10-Q: Quarterly report [Sections 13 or 15(d)]
Published on May 7, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2026
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ______ to ______
Commission file number 001-41849
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||
(405 ) 252-8100
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | o | x | |||||||||
| Non-accelerated filer | o | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The registrant had 168,224,213 common units outstanding as of May 1, 2026.
TABLE OF CONTENTS
| Page | |||||
i
DEFINITIONS
“Adjusted EBITDA.” Net income before (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized loss (gain) on derivative instruments, (4) loss on debt extinguishment (5) equity-based compensation expense and (6) (gain) loss on sale of assets, net.
“Basin.” A large natural depression on the earth’s surface in which sediments generally brought by water accumulate.
“Bbl.” One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate or NGL.
“Bbtu.” One billion Btu.
“BCE” or “Sponsor.” Investment funds managed by Bayou City Energy Management LLC and affiliates thereof.
“BCE-Mach.” BCE-Mach LLC, a Delaware limited liability company.
“BCE-Mach II.” BCE-Mach II LLC, a Delaware limited liability company.
“BCE-Mach III.” BCE-Mach III LLC, a Delaware limited liability company.
“BCE-Mach Aggregator.” BCE-Mach Aggregator LLC, a Delaware limited liability company.
“Boe.” One barrel of oil equivalent, converting natural gas to oil at the ratio of 6 Mcf of natural gas to one Bbl of oil.
“British Thermal Unit” or “Btu.” The quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit.
“Completion.” The process of treating a drilled well followed by the installation of permanent equipment for the production of natural gas or oil, or in the case of a dry hole, the reporting of abandonment to the appropriate agency.
“Field.” An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations. For a complete definition of field, refer to the SEC’s Regulation S-X, Rule 4-10(a)(15).
“Formation.” A layer of rock which has distinct characteristics that differs from nearby rock.
“Holdco.” Mach Natural Resources Holdco LLC, a Delaware limited liability company.
“Intermediate.” Mach Natural Resources Intermediate LLC, a Delaware limited liability company.
“Lease operating expense.” The expenses of lifting oil or natural gas from a producing formation to the surface, constituting part of the current operating expenses of a working interest, and also including labor, superintendence, supplies, repairs, short-lived assets, maintenance, allocated overhead costs, workover, ad valorem taxes, insurance and other expenses incidental to production, but excluding lease acquisition or drilling or completion expenses.
“Mach Resources.” Mach Resources LLC.
“MBbl.” One thousand barrels of crude oil, condensate or NGLs.
“MBoe.” One thousand Boe.
“MBoe/d.” One thousand Boe per day.
“Mcf.” One thousand cubic feet of natural gas.
“MMBtu.” One million Btu.
“MMcf.” One million cubic feet of natural gas.
“MMcf/d.” One million cubic feet of natural gas per day.
“Net wells.” The percentage of gross wells an owner has. An owner who has a 50% interest in 100 gross wells owns 50 net wells.
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“New Credit Agreement.” Refers to the senior secured revolving credit agreement, dated as of February 27, 2025, among the Company, the lenders party thereto, and Truist Bank as administrative agent.
“NGLs.” Hydrocarbons found in natural gas which may be extracted as liquefied petroleum gas and natural gasoline.
“NYMEX.” The New York Mercantile Exchange.
“OPEC +.” Organization of the Petroleum Exporting Countries.
“Partnership agreement.” The Amended and Restated Agreement of Limited Partnership of Mach Natural Resources LP.
“Proved reserves.” Proved oil and natural gas reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible — from a given date forward from known reservoirs, and under existing economic conditions, operating methods and government regulations — prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. For a complete definition of proved crude oil and natural gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(22).
“Proved undeveloped reserves (“PUD”).” Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Undrilled locations can be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that such locations are scheduled to be drilled within five years unless specific circumstances justify a longer time.
“PV-10.” When used with respect to oil and natural gas reserves, PV-10 represents the present value of estimated future cash inflows from proved oil and gas reserves, less future development and production costs, discounted at 10% per annum to reflect the timing of future cash flows. Calculation of PV-10 does not give effect to derivatives transactions. Our PV-10 has historically been computed on the same basis as our Standardized Measure, the most comparable measure under GAAP. PV-10 is not a financial measure calculated or presented in accordance with GAAP and generally differs from Standardized Measure, the most directly comparable GAAP financial measure, because it does not include the effects of either well abandonment costs or income taxes on future net revenues. Neither PV-10 nor Standardized Measure represents an estimate of the fair market value of our oil and natural gas properties. We and others in the industry use PV-10 as a measure to compare the relative size and value of proved reserves held by companies without regard to the specific tax characteristics of such entities.
“Recompletion.” The process of re-entering an existing wellbore that is either producing or not producing and completing reservoirs in an attempt to establish or increase existing production.
“Reservoir.” A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.
“Revolving Credit Agreement.” Refers to the senior secured revolving credit agreement, dated as of December 28, 2023, among the Company, the lenders party thereto, and MidFirst Bank as administrative agent.
“Standardized Measure.” Standardized Measure is our standardized measure of discounted future net cash flows, which is prepared using assumptions required by the Financial Accounting Standards Board. Such assumptions include the use of 12-month average prices for oil and gas, based on the first-day-of-the-month price for each month in the period, and year end costs for estimated future development and production expenditures to produce year-end estimated proved reserves. Discounted future net cash flows are calculated using a 10% rate. No provision is included for federal income taxes since our future net cash flows are not subject to taxation. However, our operations are subject to the Texas franchise tax. Estimated well abandonment costs, net of salvage values, are deducted from the standardized measure using year-end costs and discounted at the 10% rate. The standardized measure does not represent management’s estimate of our future cash flows or the value of proved oil and natural gas reserves. Probable and possible reserves, which may become proved in the future, are excluded from the calculations. Furthermore, prices used to determine the standardized measure are influenced by supply and demand as effected by recent economic conditions as well as other factors and may not be the most representative in estimating future revenues or reserve data.
“Term Loan Credit Agreement.” Refers to the senior secured term loan credit agreement, dated as of December 28, 2023, among the Company, the lenders party thereto, Texas Capital Bank, as agent, and Chambers Energy Management, LP, as the arranger.
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“Wellbore.” The hole drilled by the bit that is equipped for oil and natural gas production on a completed well. Also called well or borehole.
“Working interest.” The right granted to the lessee of a property to explore for and to produce and own oil and natural gas or other minerals. The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis.
“Workover.” Operations on a producing well to restore or increase production.
“WTI.” West Texas Intermediate.
iv
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The information in this Quarterly Report on Form 10-Q contains or incorporates by reference information that includes or is based upon “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, words such as “may,” “assume,” “forecast,” “could,” “should,” “will,” “plan,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “budget” and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events at the time such statement was made. When considering forward-looking statements, you should keep in mind the risk factors included in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025 and elsewhere in this Quarterly Report. All forward-looking statements speak only as of the date of this Quarterly Report.
Forward-looking statements may include statements about:
•our business strategy;
•our estimated proved reserves;
•our ability to distribute cash available for distribution and achieve or maintain certain financial and operational metrics;
•our drilling prospects, inventories, projects and programs;
•general economic conditions;
•actions taken by OPEC + as it pertains to the global supply and demand of, and prices for, oil, natural gas and NGLs;
•our ability to replace the reserves we produce through drilling and property acquisitions;
•our financial strategy, leverage, liquidity and capital required for our development program;
•our pending legal or environmental matters;
•our realized oil and natural gas prices;
•the timing and amount of our future production of natural gas;
•our hedging strategy and results;
•our competition and government regulations;
•our ability to obtain permits and governmental approvals;
•our marketing of natural gas;
•our leasehold or business acquisitions;
•our costs of developing our properties;
•credit markets;
•our decline rates of our oil and natural gas properties;
•uncertainty regarding our future operating results; and
•our plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.
We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development and production of oil, natural gas and NGLs. We disclose important factors that could cause our actual results to differ materially from our expectations as described under “Risk Factors” included in Part I, Item 1A in our Annual Report for the year ended December 31, 2025. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
•commodity price volatility;
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•the impact of epidemics, outbreaks or other public health events, and the related effects on financial markets, worldwide economic activity and our operations;
•uncertainties about our estimated oil, natural gas and NGL reserves, including the impact of commodity price declines on the economic producibility of such reserves, and in projecting future rates of production;
•difficult and adverse conditions in the domestic and global capital and credit markets;
•lack of transportation and storage capacity as a result of oversupply, government regulations or other factors;
•lack of availability of drilling and production equipment and services;
•potential financial losses or earnings reductions resulting from our commodity price risk management program or any inability to manage our commodity risks;
•failure to realize expected value creation from property acquisitions and trades;
•access to capital and the timing of development expenditures;
•environmental, weather, drilling and other operating risks;
•regulatory changes, including potential shut-ins or production curtailments mandated by the Railroad Commission of Texas, the Oklahoma Corporation Commission and/or the Kansas Corporation Commission;
•competition in the oil and natural gas industry;
•loss of production and leasehold rights due to mechanical failure or depletion of wells and our inability to re-establish their production;
•our ability to service our indebtedness;
•any downgrades in our credit ratings that could negatively impact our cost of and ability to access capital;
•cost inflation;
•the potential for significant new tariffs and their impact on global oil, natural gas and NGL markets;
•political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the war in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage;
•evolving cybersecurity risks such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insiders or others with authorized access, cyber or phishing-attacks, ransomware, social engineering, physical breaches or other actions; and
•risks related to our ability to expand our business, including through the recruitment and retention of qualified personnel.
Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reservoir engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, our reserve and PV-10 estimates may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.
Should one or more of the risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MACH NATURAL RESOURCES LP
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
| March 31, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable – joint interest and other, net | |||||||||||
Accounts receivable – oil, gas, and NGL sales | |||||||||||
Short-term derivative assets | |||||||||||
Inventories | |||||||||||
Other current assets | |||||||||||
| Other current assets – related party | |||||||||||
Total current assets | |||||||||||
Oil and natural gas properties, using the full cost method: | |||||||||||
Proved oil and natural gas properties | |||||||||||
| Less: accumulated depreciation, depletion, amortization and impairment | ( | ( | |||||||||
Oil and natural gas properties, net | |||||||||||
Other property, plant and equipment | |||||||||||
Less: accumulated depreciation | ( | ( | |||||||||
Other property, plant and equipment, net | |||||||||||
Long-term derivative assets | |||||||||||
Other assets | |||||||||||
Operating lease assets | |||||||||||
Total assets | $ | $ | |||||||||
| LIABILITIES AND PARTNERS' CAPITAL | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accounts payable – related party | |||||||||||
Accrued liabilities | |||||||||||
Revenue payable | |||||||||||
Short-term derivative liabilities | |||||||||||
Current portion of operating lease liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Asset retirement obligations | |||||||||||
Long-term derivative liabilities | |||||||||||
Long-term portion of operating leases | |||||||||||
Other long-term liabilities | |||||||||||
Total long-term liabilities | |||||||||||
Commitments and contingencies (Note 10) | |||||||||||
Partners’ capital: | |||||||||||
| Partners’ capital | |||||||||||
Total liabilities and partners’ capital | $ | $ | |||||||||
The accompanying notes are an integral part of these financial statements.
1
MACH NATURAL RESOURCES LP
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per common unit data)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
Revenue | |||||||||||
Oil, natural gas, and NGL sales | $ | $ | |||||||||
Loss on oil and natural gas derivatives | ( | ( | |||||||||
Midstream revenue | |||||||||||
Product sales | |||||||||||
Total revenues | |||||||||||
Operating expenses | |||||||||||
Gathering and processing | |||||||||||
Lease operating expense | |||||||||||
Production taxes | |||||||||||
Midstream operating expense | |||||||||||
Cost of product sales | |||||||||||
Depreciation, depletion, amortization and accretion – oil and natural gas | |||||||||||
Depreciation and amortization – other | |||||||||||
General and administrative | |||||||||||
General and administrative – related party | |||||||||||
Total operating expenses | |||||||||||
(Loss) income from operations | ( | ||||||||||
Other (expense) income | |||||||||||
Interest expense | ( | ( | |||||||||
Loss on debt extinguishment | ( | ||||||||||
Other (expense) income, net | ( | ||||||||||
Total other expense | ( | ( | |||||||||
Net (loss) income | $ | ( | $ | ||||||||
| Net (loss) income per common unit: | |||||||||||
| Basic | $ | ( | $ | ||||||||
| Diluted | $ | ( | $ | ||||||||
| Weighted average common units outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of these financial statements.
