Form: 8-K

Current report filing

November 12, 2024

Exhibit 99.2

 

Three months and nine months ended September 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
2025 Guidance   5
Non-GAAP Financial Measures and Reconciliations   6
Derivative Contracts   8

 

 

 

 

MACH NATURAL RESOURCES LP

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

 

    September 30,
2024
    December 31,
2023
 
ASSETS            
Current assets:            
Cash and cash equivalents   $ 184,533     $ 152,792  
Accounts receivable – joint interest and other, net     34,326       54,155  
Accounts receivable – oil, gas, and NGL sales     98,924       78,051  
Short-term derivative assets     30,282       24,802  
Inventories     26,311       31,377  
Other current assets     6,080       2,425  
Total current assets     380,456       343,602  
Oil and natural gas properties, using the full cost method:                
Proved oil and natural gas properties     2,275,042       2,097,540  
Less: accumulated depreciation, depletion and amortization     (455,164 )     (265,895 )
Oil and natural gas properties, net     1,819,878       1,831,645  
Other property, plant and equipment     114,162       105,302  
Less: accumulated depreciation     (21,767 )     (15,642 )
Other property, plant and equipment, net     92,395       89,660  
Long-term derivative assets     7,077       15,112  
Other assets     15,180       7,102  
Operating lease assets     11,114       17,394  
Total assets   $ 2,326,100     $ 2,304,515  
LIABILITIES AND EQUITY                
Current liabilities:                
Accounts payable   $ 42,541     $ 44,577  
Accounts payable – related party     1,776       2,867  
Accrued liabilities     49,818       44,529  
Revenue payable     120,984       110,296  
Short-term derivative liabilities     2,111        
Current portion of long-term debt     82,500       61,875  
Current portion of operating lease liabilities     6,423       10,765  
Total current liabilities     306,153       274,909  
Long-term debt     687,669       745,140  
Asset retirement obligations     99,380       85,094  
Long-term derivative liabilities     1,315        
Long-term portion of operating leases     4,718       6,705  
Other long-term liabilities     2,203       943  
Total long-term liabilities     795,285       837,882  
Commitments and contingencies (Note 10)                
Partners’ capital:                
Partners’ capital     1,224,662       1,191,724  
Total liabilities and partners’ capital   $ 2,326,100     $ 2,304,515  

 

2

 

 

MACH NATURAL RESOURCES LP

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per common unit data)

 

   

Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
    2024     2023     2024     2023  
Revenue                        
Oil, natural gas, and NGL sales   $ 209,165     $ 166,706     $ 695,944     $ 479,319  
Gain (loss) on oil and natural gas derivatives     33,684       (4,900 )     (219 )     10,842  
Midstream revenue     5,889       6,683       18,549       20,001  
Product sales     6,798       6,900       20,411       24,321  
Total revenues     255,536       175,389       734,685       534,483  
                                 
Operating expenses                                
Gathering and processing     23,587       7,962       79,360       25,472  
Lease operating expense     44,029       28,879       131,286       89,494  
Production taxes     9,784       7,660       33,838       23,186  
Midstream operating expense     2,607       2,725       7,782       8,263  
Cost of product sales     5,833       6,024       17,719       21,599  
Depreciation, depletion, amortization and accretion – oil and natural gas     63,262       31,277       194,453       89,372  
Depreciation and amortization – other     2,315       1,758       6,655       4,551  
General and administrative     7,535       4,293       25,581       12,063  
General and administrative - related party     1,850       1,067       5,550       3,202  
Total operating expenses     160,802       91,645       502,224       277,202  
Income from operations     94,734       83,744       232,461       257,281  
                                 
Other (expense) income                                
Interest expense     (26,772 )     (2,054 )     (80,103 )     (5,843 )
Other (expense) income, net     (518 )     1,795       (3,696 )     1,550  
Total other expense     (27,290 )     (259 )     (83,799 )     (4,293 )
Net income   $ 67,444     $ 83,485     $ 148,662     $ 252,988  
Net income per common unit:                                
Basic   $ 0.70             $ 1.55          
Diluted   $ 0.70             $ 1.55          
Weighted average common units outstanding:                                
Basic     96,856               95,626          
Diluted     97,033               95,762          

 

3

 

 

MACH NATURAL RESOURCES LP

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

    Nine Months Ended
September 30,
 
    2024     2023  
Cash flows from operating activities            
Net income   $ 148,662     $ 252,988  
Adjustments to reconcile net income to cash provided by operating activities                
Depreciation, depletion, amortization and accretion     201,108       93,923  
Loss (gain) on derivative instruments     219       (10,842 )
Cash receipts (payments) on settlement of derivative contracts, net     4,287       5,207  
Debt issuance costs amortization     5,521       232  
Equity based compensation     4,749       1,941  
Credit losses     1,890        
(Gain) loss on sale of assets     (349 )     (1 )
Settlement of asset retirement obligations     (676 )     (445 )
Changes in operating assets and liabilities (decreasing) increasing cash:                
Accounts receivable     (7,188 )     28,549  
Revenue payable     10,689       6,394  
Accounts payable and accrued liabilities     (192 )     (2,764 )
Other     2,911       6,785  
Net cash provided by operating activities     371,631       381,967  
                 
Cash flows from investing activities                
Capital expenditures for oil and natural gas properties     (162,432 )     (251,538 )
Capital expenditures for other property and equipment     (9,187 )     (9,083 )
Acquisition of assets     (47,192 )     (20,613 )
Proceeds from sales of oil and natural gas properties     38,975       3,305  
Proceeds from sales of other property and equipment     561       36  
Net cash used in investing activities     (179,275 )     (277,893 )
                 
