Mach Natural Resources Q2 2025 Earnings Report

Mach Natural Resources EPS Results

• Actual EPS: $0.76
• Consensus EPS: $0.53
• Beat/Miss: Beat by +$0.23
• One Year Ago EPS: N/A

Mach Natural Resources Revenue Results

• Actual Revenue: $288.52 million
• Expected Revenue: $237.56 million
• Beat/Miss: Beat by +$50.95 million
• YoY Revenue Growth: N/A

Mach Natural Resources Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 8, 2025
• Conference Call Time: 10:00AM ET

Mach Natural Resources (NYSE:MNR), an independent upstream oil and gas company, focuses on the acquisition, development, and production of oil, natural gas, and natural gas liquids reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas, and the panhandle of Texas. It also owns a portfolio of midstream assets, as well as owns plants and water infrastructure. The company was incorporated in 2023 and is headquartered in Oklahoma City, Oklahoma.

Mach Natural Resources Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: We maintain financial strength with approximately 1× debt/EBITDA leverage, enabling the Savinol and iCAV acquisitions while preserving capacity for future opportunities.
• Positive Sentiment: Our disciplined acquisition strategy at discounts to PDP PV-10 has built a 3 million-acre, low-decline portfolio, while capping reinvestment below 50% of operating cash flow to optimize distributions.
• Neutral Sentiment: In Q2 we produced 84,000 BOE/d (23% oil, 53% gas), generated $289 million in revenue and $122 million in adjusted EBITDA, and declared a $0.38/unit distribution after an $8.2 million legal settlement.
• Negative Sentiment: We anticipate near-term natural gas price pressure due to full storage levels and new takeaway capacity ahead of winter, which may weigh on margins before demand recovery.
• Positive Sentiment: For 2026 we plan to deploy five rigs targeting gas—three in San Juan and two deep Anadarko—plus one Oswego oil rig, aiming for a >70% gas mix and >50% IRRs on new wells.

Presentation

[Operator]

Good morning, everyone. Thank you for joining today's call to discuss MOP Natural Resources Second Quarter twenty twenty five Financial and Operational Results. During this morning's call, the speakers will be making forward looking statements that cannot be confirmed by reference to existing information, including statements regarding expectations, projections, future performance and the assumptions underlying such statements. Please note, a number of factors will cause actual results to differ materially from their forward looking statements, including the factors identified and discussed in their press release and in other SEC filings. For a further discussion of risks and uncertainties that could cause actual results to differ from those in such forward looking statements, please read the company's annual report on Form 10 ks, which is available on the company's website or the SEC's website.

[Operator]

Please recognize that except as required by law, they undertake no duty to update any forward looking statements, and you should not place undue reliance on such statements. They may refer to some non GAAP financial measures in today's discussion. For reconciliation from non GAAP financial measures to the most directly comparable GAAP measures, please reference their press release and supplemental tables, which are available on website and their 10 Q, which will also be available on the website when filed. Today's speakers are Tom Ward, CEO and Kevin White, CFO. Tom will give an introduction and overview.

[Operator]

Kevin will discuss financial results, and then the call will be opened for questions. With that, I'll turn the call over to Mr. Tom Ward. Tom?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Thank you, Shimali. Welcome to Monct Natural Resources second quarter earnings update. Each quarter, it is important to reiterate the company's four strategic pillars. These are number one, maintain financial strength. Our goal is to have a long term debt to EBITDA ratio of one times leverage.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We believe maintaining a turn of leverage is appropriate to give ourselves opportunities when markets experience high volatility. We accomplished the iCAV and Savinol purchases by having low leverage. Savinol provides us with long term upside potential to oil markets priced in the low 60s. We feel that this price is not sustainable very far into the future and that ultimately crude prices will rise even if the near term outlook is negative. If the OPEC plus announcement of bumper oil supply increases comes to pass, we want to stay in a position to capitalize on more crude oil purchases.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

