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What changed in MACH NATURAL RESOURCES LP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MACH NATURAL RESOURCES LP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+300 added−314 removedSource: 10-K (2025-03-13) vs 10-K (2024-04-01)

Top changes in MACH NATURAL RESOURCES LP's 2024 10-K

300 paragraphs added · 314 removed · 230 edited across 7 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

147 edited+49 added−32 removed409 unchanged
Biggest changeOur cash flow from operations and access to capital are subject to a number of variables, including: • the prices at which our production is sold; • the amount of our proved reserves; • the amount of hydrocarbons we are able to produce from existing wells; • our ability to acquire, locate and produce new reserves; • the amount of our operating expenses; • cash settlements from our derivative activities; • our ability to borrow under the Revolving Credit Agreement; and • our ability to access the debt and equity capital markets or sell non-core assets.
Biggest changeThe issuance of additional equity securities may be dilutive to our unitholders The actual amount and timing of our future capital expenditures may differ materially from our estimates as a result of, among other things: oil and natural gas prices; actual drilling results; the availability and cost of drilling rigs and labor and other services and equipment; the availability, cost and adequacy of midstream gathering, processing, compression and transportation infrastructure; and regulatory, technological and competitive developments. 28 Table of Contents Our cash flow from operations and access to capital are subject to a number of variables, including: • the prices at which our production is sold; • the amount of our proved reserves; • the amount of hydrocarbons we are able to produce from existing wells; • our ability to acquire, locate and produce new reserves; • the amount of our operating expenses; • cash settlements from our derivative activities; • our ability to borrow under the Revolving Credit Agreement; and • our ability to access the debt and equity capital markets or sell non-core assets.
Our revenues, operating results, cash available for distribution, liquidity and ability to grow depend primarily upon the prices we receive for the natural gas, oil and NGLs we sell. We require substantial expenditures to replace our natural gas, oil and NGL reserves, sustain production and fund our business plans, including our development and exploratory drilling efforts.
Our revenues, operating results, cash available for distribution, liquidity and ability to grow depend primarily upon the prices we receive for the oil, natural gas and NGLs we sell. We require substantial expenditures to replace our oil, natural gas and NGL reserves, sustain production and fund our business plans, including our development and exploratory drilling efforts.
Historically, the markets for natural gas, oil and NGLs have been volatile, and they are likely to continue to be volatile.
Historically, the markets for oil, natural gas and NGLs have been volatile, and they are likely to continue to be volatile.
It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions. Item 1B. Unresolved Staff Comments None.
It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions. Item 1B. Unresolved Staff Comments None.
Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.” Further, many factors may increase the cost of, curtail, delay or cancel our scheduled drilling projects, including: • declines in oil, natural gas and NGL prices; • increases in the cost of, and shortages or delays in the availability of, proppant, acid, equipment, services and qualified personnel or in obtaining water for hydraulic fracturing activities; • equipment failures, accidents or other unexpected operational events; • capacity or pressure limitations on gathering systems, processing and treating facilities or other related midstream infrastructure; • any future lack of available capacity on interconnecting transmission pipelines; • delays imposed by, or resulting from, compliance with regulatory requirements, including limitations on freshwater sourcing, wastewater disposal, emissions of GHGs and hydraulic fracturing; • pressure or irregularities in geological formations; • limited availability of financing on acceptable terms; • issues related to compliance with or liability arising under environmental laws and regulations; • environmental hazards, such as natural gas leaks, oil spills, pipeline and tank ruptures and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the air, surface and subsurface environment; • compliance with contractual requirements; • competition for surface locations from other operators that may own rights to drill at certain depths across portions of our leasehold; • lack of available gathering facilities or delays in construction of gathering facilities; • adverse weather conditions, such as hurricanes, lightning storms, flooding, tornadoes, snow or ice storms and changes in weather patterns; • the availability and timely issuance of required governmental permits and licenses; • title issues or legal disputes regarding leasehold rights; and • other market limitations in our industry.
Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.” Further, many factors may increase the cost of, curtail, delay or cancel our scheduled drilling projects, including: • declines in oil, natural gas and NGL prices; • increases in the cost of, and shortages or delays in the availability of, proppant, acid, equipment, services and qualified personnel or in obtaining water for hydraulic fracturing activities; • equipment failures, accidents or other unexpected operational events; • capacity or pressure limitations on gathering systems, processing and treating facilities or other related midstream infrastructure; • any future lack of available capacity on interconnecting transmission pipelines; • delays imposed by, or resulting from, compliance with regulatory requirements, including limitations on freshwater sourcing, wastewater disposal, emissions of GHGs and hydraulic fracturing; • pressure or irregularities in geological formations; • limited availability of financing on acceptable terms; • issues related to compliance with or liability arising under environmental laws and regulations; • environmental hazards, such as natural gas leaks, oil spills, pipeline and tank ruptures and unauthorized discharges of brine, well stimulation and completion fluids, toxic gases or other pollutants into the air, surface and subsurface environment; • compliance with contractual requirements; • competition for surface locations from other operators that may own rights to drill at certain depths across portions of our leasehold; 22 Table of Contents • lack of available gathering facilities or delays in construction of gathering facilities; • adverse weather conditions, such as hurricanes, lightning storms, flooding, tornadoes, snow or ice storms and changes in weather patterns; • the availability and timely issuance of required governmental permits and licenses; • title issues or legal disputes regarding leasehold rights; and • other market limitations in our industry.
Any of these events could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims by government agencies or third parties for: • injury or loss of life; • damage to and destruction of property, natural resources and equipment; • pollution and other environmental damage; • regulatory investigations and penalties; and • repair and remediation costs.
Any of these events could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims by government agencies or third parties for: • injury or loss of life; • damage to and destruction of property, natural resources and equipment; • pollution and other environmental harm; • regulatory investigations and penalties; and • repair and remediation costs.
In addition, the proposed rule would establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. In November 2022, the EPA issued the proposed rule supplementing the November 2021 proposed rule.
In addition, the proposed rule sought to establish “Emissions Guidelines,” creating a Subpart OOOOc that would require states to develop plans to reduce methane emissions from existing sources that must be at least as effective as presumptive standards set by the EPA. In November 2022, the EPA issued a proposed rule supplementing the November 2021 proposed rule.
These conflicts include, among others, the following: • Our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limiting our general partner’s liabilities and restricting the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; • Neither our partnership agreement nor any other agreement requires the Sponsor (excluding our general partner) to pursue a business strategy that favors us; • The Sponsor is not limited in its ability to compete with us, including with respect to future acquisition opportunities, and are under no obligation to offer or sell assets to us; • Our general partner determines the amount and timing of our development operations and related capital expenditures, asset purchases and sales, borrowings, issuance of additional partnership interests, other investments, including investment capital expenditures in other partnerships with which our general partner is or may become affiliated, and cash reserves, each of which can affect the amount of cash that is distributed to unitholders; 43 Table of Cont ents • Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval; • Our general partner determines which costs incurred by it and its affiliates are reimbursable by us; • Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf; • Our general partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us; • Our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more than 95% of the common units; • Our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates; and • Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
These conflicts include, among others, the following: • Our partnership agreement replaces the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing its duties, limiting our general partner’s liabilities and restricting the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; • Neither our partnership agreement nor any other agreement requires the Sponsor (excluding our general partner) to pursue a business strategy that favors us; • The Sponsor is not limited in its ability to compete with us, including with respect to future acquisition opportunities, and are under no obligation to offer or sell assets to us; • Our general partner determines the amount and timing of our development operations and related capital expenditures, asset purchases and sales, borrowings, issuance of additional partnership interests, other investments, including investment capital expenditures in other partnerships with which our general partner is or may become affiliated, and cash reserves, each of which can affect the amount of cash that is distributed to unitholders; • Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval; • Our general partner determines which costs incurred by it and its affiliates are reimbursable by us; • Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf; • Our general partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us; • Our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more than 95% of the common units; • Our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates; and • Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
In addition, any such negative effect on production volumes, or significant increases in costs could have a material adverse effect on our cash flow and profitability. We depend upon several significant purchasers for the sale of most of our oil, natural gas and NGL production.
In addition, any such negative effect on net production volumes, or significant increases in costs could have a material adverse effect on our cash flow and profitability. We depend upon several significant purchasers for the sale of most of our oil, natural gas and NGL production.
We cannot predict the scope of any final methane regulatory requirements or the cost to comply with such requirements. However, given the long-term trend toward increasing regulation, future federal GHG regulations of the oil and gas industry remain a significant possibility.
We cannot predict the scope of any future methane regulatory requirements or the cost to comply with such requirements. However, given the long-term trend toward increasing regulation, future federal GHG regulations of the oil and gas industry remain a significant possibility.
Increasing attention from governmental and regulatory bodies, investors, consumers, industry and other stakeholders on combating climate change, together with changes in consumer and industrial/commercial behavior, societal pressure on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the enactment of climate change-related regulations, policies and initiatives at the government, regulator, corporate and/or investor community levels, including alternative energy requirements, new fuel consumption standards, energy conservation and emissions reductions measures and responsible energy development; technological advances with respect to the generation, transmission, storage and consumption of energy (including advances in wind, solar and hydrogen power, as well as battery technology); increased availability of, and increased demand from consumers and industry for, energy sources other than oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles); and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies) as well as more efficient products and services.
Increasing attention from governmental and regulatory bodies, investors, consumers, industry and other stakeholders on combating climate change, together with changes in consumer and industrial/commercial behavior, societal pressure on companies to address climate change, investor and societal expectations regarding voluntary climate-related disclosures, preferences and attitudes with respect to the generation and consumption of energy, the use of hydrocarbons, and the use of products manufactured with, or powered by, hydrocarbons, may result in the enactment of climate change-related regulations, policies and initiatives at the government, regulator, corporate and/or investor community levels, including alternative energy requirements, new fuel consumption standards, energy conservation, enhanced disclosure obligations and emissions reductions measures and responsible energy development; technological advances with respect to the generation, transmission, storage and consumption of energy (including advances in wind, solar and hydrogen power, as well as battery technology); increased availability of, and increased demand from consumers and industry for, energy sources other than oil and natural gas (including wind, solar, nuclear, and geothermal sources as well as electric vehicles); and development of, and increased demand from consumers and industry for, lower-emission products and services (including electric vehicles and renewable residential and commercial power supplies) as well as more efficient products and services.
The market price of our common units could be subject to wide fluctuations in response to a number of factors, most of which we cannot control, including: • changes in commodity prices; • changes in securities analysts’ recommendations and their estimates of our financial performance; • public reaction to our press releases, announcements and filings with the SEC; • fluctuations in broader securities market prices and volumes, particularly among securities of oil and natural gas companies and securities of publicly traded partnerships and limited liability companies; • changes in market valuations of similar companies; • departures of key personnel; • commencement of or involvement in litigation; • variations in our quarterly results of operations or those of other oil and natural gas companies; • variations in the amount of our quarterly cash distributions to our unitholders; • changes in tax law; • an election by our general partner to convert or restructure us as a taxable entity; • future issuances and sales of our common units; and • changes in general conditions in the U.S. economy, financial markets or the oil and natural gas industry.
The market price of our common units could be subject to wide fluctuations in response to a number of factors, most of which we cannot control, including: • changes in commodity prices; • changes in securities analysts’ recommendations and their estimates of our financial performance; • public reaction to our press releases, announcements and filings with the SEC; 50 Table of Contents • fluctuations in broader securities market prices and volumes, particularly among securities of oil and natural gas companies and securities of publicly traded partnerships and limited liability companies; • changes in market valuations of similar companies; • departures of key personnel; • commencement of or involvement in litigation; • variations in our quarterly results of operations or those of other oil and natural gas companies; • variations in the amount of our quarterly cash distributions to our unitholders; • changes in tax law; • an election by our general partner to convert or restructure us as a taxable entity; • future issuances and sales of our common units; and • changes in general conditions in the U.S. economy, financial markets or the oil and natural gas industry.
The Revolving Credit Agreement limits the amounts we can borrow up to certain borrowing base amounts, which the administrative agent in good faith and in accordance with its usual and customary procedures for evaluating oil and gas loans and related assets at that particular time and otherwise acting in its sole discretion, will determine and which will be approved by the required lenders or all lenders, as applicable in the case of an increase in the borrowing base, on a semi-annual basis based upon projected revenues from our natural gas properties, our commodity derivative contracts securing our loan and certain other information (including, without limitation, the status of title information with respect to the oil and natural gas properties and the existence of any other indebtedness, liabilities, fixed charges, cash flow, business, 31 Table of Cont ents properties, prospects, management and ownership, hedged and unhedged exposure to price, price and production scenarios, interest rate and operating cost changes).