2
MACH NATURAL RESOURCES LP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (UNAUDITED)
(in thousands)
| Common Units | Partners’ Capital | ||||||||||
| Balance at December 31, 2024 | $ | ||||||||||
| Net income | — | ||||||||||
| Distributions to unitholders | — | ( | |||||||||
| Equity compensation | — | ||||||||||
| Vesting of phantom units, net of units withheld for withholding taxes | ( | ||||||||||
| Common units issued in the public offering, net of underwriting fees and offering expenses | |||||||||||
| Balance at March 31, 2025 | $ | ||||||||||
| Balance at December 31, 2025 | $ | ||||||||||
| Net loss | — | ( | |||||||||
| Distributions to unitholders | — | ( | |||||||||
| Equity compensation | — | ||||||||||
| Vesting of phantom units, net of units withheld for withholding taxes | ( | ||||||||||
| Common units cancelled in IKAV acquisition final settlement (Note 3) | ( | ( | |||||||||
| Balance at March 31, 2026 | $ | ||||||||||
The accompanying notes are an integral part of these financial statements.
3
MACH NATURAL RESOURCES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net (loss) income | $ | ( | $ | ||||||||
| Adjustments to reconcile net income to cash provided by operating activities | |||||||||||
| Depreciation, depletion, amortization and accretion | |||||||||||
| Loss on derivative instruments | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Cash receipts on settlement of derivative contracts, net | |||||||||||
| Debt issuance costs and discount amortization | |||||||||||
| Equity based compensation | |||||||||||
| Adjustments to expected credit losses | ( | ||||||||||
| Loss (gain) on sale of assets | ( | ||||||||||
| Settlement of asset retirement obligations | ( | ( | |||||||||
| Changes in operating assets and liabilities increasing (decreasing) cash: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Revenue payable | ( | ||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||
| Inventories, other assets and other liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities | |||||||||||
| Capital expenditures for oil and natural gas properties | ( | ( | |||||||||
| Capital expenditures for other property and equipment | ( | ( | |||||||||
| Acquisition of assets | ( | ( | |||||||||
| Proceeds from sales of oil and natural gas properties | |||||||||||
| Proceeds from sales of other property and equipment | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from offering, net of offering costs | |||||||||||
| Repayments of borrowings on term note | ( | ||||||||||
| Payments of debt extinguishment costs | ( | ||||||||||
| Proceeds from borrowings on credit facilities | |||||||||||
| Repayments of borrowings on credit facilities | ( | ( | |||||||||
| Debt issuance costs | ( | ||||||||||
| Distributions to unitholders | ( | ( | |||||||||
| Withholding taxes paid on vesting of phantom units | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these financial statements.
4
1.Organization and Nature of Business
Mach Natural Resources LP (the “Company”) is a Delaware limited partnership that was formed for the purpose of effectuating an initial public offering (the “Offering”) that closed in October 2023. The Company’s common units representing limited partnership interests (the “common units”) are listed on The New York Stock Exchange under the symbol “MNR.” The Company is an independent upstream oil and gas company focused on the acquisition, development and production of oil, natural gas and natural gas liquid (“NGL”) reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas and the panhandle of Texas; the San Juan Basin region of New Mexico and Colorado; and the Permian Basin region of West Texas.
The Company is a holding partnership whose sole material asset consists of membership interests in Mach Natural Resources Intermediate LLC (“Intermediate”), which owns each of the Company’s operating subsidiaries.
The Company’s operations are governed by the provisions of its partnership agreement, executed by its general partner, Mach Natural Resources GP LLC (the “General Partner”) and the limited partners. The General Partner is managed and operated by the board of directors and executive officers of the General Partner. The members of the board of directors of the General Partner are appointed by the members of the General Partner, BCE-Mach Aggregator and Mach Resources in proportion to their respective limited partnership ownership in the Company.
Management has evaluated how the Company is organized and managed and identified a single reportable segment, which is the exploration and production of oil, natural gas and NGLs. Management considers the Company’s gathering, processing and marketing functions as ancillary to its oil and gas producing activities. All of the Company’s operations and assets are located in the United States, and its revenues are attributable to United States customers.
2.Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The unaudited consolidated financial statements included herein were prepared from records of the Company in accordance with generally accepted accounting principles in the United States (“US GAAP”) and include accounts of our wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated upon consolidation. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2025, as included in the Company’s Annual Report on Form 10-K. Results for interim periods are not necessarily indicative of results to be expected for the full year ending December 31, 2026. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals that are considered necessary for a fair statement of the financial information, have been included.
Use of Estimates
The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ from these estimates. The Company evaluates these estimates on an ongoing basis, using historical experience, consultation with experts and other methods the Company considers reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from the Company’s estimates. Any effects on the Company’s business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
Significant items subject to such estimates and assumptions include, but are not limited to, estimates of proved oil and natural gas reserves and related present value estimates of future net cash flows therefrom, the fair value determination of acquired assets and liabilities assumed in business combinations and the fair value estimates of commodity derivatives.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. These reclassifications had an immaterial effect on the previously reported total assets, total liabilities, partners’ capital, results of operations or cash flows.
5
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents for purposes of the financial statements. The Company maintains cash at financial institutions which may at times exceed federally insured amounts. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in this area.
Accounts Receivable
Accounts receivable primarily consists of receivables from joint interest owners on properties the Company operates and from sales of oil and natural gas production delivered to purchasers. The purchasers remit payment for production directly to the Company. Most payments for production are received within three months after the production date.
Accounts receivable are stated at amounts due from joint interest owners or purchasers, net of an allowance for credit losses. The Company extends credit to joint interest owners and generally does not require collateral, but typically has the ability to withhold future revenue disbursements to recover any non-payment of joint interest billings. Accounts receivable outstanding longer than the contractual payment terms are considered past due.
As of March 31, 2026, the Company had one customer that represented approximately 20.3 % of our total joint interest receivables. As of December 31, 2025, the Company had three customers that represented approximately 20.0 %, 13.5 % and 13.2 % of our total joint interest receivables.
Derivative Instruments
Oil and Natural Gas Operations
The Company uses the full cost method of accounting for its exploration and development activities. Under this method of accounting, costs of both successful and unsuccessful exploration and development activities are capitalized as proved oil and natural gas properties. This includes any internal costs that are directly related to exploration and development activities, but does not include any costs related to production, general corporate overhead or similar activities, which are expensed as incurred. Capitalized costs are depreciated using the unit of production method. Under this method, depletion is computed at the end of each period by multiplying total production for the period by a depletion rate. The depletion rate is determined by dividing the total unamortized cost base plus future development costs by a net equivalent proved reserves at the beginning of the period. The average depletion rate per barrel equivalent unit of production was $6.20 and $8.12 for the three months ended March 31, 2026 and 2025, respectively. Depreciation, depletion and amortization expense for oil and natural gas properties was $88.0 million and $59.1 million for the three months ended March 31, 2026 and 2025, respectively.
6
Under the full cost method, capitalized costs of oil and natural gas properties, net of accumulated depreciation, depletion and amortization, may not exceed the full cost “ceiling” at the end of each reporting period. The ceiling is calculated based on the present value of estimated future net cash flows from proved oil and gas reserves, discounted at 10%. The estimated future net revenues exclude future cash outflows associated with settling asset retirement obligations included in the net book value of oil and natural gas properties. Estimated future net cash flows are calculated using the preceding 12-months’ average price based on closing prices on the first day of each month. The net book value is compared to the ceiling limitation on a quarterly basis. The excess, if any, of the net book value above the ceiling limitation is charged to expense in the period in which it occurs and is not subsequently reinstated. The ceiling limitation computation is determined without regard to income taxes due to the Internal Revenue Service (“IRS”) recognition of the Company as a flow-through entity. No
Costs associated with unevaluated properties are excluded from the full cost pool until the Company has made a determination as to the existence of proved reserves. The Company assesses all items classified as unevaluated property on a quarterly basis for possible impairment. The Company assesses properties on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of the following factors, among others: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; the assignment of proved reserves; and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to amortization. As of March 31, 2026, and December 31, 2025, the Company had no properties excluded from the full cost pool.
Sales of oil and natural gas properties being amortized are accounted for as adjustments to the full cost pool, with no gain or loss recognized, unless the adjustments would significantly alter the relationship between capitalized costs and proved oil, natural gas, and NGL reserves. A significant alteration would not ordinarily be expected to occur upon the sale of reserves involving less than 25% of the proved reserve quantities of a cost center.
Other Property and Equipment, Net
Other property and equipment primarily consists of gathering systems, processing plants, and salt water disposal systems. Property and equipment are capitalized and recorded at cost, while maintenance and repairs are expensed as incurred. Depreciation of such property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from to 39 years. Depreciation expense for other property and equipment was $4.2 million and $2.4 million for the three months ended March 31, 2026 and 2025, respectively.
Inventories
| March 31, 2026 | December 31, 2025 | ||||||||||
Production equipment | $ | $ | |||||||||
Crude oil in storage | |||||||||||
Total | $ | $ | |||||||||
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Debt Issuance Costs
On February 27, 2025, the Company capitalized $14.8 million of new debt issuance costs related to the New Credit Agreement. The remaining unamortized debt issuance costs of $0.5 million from the Revolving Credit Agreement were retained and added to the additional amount of debt issuance costs associated with the New Credit Agreement and are being amortized over the New Credit Agreement’s term. See Note 6 for further discussion.
The Company capitalized $3.8 million of new debt issuance costs related to the First Amendment to the New Credit Agreement on September 12, 2025. See Note 6 for further discussion.
Other assets include capitalized costs related to the New Credit Agreement of $19.1 million, net of accumulated amortization of $4.7 million as of March 31, 2026. As of December 31, 2025, other assets include capitalized costs related to the New Credit Agreement of $19.1 million, net of accumulated amortization of $3.5 million. These costs are being amortized over the terms of the related credit agreements and are reported as interest expense on the Company’s statement of operations.
The Company capitalized $6.5 million of new debt issuance costs related to the aggregate term loan commitments under the First Amendment to the New Credit Agreement on September 12, 2025. See Note 6 for further discussion.
Debt issuance costs associated with the Company’s term loan are presented as a reduction of the carrying value of long-term debt on the Company’s balance sheet. As of March 31, 2026 and December 31, 2025, the Company had unamortized debt issuance costs of $5.5 million and $5.9 million, respectively, in relation to the aggregate term loan commitments under the First Amendment to the New Credit Agreement.
Income Taxes
The Company is a limited partnership treated as a partnership for federal and state income tax purposes, with the exception of the state of Texas, with income tax liabilities and/or benefits of the Company passed through to partners. As such, with the exception of the state of Texas, we are not a taxable entity, we do not directly pay federal and state income tax and recognition has not been given to federal and state income taxes for our operations, except as described below.
Limited partnerships are subject to state income taxes in the state of Texas. Due to immateriality, income taxes related to the Texas franchise tax have been included in general and administrative expenses on the statement of operations and no deferred tax amounts were calculated.
The Company disallows the recognition of tax positions not deemed to meet a “more-likely-than not” threshold of being sustained by the applicable tax authority. The Company’s policy is to reflect interest and penalties related to uncertain tax positions in general and administrative expense, when and if they become applicable. The Company has not recognized any potential interest or penalties in its financial statements for the three months ended March 31, 2026. The Company’s tax years 2025, 2024, and 2023 remain open for examination by state authorities.
Asset Retirement Obligations
The Company records the fair value of the future legal liability for an asset retirement obligation (“ARO”) in the period in which the liability is incurred (at the time the wells are drilled or acquired), with the offsetting increase to property cost. These property costs are depreciated on a unit-of-production basis within the full cost pool. The liability accretes each period until it is settled or the well is sold, at which time the liability is satisfied.
The Company estimates a fair value of the obligation on each well in which it owns an interest by identifying costs associated with the future downhole plugging, dismantlement and removal of production equipment and facilities, and the restoration and reclamation of a field’s surface to a condition similar to that existing before oil and natural gas extraction or saltwater disposal began.
