Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mach Natural Resources LP (MNR, Financial) exceeded the high end of production guidance, averaging 89.3 MBOE per day.
- Lease operating expenses were $5.72 per BOE, below the low end of guidance, indicating effective cost control.
- The company successfully divested a small portion of its Western Anadarko acreage for $38 million, enhancing liquidity.
- Mach Natural Resources LP (MNR) declared a quarterly cash distribution of $0.9 per unit, maintaining strong returns to unitholders.
- The company reduced its CapEx guidance by 15% and adjusted lease operating expense guidance down by 3% per BOE, reflecting improved operational efficiency.
Negative Points
- Mach Natural Resources LP (MNR) received a very low realized price of $1.33 per Mcf for natural gas, impacting revenue.
- The company reduced its rig count, which may affect future production levels.
- Natural gas, which makes up 53% of production, had a low realized price, affecting projected distributions.
- Mach Natural Resources LP (MNR) faces increased competition in the Mid-Con area, potentially driving up acquisition costs.
- The company has a high debt level with a first lien term loan principal of approximately $804 million.
Q & A Highlights
Mach Natural Resources LP (MNR) Q2 2024 Earnings Call Highlights
Q: Tom, can you explain the decision to drop a rig in the Oswego formation earlier than planned?
A: (Tom Ward, CEO) The decision was driven by our goal to maintain a CapEx to operating cash flow ratio of under 50%. Dropping the rig helped us achieve this target. Ideally, we would like to run more rigs as our operating cash flow increases.
Q: How are the wells from the recent acquisition performing compared to your expectations?
A: (Tom Ward, CEO) The wells are performing in line with our acquisition case. We generally drill in known areas to minimize risk, so we don't expect to outperform but rather meet our projections.
Q: Can you elaborate on the increased competition in Oklahoma and your strategy regarding asset divestitures?
A: (Tom Ward, CEO) Yes, the increased competition has allowed us to divest some of our Western Anadarko acreage at favorable terms. We have a large acreage position and will continue to look for opportunities to divest non-core assets while focusing on cash-flowing acquisitions.
Q: Given your bullish outlook on natural gas, how flexible is your capital allocation strategy?
A: (Tom Ward, CEO) Our strategy is rate-of-return driven. We have significant acreage in both condensate and dry gas windows, and we can shift our focus based on market conditions. We aim to have multiple rigs running in both areas as our cash flow allows.
Q: Is the change in production guidance due to activity levels or well performance?
A: (Kevin White, CFO) The change is primarily due to activity levels, specifically the earlier-than-planned reduction in rig count and some delays in bringing deeper wells online. Well performance has been in line with expectations.
Q: Are you looking at opportunities outside of your current basins?
A: (Tom Ward, CEO) Yes, we are looking for cash-flowing assets at a discount to PDP PV-10 in other basins. Areas like the second-tier Eagle Ford, Permian, and even California are on our radar for potential acquisitions.
Q: Do you see opportunities for re-fracs on your acreage?
A: (Tom Ward, CEO) We have not had much success with re-fracs and do not plan to be the instigator of such projects. We prefer to focus on new drilling opportunities.
Q: How do you anticipate the consolidation in the industry affecting your opportunities?
A: (Tom Ward, CEO) The Mid-Con area has become highly sought after, which is beneficial for us due to our large acreage position. As consolidation happens, we may find opportunities to acquire assets in other areas that are being left behind.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