The Revolving Credit Agreement limits the amounts we can borrow up to certain borrowing base amounts, which the administrative agent in good faith and in accordance with its usual and customary procedures for evaluating oil and gas loans and related assets at that particular time and otherwise acting in its sole discretion, will determine and which will be approved by the required lenders or all lenders, as applicable in the case of an increase in the borrowing base, on a semi-annual basis based upon projected revenues from our natural gas properties, our commodity derivative contracts securing our loan and certain other information (including, without limitation, the status of title information with respect to the oil and natural gas properties and the existence of any other indebtedness, liabilities, fixed charges, cash flow, business, properties, prospects, management and ownership, hedged and unhedged exposure to price, price and production scenarios, interest rate and operating cost changes).
LNG exports; • the impact on worldwide economic activity of an epidemic, outbreak or other public health events • prevailing prices on local price indexes in the areas in which we operate; • the proximity, capacity, cost and availability of gathering and processing facilities; • localized and global supply and demand fundamentals and transportation availability; • the cost of exploring for, developing, producing and transporting reserves; • the spot price of LNG on world markets; • changes in ocean freight capacity, which could adversely impact LNG shipping capacity or lead to material interruptions in service or stoppages in LNG transportation; 21 Table of Cont ents • political and economic conditions in or affecting major LNG consumption regions or countries, particularly Asia and Europe; • weather conditions and natural disasters, including those influenced by climate change; • technological advances affecting energy consumption; • the impact of energy conservation efforts; • the price and availability of alternative fuels; • activities that to restrict the exploration, development and production of oil and natural gas to minimize greenhouse gas (“GHG”) emissions; • speculative trading in oil and natural gas derivative contracts; • increased end-user conservation; • U.S. trade policies and their effect on U.S. oil and natural gas exports; • expectations about future commodity prices; and • U.S. federal, state and local and non-U.S. governmental regulation and taxes, including legislation or regulations addressing GHG emissions or requiring the reporting of GHG emissions or climate-related information.
LNG exports; • the impact on worldwide economic activity of an epidemic, outbreak or other public health events; • prevailing prices on local price indexes in the areas in which we operate; • the proximity, capacity, cost and availability of gathering and processing facilities; • localized and global supply and demand fundamentals and transportation availability; • the cost of exploring for, developing, producing and transporting reserves; • the spot price of LNG on world markets; • changes in ocean freight capacity, which could adversely impact LNG shipping capacity or lead to material interruptions in service or stoppages in LNG transportation; • political and economic conditions in or affecting major LNG consumption regions or countries, particularly Asia and Europe; • weather conditions and natural disasters, including those influenced by climate change; • technological advances affecting energy consumption; • the impact of energy conservation efforts; • the price and availability of alternative fuels; • activities to restrict the exploration, development and production of oil and natural gas to minimize greenhouse gas (“GHG”) emissions; • speculative trading in oil and natural gas derivative contracts; • increased end-user conservation; • U.S. trade policies and their effect on U.S. oil and natural gas exports; • expectations about future commodity prices; and • U.S. federal, state and local and non-U.S. governmental regulation and taxes, including legislation or regulations addressing GHG emissions or requiring the reporting of GHG emissions or climate-related information.
Examples of decisions that our general partner may make in its individual capacity include: • how to allocate corporate opportunities among us and its other affiliates; • whether to exercise its limited call right; • whether to seek approval of the resolution of a conflict of interest by the conflicts committee of the Board; provided, however, the MSA will require our general partner to seek approval by the conflicts committee of the Board in connection with an amendment to the MSA that, in the reasonable discretion of our general partner, adversely affects our unitholders; • how to exercise its voting rights with respect to the units it owns; • whether to sell or otherwise dispose of any units or other partnership interests it owns; and • whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement. • our general partner will not have any liability to us or our unitholders for breach of any duty in connection with decisions made in its capacity as general partner so long as it acted in good faith (meaning that it subjectively believed that the decision was not adverse to our best interest); • our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors acted in bad faith or engaged in intentional fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • our general partner will not be in breach of its obligations under the partnership agreement (including any duties to us or our unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is: • approved by the conflicts committee of the Board, although our general partner is not obligated to seek such approval; • approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; • determined by the Board to be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or • determined by the Board to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us. 45 Table of Cont ents In connection with a situation involving a transaction with an affiliate or a conflict of interest, any determination by our general partner or the conflicts committee must be made in good faith.
Examples of decisions that our general partner may make in its individual capacity include: • how to allocate corporate opportunities among us and its other affiliates; • whether to exercise its limited call right; • whether to seek approval of the resolution of a conflict of interest by the conflicts committee of the Board; provided, however, the MSA will require our general partner to seek approval by the conflicts committee of the Board in connection with an amendment to the MSA that, in the reasonable discretion of our general partner, adversely affects our unitholders; 45 Table of Contents • how to exercise its voting rights with respect to the units it owns; • whether to sell or otherwise dispose of any units or other partnership interests it owns; and • whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement. • our general partner will not have any liability to us or our unitholders for breach of any duty in connection with decisions made in its capacity as general partner so long as it acted in good faith (meaning that it subjectively believed that the decision was not adverse to our best interest); • our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors acted in bad faith or engaged in intentional fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • our general partner will not be in breach of its obligations under the partnership agreement (including any duties to us or our unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is: • approved by the conflicts committee of the Board, although our general partner is not obligated to seek such approval; • approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; • determined by the Board to be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or • determined by the Board to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.
Pursuant to the Bipartisan Budget Act of 2015, if the IRS makes audit adjustments to our income tax returns (including any income tax returns filed by us or the Mach Companies in respect of periods beginning prior to the closing of our initial public offering), it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us.
Pursuant to the Bipartisan Budget Act of 2015, if the IRS makes audit adjustments to our income tax returns (including any income tax returns filed by us or the Mach Companies in respect of periods beginning prior to the closing of the Offering), it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us.
The Credit Agreements contain a number of significant covenants, including restrictive covenants that, subject to certain qualifications, limit our ability to, among other things: • make certain payments, including paying dividends or distributions in respect of our equity; • incur additional indebtedness; • make loans to others; • make certain acquisitions and investments; • make or pay distributions on our common units, if an event of default or borrowing base deficiency exists; • merge or consolidate with another entity; • hedge future production or interest rates; • incur liens; • sell assets; and • engage in certain other transactions without the prior consent of the lenders.
The Credit Agreements contain a number of significant covenants, including restrictive covenants that, subject to certain qualifications, limit our ability to, among other things: • make certain payments, including paying dividends or distributions in respect of our equity; • incur additional indebtedness; 30 Table of Contents • make loans to others; • make certain acquisitions and investments; • make or pay distributions on our common units, if an event of default or borrowing base deficiency exists; • merge or consolidate with another entity; • hedge future production or interest rates; • incur liens; • sell assets; and • engage in certain other transactions without the prior consent of the lenders.
Our level of indebtedness could affect our operations in several ways, including the following: • requiring us to dedicate a substantial portion of our cash flow from operations to service our debt, thereby reducing the cash available to finance our operating and investing activities; 30 Table of Cont ents • limiting management’s discretion in operating our business and our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • increasing our vulnerability to downturns and adverse developments in our business and industry; • limiting our ability to raise capital on favorable terms; • limiting our ability to raise available financing, make investments, lease equipment, sell assets and engage in business combinations; • making us vulnerable to increases in interest rates; • putting us at a competitive disadvantage relative to our competitors; and • limiting our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities, due to covenants contained in our Credit Agreements, including financial covenants.
Our level of indebtedness could affect our operations in several ways, including the following: • requiring us to dedicate a substantial portion of our cash flow from operations to service our debt, thereby reducing the cash available to finance our operating and investing activities; • limiting management’s discretion in operating our business and our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • increasing our vulnerability to downturns and adverse developments in our business and industry; • limiting our ability to raise capital on favorable terms; • limiting our ability to raise available financing, make investments, lease equipment, sell assets and engage in business combinations; • making us vulnerable to increases in interest rates; • putting us at a competitive disadvantage relative to our competitors; and • limiting our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities, due to covenants contained in our Credit Agreements, including financial covenants.
The oil and gas exploration and production business is especially susceptible to increased cost of capital, hedging losses and declining revenues which can result in defaults on third party obligations. These risk and others can result in the incurrence of significant attorney’s fees and other expenses incurred in the prosecution or defense of litigation.
The oil and gas exploration and production business is especially susceptible to increased cost of capital, hedging losses and declining revenues which can result in defaults on third-party obligations. These risks and others can result in the incurrence of significant attorney’s fees and other expenses incurred in the prosecution or defense of litigation.
There have been efforts in recent years, for example, to influence the investment community, including investment advisors, insurance companies, and certain sovereign wealth, pension and endowment funds and other groups, by promoting divestment of fossil fuel equities and pressuring lenders to limit funding and insurance underwriters to limit coverages to companies engaged in the extraction of fossil fuel reserves.
There have been efforts, for example, to influence the investment community, including investment advisors, insurance companies, and certain sovereign wealth, pension and endowment funds and other groups, by promoting divestment of fossil fuel equities and pressuring lenders to limit funding and insurance underwriters to limit coverages to companies engaged in the extraction of fossil fuel reserves.
The amount of available cash that we distribute to our unitholders will depend principally on the cash we generate from operations, which will depend on, among other factors: • the amount of oil, natural gas and NGLs we produce; • the prices at which we sell our oil, natural gas and NGL production; • the amount and timing of settlements on our commodity derivative contracts; • the level of our capital expenditures, including scheduled and unexpected maintenance expenditures; • the level of our operating costs, including payments to our general partner and its affiliates for general and administrative expenses; • the restrictive covenants in the Term Loan Credit Agreement and the Revolving Credit Agreement (collectively, the “Credit Agreements”) and other agreements governing indebtedness that limit our ability to pay dividends or distributions in respect of our equity; and 20 Table of Cont ents • the level of our interest expenses, which will depend on the amount of our outstanding indebtedness and the applicable interest rate.
The amount of available cash that we distribute to our unitholders will depend principally on the cash we generate from operations, which will depend on, among other factors: • the amount of oil, natural gas and NGLs we produce; • the prices at which we sell our oil, natural gas and NGL production; • the amount and timing of settlements on our commodity derivative contracts; • the level of our capital expenditures, including scheduled and unexpected maintenance expenditures; • the level of our operating costs, including payments to our general partner and its affiliates for general and administrative expenses; • the restrictive covenants in the Term Loan Credit Agreement and the Revolving Credit Agreement (collectively, the “Credit Agreements”) and other agreements governing indebtedness that limit our ability to pay dividends or distributions in respect of our equity; and • the level of our interest expenses, which will depend on the amount of our outstanding indebtedness and the applicable interest rate.
Our operations are subject to all of the risks associated with drilling for and producing oil, natural gas and NGLs and operating gathering and processing facilities including the possibility of: • environmental hazards, such as releases of pollutants into the environment, including groundwater, surface water, soil and air contamination; • abnormally pressured formations; • mechanical difficulties, such as stuck oilfield drilling and service tools and casing collapse; • ruptures, fires and explosions; • damage to pipelines, processing plants, compression assets, water infrastructure, and related equipment and surrounding properties caused by tornadoes, floods, freezes, fires and other natural disasters; • inadvertent damage from construction, vehicles, farm and utility equipment; • personal injuries and death; • natural disasters; and • terrorist attacks targeting oil and natural gas related facilities and infrastructure.
Our operations are subject to all of the risks associated with drilling for and producing oil, natural gas and NGLs and operating gathering and processing facilities including the possibility of: • environmental hazards, such as releases of pollutants into the environment, including groundwater, surface water, soil and air; • abnormally pressured formations; • mechanical difficulties, such as stuck oilfield drilling and service tools and casing collapse; • ruptures, fires and explosions; 34 Table of Contents • damage to pipelines, processing plants, compression assets, water infrastructure, and related equipment and surrounding properties caused by tornadoes, floods, freezes, fires and other natural disasters; • inadvertent damage from construction, vehicles and farm and utility equipment; • personal injuries and death; • natural disasters; and • terrorist attacks targeting oil and natural gas related facilities and infrastructure.
Oil and natural gas operations in our operating areas may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife and/or habitats. The Endangered Species Act (“ESA”) and (in some cases) comparable state laws were established to protect endangered and threatened species. The U.S.
Oil and natural gas operations in our operating areas may be adversely affected by seasonal or permanent restrictions on drilling activities designed to protect various wildlife and/or habitats. The Endangered Species Act (“ESA”) and (in some cases) comparable state laws were established to protect endangered and threatened species.
Further, in January 2024, President Biden announced a temporary pause on pending decisions on exports of LNG to non-free trade agreement countries until the Department of Energy can update the underlying analyses for authorizations, including an assessment of the impact of GHG emissions.
Further, in January 2024, the Biden administration announced a temporary pause on pending decisions on exports of LNG to non-free trade agreement countries until the Department of Energy can update the underlying analyses for authorizations, including an assessment of the impact of GHG emissions.