In general, the amount of ARO and the costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices that are escalated by an assumed inflation factor up to the estimated settlement date, which is then discounted back to the date that the abandonment obligation was incurred using an estimated credit adjusted rate. If the estimated ARO changes materially, an adjustment is recorded to both the ARO and the long-lived asset. Revisions to estimated AROs can result from changes in retirement cost estimates, revisions to estimated inflation rates and
8
| March 31, 2026 | March 31, 2025 | ||||||||||
| Asset retirement obligation at beginning of period | $ | $ | |||||||||
Liabilities assumed in acquisitions | |||||||||||
| Liabilities incurred | |||||||||||
| Liabilities settled | ( | ( | |||||||||
| Accretion expense | |||||||||||
| Asset retirement obligation at end of period | $ | $ | |||||||||
Revenue Recognition
Sales of oil, natural gas and NGLs are recognized when production is sold to a purchaser at a fixed or determinable price, delivery has occurred, control has transferred and collectability of the revenue is probable. The Company’s performance obligations are satisfied at a point in time. This occurs when control is transferred to the purchaser upon delivery of contract specified production volumes at a specified point. The pricing provisions in the Company’s contracts are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, the quality of the oil or natural gas and the prevailing supply and demand conditions. As a result, the price of the oil, natural gas and NGL fluctuates to remain competitive with other available oil, natural gas and NGL supplies. The payment date is usually within 30 to 90 days of the end of the calendar month in which the commodity is delivered.
Our major market risk exposure is in the pricing applicable to our oil and natural gas production. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices applicable to our natural gas production. Pricing for oil and natural gas production is historically volatile and unpredictable, and the Company expects this volatility to continue in the future. The prices the Company receives for production depend on many factors outside of our control. See Note 7 for a discussion of the Company’s management of price volatility.
Oil Sales
The Company’s oil sales contracts are structured where it delivers oil to the purchasers at the wellhead, where the purchaser takes custody, title and risk of loss of the product. Under this arrangement, the Company recognizes revenue when control transfers to the purchaser at the delivery point based on the price received from the purchaser. Oil revenues are recorded net of any third-party transportation fees and other applicable differentials in the Company’s statement of operations.
Natural Gas and NGL Sales
Under the Company’s natural gas and NGL sales contracts, it first delivers wet natural gas to a midstream processing entity. After processing, the residue gas is transported to the purchaser at the inlet to certain natural gas pipelines, where the purchaser takes control, title and risk of loss of the product. The NGLs are delivered to the purchaser at the tailgate of the midstream processing plant, where the purchaser takes control, title and risk of loss of the product. For both natural gas sales and NGL sales, the Company evaluates whether it is the principal or the agent in the transaction. For those contracts where the Company has concluded it is the principal and the ultimate third party is its customer, the Company recognizes revenue on a gross basis, with gathering and processing fees presented as an expense in its statement of operations.
Midstream Revenue and Product Sales
The Company’s gathering and processing revenue is generated from owned gathering and compression systems and processing plants acquired in the Company’s acquisitions. The Company charges a gathering, compression, processing rate per MMBtu transported through the gathering system and processing plant. The Company also gathers and disposes of salt water from producing wells through an owned pipeline system and disposal wells. The Company charges a fixed rate per barrel of water for gathering and disposal. Fees are recognized as revenue based on measured volume at the specified delivery points when the associated service is performed.
9
Product sales are generated from the Company’s sale of natural gas, oil and NGL production purchased from third parties and subsequently gathered and processed through the Company’s owned midstream facilities. Product sales include activity from certain third-party percent-of-proceeds contracts where the Company keeps a contractually based percentage of proceeds from the sale of natural gas and NGL production, as payment for processing natural gas from the third parties. The Company retains control of the purchased natural gas and NGLs prior to delivery to the purchaser and satisfies its performance obligations by transferring control of the product at the delivery point and recognizes revenue based on the contract price received from the purchaser. The costs of buying natural gas, oil and NGL production from third-party shippers are included as costs of product sales on the statement of operations.
Transaction Price Allocated to Remaining Performance Obligations
For the Company’s product sales that are short-term in nature with a contract term of one year or less, the Company has utilized the practical expedient that exempts it from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. For the Company’s product sales that have a contract term greater than one year, the Company has utilized the practical expedient, which states that a company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Each unit of product delivered to the customer represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.
Prior-Period Performance Obligations
The Company records revenue in the month production is delivered and control passes to the customer. However, settlement statements and payment may not be received for 30 to 90 days after the date production occurs, and as a result, the Company is required to estimate the amount of production that was delivered and the price that will be received for the sale of the product. The Company records variances between its estimates and actual amounts received in the month payment is received and such variances have historically not been significant.
Concentrations
The Company is subject to risk resulting from the concentration of its crude oil and natural gas sales and receivables with several significant purchasers. The following purchasers each accounted for more than 10% of the Company’s revenues for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Purchaser A | % | * | |||||||||
| Purchaser B | % | % | |||||||||
| Purchaser C | % | % | |||||||||
| Purchaser D | * | % | |||||||||
* Purchaser did not account for greater than 10% of oil, natural gas, and NGL sales for the period.
The Company’s receivables as of March 31, 2026 and 2025 from oil and gas sales are typically concentrated with the same counterparties noted above. The Company does not believe the loss of any single purchaser would materially impact its operating results, as crude oil and natural gas are fungible products with well-established markets and numerous purchasers.
Contract Balances
Cash received relating to future performance obligations is deferred and recognized when all revenue recognition criteria are met. Receivables from contracts with customers were $165.5 million and $160.2 million as of March 31, 2026 and December 31, 2025, respectively. Receivables from contracts with customers were $124.9 million and $132.9 million as of March 31, 2025 and December 31, 2024, respectively, and are included in accounts receivable – oil, gas, and NGL sales in
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the Company’s consolidated balance sheets. Contract liabilities generated from such deferred revenue are not considered to be material as of March 31, 2026. The Company’s product sales and marketing contracts do not give rise to contract assets.
Revenue Disaggregation
The following table displays the revenue disaggregated and reconciles disaggregated revenue to the revenue reported (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenues: | |||||||||||
| Oil | $ | $ | |||||||||
| Natural gas | |||||||||||
| NGL | |||||||||||
| Gross oil, natural gas, and NGL sales | |||||||||||
| Transportation and gathering | ( | ( | |||||||||
| Net oil, natural gas, and NGL sales | $ | $ | |||||||||
Earnings per Common Unit
Supplemental Cash Flow Information
Supplemental disclosures to the statements of cash flows are presented below (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Supplemental disclosure of non-cash transactions: | |||||||||||
| Change in accrued capital expenditures including amounts in accounts payable | $ | $ | |||||||||
| Asset retirement cost capitalized | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for lease liabilities | $ | $ | |||||||||
| Change in accrued distributions | $ | $ | |||||||||
| Change in accrued offering costs | $ | $ | |||||||||
| Change in accrued debt issuance costs | $ | $ | |||||||||
| Change in accrued acquisition costs | $ | ( | $ | ||||||||
| Common units cancelled in IKAV acquisition final settlement | $ | ( | $ | ||||||||
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. The guidance is effective for the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The amendments in this update are to be applied on a prospective basis, with the option for retrospective application. Early adoption is permitted. Management is currently evaluating this ASU to determine its impact on the Company’s disclosures but does not believe the adoption of the update will impact the Company’s financial position, results of operations or liquidity.
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3.Acquisitions and Divestitures
IKAV Acquisition
On July 9, 2025, the Company entered into a membership interest purchase agreement (the “IKAV Purchase Agreement”) with VEPU Inc. and Simlog Inc. (collectively, the “IKAV Sellers”), pursuant to which the Company would acquire one hundred percent (100 %) of the IKAV Sellers’ membership interests in certain rights, titles and interests in oil and gas properties, rights and related assets located in certain designated lands in the San Juan Basin of New Mexico and Colorado. The transaction closed on September 16, 2025 for consideration of approximately $759.6 million comprised of (i) $349.8 million in cash and (ii) 30.6 million common units (the “IKAV Unit Consideration”), subject to certain customary purchase price adjustments (the “IKAV Acquisition”). On May 6, 2026, the Company and the IKAV Sellers agreed to cancel 1.4 million common units from the IKAV Unit Consideration as part of customary purchase price adjustments related to the final settlement, and the equity consideration had a final value of approximately $390.8 million.
This purchase was accounted for as a business combination, under the acquisition method, as the Company obtained control of a business by obtaining the legal right to use and develop the oil and natural gas properties included in the IKAV Purchase Agreement, as well as additional oil and gas related assets that can be used to enhance the value of the business. The table below reflects the preliminary fair value estimates of the assets acquired and liabilities assumed as of the acquisition date. Any adjustments to preliminary amounts (such as accrued liabilities or other long-term liabilities) or recognition of additional assets acquired or liabilities assumed, may occur as additional information is obtained about facts and circumstances that existed as of the acquisition date during the measurement period, which will not exceed 12 months form the date of the IKAV Acquisition. See Note 8 for additional information regarding fair value measurements. Below is a reconciliation of the assets acquired and liabilities assumed (in thousands):
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| Initial IKAV Acquisition | Adjustments | As of March 31, 2026 IKAV Acquisition | |||||||||||||||
| Consideration transferred: | |||||||||||||||||
| Common units issued | ( | (b) | |||||||||||||||
| Closing price of common units on September 15, 2025 | $ | $ | $ | ||||||||||||||
| Equity consideration | $ | $ | ( | (b) | $ | ||||||||||||
| Cash consideration | (a) | ||||||||||||||||
| Total acquisition consideration | $ | $ | ( | $ | |||||||||||||
| Assets acquired: | |||||||||||||||||
| Proved oil and natural gas properties | $ | $ | (a) | $ | |||||||||||||
| Accounts receivable | ( | (a) | |||||||||||||||
| Short-term derivative assets | |||||||||||||||||
| Inventories | ( | (a) | |||||||||||||||
| Other current assets | ( | (a) | |||||||||||||||
| Other property, plant and equipment | ( | (a) | |||||||||||||||
| Other assets | ( | (a) | |||||||||||||||
| Total assets acquired | ( | ||||||||||||||||
| Liabilities assumed: | |||||||||||||||||
| Outstanding checks in excess of bank balance | |||||||||||||||||
| Accounts payable and accrued liabilities | (a) | ||||||||||||||||
| Revenue payable | (a) | ||||||||||||||||
| Other current liabilities | |||||||||||||||||
| Asset retirement obligations | |||||||||||||||||
| Long-term derivative liabilities | |||||||||||||||||
| Other long-term liabilities | ( | (a) | |||||||||||||||
| Total liabilities assumed | ( | ||||||||||||||||
| Net assets acquired | $ | $ | ( | $ | |||||||||||||
a.Adjustment reflects additional accounting data received and processed subsequent to the acquisition date. The initial purchase price allocation considered available data at the time of disclosure.
b.Adjustment reflects a cancellation of common units transferred. The initial purchase price allocation considered available data at the time of disclosure.
For the three months ending March 31, 2026, the Company has recognized $89.6 million in revenues and earnings of $28.4 million related to the IKAV Acquisition. The Company has recognized total transaction and advisory related expenses of $14.4 million, of which $0.1 million were recognized as a reduction and are presented in general and administrative expense on the Company’s statement of operations for the three months ended March 31, 2026 and $14.5 million were recognized in general and administrative expense during the fourth quarter of 2025. Additionally, the Company capitalized
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certain debt issuance costs associated with the Company’s New Credit Agreement in connection with the acquisition as discussed in Note 2.
Sabinal Acquisition
On July 9, 2025, the Company entered into a Purchase and Sale Agreement (the “Sabinal PSA”) with Sabinal Energy Operating, LLC, Sabinal Resources, LLC and Sabinal CBP, LLC, pursuant to which the Company would acquire certain oil and gas assets located in certain designated lands in the Permian Basin. The transaction closed on September 16, 2025 for consideration of approximately $444.4 million comprised of (i) $199.3 million in cash and (ii) 19.2 million common units (the “Sabinal Unit Consideration”), subject to certain customary purchase price adjustments (the “Sabinal Acquisition”). On February 7, 2026, 0.2 million common units were cancelled from the Sabinal Unit Consideration as part of customary purchase price adjustments related to the final settlement, and the equity consideration had a final value of approximately $253.9 million.
