Natural Gas Insights: Contradictions in Production Growth, Marketing Strategies, and M&A Plans

Production and Financial Performance:
- Mach Natural Resources reported production of 84,000 BOE per day for Q2 2025, with 53% natural gas and 23% oil.
- The company's total oil and gas revenues were $29 million, and adjusted EBITDA was $122 million.
- The production volume was slightly higher than expected due to normal operations and recent bolt-on acquisitions, leading to a lower-than-anticipated cash distribution of $0.38 per unit.

Distribution and Onetime Events:
- Cash available for distribution was reduced by $8.2 million due to a settlement in a royalty owner dispute and lower natural gas prices.
- These factors reduced the distribution by $0.07 per unit each, impacting the overall payout compared to cash flow minus CapEx.

Gas Production and Market Strategy:
- Mach plans to increase natural gas production to exceed 650 million cubic feet per day in 2026, with natural gas mix to reach beyond 70% in 2026 and 75% in 2027.
- This strategy is driven by anticipation of strong natural gas demand growth over the next five years and plans to drill natural gas wells regardless of short-term headwinds.

Acquisition and Capital Structure:
- The company completed acquisitions of IKAV and Sabinal, with a goal to maintain a long-term debt to EBITDA ratio of 1x leverage.
- These acquisitions were funded by equity, which is Mach's preferred method for transactions over $300 million to maintain their leverage ratios.

Drilling and Development Plans:
- Mach plans to focus on natural gas drilling in 2026, with 3 rigs in the San Juan Basin and 2 in the deep Anadarko Basin.
- The company will also begin drilling in the Oswego field and the Fruitland coal development, prioritizing activities with high return on investment.