More broadly, negative public perception regarding us and/or our industry resulting from, among other things, concerns raised by advocacy groups about climate change or other sustainability-related matters, may also lead to increased reputational and litigation risk and regulatory, legislative and judicial scrutiny, which may, in turn, lead to new laws, regulations, guidelines and enforcement interpretations targeting our industry.
Further, negative public perception regarding us and/or our industry resulting from, among other things, concerns raised by advocacy groups about climate change or other sustainability-related matters, may also lead to increased reputational and litigation risk and regulatory, legislative and judicial scrutiny, which may, in turn, lead to new laws, regulations, guidelines and enforcement interpretations targeting our industry.
For example, some parties have initiated public nuisance claims under federal or state common law against certain companies involved in the production of oil and natural gas, or claims alleging that the companies have been aware of the adverse effects of climate change for some time but failed to adequately disclose such impacts to their investors or customers.
For example, some parties have initiated public nuisance claims under federal or state common law against certain companies involved in the production of oil and natural gas, or claims alleging that the companies have been aware of the adverse effects of climate 36 Table of Contents change for some time but failed to adequately disclose such impacts to their investors or customers.
The foregoing provision will not apply to any claims as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of such court, which is rested in the exclusive jurisdiction of a court or forum other than such court (including claims arising under the Exchange Act), or for which such court does not have 48 Table of Cont ents subject matter jurisdiction, or to any claims arising under the Securities Act and, unless we consent in writing to the selection of an alternative forum, the United States federal district courts will be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.
The foregoing provision will not apply to any claims as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of such court, which is rested in the exclusive jurisdiction of a court or forum other than such court (including claims arising under the Exchange Act), or for which such court does not have subject matter jurisdiction, or to any claims arising under the Securities Act and, unless we consent in writing to the selection of an alternative forum, the United States federal district courts will be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.
In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, abandonment and reclamation costs and we will be responsible for the payment of the balance of such costs. Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in areas where we operate.
In addition, such reserves, if established, may not be sufficient to satisfy such future decommissioning, abandonment and reclamation costs and we will be responsible for the payment of the balance of such costs. 41 Table of Contents Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in areas where we operate.
Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. We currently own property or conduct business in Oklahoma, Kansas and Texas.
Our unitholders will likely be required to file state and local income tax returns and pay state and local 55 Table of Contents income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. We currently own property or conduct business in Oklahoma, Kansas and Texas.
Please read “— Our general partner and its affiliates own a controlling interest in us and have conflicts of interest with, and owe limited duties to, us, which may permit them to favor their own interests to the detriment of us and our unitholders.” Even if our unitholders are dissatisfied, they cannot remove our general partner without its consent.
Please read “— Our general partner and its affiliates own a controlling interest in us and have conflicts of interest with, and owe limited duties to, us, which may permit them to favor their own interests to the detriment of us and our unitholders.” 47 Table of Contents Even if our unitholders are dissatisfied, they cannot remove our general partner without its consent.
We also incur additional expense in order to obtain director and officer liability insurance. Because of the limitations in coverage for directors, it may be more difficult for us to attract and retain qualified persons to serve on the Board or as executive officers than it was prior to our initial public offering.
We also incur additional expense in order to obtain director and officer liability insurance. Because of the limitations in coverage for directors, it may be more difficult for us to attract and retain qualified persons to serve on the Board or as executive officers than it was prior to the Offering.
In addition, because the amount realized may include a unitholder’s share of our nonrecourse liabilities, a unitholder that sells common units may incur a tax liability in excess of the amount of the cash received from the sale. Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
In addition, because the amount realized may include a unitholder’s share of our nonrecourse liabilities, a unitholder that sells common units may incur a tax liability in excess of the amount of the cash received from the sale. 54 Table of Contents Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
In response to findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to public health and the environment and in the absence of comprehensive federal legislation on GHG emission control, the EPA has adopted regulations pursuant to the CAA to monitor, report, and/or reduce GHG emissions from various sources.
In response to findings that emissions of carbon dioxide, 38 Table of Contents methane and other GHGs present an endangerment to public health and the environment and in the absence of comprehensive federal legislation on GHG emission control, the EPA has adopted regulations pursuant to the CAA to monitor, report, and/or reduce GHG emissions from various sources.
In January 2021, the Department of the Interior finalized a rule limiting the application of the MBTA. In October 2021, the Biden administration published two rules that reversed those changes, and in June and July 2022, the FWS issued final rules rescinding Trump-era regulations concerning the definition of “habitat” and critical habitat exclusions. In June 2023, the U.S.
In January 2021, the Department of the Interior finalized a rule limiting the application of the MBTA. In October 2021, the Biden administration published two rules that reversed those changes, and in June and July 2022, the FWS issued final rules rescinding Trump-era regulations concerning the definition of “habitat” and critical habitat exclusions.
At the international level, in February 2021, pursuant to the Paris Agreement, the current administration announced reentry of the U.S. into the Paris Agreement (an international agreement from the 21 st Conference of the Parties to the United Nations Framework Convention on Climate Change in Paris, France, which resulted in an agreement for signatory countries to nationally determine their contributions and set GHG emission reduction goals) along with a new “nationally determined contribution” for U.S.
At the international level, in February 2021, the Biden administration announced reentry of the U.S. into the Paris Agreement (an international agreement from the 21 st Conference of the Parties (“COP”) to the United Nations Framework Convention on Climate Change in Paris, France, which resulted in an agreement for signatory countries to nationally determine their contributions and set GHG emission reduction goals) along with a new “nationally determined contribution” for U.S.
The issuance by us of additional common units or other equity interests of equal or senior rank will have the following effects: • our unitholders’ proportionate ownership interest in us will decrease; 47 Table of Cont ents • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of our common units may decline.
The issuance by us of additional common units or other equity interests of equal or senior rank will have the following effects: • our unitholders’ proportionate ownership interest in us will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of our common units may decline.
In addition, the 10% discount factor we use when calculating discounted future net cash flow for reporting requirements in compliance with Accounting Standards Codification 932, “Extractive Activities — Oil and Gas,” may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and natural gas industry in general.
In addition, the 10% discount factor we use when calculating discounted future net cash flow for reporting 25 Table of Contents requirements in compliance with Accounting Standards Codification 932, “Extractive Activities — Oil and Gas,” may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and natural gas industry in general.
Certain of our directors and officers may in the future spend significant time serving, and may have significant duties with, investment partnerships or other private entities that compete with us in seeking out acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.
Certain of our directors and officers may in the future spend significant time serving, and may have significant duties with, investment partnerships or other 44 Table of Contents private entities that compete with us in seeking out acquisitions and business opportunities and, accordingly, may have conflicts of interest in allocating time or pursuing business opportunities.
We cannot be certain that our efforts to develop and maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
We cannot be certain that our efforts to develop and maintain our internal controls will be successful, that we will be able to maintain adequate controls over our financial processes and reporting in the future or that we will be 51 Table of Contents able to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such regulations, which could have adverse effects on our operations similar to the possible effects on our operations of the Dodd-Frank Act’s swap regulatory provisions and the rules of the CFTC.
To the extent we transact with counterparties in foreign jurisdictions, we may 42 Table of Contents become subject to such regulations, which could have adverse effects on our operations similar to the possible effects on our operations of the Dodd-Frank Act’s swap regulatory provisions and the rules of the CFTC.
At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise, capital, and other forms of business taxes, as well as subjecting nonresident partners to taxation through the imposition of withholding obligations and composite, combined, group, block, or similar filing 52 Table of Cont ents obligations on nonresident partners receiving a distributive share of state “sourced” income.
At the state level, several states have been evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise, capital, and other forms of business taxes, as well as subjecting nonresident partners to taxation through the imposition of withholding obligations and composite, combined, group, block, or similar filing obligations on nonresident partners receiving a distributive share of state “sourced” income.
Increased drilling activity could materially increase the demand for and prices of these goods and services, and we could encounter rising costs and delays in or an inability to secure the personnel, equipment, power, services, resources and facilities access necessary for us to conduct our drilling and development activities, which could result in production volumes being below our forecasted volumes.
Increased drilling 29 Table of Contents activity could materially increase the demand for and prices of these goods and services, and we could encounter rising costs and delays in or an inability to secure the personnel, equipment, power, services, resources and facilities access necessary for us to conduct our drilling and development activities, which could result in net production volumes being below our forecasted volumes.
Concerns over global economic conditions, energy costs, supply chain disruptions, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial market and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy.
Concerns over global economic conditions, energy costs, supply chain disruptions, the potential for significant new tariffs, increased demand, labor shortages associated with a fully employed U.S. labor force, geopolitical issues, inflation, the availability and cost of credit and the United States financial market and other factors have contributed to increased economic uncertainty and diminished expectations for the global economy.
As a result, we may be required to reclassify certain of our PUDs if we do not drill those wells within the required five-year timeframe. 24 Table of Cont ents Part of our business strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application.
As a result, we may be required to reclassify certain of our PUDs if we do not drill those wells within the required five-year timeframe. Part of our business strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application.
To the extent we issue additional units in connection with any acquisitions or capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level.
To the extent we issue additional units in connection with any 46 Table of Contents acquisitions or capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level.
These cost increases result 29 Table of Cont ents from a variety of factors beyond our control, such as increases in the cost of sand and other proppant used in hydraulic fracturing operations or acid used for acid stimulation, and steel and other raw materials that we and our vendors rely upon; increased demand for labor, services and materials as drilling activity increases; and increased taxes.
These cost increases result from a variety of factors beyond our control, such as increases in the cost of sand and other proppant used in hydraulic fracturing operations or acid used for acid stimulation, and steel and other raw materials that we and our vendors rely upon; increased demand for labor, services and materials as drilling activity increases; and increased taxes.
We have entered into transactions with counterparties in the financial services industry, including commercial banks, investment banks, insurance companies and other institutions. These transactions expose us to credit risk in the event of default of our counterparty.
The credit risk of financial institutions could adversely affect us. We have entered into transactions with counterparties in the financial services industry, including commercial banks, investment banks, insurance companies and other institutions. These transactions expose us to credit risk in the event of default of our counterparty.
Moreover, incentives or requirements to conserve energy, use alternative energy sources, reduce GHG emissions in product supply chains, and increase demand for low-carbon fuel or zero-emissions vehicles, could reduce demand for the oil and natural gas we produce.
Moreover, incentives or requirements to conserve energy, use alternative energy sources, reduce GHG emissions in product supply chains, and increase demand for lower-carbon fuel or zero-operating emissions vehicles, could reduce demand for the oil and natural gas we produce.
As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax liability upon a sale of your common units.
As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax liability 48 Table of Contents upon a sale of your common units.
We depend on Mach Resources to provide us services necessary to operate our business. If Mach Resources were unable or unwilling to provide these services, it would result in a disruption in our business that could have an adverse effect on our financial position, financial results and cash flow. We do not directly employ directors, officers or employees.
If Mach Resources were unable or unwilling to provide these services, it would result in a disruption in our business that could have an adverse effect on our financial position, financial results and cash flow. We do not directly employ directors, officers or employees.
Our partnership agreement does not set a limit on the amount of expenses for which our general partner and its affiliates may be reimbursed. The amount and timing of such reimbursements will be determined by our general partner.
Our partnership agreement does not set a limit 49 Table of Contents on the amount of expenses for which our general partner and its affiliates may be reimbursed. The amount and timing of such reimbursements will be determined by our general partner.
If any such effects were to occur, they could adversely affect or delay demand for oil or natural gas products or cause us to incur significant costs in 35 Table of Cont ents preparing for or responding to the effects of climatic events themselves, which may not be fully insured.
If any such effects were to occur, they could adversely affect or delay demand for oil or natural gas products or cause us to incur significant costs in preparing for or responding to the effects of climatic events themselves, which may not be fully insured.
In addition, claims for damages to persons or property, including 37 Table of Cont ents natural resources, may result from the environmental, health and safety impacts of our operations or historical oil and natural gas production in our areas of operation, which have been producing oil in certain instances for several decades.
In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety impacts of our operations or historical oil and natural gas production in our areas of operation, which have been producing oil in certain instances for several decades.
Further, in November 2021, the EPA issued a proposed rule intended to reduce methane emissions from oil and gas sources.
In addition, in November 2021, the EPA issued a proposed rule intended to reduce methane emissions from oil and gas sources.
The tax liability, if any, of a unitholder as a result of such an event may be material to such unitholder and may vary depending on the unitholder’s particular situation and may vary from the tax 51 Table of Cont ents liability of us or of any affiliates of our general partner who choose to retain their partnership interests in us.
The tax liability, if any, of a unitholder as a result of such an event may be material to such unitholder and may vary depending on the unitholder’s particular situation and may vary from the tax liability of us or of any affiliates of our general partner who choose to retain their partnership interests in us.
Cyber-security attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead 42 Table of Cont ents to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
Cyber-security attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data.
