Mach Natural Resources Q2 Earnings Call Highlights

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Sat, August 8, 2026 at 10:03 PM GMT+3 7 min read

Key Points

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Mach reported solid second-quarter results, producing 149,000 BOE per day, generating $154 million in operating cash flow and $182 million in adjusted EBITDA. The company declared a $0.36-per-unit quarterly distribution.
Management is maintaining disciplined capital allocation, targeting reinvestment at roughly 50% of operating cash flow and seeking to reduce leverage to about 1.0 times debt-to-EBITDA by the end of 2027. Potential deleveraging measures include equity-funded acquisitions, its $100 million at-the-market equity program and possibly retaining distributions.
Mach is prioritizing oil-focused drilling while deferring some gas development until market conditions improve. The company expects largely flat 2027 production, with Mancos gas activity dependent on prices—particularly whether natural gas rises above approximately $3 per Mcf.

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Mach Natural Resources (NYSE:MNR) reported second-quarter production of 149,000 barrels of oil equivalent per day and generated $154 million in operating cash flow, while maintaining its stated focus on limiting reinvestment to less than 50% of operating cash flow on a year-to-date basis.

The company declared a quarterly distribution of $0.36 per unit after generating $60 million in cash available for distribution. The payment is scheduled for Aug. 31 to unitholders of record as of Aug. 17.

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Chief Executive Officer Tom Ward said the company's strategy remains centered on disciplined asset purchases, restrained capital spending, financial strength and maximizing cash distributions. He said Mach intends to bring leverage back to its goal of roughly one times debt to EBITDA by the end of 2027, compared with its projection of 1.4 times at the end of 2026.

Second-quarter financial and operating results

For the quarter, Mach's production mix was 15% oil, 69% natural gas and 16% natural gas liquids. Average realized prices were $95.40 per barrel for oil, $1.93 per Mcf for natural gas and $28.99 per barrel for NGLs, according to Chief Financial Officer Kevin White.

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Oil and gas revenue totaled $360 million, with oil accounting for 54% of the total, natural gas contributing 30%, and NGLs representing 16%. Including hedges and midstream activities, total revenue was $406 million.

Adjusted EBITDA was $182 million.
Operating cash flow was $154 million.
Development capital expenditures were $97 million, or 63% of operating cash flow during the quarter.
Lease operating expense was $98 million, or $7.21 per BOE.
Cash general and administrative expense was about $7 million, or $0.54 per BOE.
The company ended the quarter with $41 million in cash and $270 million of availability under its credit facility.

While quarterly development spending exceeded Mach's 50% operating-cash-flow target, White said year-to-date capital spending was "right on top of 50%" of operating cash flow. Management expects to finish the year near that reinvestment level, though results may vary by quarter.

Capital allocation and leverage priorities

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Ward said Mach's capital spending will remain tied to operating cash flow rather than a fixed development plan. The company's variable distribution model allows it to reduce or increase spending as commodity prices and project returns change, he said.

Mach expects to use several options to reduce leverage, including accretive acquisitions funded with equity, its $100 million at-the-market equity program, and potentially retaining a portion of distributions to pay down debt. Ward said cutting distributions could be an option if needed, but he also said the company would prefer to make an acquisition using equity if suitable opportunities emerge.

Ward said the company is reluctant to pursue asset sales or acreage divestitures as a deleveraging tool. He noted that acreage previously viewed as non-core has at times developed into productive areas, and selling producing properties would reduce cash flow.

"Selling away your assets, to me, is not as efficient as if we were to cut a distribution," Ward said.

Drilling shifts toward oil-weighted opportunities

Mach has shifted its near-term drilling emphasis toward crude-heavy projects following the start of the conflict in Iran, Ward said. The company is completing its final two Mancos Shale wells this year but has delayed their completion phase until 2027 to stay within its internally mandated capital spending limit.

The company currently has three rigs operating in Oklahoma, targeting the Oswego, Red Fork and Ardmore Basin Sycamore formations. Ardmore Basin locations are expected to be completed by the end of the third quarter. Mach plans to defer further Red Fork drilling until the first quarter of 2027 while retaining one Oswego rig during the fourth quarter of 2026.

Ward described the Oswego Limestone in Kingfisher County, Oklahoma, as the company's principal drilling workhorse. Mach has drilled more than 250 wells in the area since 2021 and estimates an 87% rate of return at a $75 oil strip price. The company expects to spend about $3.3 million to drill and complete Oswego wells targeting approximately 160,000 barrels of oil.

The company also discussed a smaller Clear Fork opportunity, which is not currently included in its drilling schedule. Ward said the program consists of roughly seven or eight potential horizontal wells within a waterflood, with an estimated 53% rate of return at the end of July. He said the project ranks below the Oswego on returns and could enter the 2027 program depending on prices and available cash flow.

Mancos opportunity depends on gas market conditions

Mach holds 575,000 acres in the San Juan Basin and sees the Mancos Shale as a potentially significant long-term natural gas growth opportunity. Ward said Mach is the second-largest natural gas producer and acreage holder in the play behind Hilcorp, with three other sizable owners.

The company has a gas marketing agreement through 2030 and said it can hold approximately 350 million cubic feet per day of gas production flat by drilling five net wells annually. Drilling 10 net wells per year could increase Mach's net gas production to more than 500 MMcf per day, according to Ward.

However, the company's near-term activity in the Mancos will depend on natural gas prices, regional basis conditions and competition with oil-focused drilling opportunities. Ward said Mach would be unlikely to pursue a gas capital program if prices remain below $3 per Mcf, though management remains constructive on long-term gas demand.

Mach expects its 2027 program to prioritize oil activity in the first half, with potential Mancos completions beginning in late spring or summer if gas prices improve. Ward said the company has not finalized its 2027 capital plan.

The company also said it is working to lower Mancos well costs. Ward said historical costs for three-mile lateral wells were nearly $20 million, while the current program is expected to be closer to $13 million per completed well. Vice President of Production Operations Rick Hughes attributed the reduction in part to improved drilling performance, fewer drilling days, lower completion costs and new vendors.

Ward said Mach's overall 2027 production outlook is expected to be "basically keeping it flat," reflecting the company's commitment to keep capital spending below 50% of operating cash flow.

About Mach Natural Resources (NYSE:MNR)

Mach Natural Resources LP, 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.

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