Le Lézard
Classified in: Oil industry, Business, Covid-19 virus
Subject: ERN

Mach Natural Resources LP Announces Third-Quarter 2023 Financial and Operating Results


OKLAHOMA CITY, Dec. 6, 2023 /PRNewswire/ -- Mach Natural Resources LP (NYSE: MNR) ("Mach" or the "Company") today reported financial and operating results for the three and nine months ended September 30, 2023, and additional Company updates.

Key Updates

The highlights presented below reflect select financial metrics of our predecessor BCE-Mach III LLC.  The unaudited financial statements of our predecessor BCE-Mach III LLC are presented in their entirety in the appendix of this release. The business combination that resulted in our 100% ownership of BCE-Mach LLC, BCE-Mach II LLC and BCE-Mach III LLC occurred at the time of the IPO and the corporate reorganization and as a result was after the end of the third quarter and not reflected in the Form 10-Q.

BCE-Mach III LLC Financial and Operational Highlights

To facilitate a clearer representation of our third-quarter 2023 performance, all results presented hereinafter are on a pro forma basis to reflect the combined results of each of these three entities. 

Pro Forma Financial and Operational Highlights

Reflecting on the quarter, Mach's Chief Executive Officer, Tom L. Ward, commented, "In the third quarter, we generated strong cash flow from better-than-expected production volumes while controlling costs across all areas of our business.  Additionally, our strong results for the quarter were achieved while keeping our reinvestment rate below 50%.  As we look ahead, our focus will remain the same?execute on our operations so that we can continue to deliver robust distributions to our unitholders."

1)

Adjusted EBITDA is a non-GAAP financial measure. Please see "Reconciliation of Adjusted EBITDA and Cash Available for Distribution to GAAP Financial Measures" below for discussion and reconciliation of such measures to their most directly comparable financial measures calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP").

Pro Forma Third-Quarter 2023 Operational Results
Mach's sales volumes during the quarter averaged 66,280 Boe per day, which consisted of 28% oil, 54% natural gas and 18% natural gas liquids ("NGLs").

Also during the third quarter, the Company spud 20 gross (15 net) wells and brought online 20 gross (16 net) wells. As of September 30, 2023, the Company had 6 gross (4 net) wells in various stages of drilling and completion. 

Pro Forma Third-Quarter 2023 Financial Results
Mach reported net income of $94 million for the third quarter of 2023 and Adjusted EBITDA of $140 million.

For the third quarter of 2023, the average realized price was $80.88 per barrel of crude oil, $23.47 per barrel of NGLs and $2.36 per Mcf of natural gas.

Paloma Acquisition Update
Mach's recently announced acquisition from Paloma (the "Paloma Acquisition") is expected to close on December 29, 2023, adding 75 million Boe of proved developed producing ("PDP") reserves, greater than 12 years of drilling inventory, and recent production of approximately 32,000 Boe per day.

"Our most recent acquisition from Paloma is accretive to both total cash available for distribution, as well as expected cash distribution per unit. This fits with the stated objectives of our Company: 

(1) maximize distributions;
(2) disciplined acquisitions focused on accretion to distribution;
(3) maintain low leverage; and
(4) strategic reinvestment rate to optimize distributions.

Looking ahead, we will continue to act swiftly when the right opportunity arises, while assuring that Mach's commitment to maximizing cash distributions to unitholders is upheld," commented Tom L. Ward, Mach's Chief Executive Officer.

In anticipation of the transaction, the Company has actively been adding to its existing hedges with the expectation that 2024 and 2025 PDP oil and natural gas production will be 50% and 25% hedged, respectively, by closing of the Paloma Acquisition.

Distributions
The Company's first quarterly cash distribution as a public company is expected to be announced mid-February of 2024. The first quarterly cash distribution will be based on the results from the fourth quarter of 2023 and is expected to be distributed to unitholders in mid-March of 2024. Subsequent quarterly cash distributions will include incremental cash flow generated from the announced Paloma Acquisition.

2024 Guidance
Mach plans to provide full-year 2024 guidance in February of 2024.

Conference Call and Webcast Information
Mach will host a conference call and webcast at 8:00 a.m. Central (9:00 a.m. Eastern) on Thursday, December 7, 2023, to discuss its third-quarter 2023 results.  Participants can access the conference call by dialing 877-407-2984.  A webcast link to the conference call will be provided on the Company's website at www.ir.machnr.com. A replay will also be available on the Company's website following the call.