Future collateral requirements will depend on arrangements with our counterparties and oil and natural gas prices. The cost to drill and complete oil and natural gas wells often increases in times of rising oil and natural gas prices.
Future collateral requirements will depend on arrangements with our counterparties and oil and natural gas prices. 32 Table of Contents The cost to drill and complete oil and natural gas wells often increases in times of rising oil and natural gas prices.
Ward through his ownership of Mach Resources) own approximately 86.2% of our outstanding common units, which enable those holders, collectively, to prevent the removal of our general partner. Control of our general partner may be transferred to a third party without unitholder consent.
Ward through his ownership of Mach Resources) own approximately 74.3% of our outstanding common units, which enable those holders, collectively, to prevent the removal of our general partner. Control of our general partner may be transferred to a third party without unitholder consent.
The impact of the unutilized portion of this contract is assumed under the weighted average sales price in the reserves. Total remaining payments as of December 31, 2023 under firm transportation contracts were $7.0 million.
The impact of the unutilized portion of this contract is assumed under the weighted average sales price in the reserves. Total remaining payments as of December 31, 2024 under firm transportation contracts were $0.3 million.
We incur increased costs as a result of being a publicly traded partnership. We have a limited history operating as a publicly traded partnership. As a publicly traded partnership, we incur significant legal, accounting and other expenses that we did not incur prior to our initial public offering.
We incur increased costs as a result of being a publicly traded partnership. We have a limited history operating as a publicly traded partnership. As a publicly traded partnership, we incur significant legal, accounting and other expenses that we did not incur prior to the Offering.
Our ability to acquire additional oil and natural gas properties and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment 26 Table of Cont ents for acquiring properties, marketing natural gas and securing trained personnel.
Our ability to acquire additional oil and natural gas properties and to find and develop reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment for acquiring properties, marketing natural gas and securing trained personnel.
In addition, the Credit Agreements impose certain limitations on our ability to enter into mergers or combination transactions and to incur certain indebtedness, which could limit our ability to acquire assets and businesses. 28 Table of Cont ents Our development projects and acquisitions require substantial capital expenditures.
In addition, the Credit Agreements impose certain limitations on our ability to enter into mergers or combination transactions and to incur certain indebtedness, which could limit our ability to acquire assets and businesses. Our development projects and acquisitions require substantial capital expenditures.
There is also increasing interest in nature-related matters beyond protected 41 Table of Cont ents species, such as general biodiversity, which may similarly require us or our customers to incur costs or take other measures which may adversely impact our business or operations.
There is also increasing interest in nature-related matters beyond protected species, such as general biodiversity, which may similarly require us or our customers to incur costs or take other measures which may adversely impact our business or operations.
The development of our estimated proved undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated proved undeveloped reserves may not be ultimately developed or produced. As of December 31, 2023, approximately 22% of our total estimated proved reserves were classified as PUDs using SEC Pricing.
Therefore, our estimated proved undeveloped reserves may not be ultimately developed or produced. As of December 31, 2024, approximately 27% of our total estimated proved reserves were classified as PUDs using SEC Pricing. Development of these undeveloped reserves may take longer and require higher levels of capital expenditures than we currently anticipate.
Wide fluctuations in natural gas, oil and NGL prices may result from relatively minor changes in the supply of or demand for natural gas, oil and NGLs, market uncertainty and other factors that are beyond our control, including: • worldwide and regional economic conditions impacting the supply and demand for oil, natural gas and NGLs; • political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the war in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage; • actions of the Organization of the Petroleum Exporting Countries and its allies (“OPEC+”), including the ability and willingness of the members of OPEC+ and other exporting nations to agree to and maintain oil price and production controls; • changes in seasonal temperatures, including the number of heating degree days during winter months and cooling degree days during summer months; • the level of oil, natural gas and NGL exploration, development and production; • the level of oil, natural gas and NGL inventories; • the level of U.S.
Wide fluctuations in oil, natural gas and NGL prices may result from relatively minor changes in the supply of or demand for oil, natural gas and NGLs, market uncertainty and other factors that are beyond our control, including: • worldwide and regional economic conditions impacting the supply and demand for oil, natural gas and NGLs, including the potential impact of any significant new tariffs; • political and economic conditions and events in foreign oil and natural gas producing countries, including embargoes, continued hostilities in the Middle East and other sustained military campaigns, the war in Ukraine 20 Table of Contents and associated economic sanctions on Russia, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage; • actions of OPEC+ including the ability and willingness of the members of OPEC+ and other exporting nations to agree to and maintain oil price and production controls; • changes in seasonal temperatures, including the number of heating degree days during winter months and cooling degree days during summer months; • the level of oil, natural gas and NGL exploration, development and production; • the level of oil, natural gas and NGL inventories; • the level of U.S.
Fish and Wildlife Service (“FWS”) may designate critical habitat and suitable habitat areas that it believes are necessary for survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in material restrictions to land use and may materially delay or prohibit land access for natural gas development.
The FWS may designate critical habitat and suitable habitat areas that it believes are necessary for survival of a threatened or endangered species. A critical habitat or suitable habitat designation could result in material restrictions to land use and may materially delay or prohibit land access for natural gas development.
These factors and other factors, such as another surge in COVID-19 cases or decreased demand from China, combined with volatile commodity prices, and declining business and consumer confidence may contribute to an economic slowdown and a recession. Recent growing concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices.
These factors and other factors, such as decreased demand from China, combined with volatile commodity prices, and declining business and consumer confidence may contribute to an economic slowdown and a recession. Recent growing concerns about global economic growth have had a significant adverse impact on global financial markets and commodity prices.
Our general partner may not be removed except by vote of the holders of at least 66⅔% of all outstanding units voting together as a single class is required to remove our general partner. As of December 31, 2023, affiliates of our general partner (including the Sponsor and Tom L.
Our general partner may not be removed except by vote of the holders of at least 66⅔% of all outstanding units voting together as a single class is required to remove our general partner. As of March 7, 2025, affiliates of our general partner (including the Sponsor and Tom L.
For example, our estimated proved reserves as of December 31, 2023 were calculated under SEC rules using the unweighted arithmetic average first day of the month prices for the prior 12 months of $2.637/MMBtu for natural gas and $78.22/Bbl for oil at December 31, 2023, which, for certain periods during this period, were substantially different from the available spot prices.
For example, our estimated proved reserves as of December 31, 2024 were calculated under SEC rules using the unweighted arithmetic average first day of the month prices for the prior 12 months of $2.130/MMBtu for natural gas and $75.48/Bbl for oil at December 31, 2024, which, for certain periods during this period, were substantially different from the available spot prices.
Our leverage and debt service obligations may adversely affect our financial condition, results of operations and business prospects. As of December 31, 2023, we had $825.0 million outstanding under our Credit Agreements. In the future, we and our subsidiaries may incur substantial additional indebtedness.
Our leverage and debt service obligations may adversely affect our financial condition, results of operations and business prospects. As of December 31, 2024, we had $763.1 million outstanding under our Credit Agreements. In the future, we and our subsidiaries may incur substantial additional indebtedness.
The Sponsor and Tom L. Ward through his ownership of Mach Resources own all of the membership interests in our general partner which are in the same proportion to each other as their limited partner interest ownership in us. The Sponsor and Tom L.
Our general partner has control over all decisions related to our operations. The Sponsor and Tom L. Ward through his ownership of Mach Resources own all of the membership interests in our general partner which are in the same proportion to each other as their limited partner interest ownership in us. The Sponsor and Tom L.
A successful IRS challenge to these methods or allocations could adversely affect the amount, character and timing of taxable income or loss being allocated to our unitholders.
The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction. A successful IRS challenge to these methods or allocations could adversely affect the amount, character and timing of taxable income or loss being allocated to our unitholders.
To achieve more predictable cash flows and reduce our exposure to adverse fluctuations in the prices of oil and natural gas, we enter into derivative contracts for a portion of our projected oil and natural gas production, primarily consisting of swaps.
Our derivative activities could result in financial losses or could reduce our earnings. To achieve more predictable cash flows and reduce our exposure to adverse fluctuations in the prices of oil and natural gas, we enter into derivative contracts for a portion of our projected oil and natural gas production, primarily consisting of swaps.
GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030. In September 2021, President Biden publicly announced the Global Methane Pledge, an international pact that aims to reduce global methane emissions to at least 30% below 2020 levels by 2030. To date, over 150 countries have joined the pledge.
GHG emissions that would achieve emissions reductions of at least 50% relative to 2005 levels by 2030. In September 2021, the Biden administration publicly announced the Global Methane Pledge, an international pact that aims to reduce global methane emissions to at least 30% below 2020 levels by 2030.
Ward through his ownership of Mach Resources) collectively own and control the voting of an aggregate of approximately 86.2% of our outstanding common units as of December 31, 2023, the other unitholders do not have an ability to influence any operating decisions and are not able to prevent us from entering into any transactions.
Ward through his ownership of Mach Resources) collectively own and control the voting of an aggregate of approximately 74.3% of our outstanding common units as of March 7, 2025, the other unitholders do not have an ability to influence any operating decisions and are not able to prevent us from entering into any transactions.
Drilling for oil, natural gas and NGLs often involves unprofitable efforts from wells that do not produce sufficient oil, natural gas and NGLs to return a profit at then-realized prices after deducting drilling, operating and other costs.
Drilling for oil, natural gas and NGLs often involves unprofitable efforts from wells that do not produce sufficient oil, natural gas and NGLs to return a profit at then-realized prices after deducting drilling, operating and other costs. In addition, our cost of drilling, completing and operating wells is often uncertain.
In recent years, companies across all industries are facing increasing scrutiny from a variety of stakeholders, including investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other 39 Table of Cont ents influential investors and rating agencies, related to their ESG and sustainability practices.
Companies across all industries continue to face increasing scrutiny from a variety of stakeholders, including investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment funds and other influential 39 Table of Contents investors and rating agencies, related to their ESG and sustainability practices.
Widespread public health crises, epidemics, and outbreaks of infectious diseases, which can give rise to a threat of recession and related economic repercussions can create significant volatility, uncertainty and turmoil in the global economy and oil and gas industry, as did COVID-19 during 2020 through the beginning of 2022.
Widespread public health crises, epidemics, and outbreaks of infectious diseases, which can give rise to a threat of recession and related economic repercussions can create significant volatility, uncertainty and turmoil in the global economy and oil and gas industry.
The proposed rule imposes emissions reduction standards on both new and existing sources in the oil and natural gas industry, expands the scope of Clean Air Act (“CAA”) regulation by making regulations in Subpart OOOOa more stringent and creating a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources, including standards focusing on certain source types that have never been regulated under the CAA, and imposes emissions reductions targets to meet the stated goals of the U.S. federal administration.
The proposed rule sought to impose emissions reduction standards on both new and existing sources in the oil and natural gas industry, expand the scope of Clean Air Act (“CAA”) regulation by making regulations in Subpart OOOOa more stringent 37 Table of Contents and creating a Subpart OOOOb to expand reduction requirements for new, modified, and reconstructed oil and gas sources, including standards focusing on certain source types that have never been regulated under the CAA.
In addition, if any lender under the Revolving Credit Agreement is unable to fund its commitment, our liquidity will be reduced by an amount up to the aggregate amount of such lender’s commitment under the credit agreement. Some of the Company’s deposit accounts are held at regional banks.
In addition, if any lender under the Revolving Credit Agreement is unable to fund its commitment, our liquidity will be reduced by an amount up to the aggregate amount of such lender’s commitment under the credit agreement.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeManagement Cybersecurity is a paramount enterprise risk, demanding vigilant attention and strategic planning. Our Chief Information Officer, with over 20 years of technological and leadership experience in the oil and gas industry, oversees all aspects of information technology, including cybersecurity, networking, infrastructure, applications, data management and protection.
Biggest changeOur Chief Information Officer (“CIO”), with over 20 years of technological and leadership experience in the oil and gas industry, is responsible for all aspects of the Company’s information technology, including cybersecurity, networking, infrastructure, applications, data management and protection.
We employ a strategic combination of the National Institute of Standards and Technology (NIST) Cybersecurity Framework, the International Organization for Standardization (ISO), and the Center for Internet Security (CIS) best practice standards to benchmark and enhance our cybersecurity measures. This multifaceted approach allows us to maintain a robust security posture, manage risks, and respond to evolving cyber threats.
We employ a strategic combination of the National Institute of Standards and Technology (NIST) Cybersecurity Framework, the International Organization for Standardization (ISO), and the Center for Internet Security (CIS) best practice standards to benchmark and enhance our cybersecurity measures. We believe this multifaceted approach allows us to maintain a robust security posture, manage risks, and respond to evolving cyber threats.