In the case of ICAV, we purchased an existing natural gas cash flow stream that is heavily hedged with tremendous upside to market demand in the future and nearly unlimited growth opportunities in the San Juan Basin. Both acquisitions were made because our balance sheet was in pristine condition. We also see headwinds ahead for natural gas prices as we enter the winter season with full storage and growing supply along with additional takeaway capacity being added before further demand develops in 2026. Therefore, we see continued opportunity to add to our portfolio as long as we maintain our leverage goals. Number two, disciplined execution.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We acquire only cash flowing assets at a discount to PDP PV-ten that are also accretive to our distribution. We now have initiated 24 acquisitions, spending more than $3,000,000,000 In every case, we have maintained this execution strategy. This strategy has allowed us to build an acreage base that will be nearly 3,000,000 acres in size with multiple areas that have high rates of return drilling locations that are held by production. We believe that Mock is unique in this regard. Number three, disciplined reinvestment rate.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We maintain a reinvestment rate of less than 50% of our operating cash flow. By keeping our reinvestment rate low, we optimize our distribution to unitholders. MAPC is also unique in being able to maintain production with an industry leading reinvestment rate due to emphasizing our second pillar of disciplined execution. Our entry in the San Juan And Permian Basins will move our decline to 15% from 20% through buying low decline cash flowing assets. This allows us to enhance our operating cash flow and maintain our production during periods of low prices while looking for areas to purchase if markets become destabilized.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

However, during periods of high prices, we can use our enhanced cash flow to reinvest more in drilling and grow production during those periods. MAC is positioned well to thrive in both scenarios by being able to pivot from acquisitions during higher prices to drilling of high return locations that are waiting for us with no expiration dates. The iCAV acquisition is an example of this. In the San Juan, we're acquiring more than 500,000 acres of land that is held by production. If natural gas prices remain elevated, we can switch away from drilling crude oil locations to more natural gas focused sites.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We are planning to implement this strategy in 2026 by using the spring and summer drilling season with three rigs searching for natural gas in San Juan during drilling for the Mancos shale, dry gas and the Fruitland coal. At today's strip, we plan to maintain our production volumes through 2027 while spending less than 50% of our operating cash flow and using some of the excess to pay down debt. We project increasing our natural gas volumes to 70% post the Savinol ICAV acquisitions and for the first time since our inception, project natural gas to be at least 50% of our revenue stream starting in 2026. All of the main pillars lead to the fourth and most important, delivering industry leading cash returns on capital invested through distributions to our unitholders. With our announced distribution of $0.38 per unit in the second quarter, we have sent back $4.87 per unit to our unitholders since our public offering in October 2023 and more than 1,200,000,000 in total since inception in 2018.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

All the while, we have grown our business to more than $3,500,000,000 of enterprise value without selling any material assets while maintaining a cash return on capital invested more than 30% per year over the past five years. Even in this year with crude prices moving down, we are expecting to have a 25% return on capital invested and have never been less than 20% since our company was founded. Post the iCab and Sabino acquisitions, we anticipate having leverage just above one times. However, we'll work diligently to bring back our leverage to our desired goal by presenting a clear path of reducing our debt levels. We will resist the opportunity to acquire other assets that would lead to moving our leverage higher.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Our goal is to continue to look for free cash flowing assets where private equity backed sponsors need to move towards a more liquid currency by taking our equity. In these circumstances, we see the opportunity to increase our operating cash flow while expanding our drilling budget on our vast acreage. We also continue to be able to purchase small acquisitions in the Mid Con that fit our goals by using cash on hand. By sticking to our model of reinvesting only 50% of our cash flow, we can keep our production flat to slightly growing while expanding our distributions per unit. Our drilling plans for 2026 revolve around adding to our natural gas mix.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We currently plan to have two deep Anadarko dry gas rigs running. These locations are targeting natural gas of a depth of approximately 15,000 feet true vertical depth. We then project to drill 50 another 15,000 foot of horizontal length. These wells will cost approximately $14,000,000 and find between 15 to 20 Bcf of gas and have returns in excess of 50% at today's crisis. We'll also focus on the San Juan during the summer drilling season.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

In the San Juan, we plan to have three rigs running in 2026. The Mancos Dry gas Play is targeting three mile laterals at a true vertical depth of approximately 7,000 feet. We plan to spend approximately $15,000,000 location to find 15 to 20 BCF of gas and have a return of greater than 50%. The Deep Anadarko and the San Juan Gas Plays are just developing. Both are known to be prolific gas areas that have not been extensively drilled since the onset of enhanced drilling procedures with large stimulations due to the previous decade of low natural gas prices.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