Cash flows from financing activities                
Proceeds from public offering, net of offering costs     129,812        
Repayments of borrowings on term note     (41,250 )      
Proceeds from borrowings on credit facility           7,000  
Distributions to unitholders     (247,153 )      
Distributions to members           (101,350 )
Contributions from members           20,000  
Withholding taxes paid on vesting of phantom units     (570 )      
Payment of other financing fees     (1,454 )     (404 )
Net cash used in financing activities     (160,615 )     (74,754 )
Net increase in cash and cash equivalents     31,741       29,320  
Cash and cash equivalents, beginning of period     152,792       29,417  
Cash and cash equivalents, end of period   $ 184,533     $ 58,737  

 

4

 

 

2025 Guidance:

 

    2025
    Full-Year
Net Production Guidance    
Oil (MBbls/d)   18.2 - 19.3
NGLs (MBbls/d)   17.8 - 18.9
Natural Gas (MMcf/d)   253 - 269
Total (Mboe/d)   78.2 - 83.1
     
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)   ($0.45) - ($0.25)
     
Other Guidance Items    
Lease Operating Expense ($/Boe)   $6.25 - $6.50
Gathering and Processing ($/Boe)   $3.00 - $3.30
Production Taxes (% of Oil, natural gas, and NGL sales)   5.0% - 6.0%
Midstream Operating Profit ($MM)   $15 - $18
General and Administrative, excluding equity-based compensation ($MM)   $30 - $34
Interest Expense ($MM)   $75 - $80
     
Capital Expenditure Guidance ($MM)    
Upstream (D&C and Workovers)   $225 - $240
Other (Midstream and Land)   $35 - $40
Total   $260 - $280

 

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

September 30,

   

Nine Months Ended

September 30,

 
($ in thousands)   2024     2023     2024     2023  
Net Income Reconciliation to Adjusted EBITDA:                        
Net income   $ 67,444     $ 83,485     $ 148,662     $ 252,988  
Interest expense, net     25,598       1,667       76,550       4,962  
Depreciation, depletion, amortization and accretion     65,577       33,035       201,108       93,923  
Unrealized (gain) loss on derivative instruments     (27,118 )     1,678       5,981       (6,534 )
Equity-based compensation expense     1,267       647       4,749       1,941  
Credit losses     1,243             1,890        
Gain on sale of assets     (40 )           (349 )     (1 )
Adjusted EBITDA   $ 133,971     $ 120,512     $ 438,591     $ 347,279  
Net Income Reconciliation to Cash Available for Distribution:                                
Net income   $ 67,444     $ 83,485     $ 148,662     $ 252,988  
Interest expense, net     25,598       1,667       76,550       4,962  
Depreciation, depletion, amortization and accretion     65,577       33,035       201,108       93,923  
Unrealized (gain) loss on derivative instruments     (27,118 )     1,678       5,981       (6,534 )
Equity-based compensation expense     1,267       647       4,749       1,941  
Credit losses     1,243             1,890        
Gain on sale of assets     (40 )           (349 )     (1 )
Settlement of asset retirement obligations     (258 )     (366 )     (676 )     (445 )
Cash interest expense, net     (23,571 )     (1,636 )     (71,029 )     (4,730 )
Development costs     (52,922 )     (66,052 )     (178,909 )     (258,944 )
Change in accrued realized derivative settlements     (5,663 )     1,183       (1,475 )     899  
Cash available for distribution   $ 51,557     $ 53,641     $ 186,502     $ 84,059  
Net Cash Provided by Operating Activities Reconciliation to Cash Available for Distribution:                                
Net cash provided by operating activities   $ 110,847     $ 106,822     $ 371,631     $ 381,967  
Changes in operating assets and liabilities     (6,368 )     12,871       (6,220 )     (38,964 )
Development costs     (52,922 )     (66,052 )     (178,909 )     (258,944 )
Cash available for distribution   $ 51,557     $ 53,641     $ 186,502     $ 84,059  

 

7

 

 

Derivative Contracts

 

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

 

Oil Derivative Contracts                        
2024                             Q4  
Oil Volumes (MBbl)                             729  
Weighted Average Fixed Price (per Bbl)                           $ 73.00  
                                 
2025     Q1       Q2       Q3       Q4  
Oil Volumes (MBbl)     663       614       575       271  
Weighted Average Fixed Price (per Bbl)   $ 72.32     $ 72.85     $ 69.06     $ 71.83  
                                 
2026     Q1       Q2       Q3       Q4  
Oil Volumes (MBbl)     257       245       233       -  
Weighted Average Fixed Price (per Bbl)   $ 68.89     $ 73.95     $ 66.30       -  
                                 
Natural Gas Derivative Contracts                                
2024                             Q4  
Natural Gas Volumes (Bbtu)                             10,868  
Weighted Average Fixed Price (per Mmbtu)                           $ 3.68  
                                 
2025     Q1       Q2       Q3       Q4  
Natural Gas Volumes (Bbtu)     10,349       9,905       9,515       4,584  
Weighted Average Fixed Price (per Mmbtu)   $ 3.72     $ 3.42     $ 3.52     $ 4.30  
                                 
2026     Q1       Q2       Q3       Q4  
Natural Gas Volumes (Bbtu)     4,427       4,285       4,155       -  
Weighted Average Fixed Price (per Mmbtu)   $ 3.47     $ 3.48     $ 3.48       -  

 

8