Our internal cybersecurity team receives cybersecurity news and updates from various private energy sector and federal security working groups and organizations. Governance Cybersecurity risks are managed alongside the Company’s other enterprise risks, which the Board of Directors oversees. The Company's IT security efforts, encompassing cybersecurity, fall under the oversight of the Audit Committee within the Board of Directors.
Our Cybersecurity Team receives cybersecurity news and updates from various private energy sector and federal security working groups and organizations. Governance Cybersecurity risks are managed alongside the Company’s other enterprise risks, which the Board of Directors oversees. The Company’s IT security efforts, encompassing cybersecurity, fall under the oversight of the Audit Committee of the Board of Directors.
The Company's cybersecurity strategy undergoes a quarterly review by the Audit Committee. During these sessions, the Chief Information Officer (CIO) provides a comprehensive update to the committee on cybersecurity and data protection matters. This includes an assessment of the Company's actions to recognize and reduce cybersecurity risks.
The Company’s cybersecurity strategy undergoes a quarterly review by the Audit Committee. During these sessions, the CIO provides a comprehensive update to the Audit Committee on cybersecurity and data protection matters. This includes an assessment of the Company’s actions to recognize and reduce cybersecurity risks.
Our cybersecurity practices include: Data Monitoring and Loss Prevention: We continuously scan and monitor our systems to detect and prevent data breaches, ensuring sensitive information remains secure. - Network Vulnerability Testing: Regular assessments of our network's security through certified third-party testers to identify and remediate vulnerabilities. - Robust Encryption: Implement strong encryption protocols to protect data in transit and at rest, mitigating the risk of unauthorized access. - Continuous Monitoring: We are monitoring our digital environment continually to detect and respond to potential security incidents quickly. - Regular Updates: Systematic updates to our security systems in response to new threats and vulnerabilities, ensuring our defenses remain effective.
Our cybersecurity practices include: Data Monitoring and Loss Prevention: We continuously scan and monitor our systems to detect and prevent data breaches, in an effort to ensure sensitive information remains secure. 56 Table of Contents - Network Vulnerability Testing: Regular assessments of our network’s security through certified third-party testers to identify and remediate vulnerabilities. - Robust Encryption: Implement strong encryption protocols to protect data in transit and at rest, mitigating the risk of unauthorized access. - Continuous Monitoring: We are monitoring our digital environment continuously to detect and respond to potential security incidents quickly. - Regular Updates: Systematic updates to our security systems in response to new threats and vulnerabilities, in an effort to maintain effective defenses.
The Cybersecurity Team led by the CIO, assesses and manages cybersecurity threats, oversees the comprehensive cybersecurity risk management program, and supervises both the internal IT staff and external cybersecurity consultants. The Cybersecurity Team serves a crucial role in reporting significant incidents to the Chief Information Officer.
The Cybersecurity Team led by the CIO, assesses and manages cybersecurity threats, implements the comprehensive cybersecurity risk management program, and supervises both the internal IT staff and external cybersecurity consultants. The Cybersecurity Team serves a crucial role in reporting significant incidents to the CIO.
Item 1C. Cybersecurity Mach's cybersecurity posture is proactive and multifaceted, reflecting our prioritization of protecting our organization against cyber threats. Through the implementation of advanced technologies and adherence to rigorous standards, we have established a layered defense strategy to protect our information and computer systems and align with industry best practices.
Item 1C. Cybersecurity Mach’s cybersecurity posture is proactive and multifaceted, reflecting our prioritization of safeguarding our organization against cyber threats. Through the implementation of advanced technologies and adherence to rigorous standards, we have developed a robust multilayered defense strategy designed to protect our data and information systems and align with industry best practices.
The Cybersecurity Team, along with our Chief Information Officer, convenes at least once a week to review any incidents related to digital security and the corresponding response actions, analyze emerging threats to the organization's 56 Table of Cont ents cybersecurity landscape, and deliberate on and discuss preventative strategies.
The Cybersecurity Team, along with our CIO, convenes at least once each week to review any incidents related to digital security and the corresponding response actions, analyze emerging threats to the organization’s cybersecurity landscape, and deliberate on and discuss preventative strategies.
Added
In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with use of third-party service providers. We obtain Systems and Organization Controls (“SOC”) 1 and SOC 2 reports, as applicable, from our third-party service providers which assess those entities’ controls to cover security, availability, integrity, confidentiality and privacy.
Added
Any applicable findings of this third-party assessment are analyzed by the appropriate employees and further action is taken as needed. Management Cybersecurity is a paramount enterprise risk, demanding vigilant attention and strategic planning.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business. We are not currently a party to any material legal proceedings. In addition, we are not aware of any material legal proceedings contemplated to be brought against the Company.
Biggest changeItem 3. Legal Proceedings The Company may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business including, but not limited to, title disputes, royalty disputes, contract claims, personal injury claims and employment claims. See Note 10 in “Item 8.
These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution cleanup resulting from operations and subject the lessee to liability for pollution damages. In some instances, we may be directed to suspend or cease operations in the affected area.
These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution cleanup resulting from operations and subject the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area.
We maintain insurance coverage that is customary in the industry, although we are not fully insured against all environmental risks. We are not aware of any environmental claims existing as of December 31, 2023.
The Company maintains insurance coverage that is customary in the industry, although the Company is not fully insured against all environmental risks. 57 Table of Contents The Company is not aware of any environmental claims existing as of December 31, 2024.
There can be no assurance, however, that current regulatory requirements will not change, or past non-compliance with environmental issues will not be discovered on our oil and natural gas properties.
There can be no assurance, however, that current regulatory requirements will not change, or past non-compliance with environmental issues will not be discovered on the Company’s oil and gas properties. Item 4. Mine Safety Disclosures Not applicable. 58 Table of Contents Part II
For more information on our legal contingencies see Note 10 in “Item 8. Financial Statements and Supplementary Data” of this Annual Report. As an owner and operator of oil and natural gas properties, we are subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment.
Financial Statements and Supplementary Data” of this Annual Report for information regarding our estimation and provision for potential losses related to litigation and regulatory proceedings. The Company, as an owner and operator of oil and gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common units are listed and traded on the NYSE under the ticker symbol “MNR.” As of March 15, 2024, there were 95,000,000 common units outstanding held by 8 holders of record.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common units are listed and traded on the NYSE under the ticker symbol “MNR.” As of March 7, 2025, there were 118,334,519 common units outstanding held by 5 holders of record.
Removed
Unregistered Sale of Equity Securities On October 25, 2023, the Company underwent the Corporate Reorganization whereby (a) the Existing Owners who directly held membership interests in the Mach Companies contributed 100% of their membership interests in the Mach Companies for a pro rata allocation of 100% of the limited partner interests in the Company, (b) the Company contributed 100% of its membership interests in the Mach Companies to Intermediate in exchange for 100% of the membership interests in Intermediate, and (c) Intermediate contributed 100% of its membership interests in the Mach Companies to Holdco in exchange for 100% of the membership interests in Holdco.
Added
Unregistered Sale of Equity Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [ Reserved ]
Removed
The referenced issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe such issuances are exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and/or Regulation D promulgated thereunder. 58 Table of Cont ents Use of Proceeds On October 24, 2023, the Registration Statement (File No. 333-274662) was declared effective by the SEC for the Offering pursuant to which the Company registered and sold an aggregate of 10,000,000 common units at a price of $19.00 per common unit to the public.
Removed
The sale of the common units resulted in gross proceeds of $190.0 million to the Company and net proceeds of $168.5 million, after deducting underwriting fees and offering expenses.
Removed
The Company used $102.2 million of the proceeds to pay down the Pre-IPO Credit Facilities of its operating subsidiaries and $66.3 million of the proceeds to purchase 3,750,000 common units from the existing common unit owners on a pro rata basis. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [ Reserved ]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [ Reserved ] 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 59 Results of Operations 62 Liquidity and Capital Resources 67 Critical Accounting Policies and Estimates 70 Item 7A. Quantitative and Qualitative Disclosures A bout Market Risk 71 Item 8. Financial Statements and Supplementary Data 73
Biggest changeItem 6. [ Reserved ] 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 59 Results of Operations 62 Liquidity and Capital Resources 67 Critical Accounting Policies and Estimates 69 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 70 Item 8. Financial Statements and Supplementary Data 72

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, Change ($ in thousands) 2023 2022 Amount Percent Revenues: Oil $ 422,312 $ 448,567 $ (26,255) (6 %) Natural gas 149,795 301,423 (151,628) (50 %) Natural gas liquids 75,245 110,398 (35,153) (32 %) Total oil, natural gas, and NGL sales 647,352 860,388 (213,036) (25 %) Gain (loss) on oil and natural gas derivatives, net 57,272 (67,453) 124,725 (185 %) Midstream revenue 26,328 44,373 (18,045) (41 %) Product sales 31,357 100,106 (68,749) (69 %) Total revenues $ 762,309 $ 937,414 $ (175,105) (19 %) Average Sales Price (1) : Oil ($/Bbl) $ 77.57 $ 93.43 $ (15.86) (17 %) Natural gas ($/Mcf) $ 2.52 $ 6.34 $ (3.82) (60 %) NGL ($/Bbl) $ 24.52 $ 39.27 $ (14.75) (38 %) Total ($/Boe) – before effects of realized derivatives $ 35.16 $ 55.37 $ (20.21) (36 %) Total ($/Boe) – after effects of realized derivatives $ 35.62 $ 49.53 $ (13.91) (28 %) Net Production Volumes: Oil (MBbl) 5,445 4,801 644 13 % Natural gas (MMcf) 59,378 47,561 11,817 25 % NGL (MBbl) 3,068 2,812 256 9 % Total (MBoe) 18,409 15,539 2,870 18 % Average daily total volumes (MBoe/d) 50.44 42.57 7.87 18 % ____________ (1) Average sales prices reflected above exclude gathering and processing expense.
Biggest changeYear Ended December 31, Change ($ in thousands) 2024 2023 Amount Percent Revenues: Oil $ 555,692 $ 422,312 $ 133,380 32 % Natural gas 195,472 149,795 45,677 30 % Natural gas liquids 185,621 75,245 110,376 147 % Total oil, natural gas, and NGL sales 936,785 647,352 289,433 45 % (Loss) gain on oil and natural gas derivatives, net (18,854) 57,272 (76,126) NM (1) Midstream revenue 24,341 26,328 (1,987) (8 %) Product sales 27,356 31,357 (4,001) (13 %) Total revenues $ 969,628 $ 762,309 $ 207,319 27 % Average Sales Price: Oil ($/Bbl) $ 75.27 $ 77.57 $ (2.30) (3 %) Natural gas ($/Mcf) $ 1.93 $ 2.52 $ (0.59) (23 %) NGL ($/Bbl) $ 24.79 $ 24.52 $ 0.27 1 % Total ($/Boe) – before effects of realized derivatives $ 29.52 $ 35.16 $ (5.64) (16 %) Total ($/Boe) – after effects of realized derivatives $ 30.07 $ 35.62 $ (5.55) (16 %) Net Production Volumes: Oil (MBbl) 7,382 5,445 1,937 36 % Natural gas (MMcf) 101,147 59,378 41,769 70 % NGL (MBbl) 7,489 3,068 4,421 144 % Total (MBoe) 31,729 18,409 13,320 72 % Average daily total volumes (MBoe/d) 86.69 50.44 36.25 72 % (1) Not Meaningful Revenue and Other Operating Income Oil, natural gas and NGL sales Revenues from oil, natural gas and NGL sales increased $289.4 million, or 45%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
For further information on firm transportation contracts, see the notes to our audited financial statements included in Item 8 of Part II of this Annual Report. Operating lease obligations Our operating lease obligations include long-term lease payments for office space, vehicles, equipment related to exploration, development and production activities.
For further information on firm transportation contracts, see the notes to our audited financial statements included in Item 8 of Part II of this Annual Report. Operating lease obligations Our operating lease obligations include long-term lease payments for office space, vehicles, and equipment related to exploration, development and production activities.
Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGLs, production volumes, estimates of proved reserves, capital expenditures, economic, inflationary and competitive conditions, drilling results, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Annual Report, particularly under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict.
Factors that could cause or contribute to such differences include, but are not limited to, market prices for oil, natural gas and NGLs, net production volumes, estimates of proved reserves, capital expenditures, economic, inflationary and competitive conditions, drilling results, regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Annual Report, particularly under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements,” all of which are difficult to predict.
Critical Accounting Policies and Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States require us to make estimates and assumptions. The accounting estimates and assumptions we consider to be most significant to our financial statements are discussed below.
Critical Accounting Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States require us to make estimates and assumptions. The accounting estimates and assumptions we consider to be most significant to our financial statements are discussed below.
We could choose to defer a portion of these planned 2024 capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, including acid to be used for our acid stimulation completion, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other working interest owners.
We could choose to defer a portion of these planned 2025 capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, including acid to be used for our acid stimulation completion, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other working interest owners.