MAC has hundreds of thousands of acres across the plays to review and bring to market with no time pressure to be implemented without losing our acreage. We also plan to have one drilling rig drilling in the Fruitland coal. This development is ongoing in the San Juan with rigs targeting the coal between older vertical wells by drilling multiple laterals from one wellbore. The target is shallow at 2,000 feet, and we anticipate having 5,000 to 8,000 feet of lateral in each wellbore. These locations are expected to cost approximately $3,000,000 and have returns in excess of 50%.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Lastly, we plan to move back into the Oswego to continue our drilling program that was started in 2021. We have drilled more than two fifty wells in the Oswego where a 1.5 mile lateral cost less than $3,000,000 and even at today's distressed pricing has returns approaching 40%. Our second Deep Anadarko rig is projected to spud in early September. The Oswego locations are projected to start in early twenty twenty six and the San Juan rig should move in early spring twenty twenty six. Our focus on gas development through 2026 is driven not only by the current price environment, but also by how we see demand over the next five years.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We see total demand growth of upwards of 25 Bcf of gas per day by 02/1930. This is broken down to the following: 15.6 Bcf per day of LNG feed gas growth. This includes the facilities under construction in Mexico, which will be an additional outlet for U. S. Production.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

And our San Juan purchase is well positioned to meet West Coast demand. Six Bcf a day per day six Bcf per day of power generation growth is a conservative estimate, but it should be acknowledged that two to four Bcf of power generation growth will be from the data centers located in Texas, Colorado, the Desert Southwest and California. Thus, the San Juan acreage is also strategic and well positioned to meet this upcoming demand. 1.1 Bcf per day of demand growth from commercial and industrial and 1.4 Bcf a day of growth from exports to Mexico. We see supply of six Bcf a day from the Permian associated gas growth, which is at risk if prices remain soft, 15 Bcf per day of supply growth in the Haynesville and the Northeast in response to LNG and data center demand.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

This leaves the Eagle Ford, Mid Con and San Juan Rockies as the natural supply growth areas to meet demand. We see the current processing capacity of approximately four Bcf a day in the San Juan and nearly 16 Bcf a day at Mid Con to meet the ongoing demand requirements needed to fuel or enhance consumption of U. S. Natural gas. During the quarter, Mok drilled 10 total wells consisting of six Oswego, three Woodford Miss Condensate and Red Fork location.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We're currently drilling one Red Fork and one Deep Anadarko dry gas well. These rigs are located in Dewey And Custer Counties, Oklahoma. In our Oswego program, we averaged 9,850 feet per lateral, our longest locations to date. These locations averaged 3,600,000 per well. Mock drilled three locations in the Woodford Miss program, including the Brockland 3MH, which was drilled to a total depth of 30,384 feet.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

The Brockland 3MH is waiting on completion alongside the Brockland 2MH, which is drilling currently. Both locations will be completed together starting later this month. In the Woodford Mist Condensate area, we drilled two locations that averaged 10,240 feet of horizontal section. Our operation goals for Q3 twenty twenty five are to continue to refine and reduce our days on location in our Deep Anadarko drilling program while increasing our rig count from one to two starting in mid September. We continue to keep our lease operating costs low at $6.52 per barrel and look forward to closing both the Sabodil and ICAV asset purchases to start to work on reducing costs.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We're not certain there are additional places to cut LOE. However, in our previous 22 acquisitions, we reduced LOE by between 25% to 33% each. With that, I'll turn the call over to Kevin for the financial results.

[Kevin White, CFO at Mach Natural Resources]

Thanks, Tom. For the quarter, our production of 84,000 BOE per day was 23% oil, 53% natural gas and 24% NGLs. Our average realized prices were $63.1 per barrel of oil, dollars 2.81 per Mcf of gas and $22.41 per barrel of NGLs. Worth noting, prehedged realized prices were lower by 11%, 2117% for oil, gas and NGLs compared to the first quarter of this year. Of the February total oil and gas revenues, the relative contribution for oil was 51%, 31% for gas and 18% for NGLs.

