Earnings call transcript: Mach Natural Resources Q4 2024 misses EPS forecast

Mach Natural Resources LP reported its financial results for the fourth quarter of 2024, revealing earnings per share (EPS) of $0.34, significantly below the forecasted $0.97. The company also reported revenue of $235 million, missing the expected $265.69 million. Following the earnings announcement, the company’s stock price experienced a modest increase of 0.87%, closing at $14.43. According to InvestingPro data, the stock is currently trading near its 52-week low of $13.53, while offering a substantial dividend yield of ~14%. Analysis from InvestingPro suggests the stock may be undervalued at current levels.

Key Takeaways

• Mach Natural Resources’ EPS and revenue fell short of expectations for Q4 2024.
• The stock price increased by 0.87% despite the earnings miss, indicating mixed investor sentiment.
• The company highlighted its robust drilling program and low operating expenses.
• Strategic focus remains on acquisitions and maintaining low reinvestment rates.

Company Performance

Mach Natural Resources continued to emphasize its strong operational performance, with net production reaching 86.7 MBOE per day in 2024. The company achieved a net income of $185 million and an adjusted EBITDA of $611 million. Despite the earnings miss, the company maintained its position as a leader in distribution yield among public upstream energy companies.

Financial Highlights

• Revenue: $235 million, below the forecast of $265.69 million
• Earnings per share: $0.34, compared to a forecast of $0.97
• Distributed $310 million, or $3.2 per unit, to shareholders
• Cash return on capital invested stood at 25%

Earnings vs. Forecast

Mach Natural Resources’ actual EPS of $0.34 was significantly below the forecast of $0.97, representing a miss of approximately 65%. Revenue also fell short by 11.5%, coming in at $235 million against the expected $265.69 million. This marks a notable deviation from the company’s previous performance trends.

Market Reaction

Despite the earnings miss, Mach Natural Resources’ stock price rose by 0.87%, closing at $14.43. This movement contrasts with the broader market trend, suggesting that investors may have responded positively to the company’s operational updates and strategic plans.

Outlook & Guidance

Looking ahead to 2025, Mach Natural Resources plans to maintain its focus on accretive acquisitions and low reinvestment rates. The company anticipates running three rigs and has outlined a capital expenditure plan of $225-$240 million for drilling, completion, and workovers. Additionally, Mach Natural Resources is exploring potential equity partnerships and larger acquisitions exceeding $500 million. InvestingPro data shows analyst consensus remains optimistic, with a Strong Buy recommendation and price targets ranging from $23 to $27.50, suggesting significant potential upside from current levels. Get detailed analysis and fair value estimates for over 1,400 stocks with InvestingPro’s comprehensive Research Reports.

Executive Commentary

CEO Tom Ward emphasized the company’s commitment to acquisitions and high return drilling results, stating, "We are an acquisition company. Our industry-leading cash returns have been made through opportunistic acquisitions." He also highlighted the potential of natural gas, noting, "Natural gas is the fuel of the next ten years that’s going to have tremendous demand."

Risks and Challenges

• Potential volatility in commodity prices, particularly natural gas
• Execution risks associated with planned acquisitions
• Maintaining low operating expenses amid inflationary pressures
• Competition for attractive acquisition targets
• Regulatory changes impacting the energy sector

Q&A

During the earnings call, analysts questioned the company’s M&A strategy, particularly its interest in oil assets and potential $100 million acquisition opportunities. Mach Natural Resources reiterated its focus on high-return drilling programs, especially in the Oswego formation and the Deep Mississippian in the Anadarko Basin.

Full transcript - Mach Natural Resources LP (MNR) Q4 2024:

Kevin, Conference Call Moderator: Greetings, and welcome to the Mach Natural Resources Fourth Quarter and Full Year twenty twenty four Earnings Results Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Chief Executive Officer and Director, Tom Ward.

Please go ahead, sir.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Thank you, Kevin. Welcome to Mach Natural Resources’ fourth quarter earnings update. Each quarter, it’s 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 or less.