We have applied provisions of the SEC’s FAST Act Modernization and Simplification of Regulation S-K, which limits the discussion to the two most recent fiscal years. The following information updates the discussion of our financial condition provided in our previous filings, and analyzes the changes in the results of operations between the years ended December 31, 2023 and 2022.
We have applied provisions of the SEC’s FAST Act Modernization and Simplification of Regulation S-K, which limits the discussion to the two most recent fiscal years. The following information updates the discussion of our financial condition provided in our previous filings, and analyzes the changes in the results of operations between the years ended December 31, 2024 and 2023.
The Revolving Credit Agreement has (i) a maximum available principal amount of $75.0 million, (ii) a maturity date of December 28, 2026 and (iii) an interest rate equal to one, three, or six month SOFR, at the Company’s election, plus a credit spread adjustment equal to 0.10%, 0.15% or 0.25%, respectively, in each case, plus 3.00%, provided that the applicable tenor SOFR will not be less than 3.50%.
The Revolving Credit Agreement has (i) a maximum available principal amount of $75.0 million, (ii) a maturity date of December 28, 2026 and (iii) an interest rate equal to one, three, or six month SOFR, at the 68 Table of Contents Company’s election, plus a credit spread adjustment equal to 0.10%, 0.15% or 0.25%, respectively, in each case, plus 3.00%, provided that the applicable tenor SOFR will not be less than 3.50%.
For example, we expect a portion of our future capital expenditures to be financed with cash flows from operations derived from wells drilled on drilling locations not classified as proved reserves in our December 31, 2023 reserve report.
For example, we expect a portion of our future capital expenditures to be financed with cash flows from operations derived from wells drilled on drilling locations not classified as proved reserves in our December 31, 2024 reserve report.
Term Loan Credit Agreement and Revolving Credit Agreement On December 28, 2023, the Company entered into (i) the Term Loan Credit Agreement with the lenders party thereto, Texas Capital Bank, as agent, and Chambers Energy Management, LP, as the arranger, and (ii) the Revolving Credit Agreement with the lenders party thereto and MidFirst Bank as the agent.
Debt Agreements Term Loan Credit Agreement and Revolving Credit Agreement On December 28, 2023, the Company entered into (i) the Term Loan Credit Agreement with the lenders party thereto, Texas Capital Bank, as agent, and Chambers Energy Management, LP, as the arranger, and (ii) the Revolving Credit Agreement with the lenders party thereto and MidFirst Bank as the agent.
Cash available for distribution is not a measurement of our financial performance or liquidity under GAAP and should not be considered as an alternative to, or more meaningful than, net income or net cash provided by or used in operating activities as determined in accordance with GAAP or as indicators of our financial performance and liquidity.
Cash available for distribution is not a measurement of our financial performance or liquidity under GAAP and should not be considered as an alternative to, or more meaningful than, net income or net cash provided by or used in operating activities as determined in accordance with GAAP or as indicators 65 Table of Contents of our financial performance and liquidity.
A deferral of planned capital expenditures, particularly with respect to drilling and completing new wells, could result in a reduction in anticipated production and cash flows and reduce our cash available for distribution to unitholders. 67 Table of Cont ents Based on current oil and natural gas price expectations, we believe that our cash flow from operations, together with borrowings from time to time under the Revolving Credit Agreement, will be sufficient to fund our operations through 2024 and the foreseeable future.
A deferral of planned capital expenditures, particularly with respect to drilling and completing new wells, could result in a reduction in anticipated production and cash flows and reduce our cash available for distribution to unitholders. 67 Table of Contents Based on current oil and natural gas price expectations, we believe that our cash flow from operations, together with borrowings from time to time under the Revolving Credit Agreement, will be sufficient to fund our operations through 2025 and the foreseeable future.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect the Company’s operating results.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial 59 Table of Contents condition, results of operations, liquidity and certain other factors that may affect the Company’s operating results.
We also expect to incur additional significant and recurring expenses as a publicly traded partnership, including costs associated with the employment of additional personnel, compliance under the Exchange Act, annual and quarterly reports to unitholders, tax return and Schedule K-1 preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. 61 Table of Cont ents Results of Operations Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenue The following table provides the components of our revenue, net of transportation and marketing costs for the periods indicated, as well as each period’s respective average realized prices and net production volumes.
Public Company Expenses We expect to incur significant and recurring expenses as a publicly traded partnership, including costs associated with the employment of additional personnel, compliance under the Exchange Act, annual and quarterly reports to unitholders, tax return and Schedule K-1 preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. 61 Table of Contents Results of Operations Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Revenue The following table provides the components of our revenue, net of transportation and marketing costs for the periods indicated, as well as each period’s respective average realized prices and net production volumes.
Overview We are an independent upstream oil and gas company focused on the acquisition, development and production of oil, natural gas and NGL reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas and the panhandle of Texas, and we operate approximately 4,600 PDP wells.
Overview We are an independent upstream oil and gas company focused on the acquisition, development and production of oil, natural gas and NGL reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas and the panhandle of Texas, and we operate approximately 5,000 PDP wells.
Within our operating areas, our assets are prospective for multiple formations, most notably the Oswego, Woodford, Meramec/Osage and Mississippi Lime formations. Our experience in the Anadarko Basin and these formations allows us to generate significant cash available for distribution from these low declining assets in a variety of commodity price environments.
Within our operating areas, our assets are prospective for multiple formations, most notably the Oswego, Woodford and Mississippian formations. Our experience in the Anadarko Basin and these formations allows us to generate significant cash available for distribution from these low declining assets in a variety of commodity price environments.
We define cash available for distribution as net income less (1) interest expense, (2) depreciation, depletion and amortization, (3) unrealized (gain) loss on derivative settlements, (4) equity-based compensation expense, (5) loss on contingent consideration, (6) (gain) loss on sale of assets, (7) settlement of asset retirement obligations, (8) net cash interest expense, (9) development costs, (10) settlement of contingent consideration and (11) change in accrued realized derivative settlements.
We define cash available for distribution as net income adjusted for (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized loss (gain) on derivative instruments, (4) equity-based compensation expense, (5) credit losses, (6) (gain) loss on sale of assets, net, (7) settlement of asset retirement obligations, (8) cash interest expense, net (9) development costs and (10) change in accrued realized derivative settlements.
Mandatory repayments of principal of $61.9 million, $82.5 million, and $680.6 million are due in the year 2024, 2025, and 2026, respectively. The Term Loan Credit Agreement includes customary covenants, mandatory repayments and events of default of financings of this type.
Mandatory repayments of principal in amounts equal to $82.5 million and $680.6 million are due in the year 2025 and 2026, respectively. The Term Loan Credit Agreement includes customary covenants, mandatory repayments and events of default of financings of this type.
The oil and natural gas industry is cyclical and commodity prices are 59 Table of Cont ents highly volatile and we expect continued and increased pricing volatility in the crude oil and natural gas markets.
The oil and natural gas industry is cyclical and commodity prices are highly volatile and we expect continued and increased pricing volatility in the crude oil and natural gas markets.
We paid approximately $14.3 million in operating lease payments for the year ended December 31, 2023 and expect to pay approximately $18.3 million in operating lease payments through 2027. For further information on our operating lease obligations, see the notes to our audited financial statements included in Item 8 of Part II of this Annual Report.
We paid approximately $11.7 million in operating lease payments for the year ended December 31, 2024 and expect to pay approximately $16.8 million in operating lease payments through 2029. For further information on our operating lease obligations, see the notes to our audited financial statements included in Item 8 of Part II of this Annual Report.
Contractual Obligations and Commitments Firm transportation contracts We are a party to firm transportation contracts for the transport of natural gas. We paid approximately $1.0 million in firm transportation contracts for the year ended December 31, 2023 and expect to pay approximately $7.0 million in firm transportation contracts through 2025.
Contractual Obligations and Commitments Firm transportation contracts We are a party to firm transportation contracts for the transport of natural gas. We incurred approximately $3.4 million in firm transportation contracts for the year ended December 31, 2024 and expect to pay approximately $0.3 million in firm transportation contracts through 2025.
Oil and natural gas derivatives For the year ended December 31, 2023, we had realized gains on derivative instruments of $8.4 million and an unrealized gain of $48.9 million for total gains of $57.3 million.
For the year ended December 31, 2023, we had realized gains on derivative instruments of $8.4 million and unrealized gains of $48.8 million for total gains of $57.3 million.
Factors Affecting the Comparability of Our Future Results of Operations to Our Historical Results of Operations Our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below. Acquisitions We have completed eleven acquisitions since 2021.
Factors Affecting the Comparability of Our Future Results of Operations to Our Historical Results of Operations Our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below. Acquisitions We have completed six acquisitions in the last two years.
The increase in net cash used in investing activities is primarily attributable to an increase in cash used in acquisitions of $621.0 million as well as an increase in capital expenditures on our oil and gas properties of $68.8 million from 2023 to 2022. Net cash provided by (used in) financing activities.
The decrease in net cash used in investing activities is primarily attributable to a decrease in cash used in acquisitions of $628.8 million as well as a decrease in capital expenditures on our oil and gas properties of $93.0 million from 2024 to 2023. Net cash (used in) provided by financing activities.
We spent approximately $302.8 million in 2023 on development costs and our budget for 2024 is between $250.0 million and $275.0 million. For purposes of calculating our cash available for distribution, we define development costs as all of our capital expenditures, other than acquisitions.
We spent approximately $239.4 million in 2024 on development costs and our budget for 2025 is between $260.0 million and $280.0 million. For purposes of calculating our cash available for distribution, we define development costs as all of our capital expenditures, other than acquisitions.
The volatility of commodity prices results in increased uncertainty inherent in these estimates and assumptions. Changes in natural gas, oil or NGL prices could result in actual results differing significantly from our estimates. See Note 16 of our consolidated financial statements for further information.
The volatility of commodity prices results in increased uncertainty inherent in these estimates and assumptions. Changes in oil, natural gas, or NGL prices could result in actual results differing significantly from our estimates.
See Note 3 of our consolidated financial statements for further discussion of business combinations. 70 Table of Cont ents Recently Issued Accounting Pronouncements A summary of recent accounting pronouncements and our assessment of any expected impact of these pronouncements, if known, is included in Note 2 of our audited consolidated financial statements included in Item 8 of Part II of this Annual Report.
Recently Issued Accounting Pronouncements A summary of recent accounting pronouncements and our assessment of any expected impact of these pronouncements, if known, is included in Note 2 of our audited consolidated financial statements included in Item 8 of Part II of this Annual Report.
We define Adjusted EBITDA as net income before (1) interest expense, (2) depreciation, depletion and amortization, (3) unrealized (gain) loss on derivative 64 Table of Cont ents settlements, (4) equity-based compensation expense, (5) loss on contingent consideration and (6) (gain) loss on sale of assets.
We define Adjusted EBITDA as net income before (1) interest expense, net, (2) depreciation, depletion, amortization and accretion, (3) unrealized loss (gain) on derivative instruments, (4) equity-based compensation expense, (5) credit losses and (6) (gain) loss on sale of assets, net.
Cash available for distribution should not be considered as an alternative to, or more meaningful than, net income or net cash provided by operating activities. 65 Table of Cont ents Reconciliations of GAAP Financial Measures to Adjusted EBITDA and Cash Available for Distribution The following table presents our reconciliation of the GAAP financial measures of net income and net cash provided by operating activities to the non-GAAP financial measures Adjusted EBITDA and cash available for distribution, as applicable, for each of the periods indicated.
Reconciliations of GAAP Financial Measures to Adjusted EBITDA and Cash Available for Distribution The following table presents our reconciliation of the GAAP financial measures of net income and net cash provided by operating activities to the non-GAAP financial measures Adjusted EBITDA and cash available for distribution, as applicable, for each of the periods indicated.
Net cash provided by (used in) financing activities increased $869.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Net cash (used in) provided by financing activities decreased $904.8 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year ended December 31, (in thousands) 2023 2022 Net cash provided by operating activities $ 491,742 $ 553,542 Net cash used in investing activities (1,027,157) (372,660) Net cash provided by (used in) financing activities 658,790 (210,737) Net cash provided by operating activities.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year ended December 31, (in thousands) 2024 2023 Net cash provided by operating activities $ 505,292 $ 491,742 Net cash (used in) investing activities (306,316) (1,027,157) Net cash (used in) provided by financing activities (245,992) 658,790 Net cash provided by operating activities.
We cannot predict the future inflation rate but to the extent inflation remains elevated, we may experience cost increases in our operations, including costs for drill rigs, workover rigs, tubulars and other well equipment, as well as increased labor costs.
In December 2024, inflation, as measured by the consumer price index, was 2.9%. We cannot predict the future inflation rate but to the extent we experience high inflation, we may see cost increases in our operations, including costs for drill rigs, workover rigs, tubulars and other well equipment, as well as increased labor costs.