[Kevin White, CFO at Mach Natural Resources]

On the expense side, our lease operating expense totaled $50,000,000 as Tom mentioned, dollars 6.52 per BOE. Cash G and A was only $7,000,000.00 $88 per BOE. We ended the quarter with $13,800,000 in cash, and we had drawn $565,000,000 on our $750,000,000 revolver. In conjunction with plan to close the iCav and Sabinelle acquisitions, we are in the latter stages of expanding our RBL and expect the borrowing base and commitments to nearly double from its current amount and to add a handful of new banks to the syndicate. Total revenues, including our hedges and midstream activities totaled $289,000,000 adjusted EBITDA of $122,000,000 and $130,000,000 of operating cash flow.

[Kevin White, CFO at Mach Natural Resources]

We had development CapEx of $64,000,000 during the quarter. We also had a reduction of cash available for distribution of $8,200,000 due to a settlement of royalty owner legal dispute. We generated $46,000,000 of cash available for distribution, resulting in an approved distribution of $0.38 per unit, which will be paid out on September 4 to record holders as of August 21. Shimali, I will now turn the call back to you to open the line for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Charles Meade with Johnson Rice. Please proceed with your question.

[Charles Meade, Research Analyst & Member at Johnson Rice & Company L.L.C.]

Yes. Good morning, Tom and Kevin.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Good morning.

[Charles Meade, Research Analyst & Member at Johnson Rice & Company L.L.C.]

Tom, your production volumes were little higher than I think than I was looking for and I think a lot of people on the street were looking for. So I was wondering if you could tell me if there's any what part of the legacy Mid Con portfolio delivered? Or maybe you can say, it looks like a beat it surprised us. Was it a surprise to you? And what parts of the portfolio really had the strength?

[Charles Meade, Research Analyst & Member at Johnson Rice & Company L.L.C.]

And was it perhaps related to some of these recent wells that spoke about in your prepared comments?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

No, Charles, just normal operations that our production is doing well. We had a couple of bolt on acquisitions that might have enhanced some of the production. But basically, the all areas are running pretty well. We have a great operations team and continue to keep our locations working with a lot of work over. So we just I would say our operations team just does an excellent job focusing on business, but nothing out of the ordinary.

[Charles Meade, Research Analyst & Member at Johnson Rice & Company L.L.C.]

Got it. Okay. Thank you. And then, Tom, going back to the you gave us a lot of detail in your prepared comments. And I was intrigued by this Brocklin 3MH well.

[Charles Meade, Research Analyst & Member at Johnson Rice & Company L.L.C.]

Is that one of the sort of the deep Anadarko targets that you were talking about earlier that $14,000,000 well cost targeting 15 to 20 Bcf is and maybe you can tell me if those two are connected and then maybe give us a timeline for when you're going to complete the Brockwood?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yes. We're drilling the second location currently on a two well pad. We'll do a zipper frac between the two locations that will start in later this month to early September.

[Charles Meade, Research Analyst & Member at Johnson Rice & Company L.L.C.]

Okay. Got it. Thank you.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

You bet.

[Operator]

Thank you. Our next question comes from the line of Derrick Whitfield with Texas Pacific Land Corporation. Please proceed with your question.

[Derrick Whitfield, Managing Director at Texas Capital]

Good morning, guys, and thanks for your time.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Hey, Derek.

[Derrick Whitfield, Managing Director at Texas Capital]

For my first question, I wanted to focus on distribution this quarter despite the strength of operations this quarter in production and Charles just covered that. There were a series of one time events that led to a lower payout than the cash flow minus CapEx would imply. Could you perhaps add some color to those developments for the benefit of investors?

[Kevin White, CFO at Mach Natural Resources]

Sure, Derek. I think we've kind of narrowed it down for ease of digestion here. The legal settlement, again, it's a fairly ordinary type of litigation, I guess, in our business that we see frequently. It's not that ordinary for us, but we did reach a settlement with the royalty owner dispute on deductions that we were making from their revenue and that our share of that settlement was roughly $8,200,000 So that reduced the distribution by $07 per unit. And then the second part of that, really it comes down to gas prices.