By maintaining a low leverage profile, we give ourselves opportunities when markets experience high volatility. Two, disciplined execution. We acquire only cash flowing assets at a discount to PDP, PV-ten that are accretive to

Kevin, Conference Call Moderator: our

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: distribution. Three, disciplined reinvestment rate. 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. And four, maximizing cash distributions.

We target peer leading variable distributions. This pillar drives all decisions. I’d like to add additional color to each of these four pillars. Disciplined execution, our strategy since the founding of the company in 2017 has been to purchase cash flowing assets at bargain prices while paying nothing for associated acreage and future drilling and very little to nothing for the associated infrastructure and midstream assets. Our company was built during a time of distress in our industry.

We made our first acquisition in early twenty eighteen and then followed that with 19 additional acquisitions. We accumulated over 1,000,000 acres of land that is held by production. We have ownership in four midstream gathering and processing facilities and significant other infrastructure. We purchased these facilities for $65,000,000 and these assets contributed $78,000,000 of EBITDA in 2024 alone. $17,000,000 of this midstream EBITDA came from third parties and the remainder from higher realized wellhead prices for our own production.

And finally, in every single one of our acquisitions, our best in class operating team has reduced LOE by 25% to 35% from the previous owners cost. Disciplined reinvestment rates, we now have the distinct advantage of choosing where to drill from hundreds of potential locations on the previously mentioned 1,100,000 acres. In general, we look for opportunities to invest in projects with the potential to have at least 50% IRRs. In our presentation posted today on our website, we list all of the locations drilled in the Oswego and Wood formations during 2024. In short, even during a year with exceptionally low natural gas prices, we achieved our goal.

Natural gas prices have recently moved up and that will result in more operating cash flow during 2025. We plan to move in an additional rig in 2025 and still stay below our 50% reinvestment rate, while adding high rate of return wells to

Kevin, Conference Call Moderator: our production.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: In 2025, we anticipate three rigs running, continuing to drill the Oswego formation of Kingfisher County, where we’ve drilled more than two twenty five wells since 2021, The Mississippian and Woodford formations in the condensate window of the STACK and Ardmore Basin, where we incorporate locations from the last three acquisitions made and the deep Mississippian formation in the Anarco Basin. It is worth highlighting that out of the 45 wells drilled in our Oswego and Woodford drilling program that greater than 35 achieved more than 100% rates of return. These were all drilled on lands we paid zero for. We drill wells that are highly efficient. For example, our Oswego D and C cost in 2024 averaged only $2,600,000 or $2.00 $2 per lateral foot.

By keeping our costs low, we achieved medium payout periods of fifteen months, assuming that flat $70 WTI and $3.5 Henry Hub. According to Inveris, this compares to fourteen months in the Delaware and fifteen months in the Midland Basins where purchasing locations can cost more than $10,000,000 each. All of these statistics add up to an unmatched to unmatched cash returns for our unitholders over the last five years and the next five years. We anticipate spending between $225,000,000 to $240,000,000 on drilling and completion plus workovers in 2025. With this expenditure, we anticipate holding our production basically flat either up or down a few percentage points on a BOE basis.

Maintain financial strength. We also watch our leverage very closely. During the downturn, starting in 2019, we adjusted our development CapEx from $101,000,000 to only $28,000,000 in 2020, ’60 ’1 million dollars in 2021, then $291,000,000 in 2022 as prices rose. All the while, our EBITDA grew from 119,000,000 to $719,000,000 over the same period. We achieved this exceptional performance by being able to acquire cash producing properties in a distressed environment due to our strong balance sheet.

MOC also has peer leading PDP decline and reinvestment rates. Our next twelve month PDP decline is projected to be 20%, while our reinvestment rate in 2024 was only 47%. Both of these statistics are number one in a group of 16 peer companies. We have exceptionally strong asset coverage with total proved acreage or total proved coverage of 3.9 times, net debt to enterprise value of 21% and PDP PB10 to total debt of 3.3 times. Our LOE averaged $6.17 per BOE in the fourth quarter of twenty twenty four and our 2024 free cash flow was $8.43 per BOE.

