Business Context and Reporting Period
Company: Mach Natural Resources LP (MNR)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 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.
Key Financial Metrics
| Metric (in thousands, except per unit) | Three Months Ended June 30, 2026 |
Six Months Ended June 30, 2026 |
Six Months Ended June 30, 2025 |
|---|---|---|---|
| Total Revenues | $405,955 | $691,880 | $515,285 |
| Net Income | $98,213 | $63,175 | $105,547 |
| Net Income Per Unit (Diluted) | $0.58 | $0.38 | $0.92 |
| Adjusted EBITDA | $182,231 | $376,855 | $282,121 |
| Cash Available for Distribution | $60,097 | $167,447 | $140,558 |
| Net Cash Provided by Operating Activities | N/A | $323,967 | $272,660 |
| Capital Expenditures (Development) | N/A | $155,414 | $113,911 |
| Long-Term Debt Outstanding | $1,169,989 | $1,169,989 | $1,144,056 |
| Cash and Cash Equivalents | $41,187 | $41,187 | $42,633 |
Note: Capital expenditures for development exclude acquisitions. Total capital expenditures including acquisitions were $172.2 million for the six months ended June 30, 2026.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 41% ($117.4 million) for the quarter and 34% ($176.6 million) for the six months compared to the prior year periods. This was driven primarily by an 86% increase in production volumes (27,728 MBoe vs. 14,890 MBoe) resulting from the IKAV and Sabinal acquisitions closed in September 2025.
- Net Income Decline (YTD): Despite revenue growth, Net Income for the six months ended June 30, 2026, decreased 40% to $63.2 million from $105.5 million in the prior year. This was primarily due to a $73.4 million loss on oil and natural gas derivatives (compared to a $14.9 million gain in 2025) and higher interest expense ($48.9 million vs. $30.0 million).
- Derivative Impact: The company realized losses on derivatives of $11.3 million and unrealized losses of $62.1 million for the six-month period, largely due to rising oil prices exceeding fixed swap prices.
- Operating Expenses: Total operating expenses increased 64% year-over-year for the six-month period, driven by higher lease operating expenses ($198.7 million vs. $98.3 million) and depreciation, depletion, and amortization ($187.9 million vs. $125.5 million) due to the expanded asset base.
Guidance, Outlook, and Risks
- Capital Budget: The company's 2026 capital expenditure budget is between $310.0 million and $340.0 million, focusing on drilling Oswego, Woodford, and Mississippian wells. Approximately $171.8 million was spent on development costs in the first half of 2026.
- Liquidity: As of June 30, 2026, the company had $1.18 billion outstanding under its New Credit Agreement with $270.0 million remaining availability. The effective interest rate was 7.8%.
- Distributions: The company declared a quarterly distribution of $0.36 per common unit for the second quarter of 2026, payable August 31, 2026. Total distributions for the six months ended June 30, 2026, were $195.9 million.
- Contractual Commitments: The company is party to a firm sales contract to deliver natural gas at a fixed price of $1.72 per MMbtu through 2030, acquired via the IKAV Acquisition. Shortfalls in production could require compensation to the counterparty.
- Risks: Key risks include commodity price volatility, counterparty credit risk, interest rate fluctuations on variable-rate debt, and the ability to replace reserves. The company notes that forward-looking statements are subject to uncertainties regarding global economic conditions and regulatory changes.
Investor Verification Checklist
- Derivative Exposure: Verify the impact of the $73.4 million derivative loss on cash flow and future hedging strategies, particularly given the fixed-price sales commitments.
- Debt Covenants: Confirm 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).
- Acquisition Integration: Assess the performance of the IKAV and Sabinal acquisitions, which drove the majority of production growth but also increased operating costs and debt load.
- Production Volumes: Validate the sustainability of the 86% year-over-year production increase and the mix of oil vs. natural gas given the fixed-price gas contract.
- Capital Discipline: Monitor adherence to the $310M-$340M 2026 capital budget and the ability to fund development without diluting equity or increasing leverage beyond covenant limits.