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MN

MACH NATURAL RESOURCES LP (MNR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered total revenues of $289M, net income of $90M, and Adjusted EBITDA of $122M; average production was 83.6 Mboe/d and the quarterly distribution was $0.38 per unit .
  • On S&P Global definitions, EPS materially beat ($0.76 vs $0.50 consensus)* while revenue modestly missed ($222.4M vs $238.4M consensus); note consensus “revenue” excludes certain items the company includes in “total revenues.”
  • Management highlighted a pivot toward natural gas and closed-in Q3 guidance update pending two announced acquisitions totaling ~$1.3B that add Permian and San Juan scale and diversify the portfolio .
  • Cash costs remained disciplined (LOE $6.52/Boe); distribution was lower versus Q1 driven by a one-time legal settlement and weaker gas pricing/basis in the Mid-Con .

Values retrieved from S&P Global*

What Went Well and What Went Wrong

What Went Well

  • Strong execution with steady operations and disciplined model: “Our second quarter results reflect continued strong execution of our 2025 plan…distribution of $0.38 per common unit” (CEO Tom Ward) .
  • Strategic expansion: two accretive acquisitions (~$1.3B) add Permian and San Juan entry, with plans to update guidance after closing; management emphasized balance sheet strength enabling deals .
  • Cost control and operating consistency: LOE held at $6.52/Boe; production 83.6 Mboe/d with balanced mix (23% oil/53% gas/24% NGLs) .

What Went Wrong

  • Distribution down vs Q1 ($0.38 vs $0.79) due to $8.2M legal settlement with royalty owners ($0.07/unit) and weaker gas prices/basis (~$0.07/unit) (CFO) .
  • Gas basis headwinds (Panhandle Eastern) widened during Q2; management does not hedge basis and noted exposure in the Mid-Con .
  • Adjusted EBITDA down sequentially ($122M vs $160M in Q1) on commodity realizations despite solid volumes .

Financial Results

Headline P&L, Cash Returns, and Operating Metrics

MetricQ4 2024Q1 2025Q2 2025
Total Revenues ($MM)$235 $227 $289
Net Income ($MM)$37 $16 $90
Adjusted EBITDA ($MM)$162.1 $159.9 $122.3
Primary EPS ($)0.35*0.3068*0.76*
Avg Production (Mboe/d)86.7 80.9 83.6
LOE ($/Boe)$6.17 $6.69 $6.52
Distribution ($/unit)$0.50 $0.79 $0.38

Values retrieved from S&P Global*

Revenue Mix (Production Revenues) by Product

Mix (%)Q4 2024Q1 2025Q2 2025
Oil56% 49% 51%
Natural Gas24% 33% 31%
NGLs20% 18% 18%

Realized Prices (Ex-Derivatives)

PriceQ4 2024Q1 2025Q2 2025
Oil ($/Bbl)$70.06 $70.75 $63.10
Gas ($/Mcf)$2.31 $3.56 $2.81
NGL ($/Bbl)$25.82 $27.33 $22.41

Cash Generation and Reinvestment

MetricQ4 2024Q1 2025Q2 2025
Net Cash from Operations ($MM)$134 $143 $130
Total Development Costs ($MM)$60 $52 $64

Results vs S&P Global Consensus (Q2 2025)

MetricConsensusActualOutcome
Primary EPS ($)0.5045*0.76*Beat*
Revenue ($MM)$238.4*$222.4*Miss*

Note: Company-reported “total revenues” of $289M include hedges and midstream; S&P “revenue” used for consensus comparison differs in definition .
Values retrieved from S&P Global*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Development Capex ($MM)FY 2025$260–$280 (reaffirmed in Mar/Q1) No update in Q2; update post-acquisition close Maintained
Total Production (Mboe/d)FY 202579–83 (reaffirmed in Mar/Q1) No update in Q2; update post-acquisition close Maintained
Interest Expense (midpoint)FY 2025Lowered by $22M (Mar) No update in Q2Maintained
Distribution per unit ($)Q2 2025$0.79 (Q1 2025) $0.38 (Q2 2025) Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Balance sheet & leverageNew $750M RBL; de-leveraging to 0.8x; lowered 2025 interest midpoint by $22M Post iCAV/Sabinal, leverage just above 1x; intent to bring it back to goal ~1x Stable discipline
Reinvestment rate2024 reinvestment 47%; 2025 plan maintains <50% Reaffirmed target ~50% to keep production flat/slightly growing Maintained
Gas pivot & demand2025 outlook 79–83 Mboe/d; flexibility signaled Strategy to be long gas by late 2026; expect demand growth from LNG/data centers; gas mix >70% in 2026 Pivot accelerating
Basis/marketing—Panhandle Eastern basis widened; switched Paloma marketing to NextEra; bottom-line neutral reclass Managing headwind
LOE & efficiencyQ4 LOE $6.17/Boe; Q1 $6.69/Boe Q2 LOE $6.52/Boe; plan to seek further reductions post-close Stable to improving
M&A strategyBolt-ons in 2024; equity offering for flexibility Two transformative acquisitions (~$1.3B), equity required for >$300–$400M deals Scaling up
Rig program & permits—2026 plan: 2 Deep Anadarko gas rigs; 3 San Juan rigs (Mancos, Fruitland); 1 Oswego oil rig; San Juan drilling window May–Sep Buildout plan set