We’re also starting 2025 with a net debt to EBITDA at 0.8 times pro form a for our recent offering. Maximizing distributions, management tries to understand risk and mitigate that risk where possible. We hedge 50% of our oil and natural gas on a rolling one year basis and 25% during the second year. We also have a variable distribution that rises and falls with the changes in pricing. Each quarter, we are methodical to reinvest 50% of our operating cash flow, then receive our calculated cash available for distribution and send it home to unitholders.

We’ve done this since our inception and do not plan to change our approach. During this time, we have distributed back to our owners over $1,000,000,000 When we hold our production flat by spending less than 50% of our operating cash flow, we are allowed to send back distributions to our unitholders. The best way to describe what we do is consistency. In all price environments, we maximize our distributions while maintaining a clean balance sheet. In times of lower pricing, we lower our CapEx, thus not having long term contracts on capital expenditures.

In doing so, we continue to have excellent cash returns on capital invested. Our CROQUEE five year average from 2020 to 2024 is 32%. This was achieved through several commodity cycle fluctuations. During 2024, we delivered total net production of 86.7 MBOE a day and reported net income and adjusted EBITDA of $185,000,000 and $6.00 $1,000,000 respectively. We also distributed $310,000,000 or $3.2 per unit and attained a cash return on capital invested metric of 25%.

Recently, we closed a bolt on acquisition in the Ardmore Basin of approximately $30,000,000 that will provide additional locations for us to drill this year. We repaid the company’s term loan and lowered our net debt to EBITDA to 8.8x from 1.0x. We then entered into a new revolving credit facility with initial borrowing base of $750,000,000 We continue to have success buying assets in the Mid Con. Our latest successful acquisitions have been in the $100,000,000 range. In fact, we’ve made 20 acquisitions and averaged just less than $100,000,000 on each one.

This approach is important as we can stay away from large well capitalized competitors to buy assets that are less expensive. We focus these acquisitions on not only acquiring PDP at less than PV-ten, but also acquiring land that one day will be drilled by us at no cost and no timeframe for expiration due to being held by production. This formula served us well. We also like buying crude oil anytime we move into the 60s or less and have a backwardated curve. We see the crude market moving through the inevitable one to two standard deviations both up and down and want to be ready with a strong balance sheet during times when pricing is at the bottom of a cycle.

We do not envision a longer term down cycle in the vein of 2015 to 2020 and feel like it’s a good time to lean in on a crude acquisition if we can find the right deal that fits our criteria for investing. However, we also do not stray away from our basic philosophy of needing an acquisition to be accretive to our distribution. We also will trade in natural gas if the opportunity arises at the correct price. In order for us to make a larger acquisition, say something north of $500,000,000 we need to find a partner who will be willing to take equity alongside of us. We believe our time is coming when PE firms and small public companies will find our formula for cash returns attractive and want to be a part of larger mark of a larger mark.

We welcome these opportunities as a way to grow our business while creating larger cash returns to our unitholders and having more flow so that institutional investors can participate on a larger scale in our business. I feel that we will accomplish at least one of these types of transactions in 2025. Even if we do not make a meaningful acquisition, we will continue to replace our production through our drilling program and small acquisitions and deliver excellent returns to our unitholders. In 2024, we ranked first out of all public upstream energy companies and distribution yield. We also ranked tenth in the total shareholder returns.

We achieved these returns at a time of very low natural gas prices. In fact, 2024 had the lowest natural gas prices since the early 1990s. Our commodity mix on a revenue basis was weighted 59% oil, 21% natural gas and 20% NGLs by revenue in 2024. However, as we move into 2025, we can see what happens in a higher natural gas environment with our volume by product being 54% natural gas, 23% NGLs and 23% oil. Therefore, in a $4 plus environment for natural gas, we’re leaving all of our liquids in the gas stream and producing 77% of our production as natural gas.

