrels for April–December 2024 at a weighted average fixed price of $73.46/Bbl, plus 0.903 million barrels for January–June 2025 at $72.18/Bbl. Gas swaps covered 23.059 million MMBtu for April–December 2024 at $3.30/MMBtu and 9.540 million MMBtu for January–June 2025 at $4.02/MMBtu. Hedges limit downside exposure but can constrain gains.
- The December 2023 Paloma acquisition was approximately $815 million, funded with term-loan borrowings; purchase-price allocation and customary adjustments remained preliminary, with finalization expected in Q2 2024.
- No material legal proceedings or material risk-factor changes were reported. Management said disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- How acquisition-driven production and cash generation perform against the planned 2024 capital budget, and whether distribution levels are sustainable.
- The timing and funding of the large 2026 term-loan repayment, floating-rate exposure, covenant headroom and refinancing options.
- Commodity prices, realized differentials and the impact of derivative settlements and mark-to-market movements on earnings and cash flow.
- Final Paloma purchase-price adjustments and allocation, plus ongoing acquisition-related comparability effects and cost trends.
- Customer concentration, firm transportation commitments, environmental exposure and reserve assumptions; the filing reports no material environmental claims currently known.