Form: 8-K

Current report filing

August 13, 2024

Exhibit 99.2

 

Three months and six months ended June 30, 2024

Supplemental Information of Mach Natural Resources LP

 

Table of Contents:   Page
Consolidated Balance Sheets   2
Consolidated Statements of Operations   3
Consolidated Statements of Cash Flows   4
Updated 2024 Guidance   5
Non-GAAP Financial Measures and Reconciliations   6
Derivative Contracts   8

 

1

 

 

MACH NATURAL RESOURCES LP

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

 

    June 30,     December 31,  
    2024     2023  
ASSETS            
Current assets:            
Cash and cash equivalents   $ 144,621     $ 152,792  
Accounts receivable – joint interest and other, net     28,178       54,155  
Accounts receivable – oil, gas, and NGL sales     118,277       78,051  
Short-term derivative assets     9,110       24,802  
Inventories     27,499       31,377  
Other current assets     7,371       2,425  
Total current assets     335,056       343,602  
Oil and natural gas properties, using the full cost method:                
Proved oil and natural gas properties     2,179,014       2,097,540  
Less: accumulated depreciation, depletion and amortization     (393,653 )     (265,895 )
Oil and natural gas properties, net     1,785,361       1,831,645  
Other property, plant and equipment     111,641       105,302  
Less: accumulated depreciation     (19,475 )     (15,642 )
Other property, plant and equipment, net     92,166       89,660  
Long-term derivative assets     3,672       15,112  
Other assets     5,895       7,102  
Operating lease assets     12,887       17,394  
Total assets   $ 2,235,037     $ 2,304,515  
LIABILITIES AND EQUITY                
Current liabilities:                
Accounts payable   $ 37,759     $ 44,577  
Accounts payable – related party     860       2,867  
Accrued liabilities     53,230       44,529  
Revenue payable     131,887       110,296  
Short-term derivative liabilities     5,967        
Current portion of long-term debt     82,500       61,875  
Current portion of operating lease liabilities     7,468       10,765  
Total current liabilities     319,671       274,909  
Long-term debt     706,909       745,140  
Asset retirement obligations     88,762       85,094  
Long-term portion of operating leases     5,451       6,705  
Other long-term liabilities     1,134       943  
Total long-term liabilities     802,256       837,882  
Commitments and contingencies (Note 10)                
Partners’ capital:                
Partners’ capital     1,113,110       1,191,724  
Total liabilities and partners’ capital   $ 2,235,037     $ 2,304,515  

 

2

 

 

MACH NATURAL RESOURCES LP

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per common unit data)

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2024     2023     2024     2023  
Revenue                        
Oil, natural gas, and NGL sales   $ 231,539     $ 150,165     $ 486,779     $ 312,613  
(Loss) gain on oil and natural gas derivatives     (4,635 )     2,688       (33,903 )     15,742  
Midstream revenue     6,441       6,786       12,660       13,318  
Product sales     6,649       7,282       13,613       17,421  
Total revenues     239,994       166,921       479,149       359,094  
                                 
Operating expenses                                
Gathering and processing     23,831       7,868       55,773       17,510  
Lease operating expense     46,497       27,802       87,257       60,615  
Production taxes     11,302       6,852       24,054       15,526  
Midstream operating expense     2,616       2,569       5,175       5,538  
Cost of product sales     5,786       6,463       11,886       15,575  
Depreciation, depletion, amortization and accretion – oil and natural gas     65,819       28,528       131,191       58,095  
Depreciation and amortization – other     2,242       1,436       4,340       2,793  
General and administrative     9,568       4,195       18,046       7,770  
General and administrative - related party     1,850       1,067       3,700       2,135  
Total operating expenses     169,511       86,780       341,422       185,557  
Income from operations     70,483       80,141       137,727       173,537  
                                 
Other (expense) income                                
Interest expense     (27,046 )     (1,975 )     (53,331 )     (3,789 )
Other income (expense), net     (3,921 )     (357 )     (3,178 )     (245 )
Total other expense     (30,967 )     (2,332 )     (56,509 )     (4,034 )
Net income   $ 39,516     $ 77,809     $ 81,218     $ 169,503  
Net income per common unit:                                
Basic   $ 0.42             $ 0.85          
Diluted   $ 0.42             $ 0.85          
Weighted average common units outstanding:
Basic     95,009               95,004          
Diluted     95,187               95,129          

 

3

 

 