This purchase was accounted for as an asset acquisition as substantially all of the fair value of acquired assets could be allocated to a single identified asset group of proved oil and natural gas properties. The table below reflects the fair value estimates of the assets acquired and liabilities assumed as of the acquisition date. See Note 8 for additional information regarding fair value measurements. Below is a reconciliation of the assets acquired and liabilities assumed (in thousands):
| Initial Sabinal Acquisition | Adjustments | Final Sabinal Acquisition | |||||||||||||||
| Consideration transferred: | |||||||||||||||||
| Common units issued | ( | (b) | |||||||||||||||
| Closing price of common units on September 15, 2025 | $ | $ | $ | ||||||||||||||
| Equity consideration | $ | $ | ( | (b) | $ | ||||||||||||
| Cash consideration | ( | (a) | |||||||||||||||
| Capitalized transaction costs | (a) | ||||||||||||||||
| Less: purchase price adjustment receivable | ( | (a) | |||||||||||||||
| Total acquisition consideration | $ | $ | $ | ||||||||||||||
| Assets acquired: | |||||||||||||||||
| Proved oil and natural gas properties | $ | $ | (a) | $ | |||||||||||||
| Accounts receivable – joint interest | (a) | ||||||||||||||||
| Inventories | ( | (a) | |||||||||||||||
| Other property, plant and equipment | (a) | ||||||||||||||||
| Other assets | |||||||||||||||||
| Short-term derivative assets | |||||||||||||||||
| Long-term derivative assets | (a) | ||||||||||||||||
| Total assets acquired | |||||||||||||||||
| Liabilities assumed: | |||||||||||||||||
| Accrued liabilities | (a) | ||||||||||||||||
| Revenue payable | ( | (a) | |||||||||||||||
| Asset retirement obligations | |||||||||||||||||
| Total liabilities assumed | |||||||||||||||||
| Net assets acquired | $ | $ | $ | ||||||||||||||
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a.Adjustment reflects additional accounting data received and processed subsequent to the acquisition date. The initial purchase price allocation considered available data at the time of disclosure.
b.Adjustment reflects a cancellation of common units transferred. The initial purchase price allocation considered available data at the time of disclosure.
XTO Acquisition
On March 25, 2025, the Company entered into an Equity Interest Purchase Agreement (“XTO EIPA”), pursuant to which the Company would acquire certain oil and gas assets located in Oklahoma, Kansas and Wyoming, for consideration of $60.0 million in cash, subject to certain customary purchase price adjustments (the “XTO Acquisition”).
The transaction closed on April 30, 2025. This purchase was accounted for as a business combination, under the acquisition method, as the Company obtained control of a business by obtaining the legal right to use and develop the oil and natural gas properties included in the XTO EIPA, as well as additional oil and gas related assets that can be used to enhance the value of the business. The table below reflects the fair value estimates of the assets acquired and liabilities assumed as of the acquisition date. See Note 8 for additional information regarding fair value measurements. Below is a reconciliation of the assets acquired and liabilities assumed (in thousands):
| Initial XTO Acquisition | Adjustments | Final XTO Acquisition | |||||||||||||||
| Consideration transferred: | |||||||||||||||||
| Cash consideration | $ | $ | (a) | $ | |||||||||||||
| Less: purchase price adjustment receivable | ( | (a) | ( | ||||||||||||||
| Total acquisition consideration | $ | $ | ( | $ | |||||||||||||
| Assets acquired: | |||||||||||||||||
| Proved oil and natural gas properties | $ | $ | (a) | $ | |||||||||||||
| Accounts receivable – joint interest | $ | ( | (a) | ||||||||||||||
| Other property and equipment | $ | ( | (a) | ||||||||||||||
| Other assets | ( | (a) | |||||||||||||||
| Total assets acquired | ( | ||||||||||||||||
| Liabilities assumed: | |||||||||||||||||
| Revenue payable | (a) | ||||||||||||||||
| Accrued liabilities | |||||||||||||||||
| Asset retirement obligations | |||||||||||||||||
| Total liabilities assumed | |||||||||||||||||
| Net assets acquired | $ | $ | ( | $ | |||||||||||||
a.Adjustment reflects additional accounting data received and processed subsequent to the acquisition date. The initial purchase price allocation considered available data at the time of disclosure.
Flycatcher Acquisition
On December 20, 2024, the Company entered into a Purchase and Sale Agreement (the “Flycatcher PSA”) to purchase certain oil and gas assets near our recently acquired oil and gas assets located in the Ardmore Basin of Oklahoma for consideration of $29.8 million in cash, subject to certain customary purchase price adjustments (the “Flycatcher Acquisition”).
The transaction closed on January 31, 2025 and the Company borrowed $23.0 million on the Revolving Credit Agreement to fund the Flycatcher Acquisition. This purchase was accounted for as an asset acquisition as substantially all of the fair value of acquired assets could be allocated to a single identified asset group of proved oil and natural gas properties. The table below reflects the fair value estimates of the assets acquired and liabilities assumed as of the acquisition date. See
15
Note 8 for additional information regarding fair value measurements. Below is a reconciliation of the assets acquired and liabilities assumed (in thousands):
| Final Flycatcher Acquisition | |||||
| Consideration transferred: | |||||
| Cash consideration | $ | ||||
| Capitalized transaction costs | |||||
| Total acquisition consideration | $ | ||||
| Assets acquired: | |||||
| Proved oil and natural gas properties | $ | ||||
| Other assets | |||||
| Total assets to be acquired | |||||
| Liabilities assumed: | |||||
| Revenue suspense | |||||
| Asset retirement obligations | |||||
| Total liabilities assumed | |||||
| Net assets acquired | $ | ||||
4. Property and Equipment
The Company’s property and equipment consists of the following (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Oil and natural gas properties | |||||||||||
| Proved properties | $ | $ | |||||||||
| Accumulated depreciation, depletion, amortization and impairment | ( | ( | |||||||||
| Oil and natural gas properties, net | |||||||||||
| Other property and equipment | |||||||||||
| Gas gathering system | |||||||||||
| Gas processing plants | |||||||||||
| Water disposal assets | |||||||||||
| Vehicles | |||||||||||
| Other assets | |||||||||||
| Total other property and equipment | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Total other property and equipment, net | $ | $ | |||||||||
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5. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Operating expenses | $ | $ | |||||||||
| Capital expenditures | |||||||||||
| Payroll costs | |||||||||||
| Derivative settlements | |||||||||||
| Ad-valorem, severance and other tax | |||||||||||
| Midstream shipper payable | |||||||||||
| Interest payable | |||||||||||
| Purchaser payable | |||||||||||
| General, administrative, and other | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
6. Long-Term Debt
New Credit Agreement
On February 27, 2025, the Company entered into the New Credit Agreement, among the Company, the lenders and issuing banks party thereto from time to time and Truist Bank, as the administrative agent and collateral agent. The New Credit Agreement is secured by substantially all of our assets.
The New Credit Agreement has (i) an initial borrowing base and elected commitment amount of $750.0 million, with a maximum commitment amount of $2.0 billion subject to borrowing base availability, (ii) a maturity date of February 27, 2029 and (iii) an interest rate equal to, at the Company’s election, (a) term SOFR (subject to a 0.10 % per annum adjustment) plus a margin ranging from 3.00 -4.00 % per annum or (b) a base rate plus a margin ranging from 2.00 -3.00 % per annum, with the margin dependent upon borrowing base utilization at the time of determination. The Company is also required to pay a commitment fee of 0.50 % per annum on the daily unused portion of the current aggregate commitments under the New Credit Agreement.
The New Credit Agreement’s borrowing base is redetermined semi-annually, in April and October. The New Credit Agreement requires the Company to maintain as of the last day of each fiscal quarter (i) a consolidated total net leverage ratio of less than or equal to 3.00 to 1.00, and (ii) a current ratio of no less than 1.00 to 1.00.
The Company used borrowings from the New Credit Agreement, together with cash on hand and proceeds from the February 2025 Offering, to repay the Term Loan Credit Agreement and the Revolving Credit Agreement in full.
On September 12, 2025, the Company entered into the First Amendment, together with certain of its subsidiaries party thereto, the lenders and issuing banks party thereto and Truist Bank, as administrative and collateral agent (the “First Amendment”). The First Amendment, among other things, (a) removes the 0.10 % per annum credit spread adjustment otherwise applicable to the determination of Term SOFR (as defined in the New Credit Agreement), (b) excludes up to $750.0 million in principal amount of Borrowing Base Reduction Debt (as defined in the New Credit Agreement) issued prior to December 31, 2025 from the provisions otherwise requiring a borrowing base reduction as a result of the issuance of such indebtedness and (c) provides for (i) a $700.0 million aggregate increase in the borrowing base under the New Credit Agreement and (ii) the establishment of aggregate term loan commitments (prior to giving effect to any prior funding of term loans) in an amount of $450.0 million and the funding of any unfunded term loan commitments thereunder and increase the Aggregate Elected Revolving Commitment Amount (as defined in the New Credit Agreement) to $1.0 billion.
The Company used increased borrowings from the New Credit Agreement, together with the IKAV Unit Consideration and the Sabinal Unit Consideration, to fund the IKAV Acquisition and the Sabinal Acquisition.
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As of March 31, 2026, there were $1.14 billion of outstanding borrowings under the New Credit Agreement with $5.0 million in outstanding letters of credit, and the remaining availability under the New Credit Agreement was $305.0 million. The effective interest rate as of March 31, 2026 was 7.7 %.
Prior Credit Facilities
Term Loan Credit Agreement and Revolving Credit Agreement
On December 28, 2023, the Company entered into (i) a senior secured term loan credit agreement (the “Term Loan Credit Agreement”) with the lenders party thereto, Texas Capital Bank, as agent, and Chambers Energy Management, LP, as arranger, and (ii) a senior secured revolving credit agreement with a syndicate of lenders, including MidFirst Bank as the administrative agent.
Loans advanced to the Company under the Term Loan Credit Agreement were secured by a first-priority security interest on substantially all of our assets. The Term Loan Credit Agreement had (i) an aggregate principal amount of $825.0 million, (ii) a maturity date of December 31, 2026 and (iii) an interest rate equal to the three-month SOFR plus 6.50 % plus a credit spread adjustment equal to 0.15 %, provided that the three-month SOFR will not be less than 3.00 %. The Term Loan Credit Agreement included customary covenants, mandatory repayments and events of default of financings of this type.
On February 27, 2025, the Company used borrowings from the New Credit Agreement, together with cash on hand and proceeds from the February 2025 Offering, to repay the existing amounts outstanding under, and terminate, the Term Loan Credit Agreement. The termination of the Term Loan Credit Agreement was treated as a debt extinguishment. Accordingly, the Company recorded $18.5 million in debt extinguishment costs, which included $10.8 million related to the write-off of all unamortized discount and debt issuance costs and $7.7 million related to prepayment penalties.
Loans advanced to the Company under the Revolving Credit Agreement were secured by a super-priority security interest on substantially all of our assets. The Revolving Credit Agreement had (i) a maximum available principal amount of $75.0 million, with maximum commitments equal to $75.0 million, (ii) a maturity date of December 28, 2026 and (iii) an interest rate equal to the one, three, or six month SOFR, at the Company’s election, plus a credit spread adjustment equal to 0.10 %, 0.15 %, or 0.25 %, respectively, in each case, plus 3.00 %, provided that the applicable tenor SOFR will not be less than 3.50 %. The Revolving Credit Agreement included customary covenants, mandatory repayments and events of default of financings of this type. The Company was also required to pay a commitment fee of 0.50 % per annum on the average daily unused portion of the current aggregate commitments under the Revolving Credit Agreement.
On January 31, 2025, the Company borrowed $23.0 million under the Revolving Credit Agreement to fund the Flycatcher Acquisition.
On February 27, 2025, the Company used borrowings under the New Credit Agreement to repay the existing amounts outstanding under and terminate the existing Revolving Credit Agreement. The termination of the Revolving Credit Agreement was treated as a debt modification based on the composition of the bank syndication in the New Credit Agreement and the change in borrowing capacity.
The Company has not guaranteed the debt or obligations of any other party, nor does the Company have any other arrangements or relationships with other entities that could potentially result in consolidated debt or losses.
7. Derivative Contracts
The Company uses derivative contracts to reduce exposure to fluctuations in commodity prices. These transactions are in the form of fixed price swaps, basis swaps and costless collars. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues from favorable price changes. The Company does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.
Under fixed price swap contracts, the Company receives a fixed price for the contract and pays a floating market price to the counterparty over a specified period for a contracted volume. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty. Crude oil derivative contracts are indexed and settled based on NYMEX WTI pricing. Natural gas derivative contracts are indexed and settled based on NYMEX Henry Hub (“NYMEX HH”) pricing.
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The Company reports the fair value of derivatives on the balance sheet in derivative contracts assets and derivative contracts liabilities as either current or noncurrent based on the timing of expected future cash flows of individual trades. See Note 8 for additional information regarding fair value measurements.