[Kevin White, CFO at Mach Natural Resources]

Lower gas prices this quarter, and I'm comparing this to the first quarter and also really where consensus is out there, results in another $07 reduction from had we had prices similar to the first quarter or also kind of versus looking at the consensus analyst estimates that are out there. And then think maybe the Panhandle Eastern basis differential maybe was a little bit unique versus other basins across the country and that we had basis widened during the second quarter. And again, that may not have been that could have happened real time as we went through the quarter and probably wasn't captured, think, in a lot of analysts' estimates of the quarter.

[Derrick Whitfield, Managing Director at Texas Capital]

Okay. Great. Thanks, Kevin. And then as my follow-up, I wanted to focus on your growth profile. As we layer in recent transactions and your deep miss activity, we're backing into a fairly material natural gas growth trajectory that could exceed six fifty million cubic feet per day in 2026.

[Derrick Whitfield, Managing Director at Texas Capital]

That's quite a bit above consensus. Is that a fairly fair depiction of the production profile as you guys see it?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yes. So we see our natural gas product mix moving north of 70% in 2026 and up closer to 75% in 2027. So yes, as we drill, that's assuming we continue to have a robust natural gas market, which we do believe, even though we see near term headwinds, we want to be long natural gas in late twenty twenty six and into 2027. We're very strong bulls. Just the amount of gas coming through the field season this year leaves us in a precarious place in my opinion that we'll be moving into the fall and winter season with full storage and a couple of new pipelines coming on ahead of demand.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

But once demand hits in 2026, then we do want to be long gas, which we're just to make all that to say is we're making an assumption we'll continue to drill natural gas wells and but standalone right now without making other acquisitions, yes, we see ourselves moving up from a product mix to substantially above 70% natural gas.

[Derrick Whitfield, Managing Director at Texas Capital]

We agree with your views, Tom. And maybe just one build on that just for the benefit of clarity. When you look at your gas production base, you guys as I understand have quite a bit of that undedicated today. So you can materially steer that and benefit in a much higher gas price environment than some of your peers. Is that a fair depiction as well?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yes. I don't know as compared to our peers, but we yes, we do have a large amount of dedicated.

[Derrick Whitfield, Managing Director at Texas Capital]

Terrific. Thanks guys.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Thank you.

[Operator]

Thank you. Our next question comes from the line of John Freeman with Raymond James. Please proceed with your question.

[John Freeman, Managing Director at Raymond James Financial]

Good morning. Thank you. When we look at the portfolio that you all built, which is anchored on these very stable low decline rate assets and now you've got this exciting opportunity with the main goes as well as what's emerging with the Anadarko deep gas. And I'm just interested in your thoughts on kind of how you balance those two aspects of your portfolio with kind of the legacy proven low decline assets with now like this an emerging growth play like the Makos?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

John, are you asking how we found them?

[John Freeman, Managing Director at Raymond James Financial]

No, no, no. I'm sorry. Just how you balance the portfolio between you've got these exciting growth plays that require obviously steeper decline rates, more capital, just sort of the development process of these emerging plays versus your stable, very low decline rate type assets, they've sort of been the foundation of the company?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yes. So I mean, it all just ties together with our reinvestment rates. So we want to spend 50%. We don't want spend 20% or 30% or 40%. We like to spend close to 50% of our operating cash flow that keeps our production flat.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

And the only way you can do that is to have that long life, the balanced portfolio, as you mentioned, of low decline production that we've built over the years that then allows us to reinvest only 50% in the higher rates of return drilling that the Mancos now and the Deep Anadarko especially and guess the Fruitland Coal is probably the best of the group as far as just infill drilling and rates of return. But whenever we put that all together, it just gives us a lot of flexibility. We could pivot from oil to gas, so we can move back to oil if prices change. We have 3,000,000 acres of high return drilling locations that we can choose from. So we're in a really ideal situation that we built ourselves now down to a 15% decline that we can continue to grow our production using only 50% of reinvestment rate and choose what rates of return we want and have no real long term contracts that keep us beholden to drill one particular area over the other.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

And we don't have any lease expirations. So it's we truly are able to move around rigs as we want within thirty days.

[John Freeman, Managing Director at Raymond James Financial]

That's great. And then the gas differential kind of widened out a good bit this quarter that you all highlighted earlier. I believe you all have taken some kind of recent steps on kind of the gas marketing side to possibly improve that going forward. Maybe if you could just sort of elaborate on that?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

I don't think so. I think that basically we are at the mercy of Panhandle Eastern for most of our Mid Con gas. And so if basis widens, our basis widens, we don't hedge basis. Maybe Kit is getting ready to say something. Do you want take it?

