Infinity Natural Resources' 2025 Q3 Earnings Call: Contradictions Emerge on CapEx, Midstream, and Share Repurchase Strategies

Guidance:

• Raised full-year 2025 production guidance to 33.5–35.0 MBoe/day (from 32–35 MBoe/day).
• Updated full-year total development CapEx guidance to $270–$292M (inside prior combined $249–$292M).
• On track to turn 23 wells to sales in 2025 (12 gas-weighted, 11 oil-weighted).
• Expect further production growth in Q4 as additional turn-ins come online and anticipate continued per-unit cost declines.
• Anticipate lower capital spend in Q4.
• Board authorized a $75M share repurchase program; borrowing base expanded to $375M providing $304M liquidity.

Business Commentary:

* Production Growth and Gas Focus: - Infinity Natural Resources reported 39% total production growth year-over-year to 36.0 MBoe per day during Q3 2025, including 70% growth in natural gas production compared to Q3 2024. - This growth was driven by increased focus on natural gas development and strong results from recent projects.

• Capital Expenditure and Land Acquisitions:
• The company invested $95 million in development capital and land acquisitions during Q3, with approximately 3,000 net acres added to their portfolio.

• The increase in working interest on development wells effectively added one net well to their 2025 development program, enhancing capital efficiency.

• Financial Performance and Cobit Efficiencies:

• Infinity achieved an adjusted EBITDA margin of $18.12 per Boe, a top-tier result compared to Appalachian peers.

• Efficiency improvements in casing running speed and record stages pumped in a 24-hour period led to operational cost reductions.

• Share Repurchase Program and Undervalued Stock:

• The Board of Directors authorized a $75 million share repurchase program, reflecting confidence in the company's long-term value and undervalued stock price.
• The program will not impact asset development or acquisition strategies, and aligns with the company's commitment to maximizing shareholder returns.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 'exceptional' execution: 39% production growth YoY to 36.0 MBoe/d, 70% gas growth YoY, a single-day record of 47.9 MBoe/d, adjusted EBITDA of $60M and $18.12/BoE; expanded liquidity and a $75M buyback were presented as evidence of confidence.

Q&A:

• Question from Timothy Rezvan (KeyBanc Capital Markets): Can you talk about any plans to test the Deep Dry Gas Utica given stronger natural gas prices?
  Response: No specific Deep Dry Gas Utica development plan announced; evaluating opportunities for 2026 with positive momentum in South Bend but no commitment yet.

• Question from Timothy Rezvan (KeyBanc Capital Markets): You added ~3,000 net acres across ~350 transactions (4,300 YTD) — how is the ground game evolving and how will it affect next year?
  Response: Added ~3,000 net acres via ~350 small transactions to increase working interest in active projects; will continue the ground game while also pursuing larger M&A.

• Question from John Freeman (Raymond James): How do you think about the trade-off between share buybacks versus continued ground-game acquisitions?
  Response: Share repurchase program will not impact development or acquisition plans; repurchases are opportunistic because management views the stock as undervalued.

• Question from John Freeman (Raymond James): Natural gas hedged volumes appear to have decreased quarter-to-quarter — can you explain that decision?
  Response: Still well-hedged through 2025; the lower hedge percentage reflects stronger Pennsylvania gas production growth; hedges are executed around FID and as completions approach.

• Question from Scott Hanold (RBC Capital Markets): Can you frame 2026 activity — should we expect roughly the same ~1–1.5 rig pace and similar oil/gas mix?
  Response: No 2026 guidance yet; expect to remain at least as active as 2025 (~1.2 rigs) with activity across both oil and gas basins; formal guidance to be provided in Q1.

• Question from Scott Hanold (RBC Capital Markets): You reported a 47.9 MBoe/day rate in October — was that a peak daily spot or an average and how should we reconcile that with quarterly production?
  Response: 47.9 MBoe/d was a daily spot rate tied to recent well turn-ins; several wells came online driving the spike; the company does not provide specific quarterly production figures beyond the full‑year range.

• Question from Scott Hanold (RBC Capital Markets): Is the implied Q4 production around ~43 MBoe/d if you back into the full-year number?
  Response: No specific Q4 figure provided; use the full‑year guidance of 33.5–35 MBoe/d as the reference.

• Question from Michael Scialla (Stephens): You raised D&C CapEx at the midpoint — how are costs and development pace trending versus prior expectations?
  Response: Per-foot costs are tracking to plan; higher spend reflects added working interest (effectively one net well) and pulled-forward gas infrastructure spending, delivering more net wells at similar total spend.

• Question from Michael Scialla (Stephens): Any midstream constraints that could impact operations going forward?
  Response: No midstream constraints; building in‑house midstream for gas and Ohio pads are pipeline‑tied, so near‑term midstream is not a concern.

• Question from Paul Diamond (Citigroup): On the share buyback, is there a marker or threshold where you'd lean further into repurchases?
  Response: No specific execution thresholds disclosed; repurchases will be opportunistic given the view that shares are undervalued.