This increase in EBITDA allows us to have more operating cash flow, which enables us to add another rig in 2025 to have three rigs running versus the two we had in 2024. We remain focused on the price for our products and our reinvestment rate. The reinvestment rate drives our budget, not the IRR of the wells we drill. We feel confident we can continue to achieve high return drilling results, but we will not move away from our core tenants of keeping the reinvestment rate low to maximize cash returns to unitholders. If we are fortunate enough to add larger acquisitions, we’ll be able to then monetize more of the hundreds of high internal rate of return projects we have waiting to be drilled on our 1,100,000 acres of HBP land.

This is why our focus remains on free cash flowing assets to acquire prices that are accretive to our distribution. In closing, I want to reemphasize that we are an acquisition company. Our industry leading cash returns have been made through opportunistic acquisitions. This is our primary lever of growth. Our expectation is to continue making acquisitions that are accretive to our distribution in 2025, just as we have over the last seven years and 20 deals.

I’ll now turn the call over to Kevin to discuss our financial results.

Kevin, Financial Executive, Mach Natural Resources: Thanks, Tom. For the fourth quarter, our production of 86,700 BOE per day was 24% oil, 52% natural gas and 24% NGLs. Our average realized prices were $70.06 per barrel of oil, $2.31 per Mcf of gas and $25.82 per barrel of NGLs. Our G and A stayed flat during the quarter at $8,000,000 or around $1 per BOE. We ended the quarter with $106,000,000 in cash and our first lien term principal was $763,000,000 During the quarter, total revenues including our hedges and midstream activities totaled $235,000,000 adjusted EBITDA of $162,000,000 and $134,000,000 of operating cash flow.

After CapEx of $60,500,000 we generated $81,000,000 of free cash, which we used to pay our final principal amortization of roughly $20,600,000 on the first lien term loan and the remainder results in the $60,000,000 or $0.5 per unit distribution for this quarter and was paid earlier this week. As Tom mentioned, we’ve closed on a new $750,000,000 RBL made up of the syndicate of 10 banks. We’re currently drawn around $500,000,000 And with that, Kevin, I’ll turn it back to you to open up the call for questions.

Kevin, Conference Call Moderator: Certainly. We’ll now be conducting a question and answer session. Our first question is coming from Neal Dingmann from Truist Securities. Your line is now live.

Neal Dingmann, Analyst, Truist Securities: Tom, you sound pretty optimistic still on just the M and A environment. I’d love to hear gas oil kind of still in the mid cut kind of what your expectations are for this year?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: My expectations on gas and oil?

Neal Dingmann, Analyst, Truist Securities: Just for where you’re seeing sort of the better you think you might see some of the better deals this year?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes, either gas or oil on better deals. That’s a good question. We kind of take what is delivered to us. So if we can make a deal on gas or oil that fits our criteria, we try to do it. I mentioned that I love buying oil in the 60s.

We made a lot of money over the past several years buying low priced oil, especially in a backwardated curve and letting that come to us over time. I just don’t believe we’re in a type of market over the next five or ten years that is going to consistently be down at these levels. And so I do like buying crude oil at these prices. And we look at those deals, but we also look at natural gas. And if we can make a good natural gas acquisition that’s accretive to our distribution, we’ll do so.

But I guess if I had to pick one of the two right now, I think we would lean in on a crude oil deal.

Neal Dingmann, Analyst, Truist Securities: Got it. And then secondly, as you pointed out and I think justly so, you’ve got pretty notable infrastructure now that you’ve put together now over the years. Is there would you ever consider monetizing or is that just too valuable now to the development of your properties? And again, maybe just any comment you can make on infrastructure and the value that you see behind that.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes. Like would we sell some of our infrastructure? Yes, I think they’re pretty critical to our operations. I don’t see any reason for us to be trying to get rid of them. As we mentioned, every year that goes by, we produce more EBITDA than we paid for the whole system.

