Mach Natural Resources' Q1 2025 Earnings Call: Unpacking Contradictions in Rig Strategy, Resource Focus, and M&A Plans

Rig cadence and strategy, gas versus oil development focus, distribution and financial strategy, rig and drilling strategy, M&A strategy and focus are the key contradictions discussed in Mach Natural Resources LP's latest 2025Q1 earnings call.



Financial Strength and Debt Reduction:
- Mach Natural Resources refinanced its debt, repaying $763 million and reducing its net debt-to-EBITDA ratio from 1.0 times at year-end 2024 to 0.7 times at the end of Q1 2025.
- The refinancing provides significant savings, lowering projected interest expenses by $22 million and eliminating quarterly amortization payments of $21 million.
- This move is aimed at enhancing distributions to unitholders and maintaining financial strength amid commodity cycle volatility.

Production and drilling strategy:
- Mach plans to move to three rigs in Q4 2025 to drill more natural gas in the deep Anadarko basin, despite maintaining a reinvestment rate below 50% of operating cash flow.
- The decision is driven by favorable natural gas prices, which have moved up while oil prices have fallen, leading to superior rates of return in deep Anadarko drilling.

Recent Acquisition and Land Position:
- Mach acquired 1 million acres from XTO, increasing its total acreage inventory to over 2 million acres, for $60 million.
- The acquisition provides significant land for development with minimal incremental cost, strengthening Mach's position in the Mid-Con and enhancing future drilling opportunities.

Distribution and Cash Flow Management:
- Mach aims to maintain a peer-leading variable distribution, distributing over $1 billion to unitholders since inception.
- The company targets a LTM yield of 20%, driven by a disciplined reinvestment rate that optimizes distribution to unitholders while reinvesting only 50% of operating cash flow.