When available, a copy of the Company's earnings release and Quarterly Report on Form 10-Q may be found on its website at www.machnr.com.

FOR FURTHER INFORMATION, PLEASE CONTACT:
Mach Natural Resources LP
Investor Relations Contact: [email protected]

About Mach Natural Resources LP

Mach Natural Resources LP is 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. For more information, please visit www.machnr.com.


Cautionary Note Regarding Forward-Looking Statements

This release contains unaudited financial information. The production, reserve, acreage, well count, drilling locations, and other historical and forward-looking data in this release are presented on a combined basis unless otherwise indicated.

This release contains statements that express the Company's opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results, in contrast with statements that reflect historical facts. All statements, other than statements of historical fact included in this release regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements When used in this release, words such as "may," "assume," "forecast," "could," "should," "will," "plan," "believe," "anticipate," "intend," "estimate," "expect," "project," "budget" and similar expressions are used to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management's current belief, based on currently available information as to the outcome and timing of future events at the time such statement was made. Such statements are subject to a number of assumptions, risk and uncertainties, many of which are beyond the control of the Company. These include, but are not limited to, the satisfaction of conditions to the closing of the Paloma Acquisition, the Company's ability to consummate financing for the Paloma Acquisition, commodity price volatility; the impact of epidemics, outbreaks or other public health events, and the related effects on financial markets, worldwide economic activity and our operations; the impact of COVID-19 and governmental measures related thereto, on global demand for oil and natural gas and on the operations of our business; uncertainties about our estimated oil, natural gas and natural gas liquids reserves, including the impact of commodity price declines on the economic producibility of such reserves, and in projecting future rates of production; the concentration of our operations in the Anadarko Basin; difficult and adverse conditions in the domestic and global capital and credit markets; lack of transportation and storage capacity as a result of oversupply, government regulations or other factors; lack of availability of drilling and production equipment and services; potential financial losses or earnings reductions resulting from our commodity price risk management program or any inability to manage our commodity risks; failure to realize expected value creation from property acquisitions and trades; access to capital and the timing of development expenditures; environmental, weather, drilling and other operating risks; regulatory changes, including potential shut-ins or production curtailments mandated by the Railroad Commission of Texas, the Oklahoma Corporation Commission, and/or the Kansas Corporation Commission; competition in the oil and natural gas industry; loss of production and leasehold rights due to mechanical failure or depletion of wells and our inability to re-establish their production; our ability to service our indebtedness; any downgrades in our credit ratings that could negatively impact our cost of and ability to access capital; cost inflation; 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 armed conflict in Ukraine and associated economic sanctions on Russia, conditions in South America, Central America, China and Russia, and acts of terrorism or sabotage; evolving cybersecurity risks such as those involving unauthorized access, denial-of-service attacks, malicious software, data privacy breaches by employees, insider or other with authorized access, cyber or phishing-attacks, ransomware, social engineering, physical breaches or other actions; and risks related to our ability to expand our business, including through the recruitment and retention of qualified personnel. Please read the Company's filings with the U.S. Securities and Exchange Commission (the "SEC"), including "Risk Factors" in the Company's recently filed registration statement on Form S-1, as amended, which was originally filed with the SEC on September 22, 2023, which is on file with the SEC, for a discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements.

As a result, these forward-looking statements are not a guarantee of our performance, and you should not place undue reliance on such statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

BCE-Mach III LLC Financial Statements
BCE-Mach III LLC is the accounting predecessor to Mach for all periods prior to the IPO. The unaudited financial statements included below are for the three and nine months ended September 30, 2023, of BCE-Mach III LLC, our predecessor, and not of BCE-Mach LLC and BCE-Mach II LLC.  