So it’s just they are valuable, but they’re also valuable to us and we’d have to pay somebody else if we were to pass them on to them. So I don’t think so. I think we’ll plan to keep them.

Neal Dingmann, Analyst, Truist Securities: Great value there. Thanks, Tom.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Thank you.

Kevin, Conference Call Moderator: Thank you. Next question today is coming from Charles Meade from Johnson Rice. Your line is now live.

Charles Meade, Analyst, Johnson Rice: Good morning, Tom and Kevin.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Good morning.

Charles Meade, Analyst, Johnson Rice: Tom, I wanted to ask, I guess, about the third rig. And can you tell us when it’s going to come? I imagine how long it stays is really going to be a function of your reinvestment cap. But when is it going to come? And is that going to be focused on this the Anadarko Deep Mississippian that you talked about?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes. So the third rig is coming just any day for a four well program in the Oswego. And then that rig will leave and we’ll pick up another rig that starts the deep Mississippian project in Western in the Anadarko and Western Oklahoma. So it’s truly driven by reinvestment rate as prices have moved up, our operating cash flow has moved up. So we’re able to bring in a rig in the Oswego that allows us to stay closer to 50% reinvestment rate.

But that’s going to be a short term while we bring in a larger rig to drill the Deep Mississippi in Custer County.

Charles Meade, Analyst, Johnson Rice: Got it. Yes, it would make sense. You’d need a bigger rig for Custer County than the Oswego and Kingfisher. But second question, Tom, I really appreciate the comments you laid out on oil, but I’m wondering if you could do the same for gas. I mean, it’s not new this week or this month, but maybe this month.

We’re looking at backwardation of the gas curve for the first time in a long time with this big run we’ve had in natural gas prices. And I wonder if you could tell us what you think the setup is there and perhaps as a way of doing that, you said you like to buy oil assets and when oil is in the 60s, where do you like to buy gas assets?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: I always like to buy gas assets. So there is I think long term, I’m no different than basically anyone else now that believes natural gas is the fuel of the next ten years that’s going to have tremendous demand. So, yes, there may be in 2028 or so, you get the Qatar LNG coming on that might dampen natural gas prices some for a time. But I think demand overall just is increasing. And anytime you buy something in Anadarko, you’re going to get about 50% natural gas and another 25% or so in natural gas liquids along with crude oil being basically 25%.

And so any deal we make is just by its very nature in the Mid Con a natural gas asset. So we’ve done extremely well at buying cheap natural gas. My belief is that we still could look towards a $5 curve this summer as we need to do refills as we’re going into refill season and need to be back at 3.8 Tcf or so by the October. So I don’t know we’ll have plenty of times of moving up and down and around with gas prices, but I still think there could be a dollar move here in the summer strip.

Charles Meade, Analyst, Johnson Rice: Thank you for the thoughts, Tom. You bet.

Kevin, Conference Call Moderator: Thank you. Next question is coming from Michael Scialla from Stephens. Your line is now live. Good morning,

Michael Scialla, Analyst, Stephens: guys. Tom, I want to see if you could talk a little bit more about the recent bolt on you did. You mentioned the nine putts. Any probable locations with that? And I’m curious, you bought typically from distressed sellers.

It looks like you paid well below PV-ten value here. Could you characterize the seller situation here, why they were willing to let it go for the price that they did?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes. They weren’t as distressed as most of the sellers we’ve had over time because they were just individuals who went out and drilled a few wells and were able then to sell those at basically PDP, PV10 to us and made a lot of money. And so they drilled good wells, they sold us the wells that they drilled and then we paid a fair price for those. And then we inherited the pods that they had proven. There aren’t any probable locations because it was drilled in an area and they’re drilling and others have approved it.

So the nine locations we drill throughout the rest of this year and the next year are going to be pods already. So that’s it’s a good area to drill in with good rates of return. And in fact, by just by the very nature of being in our drilling program, we expect to have 50% rates of return.