[Kevin White, CFO at Mach Natural Resources]

Yes. Hey, John. We were talking a little bit about GP and T expense running a little higher due to new treatment of certain costs certain marketing costs related to the Paloma Wells. We had a marketing agreement with kind of a third party intermediary and we chose to get out of that agreement and fold in those volumes with kind of the bigger larger group that we've marketed gas with for years.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yes. So we use NextEra.

[Kevin White, CFO at Mach Natural Resources]

Right.

[Kevin White, CFO at Mach Natural Resources]

Yes. We'll get better pricing with NextEra than we had with the previous intermediary.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yes. Okay. Didn't know where you're going with that. But yes, NextEra has been a good partner with us.

[John Freeman, Managing Director at Raymond James Financial]

That's great. That makes sense. Thanks guys. Appreciate it.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Michael Scalia with Stephens Inc. Please proceed with your question.

[Michael Scialla, Managing Director at Stephens Inc]

Hi, good morning guys. I wanted to just talk about 2026. I realize it all depends on where oil and gas prices go. But based on what you're thinking right now, sounds like the three rigs in the San Juan will drill springtime through summer. I think there's a limited drilling window there.

[Michael Scialla, Managing Director at Stephens Inc]

You keep the two deep rigs in the Anadarko and then one on the Oswego. Is that where your 2026 plans are preliminarily at the moment?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yes, as long as our operating cash flow holds up. So it all depends on pricing and where EBITDA is, but it could expand if prices move up and can contract if they don't. So it is the barometer for us on how much we spend is 50% of our operating cash flow. So it's never written in stone that we're going to have that development program. And it's also subject to change if prices move, if gas prices move down and oil prices move up, that could also switch.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

So we are more difficult, I think, monitor with exactly where our rigs are going to be because every month we make a decision here. So I can't tell you.

[Michael Scialla, Managing Director at Stephens Inc]

No, I appreciate how fluid that is and your flexibility, but I just want to get your latest thoughts based on

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

That is as of today and where our EBITDA sits today, this is exactly what we plan to do. And also permitting, San Juan is not the easiest place to drill. The New Mexico side, you basically have May to December to have everything through. And so that has us kind of in the drilling season of May to September.

[Michael Scialla, Managing Director at Stephens Inc]

Okay. Got you. And then for the second half of this year, I think Sabino had a rig earning and were there some wells there that do you plan on going ahead and completing those on the Central Basin Platform, or do you kind of halt all the activity when you close the deal?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Yeah. They had two rigs running at four locations that they're waiting on completion that the wells will complete once it's once we close.

[Michael Scialla, Managing Director at Stephens Inc]

Okay. Got it. And then

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

There are also iCav would should have basically five locations ready to complete at closing.

[Michael Scialla, Managing Director at Stephens Inc]

Right. Got it. And then I wanted to ask one more on the kind of unusual items for the quarter. It looked like to us, we could have it wrong, but your GP and T costs kind of popped up for second quarter. Is that correct? Or anything unusual happened there?

[Kevin White, CFO at Mach Natural Resources]

Yes. Due to the marketing arrangement change that we mentioned and that took place at the beginning of the second quarter, there's essentially a reclass and won't bore you with the FASB number of the provision, but it's a reclass of moving GPT GP and T up and revenues also go up. So it is a kind of bottom line neutral impact and it just has to do with when title to the gas changes and it's in association with this new marketing arrangement. So net net, it's kind of a zero sum game, but in the individual categories of revenue and GP and T, they both went up by similar amounts.

[Michael Scialla, Managing Director at Stephens Inc]

Okay, I got it. So really it was the gas price that was the kind of the maybe the difference between our estimates and some others not there's really no change to what you're thinking in terms of gathering and transportation costs? No.

[Kevin White, CFO at Mach Natural Resources]

We'll and when we update guidance when we close the acquisitions, that line item will change to reflect that new arrangement. But again, so will our basis differential up above.

[Michael Scialla, Managing Director at Stephens Inc]

Got it. Thanks, Kevin. Thanks, Tom.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

You bet.