BCE-Mach III LLC Consolidated Balance Sheets (Unaudited)

(in thousands)



September 30,
2023


December 31,
2022

ASSETS




Current assets




Cash and cash equivalents

$           58,737


$           29,417

Accounts receivable ? joint interest and other

21,957


21,490

Accounts receivable ? oil, gas, and NGL sales

68,160


108,277

Inventories

17,647


24,700

Other current assets

3,450


2,349

Total current assets

169,951


186,233





Oil and natural gas properties, using the full cost method:




Proved oil and natural gas properties

1,018,171


749,934

Less: accumulated depreciation, depletion and amortization

(225,604)


(139,514)

Oil and natural gas properties, net

792,567


610,420





Other property, plant and equipment

91,146


82,125

Less: accumulated depreciation

(13,722)


(9,198)

Other property, plant and equipment, net

77,424


72,927





Other assets

2,846


3,052

Operating lease assets

11,995


14,809

Total assets

$      1,054,783


$         887,441





LIABILITIES AND EQUITY




Current liabilities




Accounts payable

$           34,106


$           19,429

Accrued liabilities

36,774


60,169

Revenue payable

52,955


52,196

Current portion of operating lease liabilities

8,820


10,767

Short-term derivative contracts

3,547


10,080

Total current liabilities

136,202


152,641





Long-term debt

91,900


84,900

Asset retirement obligations

55,973


52,359

Long-term portion of operating lease liabilities

3,296


4,042

Other long-term liabilities

603


269

Total long-term liabilities

151,772


141,570





Commitments and contingencies




Members' equity

766,809


593,230

Total liabilities and members' equity

$      1,054,783


$         887,441

 

BCE-Mach III LLC Consolidated Statements of Operations (Unaudited)

(in thousands)



Three Months Ended

September 30,


Nine Months Ended

September 30,


2023


2022


2023


2022

Revenue








Oil, natural gas, and NGL sales

$         166,706


$         258,431


$         479,319


$         666,873

Midstream revenue

6,683


12,045


20,001


31,929

Gain (loss) on oil and natural gas derivatives

(4,900)


(1,720)


10,842


(74,577)

Product sales

6,900


26,988


24,321


74,948

Total revenues

175,389


295,744


534,483


699,173









Operating expenses








Gathering and processing

7,962


15,147


25,472


35,959

Lease operating expense

28,879


28,431


89,494


68,023

Midstream operating expense

2,725


4,029


8,263


11,006

Cost of product sales

6,024


25,355


21,599


70,313

Production taxes

7,660


14,484


23,186


37,159

Depreciation, depletion, and accretion ? oil and natural gas

31,277


26,446


89,372


55,820

Depreciation and amortization ? other

1,758


1,217


4,551


3,225

General and administrative

5,360


5,799


15,265


19,447

Total operating expenses

91,645


120,908


277,202


300,952

Income from operations

83,744


174,836


257,281


398,221









Other (expense) income








Interest expense

(2,054)


(1,317)


(5,843)


(3,193)

Other (expense) income, net

1,795


(1,299)


1,550


(178)

Total other expense

(259)


(2,616)


(4,293)


(3,371)

Net income

$           83,485


$         172,220


$         252,988


$         394,850

 

BCE-Mach III LLC Consolidated Statements of Members' Equity (Unaudited)

(in thousands)



Total Members'

Equity

Balance at December 31, 2022

$              593,230

Net income

91,694

Distributions

(59,000)

Equity compensation

647

Balance at March 31, 2023

$              626,571

Net income

77,809

Distributions

(15,500)

Equity compensation

647

Balance at June 30, 2023

$              689,527

Net income

83,485

Distributions

(26,850)

Contributions

20,000

Equity compensation

647

Balance at September 30, 2023

$              766,809



Balance at December 31, 2021

$              278,699

Net income

68,625

Equity compensation

1,882

Balance at March 31, 2022

$              349,206

Net income

154,005

Distributions

(91,337)

Contributions

65,000

Equity compensation

1,882

Balance at June 30, 2022

$              478,756

Net income

172,220

Distributions

(88,500)

Equity compensation

1,882

Balance at September 30, 2022

$              564,358

 

BCE-Mach III LLC Consolidated Statements of Cash Flow (Unaudited)

(in thousands):



Nine Months Ended

September 30,


2023


2022

Cash flows from operating activities




Net income

$           252,988


$           394,850

Adjustments to reconcile net income to cash provided by operating activities




Depreciation, depletion and amortization

93,923


59,045

(Gain) loss on derivative instruments

(10,842)


74,577

Cash receipts (payments) on settlement of derivative contracts, net

5,207


(85,507)

Debt issuance costs amortization

232


280

Settlement of contingent consideration

?