Net cash used in investing activities increased $654.5 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Net cash (used in) investing activities decreased $720.8 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
We and others in the industry use PV-10 as a measure to compare the relative size and value of estimated reserves held by companies without regard to the specific tax characteristics of such entities. Liquidity and Capital Resources Our primary sources of liquidity and capital are cash flows generated by operating activities and borrowings under our Credit Agreements.
We and others in the industry use PV-10 as a measure to compare the relative size and value of estimated reserves held by companies without regard to the specific tax characteristics of such entities.
Accordingly, no provision for federal or state income taxes has been provided in the Standardized Measure because taxable income is passed through to our unitholders. 66 Table of Cont ents We believe that the presentation of a pre-tax PV-10 value provides relevant and useful information because it is widely used by investors and analysts as a basis for comparing the relative size and value of our proved reserves to other oil and natural gas companies.
We believe that the presentation of a pre-tax PV-10 value provides relevant and useful information because it is widely used by investors and analysts as a basis for comparing the relative size and value of our proved reserves to other oil and natural gas companies.
Year Ended December 31, (in thousands) 2023 2022 Net Income Reconciliation to Adjusted EBITDA: Net income $ 346,558 $ 516,841 Interest expense, net 9,546 4,852 Depreciation, depletion and amortization 137,617 88,589 Unrealized (gain) loss on derivative investments (48,826) (23,335) Equity-based compensation expense 3,440 7,527 Credit losses 1,746 — (Gain) loss on sale of assets (1) (45) Adjusted EBITDA $ 450,080 $ 594,429 Net Income Reconciliation to Cash Available for Distribution: Net income $ 346,558 $ 516,841 Interest expense, net 9,546 4,852 Depreciation, depletion and amortization 137,617 88,589 Unrealized (gain) loss on derivative investments (48,826) (23,335) Equity-based compensation expense 3,440 7,527 Credit losses 1,746 — (Gain) loss on sale of assets (1) (45) Settlement of asset retirement obligations (537) (49) Cash interest expense, net (7,596) (4,477) Development costs (302,799) (271,999) Settlement of contingent consideration — (13,547) Change in accrued realized derivative settlements (4,029) (3,413) Cash Available for Distribution $ 135,119 $ 300,944 Net Cash Provided by Operating Activities Reconciliation to Cash Available for Distribution: Net cash provided by operating activities $ 491,742 $ 553,542 Change in operating assets and liabilities (53,824) 19,401 Development costs (302,799) (271,999) Cash Available for Distribution $ 135,119 $ 300,944 Reconciliation of PV-10 to Standardized Measure Certain of our oil and natural gas reserve disclosures included in this Annual Report are presented on a PV-10 basis.
Year Ended December 31, (in thousands) 2024 2023 Net Income Reconciliation to Adjusted EBITDA: Net income $ 185,179 $ 346,558 Interest expense, net 100,179 9,546 Depreciation, depletion, amortization and accretion 270,967 137,617 Unrealized loss (gain) on derivative investments 36,311 (48,826) Equity-based compensation expense 6,531 3,440 Credit losses 2,240 1,746 (Gain) loss on sale of assets, net (686) (1) Adjusted EBITDA $ 600,721 $ 450,080 Net Income Reconciliation to Cash Available for Distribution: Net income $ 185,179 $ 346,558 Interest expense, net 100,179 9,546 Depreciation, depletion, amortization and accretion 270,967 137,617 Unrealized loss (gain) on derivative investments 36,311 (48,826) Equity-based compensation expense 6,531 3,440 Credit losses 2,240 1,746 (Gain) loss on sale of assets, net (686) (1) Settlement of asset retirement obligations (881) (537) Cash interest expense, net (92,789) (7,596) Development costs (239,435) (302,799) Change in accrued realized derivative settlements (150) (4,029) Cash Available for Distribution $ 267,466 $ 135,119 Net Cash Provided by Operating Activities Reconciliation to Cash Available for Distribution: Net cash provided by operating activities $ 505,292 $ 491,742 Change in operating assets and liabilities 1,609 (53,824) Development costs (239,435) (302,799) Cash Available for Distribution $ 267,466 $ 135,119 Reconciliation of PV-10 to Standardized Measure Certain of our oil and natural gas reserve disclosures included in this Annual Report are presented on a PV-10 basis.
The GAAP measures most directly comparable to cash available for distribution are net income and net cash provided by operating activities.
The GAAP measures most directly comparable to cash available for distribution are net income and net cash provided by operating activities. Cash available for distribution should not be considered as an alternative to, or more meaningful than, net income or net cash provided by operating activities.
How We Evaluate Our Operations We use a variety of financial and operational metrics to assess the performance of our operations, including the following sources of our revenue, principal components of our cost structure and other financial metrics: • production volumes; • realized prices on the sale of oil, natural gas and NGLs; • lease operating expense (“LOE”); • Adjusted EBITDA; and • cash available for distribution.
Further, if we are unable to recover higher costs through higher commodity prices, our current revenue stream, estimates of future reserves, borrowing base calculations, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted. 60 Table of Contents How We Evaluate Our Operations We use a variety of financial and operational metrics to assess the performance of our operations, including the following sources of our revenue, principal components of our cost structure and other financial metrics: • net production volumes; • realized prices on the sale of oil, natural gas and NGLs; • lease operating expense; • Adjusted EBITDA; and • cash available for distribution.
The increase in net cash provided by financing activities is primarily attributable to an increase in proceeds from borrowings, net of repayments and issuance costs, of $638.8 million, as well as cash increase in cash received from the issuance of units in the Offering, net of repurchases of exchanging members of $102.2 million.
The decrease in net cash provided by financing activities is primarily attributable to a decrease in proceeds from borrowings, net of repayments and issuance costs, of $705.9 million, as well as an increase of distributions made to unitholders in 2024 and members in 2023 of $208.5 million.
Midstream revenue Midstream revenue decreased $18.0 million, or 41%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to lower non-operated throughput in our midstream facilities.
Midstream revenue Midstream revenue decreased $2.0 million, or 8%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to lower third-party volumes flowing through our midstream facilities for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Depreciation, depletion, amortization and accretion expense Depreciation, depletion, amortization and accretion expense for oil and natural gas properties increased by $47.1 million, or 56%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Depreciation, depletion, amortization and accretion expense Depreciation, depletion, amortization and accretion expense for oil and natural gas properties increased by $130.8 million, or 100%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase is primarily a result of acquisitions and the Corporate Reorganization in 2023 that increased the amortization base.
Estimated fair values assigned to assets acquired can have a significant effect on results of operations in the future. In addition, differences between the future commodity prices when acquiring assets and the historical 12-month average trailing price to calculate ceiling test impairments of upstream assets may impact net earnings.
In addition, differences between the future commodity prices when acquiring assets and the historical 12-month average trailing price to calculate ceiling test impairments of upstream assets may impact net earnings. See Note 3 of our consolidated financial statements for further discussion of business combinations.
As a publicly traded partnership, our primary sources of liquidity and capital resources are from cash flow generated by operating activities, borrowings under the Credit Agreements, and proceeds from the issuance of equity and debt.
Liquidity and Capital Resources Our primary sources of liquidity and capital are cash flows generated by operating activities, borrowings under our Credit Agreements, and proceeds from the issuance of equity and debt. Outstanding borrowings under our Credit Agreements were $763.1 million at December 31, 2024, and the remaining availability under our Credit Agreements was $70.0 million at December 31, 2024.
As of December 31, 2023, the Revolving Credit Agreement was undrawn, and there was $5.0 million in outstanding letters of credit. 69 Table of Cont ents We have not guaranteed the debt or obligations of any other party, nor do we have any other arrangements or relationships with other entities that could potentially result in consolidated debt or losses.
Such amendment to the Revolving Credit Agreement remains in effect as of the date hereof though no such increase to commitments was realized. We have not guaranteed the debt or obligations of any other party, nor do we have any other arrangements or relationships with other entities that could potentially result in consolidated debt or losses.
Corporate Reorganization The historical consolidated financial statements included in this Annual Report are of our Predecessor for periods prior to the Corporate Reorganization, and of the Company for periods after the Corporate Reorganization. Our historical financial data presented herein does not present what our actual performance results would have been on a combined basis for the full fiscal period presented.
Our historical financial data presented herein does not present what our actual performance results would have been on a combined basis for all fiscal periods presented.
Operating Expenses The following table summarizes our expenses for the periods indicated and includes a presentation of certain expenses on a per Boe basis, as we use this information to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis: Year Ended December 31, Change ($ in thousands) 2023 2022 Amount Percent Operating Expenses: Gathering and processing expense $ 39,449 $ 47,484 $ (8,035) (17 %) Lease operating expense 127,602 95,941 31,661 33 % Production taxes 31,882 47,825 (15,943) (33 %) Midstream operating expense 10,873 15,157 (4,284) (28 %) Cost of product sales 28,089 94,580 (66,491) (70 %) Depreciation, depletion, amortization and accretion expense – oil and natural gas 131,145 84,070 47,075 56 % Depreciation and amortization expense – other 6,472 4,519 1,953 43 % General and administrative 27,653 25,454 2,199 9 % Operating Expenses ($/Boe) Gathering and processing expense $ 2.14 $ 3.06 $ (0.92) (30 %) Lease operating expense $ 6.93 $ 6.17 $ 0.76 12 % Production taxes (% of oil, natural gas and NGL sales) 4.9 % 5.6 % (0.7 %) (13 %) Depreciation, depletion, amortization and accretion expense – oil and natural gas $ 7.12 $ 5.41 $ 1.71 32 % Depreciation and amortization expense – other $ 0.35 $ 0.29 $ 0.06 21 % General and administrative $ 1.50 $ 1.64 $ (0.14) (9) % Gathering and processing expense Gathering and processing expense decreased by $8.0 million, or 17%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to decreased natural gas prices leading to lower fuel costs.
These changes corresponded with the decrease in our cost of product sales noted below. 63 Table of Contents Operating Expenses The following table summarizes our expenses for the periods indicated and includes a presentation of certain expenses on a per Boe basis, as we use this information to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis: Year Ended December 31, Change ($ in thousands) 2024 2023 Amount Percent Operating Expenses: Gathering and processing expense $ 106,152 $ 39,449 $ 66,703 169 % Lease operating expense 180,513 127,602 52,911 41 % Production taxes 45,674 31,882 13,792 43 % Midstream operating expense 10,466 10,873 (407) (4 %) Cost of product sales 24,026 28,089 (4,063) (14 %) Depreciation, depletion, amortization and accretion expense – oil and natural gas 261,949 131,145 130,804 100 % Depreciation and amortization expense – other 9,018 6,472 2,546 39 % General and administrative 40,838 27,653 13,185 48 % Total operating expenses $ 678,636 $ 403,165 $ 275,471 68 % Operating Expenses ($/Boe) Gathering and processing expense $ 3.35 $ 2.14 $ 1.21 57 % Lease operating expense $ 5.69 $ 6.93 $ (1.24) (18 %) Production taxes (% of oil, natural gas and NGL sales) 4.9 % 4.9 % — % — % Depreciation, depletion, amortization and accretion expense – oil and natural gas $ 8.26 $ 7.12 $ 1.14 16 % Depreciation and amortization expense – other $ 0.28 $ 0.35 $ (0.07) (20 %) General and administrative $ 1.29 $ 1.50 $ (0.21) (14) % Gathering and processing expense Gathering and processing expense increased by $66.7 million, or 169%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily as a result of the Corporate Reorganization and acquisitions that closed in 2023, which contributed to increased gathering and processing costs of $68.2 million.
General and administrative costs General and administrative costs increased $2.2 million, or 9%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
General and administrative costs General and administrative costs increased $13.2 million, or 48%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. The increase in general and administrative costs was primarily a result of the Corporate Reorganization which added approximately $5.9 million in general and administrative expense.
The assumptions made in performing these valuations include future production volumes, future commodity prices and costs, future operating and development activities, projections of oil and gas reserves and a weighted average cost of capital rate. There is no assurance the underlying assumptions or estimates associated with the valuation will occur as initially expected.
The most significant assumptions relate to the estimated fair values assigned to our proved oil and natural gas properties. The assumptions made in performing these valuations include future net production volumes, future commodity prices and costs, future operating and development activities, projections of oil and gas reserves and a weighted average cost of capital rate.
This decrease was primarily a result of decreases in non-operated production resulting in lower overall product sales, compounded by the decrease in the average selling price on natural gas and NGLs. These decreases corresponded with the decrease in our cost of product sales noted below.
This decrease was primarily a result of decreases in third-party volume resulting in lower overall cost of product sales of $4.5 million. This decrease was partially offset with an increase in the average purchase price of NGLs. These changes corresponded with the decrease in our product sales noted above.
Net cash provided by operating activities decreased $61.8 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The decrease in net cash provided by operating activities is primarily attributable to the decrease in realized pricing for all products.