Management Commentary

  • “A steady adherence to the four pillars of our disciplined business model allows us to announce a distribution of $0.38 per common unit for the period.” — Tom L. Ward, CEO .
  • “Post the iCAV and Sabinal acquisitions, we anticipate having leverage just above one times…we’ll work diligently to bring back our leverage to our desired goal.” — Tom L. Ward .
  • “We maintain a reinvestment rate of less than 50% of our operating cash flow…this keeps our production flat…with flexibility to pivot from oil to gas.” — Tom L. Ward .
  • “Total revenues, including our hedges and midstream activities totaled $289,000,000…Adjusted EBITDA of $122,000,000 and $130,000,000 of operating cash flow.” — Kevin White, CFO .

Q&A Highlights

  • Distribution drivers: $8.2M legal settlement on royalty deductions ($0.07/unit) and weaker gas prices/basis (~$0.07/unit) reduced payout; Panhandle Eastern basis widened in Q2 (not hedged) .
  • Gas growth trajectory: management projects gas mix >70% in 2026–27 and expects to be “long gas” as LNG and data center demand materialize .
  • Marketing change: moved Paloma volumes to NextEra; accounting reclass raises both revenue and GP&T, bottom-line neutral .
  • Rig cadence: 2026 prelim plan includes Deep Anadarko (2 rigs), San Juan (2–3 rigs across Mancos and Fruitland) and Oswego oil (1 rig); San Juan permits constrain window .
  • M&A consideration: equity is essential for >$300–$400M deals; sellers willing to take units align with long-term distributions .

Estimates Context

  • Q2 2025 vs S&P Global consensus: EPS $0.76 vs $0.50 (beat); revenue $222.4M vs $238.4M (miss).* Company-reported “total revenues” are $289M inclusive of hedges and midstream, which differ from revenue used in consensus comparisons .
  • Prior quarters: Q1 2025 EPS $0.3068 vs $0.679 consensus; Q4 2024 EPS $0.35 vs $0.494 consensus (both on S&P basis).*
  • Implications: Consensus models may need to reflect (1) Q2 basis widening and marketing reclass mechanics, (2) lower distribution run-rate absent one-time settlement, and (3) pending Q3 guidance update post-closing of acquisitions which could alter 2026 gas weighting and capex cadence .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Q2 was operationally solid with disciplined costs and production stability; EPS beat but revenue miss on S&P definitions highlights accounting scope differences versus company “total revenues” .
  • Distribution reset to $0.38 was driven by non-recurring legal settlement and weaker gas price/basis; absent these, payout capacity would have been higher, but basis risk remains a watch item .
  • The announced ~$1.3B acquisitions are the near-term catalyst; expect updated guidance after close, with a more gas-weighted portfolio and potential LOE synergies .
  • Strategic pivot to gas into 2026–27 ties to visible demand growth from LNG and data centers; management intends to keep reinvestment ≤50% while increasing gas mix >70% .
  • Balance sheet discipline remains central (target ~1x leverage post-close) and RBL expansion in process; equity remains the currency for larger deals .
  • Watch Panhandle Eastern basis and realized gas pricing into H2; marketing changes (NextEra) should improve pricing relative to prior intermediary, but basis isn’t hedged .
  • Trading lens: near-term sentiment hinges on acquisition closings/guidance, distribution trajectory in Q3, and clarity on 2026 gas growth cadence relative to consensus.

Appendix — Additional Context (Prior Periods)

  • Q1 2025: Revenues $227M; net income $16M; Adj. EBITDA $159.9M; production 80.9 Mboe/d; LOE $6.69/Boe; distribution $0.79 .
  • Q4 2024: Revenues $235M; net income $37M; Adj. EBITDA $162.1M; production 86.7 Mboe/d; LOE $6.17/Boe; distribution $0.50 .
  • Q2 2024 (YoY frame): Revenues $240M; net income $39.5M; Adj. EBITDA $135.5M; production 89.3 Mboe/d; LOE $5.72/Boe; distribution $0.90 .

Values retrieved from S&P Global*