(12,925)

Equity based compensation

1,941


5,646

(Gain) loss on sale of assets

(1)


22

Settlement of asset retirement obligations

(445)


(49)

Changes in operating assets and liabilities (decreasing) increasing cash:




Accounts receivable, inventories, other assets

35,334


(63,338)

Revenue payable

6,394


14,258

Accounts payable and accrued liabilities

(2,764)


11,443

Net cash provided by operating activities

381,967


398,302





Cash flows from investing activities




Capital expenditures for oil and natural gas properties

(251,538)


(160,557)

Capital expenditures for other property and equipment

(9,083)


(6,835)

Acquisition of assets

(20,613)


(91,282)

Acquisition of assets ? related party

?


(37,242)

Proceeds from sales of oil and natural gas properties

3,305


3,429

Proceeds from sales of other property and equipment

36


18

Net cash used in investing activities

(277,893)


(292,469)





Cash flows from financing activities




Distributions to members

(101,350)


(179,836)

Payment of other financing fees

(404)


?

Proceeds from long-term debt

7,000


?

Repayments of borrowings

?


(900)

Contributions from members

20,000


65,000

Net cash used in financing activities

(74,754)


(115,736)

Net increase (decrease) in cash and cash equivalents

29,320


(9,903)

Cash and cash equivalents, beginning of period

29,417


59,272

Cash and cash equivalents, end of period

$             58,737


$             49,369

Pro Formas

The unaudited pro forma financial information included below is not necessarily indicative of the operating results that would have occurred had the acquisition been completed on January 1, 2022, and is not necessarily indicative of future results of operations of the combined company. The unaudited pro forma financial information gives effect to the acquisitions of BCE-Mach and BCE-Mach II, as well as the IPO and the use of net proceeds to pay down a portion of the credit facilities outstanding at the time of the IPO, as if the transactions had occurred on January 1, 2022. The unaudited pro forma financial information for the three and nine months ended September 30, 2023, and 2022, is a result of combining the statements of operations of BCE-Mach III with the pre-acquisition results of BCE-Mach and BCE-Mach II, with pro forma adjustments for revenues and expenses. The unaudited pro forma financial information excludes any cost savings anticipated as a result of the acquisition and the impact of any acquisition-related costs.

Pro Forma Consolidated Statement of Operations (Unaudited)

(in thousands)



Three Months Ended

September 30,


Nine Months Ended

September 30,


2023


2022


2023


2022

Revenue








Oil, natural gas, and NGL sales

$             208,301


$             345,488


$             607,987


$             910,172

Midstream revenue

6,788


12,159


20,319


32,288

Gain (loss) on oil and natural gas derivatives

(5,228)


(8,457)


17,390


(125,703)

Product sales

6,900


26,988


24,321


74,948

Total revenues

216,761


376,178


670,017


891,705









Operating expenses








Gathering and processing

16,227


26,615


49,657


66,942

Lease operating expense

42,061


41,720


129,500


104,032

Midstream operating expense

2,851


4,161


8,612


11,354

Cost of product sales

6,024


25,355


21,599


70,313

Production taxes

9,577


19,503


29,580


51,019

Depreciation, depletion, and accretion ? oil and natural gas

37,896


34,942


109,225


81,279

Depreciation and amortization ? other

1,975


1,424


5,186


3,875

General and administrative

7,758


4,703


21,679


17,962

Total operating expenses

124,369


158,423


375,038


406,776

Income from operations

92,392


217,755


294,979


484,929









Other (expense) income








Interest expense

(1,707)


(1,182)


(4,727)


(2,905)

Other (expense) income, net

3,240


(2,927)


(1,726)


1,536

Total other expense

1,533


(4,109)


(6,453)


(1,369)

Net income

$               93,925


$             213,646


$             288,526


$             483,560

 

Pro Forma Results of Operations

Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022

(in thousands)




Three Months Ended September 30,


Change



2023


2022


Amount


Percent

Revenues:









Oil


$            135,820


$            151,534


(15,714)


(10) %

Natural gas


47,427


149,752


(102,325)


(68) %

Natural gas liquids


25,054


44,202


(19,148)


(43) %

Total oil, natural gas, and NGL sales


208,301


345,488


(137,187)


(40) %

Gain (loss) on oil and natural gas derivatives, net


(5,228)


(8,457)


3,229


(38) %

Midstream revenue


6,788


12,159


(5,371)


(44) %

Product sales


6,900


26,988


(20,088)


(74) %

Total revenues


$            216,761


$            376,178


$          (159,417)


(42) %

Average Sales Price(1):









Oil ($/Bbl)


$                 80.88


$                 92.19


$              (11.31)