The following table summarizes the open fixed price swap positions as of March 31, 2026, related to oil production:
| Period | Index | Volume (Mbbl) | Weighted Average Fixed Price | |||||||||||||||||
| Remaining 2026 | NYMEX WTI | $ | ||||||||||||||||||
| 2027 | NYMEX WTI | |||||||||||||||||||
| 2028 | NYMEX WTI | |||||||||||||||||||
The following table summarizes the open fixed price swap positions as of March 31, 2026, related to natural gas production:
| Period | Index | Volume (Bbtu) | Weighted Average Fixed Price | |||||||||||||||||
| Remaining 2026 | NYMEX HH | $ | ||||||||||||||||||
| 2027 | NYMEX HH | |||||||||||||||||||
| 2028 | NYMEX HH | |||||||||||||||||||
| 2029 | NYMEX HH | |||||||||||||||||||
Each two-way costless collar has a set floor and ceiling price for the hedged production. They are settled monthly based on differences between the floor and ceiling prices specified in the contract and the referenced settlement price. If the applicable monthly price indices are outside of the ranges set by the floor and ceiling prices in the collar contracts, the Company will cash-settle the difference with the hedge counterparty. When the referenced settlement price is less than the floor price in the contract, the Company receives an amount from the counterparty based on the price difference multiplied by the hedged contract volume. Similarly, when the referenced settlement price exceeds the ceiling price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the hedged contract
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volume. No payment is due from either party if the referenced settlement price is within the range set by the floor and ceiling prices. Crude oil derivative contracts are indexed and settled based on NYMEX WTI pricing.
The following table summarizes the open costless collar positions as of March 31, 2026, related to oil production:
| Period | Index | Volume (Mbbl) | Weighted Average Floor Price | Weighted Average Ceiling Price | ||||||||||||||||||||||
| Remaining 2026 | NYMEX WTI | $ | $ | |||||||||||||||||||||||
| 2027 | NYMEX WTI | |||||||||||||||||||||||||
In addition, the Company has entered into oil basis swap positions. These instruments are arrangements that guarantee a fixed price differential to Argus WTI Midland TMA from a specified delivery point. The Company receives the fixed price differential and pays the floating market price differential to the counterparty for the hedged commodity.
The following table summarizes the open basis swap positions as of March 31, 2026, related to oil production:
| Period | Index | Volume (Mbbl) | Weighted Average Fixed Price | |||||||||||||||||
| Remaining 2026 | Argus TMA | $ | ||||||||||||||||||
Balance Sheet Presentation. The Company has master netting agreements with all of its derivative counterparties and presents its derivative assets and liabilities with the same counterparty on a net basis on the balance sheet. The following table presents the gross amounts of recognized derivative assets, the amounts that are subject to offsetting under master netting arrangements and the net recorded fair values as recognized on the balance sheet (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
Derivative contracts – current, gross | $ | $ | |||||||||
Netting arrangements | ( | ( | |||||||||
Derivative contracts – current, net | $ | $ | |||||||||
Derivative contracts – long-term, gross | $ | $ | |||||||||
Netting arrangements | ( | ||||||||||
Derivative contracts – long-term, net | $ | $ | |||||||||
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The following table presents the gross amounts of recognized derivative liabilities, the amounts that are subject to offsetting under master netting arrangements and the net recorded fair values as recognized on the balance sheet (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
Derivative contracts – current, gross | $ | ( | $ | ( | |||||||
Netting arrangements | |||||||||||
Derivative contracts – current, net | $ | ( | $ | ||||||||
Derivative contracts – long-term, gross | $ | ( | $ | ( | |||||||
Netting arrangements | |||||||||||
Derivative contracts – long-term, net | $ | ( | $ | ( | |||||||
Gains and Losses. The following table presents the settlement and mark-to-market (“MTM”) gains and losses presented as a loss or gain on derivatives in the statement of operations for the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
Settlements of oil derivatives | $ | ( | $ | ||||||||
| Settlements of natural gas derivatives | |||||||||||
MTM (losses) gains on oil derivatives, net | ( | ||||||||||
| MTM (losses) on natural gas derivatives, net | ( | ( | |||||||||
| Total (losses) on derivative contracts | $ | ( | $ | ( | |||||||
8. Fair Value Measurements
Fair value measurement is established by a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
Level 1 — Quoted prices are available in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 — Quoted prices for similar assets or liabilities in active markets or observable inputs for assets or liabilities in non-active markets.
Level 3 — Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources.
Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
Fair Value on a Recurring Basis
Derivative Contracts. The Company determines the fair value of its derivative contracts using industry standard models that consider various assumptions including current market and contractual prices for the underlying instruments, time
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value, and nonperformance risk. Substantially all of these inputs are observable in the marketplace throughout the full term of the contract and can be supported by observable data.
The following table provides fair value measurement information for financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025 (in thousands):
| Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||||||
| As of March 31, 2026 | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Commodity derivative instruments | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Commodity derivative instruments | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Commodity derivative instruments | $ | $ | $ | $ | |||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Commodity derivative instruments | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Fair Value on a Non-Recurring Basis
The Company determines the estimated fair value of its asset retirement obligations by calculating the present value of estimated cash flows related to plugging and abandonment liabilities using level 3 inputs. The significant inputs used to calculate such liabilities include estimates of costs to be incurred, the Company’s credit adjusted discount rates, inflation rates and estimated dates of abandonment. The asset retirement liability is accreted to its present value each period and the capitalized asset retirement cost is depleted with proved oil and natural gas properties using the unit of production method.
Business Combinations
Proved properties acquired as a result of business combinations were valued using an income approach based on underlying reserves projections as of the acquisition date. The income approach is considered a Level 3 fair value estimate and includes significant assumptions of future production, commodity prices, operating and capital cost estimates, the weighted average cost of capital for industry peers, which represents the discount factor, and risk adjustment factors based on reserve category. Price assumptions were based on observable market pricing, adjusted for historical differentials, while cost estimates were based on current observable costs inflated based on historical and expected future inflation.
Fair Value of Other Financial Instruments
The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, accounts payable, revenue payable, accrued interest payable, and other current liabilities approximate fair value due to the short-term maturities of these instruments.
The carrying amount of the Company’s credit agreements approximate fair value, as the current borrowing base rate does not materially differ from market rates of similar borrowings.
9. Equity Compensation and Deferred Compensation Plan
Equity-based compensation includes unit-based payment awards that are issued to employees and non-employees in exchange for services provided to the Company. Equity-classified unit-based payment awards are recognized at fair value on the grant date and amortized over the requisite service period. For awards with service-based vesting conditions only, the Company recognizes compensation cost using straight-line attribution. The Company uses accelerated attribution for awards that contain market or performance-based vesting conditions. The Company recognizes forfeitures as they occur.
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Equity-based compensation is presented within general and administrative expense on our consolidated statements of operations.
On October 27, 2023, the Company adopted a new long-term incentive plan (the “Long-Term Incentive Plan”) for employees, consultants and directors in connection with the Offering. The Company issues phantom units (“Time-Based Phantom Units”) to certain employees of Mach Resources LLC (“Mach Resources”) and directors of the Company as compensation for services rendered to the Company. The Time-Based Phantom Unit awards for all employees of Mach Resources vest ratably on the first anniversaries of the date of the grant, subject to the employee’s continued employment. Within 60 days of the vesting of a Time-Based Phantom Unit, the employee will receive a common unit of the Company. Each Time-Based Phantom Unit was granted with a corresponding distribution equivalent right (“DER”), which entitles the employee to receive a payment equal to the total distributions paid by the Company in respect of a common unit of the Company during the time the applicable phantom unit is outstanding. Payment of a DER occurs when its corresponding phantom unit vests, and in the event such phantom unit is forfeited, the corresponding DER is also forfeited.
| Time-Based Phantom Units | Weighted Average Grant Date Fair Value | Performance Phantom Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Unvested at December 31, 2025 | $ | $ | |||||||||||||||||||||
| Granted | $ | $ | |||||||||||||||||||||
| Vested | ( | $ | $ | ||||||||||||||||||||
| Forfeited/Cancelled | ( | $ | $ | ||||||||||||||||||||
| Unvested at March 31, 2026 | $ | $ | |||||||||||||||||||||
| Time-Based Phantom Units | Weighted Average Grant Date Fair Value | Performance Phantom Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Unvested at December 31, 2024 | $ | $ | |||||||||||||||||||||
| Granted | $ | $ | |||||||||||||||||||||
| Vested | ( | $ | $ | ||||||||||||||||||||
| Forfeited/Cancelled | ( | $ | $ | ||||||||||||||||||||
| Unvested at March 31, 2025 | $ | $ | |||||||||||||||||||||
Total non-cash compensation cost related to the Time-Based Phantom Units was $3.2 million and $1.8 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, there was $20.0 million of unrecognized compensation cost related to the Time-Based Phantom Units that is expected to be recognized over a weighted average period of approximately 2.1 years.
The aggregate fair value of share based awards that vested during the three-month period ended March 31, 2026 was approximately $0.3 million based on the unit price at the time of vesting.
The Company has awarded performance based phantom units (“Performance Phantom Units”) to certain of its executive officers under the Long-Term Incentive Plan. The number of common units issued pursuant to each Performance Phantom Unit award agreement will be from 0 % to 200 % of the target number of Performance Phantom Units thereunder based on a combination of the Company’s (i) total shareholder return (“TSR”), (ii) relative TSR compared to the TSR of the companies in the Company’s designated peer group and (iii) total recordable incident rate, in each case, for the applicable performance period. The Performance Phantom Unit awards are broken into two categories: long-term performance units, which have a three-year performance period, and short-term performance units, which are broken into separate one-year tranches with performance periods in each one-year period. Performance Phantom Units vest based on the achievement of the applicable performance metrics at the end of the applicable performance period, subject generally to the applicable executive officer’s continued employment through such performance period. Within 60 days of the vesting of a Performance Phantom Unit, the executive officer will receive a common unit of the Company. Each Performance Phantom Unit was granted with a corresponding DER. Payment of any such DER occurs when its corresponding Performance
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Phantom Unit vests, and in the event such Performance Phantom Unit is forfeited, the corresponding DER is also forfeited. The grant date fair values of the Performance Phantom Units with market conditions were determined using the Monte Carlo simulation method and are being recorded ratably from the grant date to the end of the applicable performance period.
The table below summarizes the assumptions used in the Monte Carlo simulation to determine the grant date fair value of Performance Phantom Units granted during the year ended December 31, 2025, and the period ended March 31, 2026.
| Grant date | May 3, 2024 | January 1, 2025 | January 1, 2026 | ||||||||||||||
| Period for volatility, correlations, and risk-free rate | |||||||||||||||||
| Risk-free interest rate | |||||||||||||||||
| Implied equity volatility | |||||||||||||||||
| Unit price on date of grant | $ | $ | $ | ||||||||||||||
Total non-cash compensation cost related to the Performance Phantom Units was $0.4 million and $0.3 million for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, there was $2.3 million of unrecognized compensation cost related to phantom units that is expected to be recognized over a weighted average period of approximately 2.0 years.
The aggregate number of common units initially authorized for issuance with respect to awards under the Long-Term Incentive Plan was 9.5 million units, subject to the applicable adjustment and unit recycling provisions set forth in the Long-Term Incentive Plan. Pursuant to the Long-Term Incentive Plan, such initial aggregate number of common units is subject to an automatic increase on January 1 of each year for a period of 10 years commencing January 1, 2024 and ending on (and including) January 1, 2033 in an amount equal to 5 % of the total number of common units outstanding on December 31 of the preceding year (provided, that the Board may act prior to January 1 of a given year to provide that there will be no January 1 increase for such year or that the increase for such year will be a lesser number of common units).
10. Commitments and Contingencies
Legal Matters. In the ordinary course of business, the Company may at times be subject to claims and legal actions including, but not limited to, title disputes, royalty disputes, contract claims, personal injury claims and employment claims. The Company accrues liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date and the Company’s estimates of the outcomes of these matters. Nevertheless, actual outcomes may differ significantly from the Company’s assessment. As of March 31, 2026 and December 31, 2025 the Company has no
Environmental Matters. The Company is subject to various federal, state and local laws and regulations relating to pollution and the protection of the environment. These laws, which are often changing, regulate the discharge and disposal of materials into the environment and may require the Company to obtain permits for, remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites.
The Company accounts for environmental contingencies in accordance with the accounting guidance related to accounting for contingencies. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable and the costs can be reasonably estimated.
Future Firm Sales Commitments. As part of the IKAV Acquisition, the Company is now party to a firm sales contract to deliver and sell a certain amount of natural gas at a fixed price of $1.72 per MMbtu through 2030. The Company expects to fulfill its delivery commitments primarily with production from proved developed reserves. The Company’s production has been sufficient to satisfy its delivery commitments during the periods presented, and it expects its future production will continue to be the primary means of fulfilling its future commitments. However, if the Company’s production is not sufficient to satisfy its delivery commitments, it can and may use spot market purchases to satisfy the commitments.