Michael Scialla, Analyst, Stephens: Sounds good. I wanted to ask on the fourth quarter distribution. It was a little bit below a percentage of cash billable for distribution than third quarter. Can you talk about

Tim, Analyst, Stifel: the factors that went into that decision?

Kevin, Financial Executive, Mach Natural Resources: Yes, Michael, I’m not sure if you’re looking at the table itself, the cash available for distribution came in at a little above $80,000,000 but we and that’s after interest expense, but before we made our principal amortization. So the principal amortization took a little over $20,000,000 away from that $81,000,000 And so net after the principal payment, we did send out all the cash that we generated for the quarter. The per unit number was a little bit lower because it was the per unit distribution was shared with the equity purchasers that occurred in February.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: So our cash available for distribution, when we send that out, it’s fairly mechanical and keeps basically everyone happy, both equity and our debt holders.

Michael Scialla, Analyst, Stephens: So it’s really all due to the recapitalization of the balance sheet during the quarter?

Kevin, Financial Executive, Mach Natural Resources: Yes, if you were looking at the per unit number.

Derrick Whitfield, Analyst, Texas Capital: Yes. Perfect. Thank you.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: You bet.

Kevin, Conference Call Moderator: Thank you. Next question is coming from Derrick Whitfield from Texas Capital. Your line is now live.

Derrick Whitfield, Analyst, Texas Capital: Good morning, all and thanks for your time.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Sure.

Derrick Whitfield, Analyst, Texas Capital: I wanted to focus on your 2024 drilling program results with my first question. As you guys look back on the 2024 program, are you seeing opportunities for the Woodford to close the gap versus the Oswego returns from a D and C efficiency or optimization perspective?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: We’ve been pretty efficient. I think both of those zones are basically doing what we’ve asked them to do. The Oswego program is just much more mature and to me it’s an easier program to hit our rate to return just because it’s fairly simple to drill and or I guess not as complex to drill as some of the deeper Woodford. And just the amount of communication that we have in between wells, it tends to be a little less. So, I don’t think it really necessarily closes the gap.

We’ve already cut the drilling cost by nearly $2,000,000 a well from when the prior operator had it. So, I would never say never about our team and their efficiencies, but it kind of looks like I wouldn’t expect different outcome in 2025 versus 2024. Therefore, I mean, what can happen is that an Ardmore Basin well or a deep Mississippian well can have higher rates of return than a condensate well in the condensate window. So therefore, after the next couple of wells that are drilled in the condensate window, we’ll be moving that rig to the Ardmore Basin.

Derrick Whitfield, Analyst, Texas Capital: Yes, that makes sense. And maybe regarding M and A, could you more broadly speak to the competitive landscape in the Mid Con as it appears the privates like Validus are most responsible for the competitive environment we’re seeing today? And then also just maybe leaning in on where you were just now on the organic leasing opportunities you’re seeing in the deepness?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes. The Mid Con has become a very popular place and our rig count has gone up over the last year. The amount of interest in buying assets has gone up and well capitalized companies are moving into purchase assets. So that is we have never really been great at buying very large packages other than the diploma one was the one exception for us. But the amount of competition for those types of assets continues to be fairly strong.

So I see us having the niche still of buying $100,000,000 type assets where others are really looking and continue to look for free cash flowing assets that might not have as much of the drilling upside, but we really don’t need that because we have so many opportunities ourselves inside of our existing acreage. So, I mean, what we’re really focusing on is trying to grow our operating cash flow and then using 50% of that to increase our drilling budget into high rate of return drilling that we already have captured inside our existing acreage.

Derrick Whitfield, Analyst, Texas Capital: And Tom, just on the organic leasing opportunities you guys are seeing across the basin, maybe could you elaborate on that?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes. I mean, most of it we already have so much acreage that’s held by production. I mean, across the Deep Anadarko and the deeper condensate window, we have over 65,000 acres currently. So, just we don’t have to lease very much. I think our total budget for leasing this year is around $30,000,000 for 2025.