(12) %

Natural gas ($/Mcf)


$                   2.36


$                   7.65


$                 (5.29)


(69) %

NGL ($/Bbl)


$                 23.47


$                 38.43


$              (14.96)


(39) %

Total ($/Boe) ? before effects of realized derivatives


$                 34.16


$                 57.04


$              (22.88)


(40) %

Total ($/Boe) ? after effects of realized derivatives


$                 33.92


$                 48.76


$              (14.84)


(30) %

Net Production Volumes:









Oil (MBbl)


1,679


1,644


35


2 %

Natural gas (MMcf)


20,107


19,574


533


3 %

NGL (MBbl)


1,067


1,150


(83)


(7 %)

Total (MBoe)


6,098


6,056


42


1 %

Average daily total volumes (MBoe/d)


66.28


65.83


0.45


1 %



(1)

Average sales prices reflected above exclude gathering and processing expense and the separate benefit of third party midstream revenues.

 

Pro Forma Results of Operations

Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022

(in thousands)




Three Months Ended September 30,


Change



2023


2022


Amount


Percent

Operating Expenses:









Gathering and processing expense


$           16,227


$           26,615


$         (10,388)


(39 %)

Lease operating expense


$           42,061


$           41,720


$                341


1 %

Midstream operating expense


$             2,851


$             4,161


$           (1,310)


(31 %)

Cost of product sales


$             6,024


$           25,355


$         (19,331)


(76 %)

Production taxes


$             9,577


$           19,503


$           (9,926)


(51 %)

Depreciation, depletion, amortization and accretion expense ? oil and natural gas


$           37,896


$           34,942


$             2,954


8 %

Depreciation and amortization expense ? other


$             1,975


$             1,424


$                551


39 %

General and administrative


$             7,758


$             4,703


$             3,055


65 %

Operating Expenses ($/Boe)









Gathering and processing expense


$               2.66


$               4.39


$             (1.73)


(39 %)

Lease operating expense


$               6.90


$               6.89


$               0.01


? %

Production taxes (% of oil, natural gas and NGL sales)


4.6 %


5.6 %


(1.0) %


(18 %)

Depreciation, depletion, amortization and accretion expense ? oil and natural gas


$               6.21


$               5.77


$               0.44


8 %

Depreciation and amortization expense ? other


$               0.32


$               0.24


$               0.08


33 %

General and administrative


$               1.27


$               0.78


$               0.49


63 %

 

Pro Forma Results of Operations

Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022

(in thousands)




Nine Months Ended September 30,


Change



2023


2022


Amount


Percent

Revenues:









Oil


$            388,356


$            431,169


(42,813)


(10) %

Natural gas


144,011


344,306


(200,295)


(58) %

Natural gas liquids


75,620


134,697


(59,077)


(44) %

Total oil, natural gas, and NGL sales


607,987


910,172


(302,185)


(33) %

Gain (loss) on oil and natural gas derivatives, net


17,390


(125,703)


143,093


(114) %

Midstream revenue


20,319


32,288


(11,969)


(37) %

Product sales


24,321


74,948


(50,627)


(68) %

Total revenues


$            670,017


$            891,705


$            (221,688)


(25) %

Average Sales Price(1):









Oil ($/Bbl)


$                 76.91


$                 98.34


$                (21.43)


(22) %

Natural gas ($/Mcf)


$                   2.45


$                   6.63


$                  (4.18)


(63) %

NGL ($/Bbl)


$                 24.29


$                 41.99


$                (17.70)


(42) %

Total ($/Boe) ? before effects of realized derivatives


$                 33.85


$                 56.01


$                (22.16)


(40) %

Total ($/Boe) ? after effects of realized derivatives


$                 33.99


$                 47.13


$                (13.14)


(28) %

Net Production Volumes:









Oil (MBbl)


5,050


4,384


666


15 %

Natural gas (MMcf)


58,782


51,942


6,840


13 %

NGL (MBbl)


3,113


3,208


(95)


(3 %)

Total (MBoe)


17,959


16,249


1,710


11 %

Average daily total volumes (MBoe/d)


65.78


59.52


6.26


11 %



(1)

Average sales prices reflected above exclude gathering and processing expense and the separate benefit of third party midstream revenues.