[Operator]

Thank you. Our next question comes from the line of Jeff Jay with Daniel Energy Partners. Please proceed with your question.

[Geoff Jay, Partner at Daniel Energy Partners]

Hey, guys. Just a real quick one for me just to make sure I understand the activity changes, I mean, she sits today. So the three rigs in the San Juan next year, are those all incremental? Or are there some kind of we're working now, I guess? And then in the Permian then, as I understand it, you're going to basically let the two rigs that have currently drop and go to zero until you see a better drilling signal. Do I have that right?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

That's correct. The San Juan currently has one rig that will be leaving shortly, sometime in late August, early September, so let's say this month. And then we'll be picking up hopefully two Mancos rigs and one to two Fruitland coal right now. Have set up for one, but I'd love to drill with two. And then that at today's prices that then would nudge out some of our oil locations.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

So that if all things were just fantastic, we'd have three to four rigs, I'm just projecting three in the San Juan and two in the Deep Anadarko drilling for gas and one rig that is looking Oswego oil just because it's a steady, very low risk, good oil producing area with high rates of return, but they still don't match the natural gas locations that we have today.

[Geoff Jay, Partner at Daniel Energy Partners]

That's all for me. Thanks.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Carey Mantiano with Stifel. Please proceed with your question.

[Kerry Mangano, Managing Director - Investments at Stifel]

Hi, thanks for taking the question. It's kind of a bizarre one, but in terms of the acquisitions, was there any preference given to acquisitions that would take part cash and part units? Or would you guys have bought other properties or have you looked did you look at other properties that wanted all cash, but the other properties wanted would take both? Was there any consideration Yes. For

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

So we can't do an acquisition of any size more than 300 or $400,000,000 that doesn't require equity. So, anyone who would like to move from a private company into a more public liquid holding, they need to take equity if they're of any size, especially anything over $400,000,000 for sure, that we can't do with and still then maintain our leverage ratios that we have to have in order to maintain our four pillars. So the easy answer is yes. Taking equity was a large part, in fact, the only reason we could do either of the acquisitions.

[Kerry Mangano, Managing Director - Investments at Stifel]

Okay. And did you look at any others that said they wanted all cash?

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

We look at yes, look at a lot and throw in bids with equity and get declined.

[Kerry Mangano, Managing Director - Investments at Stifel]

Okay. Yes. Okay. That's I was just wondering about that. Somebody had mentioned it to me that's involved out there in Texas and they said there was some other properties that wanted all cash or something in their opinion.

[Kerry Mangano, Managing Director - Investments at Stifel]

But I just thought I'd run that by you guys. That stands to Yes.

[Tom Ward, CEO & Director of Mach Natural Resources GP LLC at Mach Natural Resources]

And you have to so I mean, the other thing to think about is that every seller has an opportunity. There's plenty of competition to take all cash. So you have to believe, which I believe, it's actually better to take our equity and ride along with a company that's going to give you 15% to 20% distributions while you wait and look for a time that you want to exit. So to me, it's along with if you have a belief that oil is going to be above $60 or $70 over time or gas prices are moving up in the future, why wouldn't you take equity and instead of a cash offer that's basically equal with where our equity offer is.

[Kerry Mangano, Managing Director - Investments at Stifel]

Yes. And I guess that just shows that these people that are selling do believe in what they're selling and they're not just trying to take a buck and get but they are along for the ride. That's a perfect way to couch it to the clients that I've got in this. So I appreciate that, Tom. I've been following you for years.

[John Freeman, Managing Director at Raymond James Financial]

Thank you.

[Operator]

Thank you. And ladies and gentlemen, we have reached the end of the question and answer session. And also this concludes today's conference and you may disconnect your lines at this time. We thank you for your participation. Have a great day.

Participants

Executives

• Tom Ward, CEO & Director of Mach Natural Resources GP LLC
• Kevin White, CFO

Analysts

• Charles Meade, Research Analyst & Member at Johnson Rice & Company L.L.C.
• Derrick Whitfield, Managing Director at Texas Capital
• John Freeman, Managing Director at Raymond James Financial
• Michael Scialla, Managing Director at Stephens Inc
• Geoff Jay, Partner at Daniel Energy Partners
• Kerry Mangano, Managing Director - Investments at Stifel