So it’s that is focused more in the deeper areas as you mentioned. The Cherokee also both Cherokee Shell and the Red Fork Sands have been areas we’ve been watching. And whenever we most of our leasing budget is places that we already own acreage, we propose a well and then we buy the rest of the unit as it’s being put together.

Derrick Whitfield, Analyst, Texas Capital: Very helpful. Thanks for your time.

Neal Dingmann, Analyst, Truist Securities: You bet.

Kevin, Conference Call Moderator: Thanks. The next question today is coming from John Freeman from Raymond James. Your line is now live.

John Freeman, Analyst, Raymond James: Good morning, guys.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Hey, John.

John Freeman, Analyst, Raymond James: Just following up on that last comment, Tom, because it looks like on a year over year basis, the midstream and land expenditures as a percentage of the total budget is doubling both like on a percentage of the total land on a dollar amount. And did you just say that the $30,000,000 of that midstream and land that you all lumped together, the $35,000,000 to $40,000,000 range you gave for the year, did you say $30,000,000 of that is for land?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes, I think that’s our budget for land is $30,000,000 We

Kevin, Financial Executive, Mach Natural Resources: have land and midstream.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Okay. So, yes, that does include both.

Kevin, Financial Executive, Mach Natural Resources: I’m sorry, John. But the midstream stays virtually the same, I think, as in prior years. So the biggest part of the change is for leasing activity. But again, as Tom mentioned, Doug, again, the majority of that just comes as a byproduct of a larger drilling program. And,

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Don, as you think too that as you move into another rig running, that does have just more locations that we add in acreage on.

John Freeman, Analyst, Raymond James: Okay. Yes, that makes sense. And then you also talked about just the increased activity that we’re seeing in Anadarko. I know just Oklahoma overall has seen the biggest increase in drilling activity of any region in the country the last several months and just sits behind only the Permian at this point. What sort of impact, if any, does sort of a non op portion of your budget see this year versus last year’s budget?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Our non op budget is usually fairly small. We elect out of most of the non ops that are proposed to us. We are participating in a couple of deep gas wells that are being drilled now by Continental. But in general, I think our non op budget stays fairly consistently low.

John Freeman, Analyst, Raymond James: Got it. Thanks. Nice quarter guys.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Thank you.

Kevin, Conference Call Moderator: Thank you. Next question is coming from Selman Akhil from Stifel. Your line is now live.

Tim, Analyst, Stifel: Hi, good morning guys. This is Tim on for Selman. Hi. Just wanted to touch on in the prepared comments you mentioned kind of leaving more liquids in the gas stream given where natural gas prices are. Just curious, are you guys able to make that election across your footprint or is it only where you guys kind of have the infrastructure?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: No, we can make that election basically across our production.

Tim, Analyst, Stifel: Okay, got it. And would you expect that to have natural gas production guidance to trend towards the high end and NGLs maybe trend a little lower or any kind of comments you can provide on that?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: It stays in the range? Yes. Yes. So sorry, the answer is it stays in our range.

Tim, Analyst, Stifel: Okay. Got it. And then last one for me. BOE expense has kind of been ticking up in 2024, and I believe that was partially due to the Paloma Wells. But just curious on kind of the cadence we should look for in 2025, whether it’s kind of a flattening or kind of a continuous kind of uptick?

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Yes, I think it’s basically flat.

Tim, Analyst, Stifel: Okay, perfect. Thank you guys for the time.

Kevin, Financial Executive, Mach Natural Resources: Yes.

Kevin, Conference Call Moderator: Thank you. We’ve reached the end of our question and answer session. I’d like to turn the floor back over for any further or closing comments.

Tom Ward, Chief Executive Officer and Director, Mach Natural Resources: Kevin, thank you. Thanks to everyone for joining. We look forward to our next call in the quarter. Thanks.

Kevin, Conference Call Moderator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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