MACH NATURAL RESOURCES LP

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

    Six Months Ended
June 30,
 
    2024     2023  
Cash flows from operating activities            
Net income   $ 81,218     $ 169,503  
Adjustments to reconcile net income to cash provided by operating activities                
Depreciation, depletion, amortization and accretion     135,531       60,888  
Loss (gain) on derivative instruments     33,903       (15,742 )
Cash receipts (payments) on settlement of derivative contracts, net     3,384       7,245  
Debt issuance costs amortization     3,494       202  
Equity based compensation     3,482       1,294  
Credit losses     647        
(Gain) loss on sale of assets     (309 )     (1 )
Settlement of asset retirement obligations     (418 )     (79 )
Changes in operating assets and liabilities (decreasing) increasing cash:                
Accounts receivable     (24,381 )     53,913  
Revenue payable     21,592       (2,675 )
Accounts payable and accrued liabilities     2,280       (5,133 )
Other     361       5,730  
Net cash provided by operating activities     260,784       275,145  
Cash flows from investing activities
Capital expenditures for oil and natural gas properties     (116,441 )     (182,427 )
Capital expenditures for other property and equipment     (7,032 )     (4,953 )
Acquisition of assets     (1,258 )     (468 )
Proceeds from sales of oil and natural gas properties     38,975        
Proceeds from sales of other property and equipment     495       36  
Net cash used in investing activities     (85,261 )     (187,812 )
Cash flows from financing activities
Repayments of borrowings on term note     (20,625 )      
Proceeds from borrowings on credit facility           7,000  
Distributions to unitholders     (161,617 )      
Distributions to members           (74,500 )
Withholding taxes paid on vesting of phantom units     (570 )      
Payment of other financing fees     (882 )     (404 )
Net cash used in financing activities     (183,694 )     (67,904 )
Net (decrease) increase in cash and cash equivalents     (8,171 )     19,429  
Cash and cash equivalents, beginning of period     152,792       29,417  
Cash and cash equivalents, end of period   $ 144,621     $ 48,846  

 

4

 

 

Updated 2024 Guidance:

 

    2024  
      Q3       Q4       Full-Year  
Net Production Guidance                        
Oil (MBbls/d)     18.6 - 19.9       18.6 - 19.9       19.4 - 20.6  
NGLs (MBbls/d)     18.4 - 19.5       18.1 - 19.2       19.1 - 20.3  
Natural Gas (MMcf/d)     249 - 265       243 - 258       262 - 278  
Total (Mboe/d)     78.5 - 83.6       77.2 - 82.1       82.2 - 87.2  

 

      Full-Year 2024  
Price Realizations Guidance (excluding derivatives)        
Oil (differential to NYMEX WTI) ($/Bbl)     ($1.50) - ($0.50)  
NGLs (% of WTI)     31% - 35%  
Natural Gas (differential to NYMEX Henry Hub) ($/Mcf)     ($0.36) - ($0.20)  
         
Other Guidance Items        
Lease Operating Expense ($/Boe)     $5.80 - $6.10  
Gathering and Processing ($/Boe)     $3.20 - $3.40  
Production Taxes (% of Oil, natural gas, and NGL sales)     5.0% - 6.0%  
Midstream Operating Profit ($MM)     $15 - $18  
General and Administrative, excluding equity-based compensation ($MM)     $30 - $34  
Interest Expense ($MM)     $88 - $92  
         
Capital Expenditure Guidance ($MM)        
Upstream (D&C and Workovers)     $195 - $210  
Other (Midstream and Land)     $20 - $30  
Total     $215 - $240  

 

5

 

 

Non-GAAP Financial Measures

 

Adjusted EBITDA

 

We include in the tables below the supplemental non-GAAP financial performance measure Adjusted EBITDA and provide our calculation of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, our most directly comparable financial measures calculated and presented in accordance with GAAP. We define Adjusted EBITDA as net income before (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized (gain) loss on derivative instruments, (4) equity-based compensation expense, (5) credit losses, and (6) (gain) loss on sale of assets.

 

Adjusted EBITDA is used as a supplemental financial performance measure by our management and by external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others, to more effectively evaluate our operating performance and our results of operation from period to period and against our peers without regard to financing methods, capital structure or historical cost basis. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as indicators of our operating performance. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax burden, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our results will be unaffected by unusual items. Our computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.