 

Pro Forma Results of Operations

Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022

(in thousands)




Nine Months Ended September 30,


Change



2023


2022


Amount


Percent

Operating Expenses:









Gathering and processing expense


$           49,657


$           66,942


$          (17,285)


(26 %)

Lease operating expense


$         129,500


$         104,032


$            25,468


24 %

Midstream operating expense


$             8,612


$           11,354


$            (2,742)


(24 %)

Cost of product sales


$           21,599


$           70,313


$          (48,714)


(69 %)

Production taxes


$           29,580


$           51,019


$          (21,439)


(42 %)

Depreciation, depletion, amortization and accretion expense ? oil and natural gas


$         109,225


$           81,279


$            27,946


34 %

Depreciation and amortization expense ? other


$             5,186


$             3,875


$              1,311


34 %

General and administrative


$           21,679


$           17,962


$              3,717


21 %

Operating Expenses ($/Boe)









Gathering and processing expense


$               2.77


$               4.12


$               (1.35)


(33 %)

Lease operating expense


$               7.21


$               6.40


$                 0.81


13 %

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


$               6.08


$               5.00


$                 1.08


22 %

Depreciation and amortization expense ? other


$               0.29


$               0.24


$                 0.05


21 %

General and administrative


$               1.21


$               1.11


$                 0.10


9 %

Non-GAAP Measures
This release includes non-GAAP financial measures. Such non-GAAP measures are not alternatives to GAAP measures. These non-GAAP measures should not be considered in isolation or as a substitute for analysis of results as reported under GAAP.

Adjusted EBITDA
We include in this release the supplemental non-GAAP financial performance measure Adjusted EBITDA and provide our calculation of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, our most directly comparable financial measures calculated and presented in accordance with GAAP. We define Adjusted EBITDA as net income before (1) interest expense and interest income, (2) depreciation, depletion, amortization and accretion, (3) unrealized (gain) loss on derivative settlements, (4) equity-based compensation expense, and (5) (gain) loss on sale of assets.

Adjusted EBITDA is used as a supplemental financial performance measure by our management and by external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others, to more effectively evaluate our operating performance and our results of operation from period to period and against our peers without regard to financing methods, capital structure or historical cost basis. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as indicators of our operating performance. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax burden, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Our presentation of Adjusted EBITDA should not be construed as an inference that our results will be unaffected by unusual items. Our computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies.

Cash Available for Distribution
Cash available for distribution is not a measure of net income or net cash flow provided by or used in operating activities as determined by GAAP. Cash available for distribution is a supplemental non-GAAP financial performance measure used by our management and by external users of our financial statements, such as industry analysts, investors, lenders, rating agencies and others, to assess our ability to internally fund our exploration and development activities, pay distributions, and to service or incur additional debt. We define cash available for distribution as net income less (1) interest expense and interest income, (2) depreciation, depletion, amortization and accretion, (3) unrealized (gain) loss on derivative settlements, (4) equity-based compensation expense, (5) (gain) loss on sale of assets, (6) settlement of asset retirement obligations, (7) cash interest expense and cash interest income, (8) development costs and (9) change in accrued realized derivative settlements. Development costs include all of our capital expenditures, other than acquisitions.  Cash available for distribution will not reflect changes in working capital balances. 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. 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.

Reconciliation of Adjusted EBITDA and Cash Available for Distribution to GAAP Financial Measures

(in thousands):



Three Months Ended

September 30, 2023


Predecessor


Pro Forma

Net income

$                     83,485


$                     93,925

Interest expense

2,054


1,707

Interest income

(387)


(616)

Depreciation, depletion, amortization and accretion

33,035


39,871

Unrealized (gain) loss on derivative settlements

1,678


3,765

Equity-based compensation expense

647


1,085

(Gain) loss on sale of assets

?


(33)

Adjusted EBITDA

$                   120,512


$                   139,704





Net income

$                     83,485


$                     93,925

Interest expense

2,054


1,707

Interest income

(387)


(616)

Depreciation, depletion, amortization and accretion

33,035


39,871

Unrealized (gain) loss on derivative settlements

1,678


3,765

Equity-based compensation expense

647


1,085

(Gain) loss on sale of assets

?


(33)

Settlement of asset retirement obligations

(366)


(396)

Cash interest expense

(2,023)


(1,630)

Cash interest income

387


616

Development costs

(66,052)


(69,521)

Change in accrued realized derivative settlements

1,183


1,443

Cash available for distribution

$                     53,641


$                     70,216

 

SOURCE Mach Natural Resources


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