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A summary of these volume commitments as of March 31, 2026 is set forth in the table below (in Bbtu):
| March 31, 2026 | |||||
| Remaining 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Total | |||||
Contributions to 401(k) Plan. The Company sponsors a 401(k) plan under which eligible employees may contribute a portion of their total compensation up to the maximum pre-tax threshold through salary deferrals. The plan provides a company match on 100 % of salary deferrals that do not exceed 10 % of compensation. We contributed $2.0 million and $1.1 million for the three months ended March 31, 2026 and 2025, respectively.
11. Leases
Nature of Leases
The Company has operating leases on office spaces, various vehicles and compressors with remaining lease durations in excess of one year . These leases have various expiration dates beyond 2031. The vehicles are used for field operations and leased from third parties. The Company recognizes right-of-use asset and lease liability on the balance sheet for all leases with lease terms of greater than one year. Short-term leases that have an initial term of one year or less are not capitalized.
Discount Rate
As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and in a similar economic environment.
Future amounts due under operating lease liabilities as of March 31, 2026, were as follows (in thousands):
| Remaining 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total lease payments | $ | ||||
| Less: imputed interest | ( | ||||
| Total | $ | ||||
The following table summarizes our total lease costs before amounts are recovered from our joint interest partners, where applicable, for the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating lease cost | $ | $ | |||||||||
The Company does not have any material leases that are short term.
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The weighted-average remaining lease term as of March 31, 2026 was 2.91 years. The weighted-average discount rate used to determine the operating lease liability as of March 31, 2026 was 7.9 %.
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating cash outflows from operating leases | $ | $ | |||||||||
12. Partners’ Capital
On September 16, 2025, the Company closed the IKAV Acquisition and Sabinal Acquisition, which included the issuance of 30.6 million and 19.2 million common units, respectively, as part of the total consideration for each transaction. As of September 15, 2025, the IKAV Unit Consideration and the Sabinal Unit Consideration had a value of approximately $409.9 million and $256.9 million, respectively.
On February 7, 2025, the Company completed an underwritten public offering of 12.9 million common units at a price to the public of $15.50 per common unit, less underwriting discounts and commissions (the “February 2025 Offering”). On February 12, 2025, the underwriters of the public offering fully exercised their option to purchase an additional 1.9 million common units at a price to the public of $15.50 per common unit, less underwriting discounts and commissions. The sale of the Company’s common units resulted in gross proceeds of $230.0 million and net proceeds of $221.1 million, after deducting underwriting fees and offering expenses. Proceeds from the offering were used to repay a portion of the Term Loan Credit Agreement and Revolving Credit Agreement.
As of March 31, 2026 and December 31, 2025, the Company had 168.2 million and 168.4 million common units outstanding, respectively. On May 6, 2026, the Company and the IKAV Sellers agreed to cancel 1.4 million common units as part of post closing adjustments associated with the IKAV Acquisition, which reduced total reported units outstanding on the Statement of Partners’ Capital as of March 31, 2026. On February 7, 2026, 0.2 million common units were cancelled as part of post closing adjustments associated with the Sabinal Acquisition, which reduced total reported units outstanding on the Statement of Partners’ Capital as of December 31, 2025.
The Company distributed $0.53 and $0.50 per unit for total cash distributions of $89.2 million and $59.2 million for the three months ended March 31, 2026 and 2025, respectively. These cash distributions paid during the three months ended March 31, 2026 and 2025, are representative of the results of our operations for the preceding quarter.
13. Earnings Per Common Unit
The Company has a single class of common units. The Company has potentially dilutive securities as of March 31, 2026, which consist of phantom units issued under the Company’s long-term incentive plan. The treasury stock method is used to determine the dilutive impact for the Company’s phantom units. As of March 31, 2026 and 2025, there were 231.9 thousand and 15.4 thousand phantom units, respectively, that were considered antidilutive and thus excluded from the calculation of diluted earnings per common unit.
The following represents the computation of basic and diluted earnings per common unit for the three months ended March 31, 2026 and 2025 (in thousands, except per unit data):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
Net (loss) income - basic and diluted | $ | ( | $ | ||||||||
Weighted-average common units outstanding - basic | |||||||||||
| Effect of dilutive securities | |||||||||||
Weighted-average common units outstanding - diluted | |||||||||||
| Earnings per common unit - basic | $ | ( | $ | ||||||||
| Earnings per common unit - diluted | $ | ( | $ | ||||||||
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14. Related Party Transactions
Management Services Agreement
On October 27, 2023, the Company entered into a management services agreement (the “MSA”) with Mach Resources. Under the MSA, Mach Resources manages and performs all aspects of oil and gas operations and other general and administrative functions for the Company and the Company (i) will pay Mach Resources an annual management fee of approximately $7.4 million and (ii) reimburse Mach Resources for the costs and expenses of the services provided. On a monthly basis, the Company distributes funding to Mach Resources for performance under the MSA. During the three months ended March 31, 2026 and 2025, the Company paid Mach Resources $48.3 million (inclusive of $1.9 million in management fees presented as general and administrative expense - related party in the statement of operations) and $31.3 million (inclusive of $1.9 million as management fees presented in general and administrative expense - related party in the statement of operations), respectively. As of March 31, 2026, the Company had a prepaid balance of $1.9 million with Mach Resources, presented as other current assets - related party in the Company’s consolidated balance sheets. As of December 31, 2025, the Company owed $0.9 million to Mach Resources, presented as accounts payable - related party in the Company’s consolidated balance sheets.
Transition Services Agreements
In connection with the closing of the IKAV and Sabinal Acquisitions, the Company entered into a transition services agreement with each respective counterparty. During the three months ended March 31, 2026, the Company paid the IKAV Sellers $1.4 million for continued assistance in transitioning processes to the Company. For the year ended December 31, 2025, the Company paid the IKAV Sellers and the Sabinal Sellers $1.6 million and $4.3 million, respectively, for continued assistance in transitioning processes to the Company. There were no
Common units purchased by BCE-Mach Aggregator
In connection with the February 2025 Offering, BCE-Mach Aggregator, an affiliate of our General Partner, purchased 5.2 million common units at the public offering price, which accounted for $79.2 million of the proceeds received by the Company in the February 2025 Offering, after deducting underwriting fees. In connection therewith, the underwriters received a reduced underwriting discount on such common units purchased by BCE-Mach Aggregator compared to other common units sold to the public in the February 2025 Offering.
15. Segment Information
Management has evaluated that the Company is organized and managed as a single reportable segment, which is the exploration and production of oil, natural gas and NGLs (“E&P Segment”). All of the Company’s operations and assets are located in the United States, and its revenues are attributable to United States customers.
The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer and Director. The CODM uses consolidated net income as presented on the accompanying statements of operations to measure E&P Segment profit or loss, and to evaluate income generated from E&P Segment assets in deciding whether to reinvest profits into operational activities or to use profits for other purposes, such as debt reduction, acquisitions, or distributions to unitholders. Additionally, consolidated net income is used in assessing budget versus actual results and in benchmarking to the Company’s competitors.
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The following table summarizes total revenues, significant expenses, net income and capital expenditures related to the E&P Segment for the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
Total revenues | $ | $ | |||||||||
Gathering and processing | |||||||||||
Lease operating expense | |||||||||||
Production taxes | |||||||||||
| Total significant expenses | |||||||||||
Midstream operating expense | |||||||||||
Cost of product sales | |||||||||||
Depreciation, depletion, amortization and accretion – oil and natural gas | |||||||||||
Depreciation and amortization – other | |||||||||||
General and administrative | |||||||||||
General and administrative – related party | |||||||||||
| Interest expense | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Other expense (income), net | ( | ||||||||||
| Total expenses | |||||||||||
| Net (loss) income | $ | ( | $ | ||||||||
| Capital expenditures, including acquisitions | |||||||||||
The following table summarizes total assets to the E&P Segment as of March 31, 2026 and December 31, 2025 (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Total assets | $ | $ | |||||||||
16. Subsequent Events
Secondary offering
On April 8, 2026, certain selling unitholders of the Company completed an underwritten public secondary offering (the “April 2026 Secondary Offering”) of 9.0 million common units at a price to the public of $13.05 per common unit. The Company did not sell any of its common units as part of this offering and did not receive any proceeds from the sale of the units sold by the selling unitholders.
In connection with the April 2026 Secondary Offering, Tom L. Ward, the Chief Executive Officer and Director, purchased 0.2 million common units at the public offering price of $13.05 per common unit.
Distribution Declaration
On May 7, 2026, the Company declared its quarterly distribution for the first quarter of 2026 of $0.64 per common unit, which will be paid on June 4, 2026.
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The Company has evaluated subsequent events through the date of issuance of these financial statements to ensure that any subsequent events that met the criteria for recognition and disclosure in this Quarterly Report have been properly included.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company’s operating results. The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and related notes included in Part I, Item I of this Quarterly Report and also with “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. The following information updates the discussion of our financial condition provided in our previous filings, and analyzes the changes in the results of operations for the three months ended March 31, 2026 and 2025.
The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance, which may affect our future operating results and financial position. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. Actual results and the timing of the events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGLs, production volumes, estimates of proved reserves, capital expenditures, economic, inflationary and competitive conditions, drilling results, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report, particularly under “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.
Overview
We are an independent upstream oil and gas company focused on the acquisition, development and production of oil, natural gas and NGL reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas and the panhandle of Texas; the San Juan Basin region of New Mexico and Colorado; and the Permian Basin region of West Texas.
Within our operating areas, our assets are prospective for multiple formations, most notably the Oswego, Woodford and Mississippian, Mancos and Fruitland formations. Our experience across these formations allows us to generate significant cash available for distribution from these low declining assets in a variety of commodity price environments. We also own an extensive portfolio of complementary midstream assets that are integrated with our upstream operations. These assets include gathering systems, processing plants and water infrastructure. Our midstream assets enhance the value of our properties by allowing us to optimize pricing, increase flow assurance and eliminate third-party costs and inefficiencies. In addition, our owned midstream systems generate third-party revenue.
Market Outlook
Our financial results depend on many factors, particularly commodity prices and our ability to find, develop and market our production on economically attractive terms. Commodity prices are affected by many factors outside of our control, including changes in market supply and demand. The oil and natural gas industry is cyclical and commodity prices are highly volatile and we expect continued and increased pricing volatility in the crude oil and natural gas markets. Regional and worldwide economic activity, including any economic downturn or recession that has occurred or may occur in the future, extreme weather conditions and other substantially variable factors, influence market conditions for these products. Between January 1, 2025 and March 31, 2026, NYMEX WTI prices for crude oil ranged from $55.27 to $102.88 per Bbl, and the NYMEX Henry Hub price of natural gas ranged from $2.70 to $7.46 per MMbtu. The war in Ukraine and conflict in the Middle East and South America, uncertainty regarding interest rates, global supply chain disruptions, tariff volatility, OPEC+’s decision to increase production in May and July 2025, concerns about a potential economic downturn or recession, and instability in the financial sector have contributed to recent economic and pricing volatility and may continue to impact pricing throughout 2026.
Between 2022 and 2024, the Federal Reserve raised the target range for the federal funds rate in an effort to curb inflation. In September 2025, October 2025 and December 2025, the Federal Reserve lowered the target range for the federal funds rate to its current range of 3.50% to 3.75% in light of the reduced inflation. In March 2026, inflation, as measured by the consumer price index, was 3.3%. We cannot predict the future inflation rate but to the extent we experience high inflation, we may see cost increases in our operations, including costs for drill rigs, workover rigs, tubulars and other well equipment, as well as increased labor costs. We continue to evaluate actions to mitigate supply chain and inflationary pressures and work closely with other suppliers and contractors to ensure availability of supplies on site, especially fuel, steel and chemical supplies which are critical to many of our operations. However, these mitigation efforts may not succeed or may be insufficient. Further, if we are unable to recover higher costs through higher commodity prices, our current
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revenue stream, estimates of future reserves, borrowing base calculations, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted.
How We Evaluate Our Operations
We use a variety of financial and operational metrics to assess the performance of our operations, including the following sources of our revenue, principal components of our cost structure and other financial metrics:
•net production volumes;
•realized prices on the sale of oil, natural gas and NGLs;
•lease operating expense;
•Adjusted EBITDA; and
•cash available for distribution.
Factors Affecting the Comparability of Our Future Results of Operations to Our Historical Results of Operations
Our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below.