 

Cash Available for Distribution

 

Cash available for distribution is not a measure of net income or net cash flow provided by or used in operating activities as determined by GAAP. Cash available for distribution is a supplemental non-GAAP financial performance measure used by our management and by external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others, to assess our ability to internally fund our exploration and development activities, pay distributions, and to service or incur additional debt. We define cash available for distribution as net income less (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized (gain) loss on derivative instruments, (4) equity-based compensation expense, (5) credit losses, (6) (gain) loss on sale of assets, (7) settlement of asset retirement obligations, (8) cash interest expense, net (9) development costs, and (10) change in accrued realized derivative settlements. Development costs include all of our capital expenditures, other than acquisitions. Cash available for distribution will not reflect changes in working capital balances. Cash available for distribution is not a measurement of our financial performance or liquidity under GAAP and should not be considered as an alternative to, or more meaningful than, net income or net cash provided by or used in operating activities as determined in accordance with GAAP or as indicators of our financial performance and liquidity. The GAAP measures most directly comparable to cash available for distribution are net income and net cash provided by operating activities. Cash available for distribution should not be considered as an alternative to, or more meaningful than, net income or net cash provided by operating activities.

 

6

 

 

Reconciliation of GAAP Financial Measures to Adjusted EBITDA and Cash Available for Distribution

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
($ in thousands)   2024     2023     2024     2023  
Net Income Reconciliation to Adjusted EBITDA:                        
Net income   $ 39,516     $ 77,809     $ 81,218     $ 169,503  
Interest expense, net     25,880       1,570       50,952       3,294  
Depreciation, depletion, amortization and accretion     68,061       29,964       135,531       60,888  
Unrealized (gain) loss on derivative instruments     (124 )     2,097       33,099       (8,212 )
Equity-based compensation expense     2,300       647       3,482       1,294  
Credit losses     193             647        
Gain on sale of assets     (298 )           (309 )     (1 )
Adjusted EBITDA   $ 135,528     $ 112,087     $ 304,620     $ 226,766  
Net Income Reconciliation to Cash Available for Distribution:                                
Net income   $ 39,516     $ 77,809     $ 81,218     $ 169,503  
Interest expense, net     25,880       1,570       50,952       3,294  
Depreciation, depletion, amortization and accretion     68,061       29,964       135,531       60,888  
Unrealized (gain) loss on derivative instruments     (124 )     2,097       33,099       (8,212 )
Equity-based compensation expense     2,300       647       3,482       1,294  
Credit losses     193             647        
Gain on sale of assets     (298 )           (309 )     (1 )
Settlement of asset retirement obligations     (390 )     (8 )     (418 )     (79 )
Cash interest expense, net     (23,654 )     (1,490 )     (47,458 )     (3,092 )
Development costs     (45,562 )     (88,301 )     (125,987 )     (192,892 )
Change in accrued realized derivative settlements     1,586       (243 )     4,188       (285 )
Cash available for distribution   $ 67,508     $ 22,045     $ 134,945     $ 30,418  
Net Cash Provided by Operating Activities Reconciliation to Cash Available for Distribution:      
Net cash provided by operating activities     116,831       127,996     $ 260,784     $ 275,145  
Changes in operating assets and liabilities     (3,761 )     (17,650 )     148       (51,835 )
Development costs     (45,562 )     (88,301 )     (125,987 )     (192,892 )
Cash available for distribution   $ 67,508     $ 22,045     $ 134,945     $ 30,418  

 

7

 

 

Derivative Contracts

 

The table below represents a summary of the Company’s derivative contracts as of August 1, 2024:

 

Oil Derivative Contracts                        
2024               Q3     Q4  
Oil Volumes (MBbl)                     781       706  
Weighted Average Fixed Price (per Bbl)                     $72.77       $73.21  
                                 
2025     Q1       Q2       Q3       Q4  
Oil Volumes (MBbl)     650       605       284       269  
Weighted Average Fixed Price (per Bbl)     $72.45       $72.94       $71.88       $71.87  
                                 
2026     Q1       Q2       Q3       Q4  
Oil Volumes (MBbl)     255       243       -       -  
Weighted Average Fixed Price (per Bbl)     $68.90       $73.98       -       -  
                                 
Natural Gas Derivative Contracts
2024                     Q3       Q4  
Natural Gas Volumes (Bbtu)                     10,653       10,158  
Weighted Average Fixed Price (per Mmbtu)                     $2.96       $3.73  
                                 
2025     Q1       Q2       Q3       Q4  
Natural Gas Volumes (Bbtu)     4,860       4,680       4,510       4,360  
Weighted Average Fixed Price (per Mmbtu)     $4.34       $3.69       $3.92       $4.36  

 

 

8