• Question from Paul Diamond (Citigroup): Since IPO and running ~1–1.5 rigs, have well results (IPs, declines, EURs) surprised to the upside or downside vs original expectations?
  Response: Results have largely met budgeted expectations and some recent projects have outperformed the base type assumptions.

• Question from Nicholas Pope (ROTH Capital): The buyback targets Class A shares — can Class B convert to be included or is conversion required?
  Response: Repurchase program targets Class A shares trading in the market; no expectation of Class B conversion and at recent prices $75M could repurchase >40% of Class A shares.

• Question from Nicholas Pope (ROTH Capital): Will buybacks be funded primarily from free cash flow and not by increasing debt?
  Response: Buybacks will not impair development plans; company intends to maintain a strong balance sheet and use cash prudently so repurchases won't hinder execution.

Contradiction Point 1

Capital Expenditure (CapEx) Guidance

It involves changes in financial forecasts, specifically regarding capital expenditure expectations, which are crucial for understanding the company's investment strategy and future growth trajectory.

What is the 2026 guidance outlook for oil vs. gas mix and capital allocation? - Scott Hanold(RBC Capital Markets, Research Division)

2025Q3: We're not giving specific guidance yet for 2026. We expect to maintain at least the same level of activity as in 2025, with attractive returns in both commodities, and we'll be active in both states next year. - [Zack Arnold](CEO)

Are there any updates on the 2026 program? - Kaleinoheaokealaula Scott Akamine(BofA Securities, Research Division)

2025Q2: We're not ready to give 2026 CapEx guidance yet, but our focus remains on maintaining growth while preserving free cash flow. We are budgeting for a similar level of capital spend as in 2025. - [Zack Arnold](CEO)

Contradiction Point 2

Midstream Constraints

It involves the company's ability to manage and resolve operational challenges, which directly impacts production and financial performance.

Are there any midstream constraints that could impact future operations? - Michael Scialla(Stephens Inc., Research Division)

2025Q3: We have no midstream constraints. We're excited about our midstream developments and well-positioned for gas volumes. Our near-term development in Ohio is tied into existing pipelines, with no anticipated midstream issues. - [Zack Arnold](CEO)

Can you explain the third-party midstream constraints in Utica? - Paul Diamond(Citigroup Inc., Research Division)

2025Q2: The issue was a farmer blocking a pipe. We rerouted the pipe and the wells are now flowing unconstrained. Midstream issues have been resolved, and we'll continue to benefit from the 25% production growth. - [Zack Arnold](CEO)

Contradiction Point 3

Share Repurchase Strategy

It involves changes in financial strategy, specifically regarding share repurchase plans, which impact shareholder value and company financial structure.

Can you discuss the share repurchase strategy and execution? - Paul Diamond(Citigroup Inc., Research Division)

2025Q3: We think our shares are undervalued. This buyback program is entirely focused on trading shares. We're opportunistic about repurchasing shares without impacting asset development. - [David Sproule](CFO)

Can you explain the $600 million share repurchase authorization? - Paul Michael Diamond(Citigroup Inc., Research Division)

2025Q2: We've got $1.1 billion of liquidity. We've got a great low-cost capital position. And so if there are any opportunities to buy our own stock, we will pay off the debt, and that will be one of the first things we would do. - [David Sproule](CFO)

Contradiction Point 4

2026 Guidance and Capital Expenditure

It involves the company's guidance and plans for 2026, which are crucial for investor expectations and strategic planning.

What is the 2026 guidance outlook for oil vs. gas mix and capital allocation? - Scott Hanold(RBC Capital Markets)

2025Q3: We're not giving specific guidance yet for 2026. We expect to maintain at least the same level of activity as in 2025, with attractive returns in both commodities, and we'll be active in both states next year. - [Zack Arnold](CEO)

What do recent Northeast deals indicate about valuations, and are you positioned to create value through M&A? - Kalei Akamine(Bank of America Securities)

2025Q1: We're not in a position to say that we have any part of that in a 2026 development plan. But clearly, our balance sheet and our cash flow allow us to do that if the economics makes sense. - [Zack Arnold](CEO)

Contradiction Point 5

Share Buyback and Strategic Focus

It involves the company's strategic approach to share buybacks, which impacts investor value and confidence.

Can you discuss the share repurchase strategy and execution? - Paul Diamond(Citigroup Inc.)

2025Q3: The share buyback won't impact our asset development or acquisition strategies. Our shares are significantly undervalued, and we're opportunistically executing this program alongside our other assets. - [David Sproule](CFO)

What are your thoughts on the Utica deep gas potential in Pennsylvania and when will the first well be drilled? - Scott Hanold(RBC Capital Markets)

2025Q1: If we do it, it won't be in a way that impacts the integrity of our strategic plan. We want to make sure that the company has enough free cash flow to deal with its capital requirements. - [David Sproule](CFO)