Acquisitions
We have completed four acquisitions since the beginning of 2025, most notably the IKAV and Sabinal Acquisitions (as defined in Note 3) that closed in September 2025. These acquisitions are reflected in our results of operations as of and after the date of completion for each such acquisition. As a result, periods prior to each such acquisition will not contain the results of such acquired assets which will affect the comparability of our results of operations for certain historical periods. We may continue to grow our operations through acquisitions when economical, including by funding such acquisitions under our New Credit Agreement.
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Results of Operations
Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025
Revenue
The following table provides the components of our revenue, net of transportation and marketing costs, for the periods indicated, as well as each period’s respective average realized prices and net production volumes. Some totals and changes throughout the below section may not sum or recalculate due to rounding.
| Three Months Ended March 31, | Change | |||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | Amount | Percent | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Oil | $ | 154,884 | $ | 125,012 | $ | 29,872 | 24 | % | ||||||||||||||||||
| Natural gas | 164,493 | 82,721 | 81,772 | 99 | % | |||||||||||||||||||||
| Natural gas liquids | 46,169 | 44,993 | 1,176 | 3 | % | |||||||||||||||||||||
| Total oil, natural gas, and NGL sales | 365,546 | 252,726 | 112,820 | 45 | % | |||||||||||||||||||||
| Loss on oil and natural gas derivatives, net | (96,899) | (40,693) | (56,206) | 138 | % | |||||||||||||||||||||
| Midstream revenue | 9,609 | 6,130 | 3,479 | 57 | % | |||||||||||||||||||||
| Product sales | 7,669 | 8,605 | (936) | (11 | %) | |||||||||||||||||||||
| Total revenues | $ | 285,925 | $ | 226,768 | $ | 59,157 | 26 | % | ||||||||||||||||||
| Average Sales Price: | ||||||||||||||||||||||||||
| Oil ($/Bbl) | $ | 69.73 | $ | 70.75 | $ | (1.02) | (1 | %) | ||||||||||||||||||
| Natural gas ($/Mcf) | $ | 2.74 | $ | 3.56 | $ | (0.82) | (23 | %) | ||||||||||||||||||
| NGL ($/Bbl) | $ | 23.75 | $ | 27.33 | $ | (3.58) | (13 | %) | ||||||||||||||||||
| Total ($/Boe) – before effects of realized derivatives | $ | 25.78 | $ | 34.70 | $ | (8.92) | (26 | %) | ||||||||||||||||||
| Total ($/Boe) – after effects of realized derivatives | $ | 26.26 | $ | 34.93 | $ | (8.67) | (25 | %) | ||||||||||||||||||
| Net Production Volumes: | ||||||||||||||||||||||||||
| Oil (MBbl) | 2,221 | 1,767 | 454 | 26 | % | |||||||||||||||||||||
| Natural gas (MMcf) | 60,079 | 23,221 | 36,858 | 159 | % | |||||||||||||||||||||
| NGL (MBbl) | 1,944 | 1,646 | 298 | 18 | % | |||||||||||||||||||||
| Total (MBoe) | 14,179 | 7,283 | 6,896 | 95 | % | |||||||||||||||||||||
| Average daily total volumes (MBoe/d) | 157.54 | 80.93 | 76.61 | 95 | % | |||||||||||||||||||||
Revenue and Other Operating Income
Oil, natural gas and NGL sales
Revenues from oil, natural gas and NGL sales increased $112.8 million, or 45%, for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. This increase was primarily related to a 95% production increase, which resulted in increased oil, natural gas and NGL sales of $139.7 million. These increases were offset with an overall decrease in the average selling price of our products, which resulted in a decrease in oil, natural gas, and NGL sales of $26.9 million.
Production
Production increased 6,896 MBoe, or 95% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. The increase was primarily the result of the IKAV and Sabinal Acquisitions, which added 6,719 Mboe of production for the period ending March 31, 2026.
Oil and Natural Gas Derivatives
For the three-month period ended March 31, 2026, we had realized gains on derivative instruments of $6.9 million and unrealized losses of $103.8 million for total losses of $96.9 million. For the three-month period ended March 31, 2025, we
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had realized gains on derivative instruments of $1.6 million and unrealized losses of $42.3 million for total losses of $40.7 million. The increase in unrealized losses is primarily due to the increase in oil prices. The increase in realized gains is primarily due to $17.5 million in early settlements from unwinding a portion of our natural gas derivatives during the three month-period ended March 31, 2026.
Product Sales
Product sales decreased $0.9 million, or 11% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. This decrease was primarily a result of a decreases in the average selling price on natural gas and NGLs. These decreases corresponded with the decrease in our cost of product sales noted below.
Midstream Revenue
Midstream revenue increased $3.5 million, or 57% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025, due to the acquisition of additional midstream facilities in the IKAV Acquisition in September 2025.
Operating expenses
The following table summarizes our expenses for the periods indicated and includes a presentation of certain expenses on a per Boe basis, as we use this information to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis:
| Three Months Ended March 31, | Change | |||||||||||||||||||||||||
| ($ in thousands) | 2026 | 2025 | Amount | Percent | ||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||
| Gathering and processing expense | $ | 59,271 | $ | 28,161 | $ | 31,110 | 110 | % | ||||||||||||||||||
| Lease operating expense | $ | 100,932 | $ | 48,752 | $ | 52,180 | 107 | % | ||||||||||||||||||
| Production taxes | $ | 16,567 | $ | 12,774 | $ | 3,793 | 30 | % | ||||||||||||||||||
| Midstream operating expense | $ | 5,156 | $ | 2,970 | $ | 2,186 | 74 | % | ||||||||||||||||||
| Cost of product sales | $ | 6,784 | $ | 7,987 | $ | (1,203) | (15 | %) | ||||||||||||||||||
| Depreciation, depletion, amortization and accretion expense – oil and natural gas | $ | 94,004 | $ | 61,185 | $ | 32,819 | 54 | % | ||||||||||||||||||
| Depreciation and amortization expense – other | $ | 4,169 | $ | 2,400 | $ | 1,769 | 74 | % | ||||||||||||||||||
| General and administrative | $ | 8,751 | $ | 10,867 | $ | (2,116) | (19) | % | ||||||||||||||||||
| Operating Expenses ($/Boe) | ||||||||||||||||||||||||||
| Gathering and processing expense | $ | 4.18 | $ | 3.87 | $ | 0.31 | 8 | % | ||||||||||||||||||
| Lease operating expense | $ | 7.12 | $ | 6.69 | $ | 0.43 | 6 | % | ||||||||||||||||||
| Production taxes (% of oil, natural gas and NGL sales) | 4.5 | % | 5.1 | % | (0.6) | % | (20 | %) | ||||||||||||||||||
| Depreciation, depletion, amortization and accretion expense – oil and natural gas | $ | 6.63 | $ | 8.40 | $ | (1.77) | (21 | %) | ||||||||||||||||||
| Depreciation and amortization expense – other | $ | 0.29 | $ | 0.33 | $ | (0.04) | (12 | %) | ||||||||||||||||||
| General and administrative | $ | 0.62 | $ | 1.49 | $ | (0.87) | (58) | % | ||||||||||||||||||
Gathering and processing expense
Gathering and processing expense increased $31.1 million, or 110%, and $0.31 per Boe, or 8%, for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025, primarily as a result of the 159% increase in natural gas production and the 18% increase in NGL production, driven by the IKAV Acquisition. Additionally, due to changes in certain purchaser contracts in the second quarter of 2025, certain post-production costs that were previously presented as a reduction to gas revenue are now presented as gathering and processing expense.
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Lease operating expense
Lease operating expense increased $52.2 million, or 107% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025, primarily due to the IKAV and Sabinal Acquisitions. Lease operating expenses per Boe increased by $0.43 primarily as a result of the oil-heavy production from the Sabinal Acquisition that added to our overall cost profile.
Production taxes
Production taxes increased $3.8 million for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. This increase was in line with the increase in oil, natural gas and NGL sales. Production taxes as a percentage of oil, natural gas and NGL sales decreased for the three-month period ended March 31, 2026 primarily due to the lower tax rates associated with the IKAV and Sabinal Acquisitions.
Midstream operating expense
Midstream operating expense increased $2.2 million, or 74% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025, due to the acquisition of additional midstream facilities in the IKAV Acquisition in September 2025.
Cost of product sales
Cost of product sales decreased $1.2 million, or 15% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. This decrease was primarily a result of the decrease in the average selling price on natural gas and NGLs. These decreases were consistent with the decrease in product sales noted above.
Depreciation, depletion, amortization and accretion expense
Depreciation, depletion, amortization and accretion expense for oil and natural gas properties increased by $32.8 million, or 54% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. The increase is primarily the result of the IKAV and Sabinal Acquisitions which added $1.3 billion to the balance of oil and gas properties subject to depletion.
General and administrative costs
General and administrative costs decreased $2.1 million, or 19% for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. The decrease in general and administrative costs was primarily a result of additional cost recovery per the terms of joint operating agreements from acquired wells subsequent to March 31, 2025. These reductions to general and administrative costs were offset by increases in compensation and benefits of $2.1 million, consulting and professional fees of $1.7 million and equity compensation of $1.4 million for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025.
Liquidity and Capital Resources
Our primary sources of liquidity and capital are cash flows generated by operating activities, borrowings under the New Credit Agreement, and proceeds from the issuance of equity and debt. At March 31, 2026, outstanding borrowings under the New Credit Agreement were $1.14 billion with $5.0 million in letters of credit outstanding, and the remaining availability under the New Credit Agreement was $305.0 million at March 31, 2026.
We may need to utilize the public equity or debt markets and bank financings to fund future acquisitions or capital expenditures, but the price at which our common units will trade could be diminished as a result of the limited voting rights of unitholders. We expect to be able to issue additional equity and debt securities from time to time as market conditions allow to facilitate future acquisitions. Our ability to finance our operations, including funding capital expenditures and acquisitions, to meet our indebtedness obligations or to refinance our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is subject to a number of factors, some of which are beyond our control, including commodity prices, particularly for oil and natural gas, and our ongoing efforts to manage operating costs and maintenance capital expenditures, as well as general economic, financial, competitive, legislative, regulatory, weather and other factors.
Our partnership agreement requires us to distribute all of our cash on hand at the end of each quarter, less reserves established by our general partner, which we refer to as “available cash.” Our quarterly cash distributions may vary from
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quarter to quarter as a direct result of variations in the performance of our business, including those caused by fluctuations in commodity prices. Any such variations may be significant, and as a result, we may pay limited or even no cash distributions to our unitholders.
Historically, our business plan has focused on acquiring and then exploiting the development and production of our assets. We spent approximately $75.2 million during the three-month period ended March 31, 2026 on development costs and our budget for 2026 is between $315.0 million and $360.0 million. For purposes of calculating our cash available for distribution, we define development costs as all of our capital expenditures, other than acquisitions. Our development efforts and capital for 2026 is anticipated to focus on a mix of drilling Oswego, Woodford, Red Fork and Mississippian wells.
During the three-month period ended March 31, 2026, we spent approximately $60.9 million on drilling and completion activities and related equipment and spud 3.7 net wells while bringing online 3 net wells, $9.6 million on remedial workovers and other capital projects and $4.7 million on midstream and other property and equipment capital projects.
Our 2026 capital expenditures program is largely discretionary and within our control. We could choose to defer a portion of these planned 2026 capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, including acid to be used for our acid stimulation completion, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other working interest owners. A deferral of planned capital expenditures, particularly with respect to drilling and completing new wells, could result in a reduction in anticipated production and cash flows and reduce our cash available for distribution to unitholders.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
| Three Months Ended March 31, | ||||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||
| Net cash provided by operating activities | $ | 170,313 | $ | 142,519 | ||||||||||
| Net cash used in investing activities | $ | (60,973) | $ | (78,010) | ||||||||||
| Net cash used in financing activities | $ | (99,284) | $ | (162,495) | ||||||||||
Net cash provided by operating activities
Net cash provided by operating activities increased $27.8 million for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. The increase in net cash provided by operating activities is primarily a result of an increase in cash receipts on settlement of derivative contracts of $12.8 million. In addition, there was an increase in production across all products, which was offset with a decrease in the average selling price of all products.
Net cash used in investing activities
Net cash used in investing activities decreased $17.0 million for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. The decrease in net cash used in investing activities is primarily a result of a decrease in cash used in acquisitions of $26.9 million. This was offset by increases in capital expenditures on oil and gas properties and our other property and equipment of $5.0 million and $3.7 million, respectively.