Net cash provided by operating activities increased $13.6 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Business Combinations We account for business combinations using the acquisition method, which is the only method permitted under FASB ASC Topic 805 — Business Combinations, and involves the use of significant judgment. Under the acquisition method of accounting, a business combination is accounted for at a purchase price based on the fair value of the consideration given.
See Note 17 of our consolidated financial statements for further information. 69 Table of Contents Business Combinations We account for business combinations using the acquisition method, which is the only method permitted under FASB ASC Topic 805 — Business Combinations, and involves the use of significant judgment.
Our development efforts and capital for 2024 is anticipated to focus on drilling Oswego wells given their high oil reserves and low breakeven costs.
Our development efforts and capital for 2025 is anticipated to focus on a mix of drilling Oswego, Woodford and Mississippian wells.
Lease operating expense Lease operating expense increased $31.7 million, or 33% and by $0.76 per Boe , for the year ended December 31, 2023, as compared to the year ended December 31, 2022. Lease operating expense increased primarily as a result of additional wells brought on-line as a result of the drilling activity subsequent to December 31, 2022.
Lease operating expense Lease operating expense increased $52.9 million, or 41%,for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily as a result of acquisitions and the Corporate Reorganization in 2023, which increased lease operating expenses by $66.4 million.
During the year ended December 31, 2023, we spent approximately $261.6 million to drill 79.3 net wells and on related equipment, $28.8 million on remedial workovers and other capital projects, $12.4 million on midstream and other property and equipment capital projects, and $774.9 million on acquisitions. Our 2024 capital expenditures program is largely discretionary and within our control.
During the year ended December 31, 2024, we spent approximately $195.0 million on drilling and completion activities and related equipment and spud 50.1 net wells while bringing online 52.4 net wells, $33.5 million on remedial workovers and other capital projects, $10.9 million on midstream and other property and equipment capital projects and $123.1 million on acquisitions.
For the year ended December 31, 2022, we had realized losses on derivative instruments of $90.8 million and an unrealized gain of $23.3 million for total losses of $67.5 million. The increase in realized gains is primarily from the overall decrease in oil and gas prices in 2023.
The change in unrealized (losses) gains for the year ended December 31, 2024, as compared to the year ended December 31, 2023, is primarily due to new derivatives added in conjunction with the closing of acquisitions subsequent to December 31, 2023. The increase in realized gains is primarily from the overall decrease in oil and gas prices in 2024.
Cost of product sales Cost of product sales decreased $66.5 million, or 70%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Midstream operating expense Midstream operating expense decreased $0.4 million, or 4%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, which is in line with the decrease in associated midstream revenue. 64 Table of Contents Cost of product sales Cost of product sales decreased $4.1 million, or 14%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
The assets and liabilities acquired are measured at their fair values, and the purchase price is allocated to the assets and liabilities based upon these fair values. The most significant assumptions relate to the estimated fair values assigned to our proved oil and natural gas properties.
Under the acquisition method of accounting, a business combination is accounted for at a purchase price based on the fair value of the consideration given. The assets and liabilities acquired are measured at their fair values, and the purchase price is allocated to the assets and liabilities based upon these fair values.
We may continue to grow our operations through acquisitions when economical, including by funding such acquisitions under our Revolving Credit Agreement. On January 1, 2023, we assumed operations of a significant amount of properties where we previously were a non-operating partner in the properties and provided midstream services.
We may continue to grow our operations through acquisitions when economical, including by funding such acquisitions under our Revolving Credit Agreement. Corporate Reorganization The historical consolidated financial statements included in this Annual Report are of our Predecessor for periods prior to the Corporate Reorganization, and of the Company for periods after the Corporate Reorganization.
An increase in production of 2,870 MBoe for the year ended December 31, 2023, as compared to the year ended December 31, 2022, resulted in an increase in oil, natural gas and NGL revenues of $86.0 million.
These increases were slightly offset with an overall decrease in the average selling price of our products, which resulted in a decrease in oil, natural gas, and NGL sales of $46.7 million. 62 Table of Contents Oil, natural gas and NGL production Production increased 13,320 MBoe, or 72%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
The Revolving Credit Agreement includes customary covenants, mandatory repayments and events of default of financings of this type. The Company used borrowings from the Term Loan Credit Agreement, together with cash on hand, to repay the November 2023 Credit Facility.
The Revolving Credit Agreement includes customary covenants, mandatory repayments and events of default of financings of this type. The Company is also required to pay a commitment fee of 0.50% per annum on the average daily unused portion of the current aggregate commitments under the Revolving Credit Agreement.
The November 2023 Credit Facility provided for a revolving credit facility in an aggregate maximum amount of $1.0 billion, with an initial borrowing base of $600.0 million, subject to commitments of $200.0 million. On December 28, 2023, we entered into the Term Loan Credit Agreement and Revolving Credit Agreement, as described below, and terminated the November 2023 Credit Facility.
As of December 31, 2024, the Revolving Credit Agreement was undrawn, and there was $5.0 million in outstanding letters of credit. On August 26, 2024, the Company entered into the first amendment (the “Term Loan First Amendment”) to the Term Loan Credit Agreement, which provided for an increase to aggregate commitments of $75.0 million.
Removed
Refer to our final prospectus, filed with the SEC on October 26, 2023, pursuant to Rule 424(b)(4) of the Securities Act, for discussion and analysis of the changes in results of operations between the years ended December 31, 2022 and 2021.
Added
Regional and worldwide economic activity, including any economic downturn or recession that has occurred or may occur in the future, extreme weather conditions, and other substantially variable factors influence market conditions for these products.
Removed
Oil prices have been affected by increased demand, domestic supply reductions, OPEC control measures and market disruptions resulting from the Russia-Ukraine war and sanctions on Russia.
Added
Between January 1, 2023 and December 31, 2024, NYMEX WTI prices for crude oil ranged from $65.75 to $93.68 per Bbl, and the NYMEX Henry Hub price of natural gas ranged from $1.58 to $4.17 per MMbtu.
Removed
For example, during the period from December 31, 2020 through December 31, 2023, prices for crude oil and natural gas reached a high of $123.64 per Bbl and $23.86 per MMBtu, respectively, and a low of $47.47 per Bbl and $1.74 per MMBtu, respectively.
Added
The war in Ukraine and conflict in the Middle East, uncertainty regarding interest rates, global supply chain disruptions, the potential for significant new tariffs, concerns about a potential economic downturn or recession, and instability in the financial sector have contributed to recent economic and pricing volatility and may continue to impact pricing throughout 2025.
Removed
Starting in 2022, NYMEX oil and natural gas futures prices strengthened following the reduction of pandemic-related restrictions and increased OPEC+ cooperation. During the first quarter of 2023, the price of crude oil decreased as the global oil market saw higher inventory levels; however, prices remained above the 10-year average from 2010 through 2019.
Added
Between 2022 and 2024, the Federal Reserve raised the target range for the federal funds rate in an effort to curb inflation. In September 2024 and November 2024, the Federal Reserve lowered the target range for the federal funds rate to its current range of 4.25% to 4.50% in light of the reduced inflation.
Removed
The increase in inventory levels was followed by an early June announcement from OPEC + oil producers to further reduce oil output. The Energy Information Administration (“EIA”) forecasts global oil inventories to fall slightly in each of the next five quarters and projects these draws will put upward pressure on crude oil prices, notably in late-2023 and early-2024.
Added
This increase was primarily related to a 72% production increase, which resulted in increased oil, natural gas and NGL sales of $336.1 million.
Removed
Also during the first quarter of 2023, natural gas prices remained above the 10-year range, despite declining significantly in the quarter as milder weather eased demand for natural gas heating, allowing storage levels to increase above historical averages in the United States and Europe.
Added
The increase was primarily a result of acquisitions and the Corporate Reorganization which added approximately 15,864 MBoe, offset by natural declines on existing wells. Oil and natural gas derivatives For the year ended December 31, 2024, we had realized gains on derivative instruments of $17.5 million and unrealized losses of $36.3 million for total losses of $18.9 million.
Removed
The EIA projects that the U.S. benchmark Henry Hub natural gas spot price to rise in the summer months due to rising natural gas use in the electric power sector and flattening production growth, which together contribute to storage injections that are less than the five-year average from 2018 through 2022 in the coming months.
Added
Product sales Product sales decreased $4.0 million, or 13%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023. This decrease was primarily due to the decreases in third-party volume resulting in lower overall product sales of $4.5 million. This decrease was partially offset with an increase in average selling price of our NGLs.
Removed
Further, although inflation in the United States had been relatively low for many years, there was a significant increase in inflation beginning in the second half of 2021, which continued into 2023, due to a substantial increase in the money supply, a stimulative fiscal policy, a significant rebound in consumer demand as COVID-19 restrictions were relaxed, the Russia-Ukraine war and worldwide supply chain disruptions resulting from the economic contraction caused by COVID-19 and lockdowns followed by a rapid recovery.
Added
The increase in gathering expense per Boe is due to BCE-Mach having higher gathering and processing costs per Boe than the Predecessor.
Removed
Inflation rose from 7.5% in January 2022 to a peak of 9.1% in June 2022 and then decreased to 6.5% in December 2022. In December 2023, inflation was 3.4%.
Added
These increases were partially offset with a $16.5 million reduction in lease operating expense associated with our Predecessor’s lease operating expense, which was driven by a decrease in workover expense, utilities, and contract services.
Removed
Further, if we are unable to recover higher costs through higher commodity prices, our current revenue stream, estimates of future reserves, borrowing base calculations, impairment assessments of oil and natural gas properties, and values of properties in purchase and sale transactions would all be significantly impacted.
Added
Lease operating expenses per Boe decreased by $1.24, primarily a result of the lower cost profiles of acquired properties from 2023, and the increase in production from acquired properties as discussed above. Production taxes Production taxes increased $13.8 million, or 43%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−0 removed15 unchanged
Biggest changeThe creditworthiness of our counterparties is subject to periodic review. As of December 31, 2023, we had derivative instruments in place with three different counterparties, with Morgan Stanley accounting for approximately 89% of the fair value. We believe our counterparties currently represent acceptable credit risks.
Biggest changeThe creditworthiness of our counterparties is subject to periodic review. As of December 31, 2024, we had derivative instruments in place with four different counterparties. We believe our counterparties currently represent acceptable credit risks.
Interest rate derivative activities As of December 31, 2023, we did not have any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness, but we may enter into such derivative arrangements in the future.
Interest rate derivative activities As of December 31, 2024, we did not have any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness, but we may enter into such derivative arrangements in the future.
We are not required to provide credit support or collateral to our counterparties under current contracts, nor are they required to provide credit support or collateral to us. 71 Table of Cont ents Substantially all of our revenue and receivables result from oil and gas sales to third parties operating in the oil and gas industry.
We are not required to provide credit support or collateral to our counterparties under current contracts, nor are they required to provide credit support or collateral to us. Substantially all of our revenue and receivables result from oil and gas sales to third parties operating in the oil and gas industry.
Under swap contracts, the counterparty is required to make a payment to us for the difference between the swap price specified in the contract and the settlement price, which is based on market prices on the settlement date, if the settlement price is below the swap price.
Under swap contracts, the counterparty is required to make a payment to us for the difference 70 Table of Contents between the swap price specified in the contract and the settlement price, which is based on market prices on the settlement date, if the settlement price is below the swap price.
Assuming no change in the amount outstanding, the impact on interest expense of a 1% (or 100 basis points) increase or decrease in the assumed weighted average interest rate on our variable interest debt would be approximately $8.3 million per year based on our borrowings outstanding at December 31, 2023.
Assuming no change in the amount outstanding, the impact on interest expense of a 1% (or 100 basis points) increase or decrease in the assumed weighted average interest rate on our variable interest debt would be approximately $7.6 million per year based on our borrowings outstanding at December 31, 2024.
In the case of joint interest owners, we often have the ability to withhold future revenue disbursements to recover non-payment of joint interest billings. Interest Rate Risk Variable rate debt At December 31, 2023, we had $825.0 million of debt outstanding under the Term Loan Credit Agreement.
In the case of joint interest owners, we often have the ability to withhold future revenue disbursements to recover non-payment of joint interest billings. Interest Rate Risk Variable rate debt At December 31, 2024, we had $763.1 million of debt outstanding under the Term Loan Credit Agreement.
To the extent we enter into any such interest rate derivative arrangement, we would be subject to risk for financial loss. 72 Table of Cont ents
To the extent we enter into any such interest rate derivative arrangement, we would be subject to risk for financial loss. 71 Table of Contents
Borrowings outstanding under the Term Loan Credit Agreement bore an effective interest rate of 13.1% as of December 31, 2023.
Borrowings outstanding under the Term Loan Credit Agreement bore an effective interest rate of 12.3% as of December 31, 2024.

Other MNR 10-K year-over-year comparisons