Net cash used in financing activities
Net cash used in financing activities decreased $63.2 million for the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025. The decrease in net cash used in financing activities is primarily due to decreases in cash used for repayments of our term loan of $763.1 million, prepayment penalties of $7.7 million and new debt issuance costs of $13.9 million. Additionally, there was a decrease in cash provided by borrowings on our credit facilities, net of repayments of $470.0 million, and a decrease in cash provided from proceeds from follow-on offerings of $221.6 million. These were offset by an increase in cash used for distributions of $30.0 million in the three-month period ended March 31, 2026, as compared to the three-month period ended March 31, 2025.
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Debt Agreements
New Credit Agreement
On February 27, 2025, the Company entered into the New Credit Agreement, among the Company, the lenders and issuing banks party thereto from time to time and Truist Bank, as the administrative agent and collateral agent. The New Credit Agreement is secured by substantially all of our assets.
The New Credit Agreement has (i) an initial borrowing base and elected commitment amount of $750.0 million, with a maximum commitment amount of $2.0 billion subject to borrowing base availability, (ii) a maturity date of February 27, 2029 and (iii) an interest rate equal to, at the Company’s election, (a) term SOFR (subject to a 0.10% per annum adjustment) plus a margin ranging from 3.00-4.00% per annum or (b) a base rate plus a margin ranging from 2.00-3.00% per annum, with the margin dependent upon borrowing base utilization at the time of determination. The Company is also required to pay a commitment fee of 0.50% per annum on the daily unused portion of the current aggregate commitments under the New Credit Agreement.
The New Credit Agreement’s borrowing base is redetermined semi-annually, in April and October. The New Credit Agreement requires the Company to maintain as of the last day of each fiscal quarter (i) a consolidated total net leverage ratio of less than or equal to 3.00 to 1.00, and (ii) a current ratio of no less than 1.00 to 1.00.
The Company used borrowings from the New Credit Agreement, together with cash on hand and proceeds from the February 2025 Offering, to repay the Term Loan Credit Agreement and the Revolving Credit Agreement in full.
On September 12, 2025, the Company entered into the First Amendment to the New Credit Agreement, together with certain of its subsidiaries party thereto, the lenders and issuing banks party thereto and Truist Bank, as administrative and collateral agent (the “First Amendment”). The First Amendment, among other things, (a) removes the 0.10% per annum credit spread adjustment otherwise applicable to the determination of Term SOFR (as defined in the New Credit Agreement), (b) excludes up to $750.0 million in principal amount of Borrowing Base Reduction Debt (as defined in the New Credit Agreement) issued prior to December 31, 2025 from the provisions otherwise requiring a borrowing base reduction as a result of the issuance of such indebtedness and (c) provides for (i) a $700.0 million aggregate increase in the borrowing base under the Credit Agreement and (ii) the establishment of aggregate term loan commitments (prior to giving effect to any prior funding of term loans) in an amount of $450.0 million and the funding of any unfunded term loan commitments thereunder and increase the Aggregate Elected Revolving Commitment Amount (as defined in the Credit Agreement) to $1.0 billion.
We have not guaranteed the debt or obligations of any other party, nor do we have any other arrangements or relationships with other entities that could potentially result in consolidated debt or losses.
Contractual Obligations and Commitments
As part of the IKAV Acquisition, we are now party to a firm sales contract to deliver and sell a certain amount of natural gas at a fixed price of $1.72 per MMbtu through 2030. We expect to fulfill the delivery commitments primarily with production from proved developed reserves. Our production has been sufficient to satisfy the delivery commitments during the periods presented, and we expect our future production will continue to be the primary means of fulfilling the future commitments. However, if our production is not sufficient to satisfy the delivery commitments, we can and may use spot market purchases to satisfy the commitments. For further information on firm sales commitments, see Note 10 of our consolidated financial statements.
Operating lease obligations
Our operating lease obligations include long-term lease payments for office space, vehicles, equipment related to exploration, development and production activities. We paid approximately $2.2 million in operating lease payments for the three-month period ended March 31, 2026 and expect to pay approximately $22.4 million in operating lease payments through 2030. For further information on our operating lease obligations, see Note 11 of our consolidated financial statements.
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Non-GAAP Financial Measures
Adjusted EBITDA
We include in this Quarterly Report 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 measure 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) loss on debt extinguishment, (5) equity-based compensation expense and (6) loss (gain) on sale of assets, net.
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 adjusted for (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized (gain) loss on derivative instruments, (4) loss on debt extinguishment, (5) equity-based compensation expense, (6) loss (gain) on sale of assets, (7) cash interest expense, net, (8) development costs and (9) 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 measure most directly comparable to cash available for distribution is net income. Cash available for distribution should not be considered as an alternative to, or more meaningful than, net income.
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Reconciliation of Adjusted EBITDA and Cash Available for Distribution to GAAP Financial Measures
The following table presents our reconciliation of the GAAP financial measures of net income and net cash provided by operating activities to the non-GAAP financial measures Adjusted EBITDA and cash available for distribution, as applicable, for each of the periods indicated.
| Three Months Ended March 31, | |||||||||||
| ($ in thousands) | 2026 | 2025 | |||||||||
| Net Income Reconciliation to Adjusted EBITDA: | |||||||||||
| Net (loss) income | $ | (35,038) | $ | 15,886 | |||||||
| Interest expense, net | 24,163 | 17,417 | |||||||||
| Depreciation, depletion, amortization and accretion | 98,173 | 63,585 | |||||||||
| Unrealized loss on derivative instruments | 103,769 | 42,340 | |||||||||
| Loss on debt extinguishment | — | 18,540 | |||||||||
| Equity-based compensation expense | 3,549 | 2,112 | |||||||||
| Loss (gain) on sale of assets | 8 | (29) | |||||||||
| Adjusted EBITDA | $ | 194,624 | $ | 159,851 | |||||||
| Net Income Reconciliation to Cash Available for Distribution: | |||||||||||
| Net (loss) income | $ | (35,038) | $ | 15,886 | |||||||
| Interest expense, net | 24,163 | 17,417 | |||||||||
| Depreciation, depletion, amortization and accretion | 98,173 | 63,585 | |||||||||
| Unrealized loss on derivative instruments | 103,769 | 42,340 | |||||||||
| Loss on debt extinguishment | — | 18,540 | |||||||||
| Equity-based compensation expense | 3,549 | 2,112 | |||||||||
| Loss (gain) on sale of assets | 8 | (29) | |||||||||
| Cash interest expense, net | (22,485) | (16,000) | |||||||||
| Development costs | (75,156) | (52,055) | |||||||||
| Change in accrued realized derivative settlements | 10,367 | 2,780 | |||||||||
| Cash available for distribution | $ | 107,350 | $ | 94,576 | |||||||
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report for the year ended December 31, 2025. No modifications have been made during the three months ended March 31, 2026.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk, including the effects of adverse changes in commodity prices and interest rates as described below. The primary objective of the following information is to provide quantitative and qualitative information about our potential exposure to market risks. The term “market risk” refers to the risk of loss arising from adverse changes in commodity prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses but rather indicators of reasonably possible losses.
Commodity Price Risk
Oil and gas revenue
Our revenue and cash flow from operations are subject to many variables, the most significant of which is the volatility of commodity prices. Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, which are impacted by global economic factors, pipeline capacity constraints, inventory levels, basis
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differentials, weather conditions and other factors. Commodity prices have long been volatile and unpredictable, and we expect this volatility to continue in the future.
There can be no assurance that commodity prices will not be subject to continued wide fluctuations in the future. A substantial or extended decline in such prices could have a material adverse effect on our financial position, results of operations, cash flows and quantities of oil and gas reserves that may be economically produced, which could result in impairments of our oil and natural gas properties.
Commodity derivative activities
To reduce the impact of fluctuations of commodity prices on our total revenue and other operating income, we have historically used, and we expect to continue to use, commodity derivative instruments, primarily swaps, to hedge price risk associated with a portion of our anticipated production. Our hedging instruments allow us to reduce, but not eliminate the potential effects of the variability in cash flow from operations due to fluctuations in commodity prices and provide increased certainty of cash flows for funding our drilling program and debt service requirements. These instruments provide only partial price protection against declines in prices and may partially limit our potential gains from future increases in prices. We do not enter derivative contracts for speculative trading purposes. The New Credit Agreement contains various covenants and restrictive provisions which, among other things, limit our ability to enter into commodity price hedges exceeding a certain percentage of production.
Our hedging activities are intended to support oil and natural gas prices at targeted levels and manage our exposure to natural gas price volatility. Under swap contracts, the counterparty is required to make a payment to us for the difference between the swap price specified in the contract and the settlement price, which is based on market prices on the settlement date, if the settlement price is below the swap price. We are required to make a payment to the counterparty for the difference between the swap price and the settlement price if the swap price is below the settlement price. See Note 7 of our consolidated financial statements for further information on our open derivative positions and valuation as of March 31, 2026.
Counterparty and Customer Credit Risk
By using derivative instruments to hedge exposures to changes in commodity prices, we expose ourselves to the credit risk of our counterparties. Credit risk is the potential failure of the counterparty to perform under the terms of a contract. When the fair value of a derivative contract is positive, the counterparty is expected to owe us, which creates credit risk. To minimize the credit risk in derivative instruments, it is our policy to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. The creditworthiness of our counterparties is subject to periodic review. As of March 31, 2026, we had derivative instruments in place with eight different counterparties. We believe our counterparties currently represent acceptable credit risks. We are not required to provide credit support or collateral to our counterparties under current contracts, nor are they required to provide credit support or collateral to us.
Substantially all of our revenue and receivables result from oil and gas sales to third parties operating in the oil and gas industry. Our receivables also include amounts owed by joint interest owners in the properties we operate. Both our purchasers and joint interest partners have recently experienced the impact of significant commodity price volatility as discussed above under “— Commodity Price Risk — Oil and Gas Revenue.” This concentration of customers and joint interest owners may impact our overall credit risk in that these entities may be similarly affected by changes in commodity prices and economic and other conditions. In the case of joint interest owners, we often have the ability to withhold future revenue disbursements to recover non-payment of joint interest billings.
Interest Rate Risk
Variable rate debt
At March 31, 2026, we had $1.14 billion of debt outstanding under the New Credit Agreement. Borrowings outstanding under the New Credit Agreement bore an interest rate of 7.7% as of March 31, 2026. Assuming no change in the amount outstanding, the impact on interest expense of a 1% (or 100 basis points) increase or decrease in the assumed weighted average interest rate on our variable interest debt would be approximately $11.4 million per year based on our borrowings outstanding at March 31, 2026.
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Interest rate derivative activities
As of March 31, 2026, we did not have any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness, but we may enter into such derivative arrangements in the future. To the extent we enter into any such interest rate derivative arrangement, we would be subject to risk for financial loss.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2026. Based on such evaluation, such officers have concluded that, as of March 31, 2026, the Company’s disclosure controls and procedures are designed and effective to ensure that information required to be included in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to the Company’s management including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the control system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events and the application of judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of these and other inherent limitations of control systems, there is only reasonable assurance that the Company’s controls will succeed in achieving their goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three-month period ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business including, but not limited to, title disputes, royalty disputes, contract claims, personal injury claims and employment claims. See Note 10 of the notes to our consolidated financial statements included in Item 1 of Part I of this report for information regarding our estimation and provision for potential losses related to litigation and regulatory proceedings.
The Company, as an owner and operator of oil and gas properties, is subject to various federal, state and local laws and regulations relating to disposal or discharge of materials into, and pollution or protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution cleanup resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. The Company maintains insurance coverage that is customary in the industry, although the Company is not fully insured against all environmental risks.
The Company is not aware of any environmental claims existing as of March 31, 2026. There can be no assurance, however, that current regulatory requirements will not change or will not be interpreted or enforced differently, or past non-compliance with environmental laws and regulations or other issues will not be discovered on the Company’s oil and gas properties.
Item 1A. Risk Factors
There have been no material changes to the Company’s “Risk Factors” previously disclosed in Part I, Item 1A of our Annual Report for the year ended December 31, 2025. For a detailed discussion of the risks that affect our business, please refer to Part I, Item 1A “Risk Factors” in our Annual Report for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the three months ended March 31, 2026, none of our directors or “officers” (as such term is defined in Rule 16(a)-1(f) under the Exchange Act) adopted terminated
Item 6. Exhibits
| Exhibit Number | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3 | ||||||||
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| 3.4 | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS* | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
____________
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Mach Natural Resources LP | ||||||||
| By: | Mach Natural Resources GP LLC, its general partner | |||||||
Date: May 7, 2026 | By: | /s/ Kevin R. White | ||||||
| Name: | Kevin R. White | |||||||
| Title: | Chief Financial Officer | |||||||
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