Mach Natural Resources (NYSE:MNR) said it is shifting more of its 2026 drilling program toward oil-weighted opportunities while maintaining its emphasis on distributions, low reinvestment and balance sheet discipline, according to comments from executives on the company’s first-quarter 2026 earnings call.
Chief Executive Officer Tom Ward said the company’s operating strategy continues to be guided by four pillars: disciplined execution, disciplined reinvestment, financial strength and maximizing distributions to equity holders. Ward said Mach has focused since its founding in 2017 on buying free cash-flowing assets at discounts to producing-property PV-10 values, often in distressed situations.
“We did not establish Mach to grow our production through drilling,” Ward said. “Our drilling program is set to stabilize our production.”
First-quarter production and cash flow
Chief Financial Officer Kevin White said Mach produced 158,000 barrels of oil equivalent per day in the first quarter. The production mix was 16% oil, 70% natural gas and 14% natural gas liquids.
Average realized prices were $69.73 per barrel of oil, $2.74 per Mcf of natural gas and $23.75 per barrel of NGLs, White said. Of the company’s $366 million in total oil and gas revenue, oil contributed 42%, natural gas 45% and NGLs 13%.
White said lease operating expense was $101 million, or $7.12 per BOE, while cash general and administrative expense was about $5 million, or $0.37 per BOE. Mach ended the quarter with $53 million in cash and $305 million of availability under its credit facility.
Total revenue, including hedges and midstream activities, was $286 million. Adjusted EBITDA was $195 million, and operating cash flow was $170 million. The company spent $75 million in development capital expenditures, which White said represented 40% of operating cash flow after interest.
Mach generated $107 million of cash available for distribution and declared a distribution of $0.64 per unit, payable June 4 to holders of record as of May 21.
Oil-weighted drilling gains priority
Ward said the company is responding to weaker natural gas prices and stronger oil prices by reallocating capital toward oil-weighted drilling. Beginning May 1, Mach moved its first rig to drill for oil in the Oswego formation in Kingfisher County, Oklahoma. Ward said Mach has drilled more than 250 Oswego locations since 2021 and has seen “very good results.”
He said Mach expects to add three oil-weighted rigs by postponing its Deep Anadarko dry gas program. One rig will drill the Oswego, another will move to southern Oklahoma’s Ardmore Basin assets acquired through the Cheyenne and Flycatcher purchases in 2024, and a third will target the Red Fork sand in western Oklahoma.
The company may also delay completion of its San Juan Mancos program until 2027 in order to add another oil rig in the Clear Fork formation from the Sabinal acquisition. Ward said that, at current prices, Clear Fork locations are expected to generate roughly 100% rates of return, making them more attractive than completing San Juan gas wells under current basin pricing.
During the question-and-answer session, Ward said the shift toward oil is not expected to meaningfully change the company’s production mix in the near term. Instead, he said, the goal is to maintain oil production and prevent decline, with the possibility of increasing oil’s share by “a percent or so a year.”
Natural gas assets remain a long-term option
Although Mach is deferring some gas activity, Ward said management remains optimistic about the long-term value of its natural gas position in the Deep Anadarko Basin and San Juan Basin.
In the Deep Anadarko, Ward said five wells with more than 90 days of production averaged more than 12 million cubic feet of gas per day over their first 90 days, compared with a 15 billion cubic foot type curve projected at 10.6 million cubic feet per day.
In the San Juan Basin, Ward said Mach has begun its 2026 drilling program with one rig working on Mancos Shale wells. The company plans to drill seven wells during the summer drilling window. He said Mach has 575,000 acres in the San Juan held by production, giving the company flexibility on timing.
Ward said five San Juan wells that came online last fall have produced more than 14 billion cubic feet of gas and are still producing more than 60 million cubic feet per day. He also said Mach expects to reduce San Juan drilling costs versus historical levels by bringing in new service providers from the Mid-Continent and working with existing providers.
Mach inherited a volume production contract through its IKAV acquisition that runs through 2030. Ward said about 65% of San Juan volumes are currently tied to the contract at a price of $1.72. He described the contract as an effective hedge if basis remains weak.
Debt reduction remains a focus
Ward said Mach’s leverage rose to about 1.3 times following the IKAV and Sabinal acquisitions last September. Historically, he said, the company has sought to keep leverage at or below 1.0 times.
“Our goal is to move that ratio back to our desired level before we make any more acquisitions that require substantial debt,” Ward said.
As a result, Ward said Mach’s acquisition strategy is currently on hold unless the company finds an accretive transaction that can use equity to improve cash available for distribution while lowering debt levels. He said sellers have shown interest in exchanging production for equity, but Mach is not looking to increase leverage for new deals.
Ward described the current debt level as manageable but said it is “a pebble in my shoe” that he would prefer to remove by returning to 1.0 times leverage. Asked whether Mach might retain cash to pay down debt, Ward said he hopes that will not be necessary and that higher commodity prices could reduce leverage naturally. However, he noted the company could temporarily reduce distributions if needed.
Inflation and acquisitions
Ward said Mach is seeing oilfield service inflation, including rising costs for bits, steel, labor and fuel surcharges. He said the company updates its authorization for expenditure estimates monthly and adjusts drilling decisions based on commodity prices and service costs.
On mergers and acquisitions, Ward said Mach remains focused on smaller opportunities, generally in the $100 million to $300 million range, where it can identify distressed or overlooked assets. He said the company is less competitive in larger transactions or deals where buyers must pay for significant upside.
Ward said Mach has assembled a large inventory of oil and gas opportunities across its acreage base, which allows the company to adjust capital allocation based on expected returns. “We let pricing dictate where we spend capital,” he said.
About Mach Natural Resources (NYSE:MNR)
Mach Natural Resources LP, an independent upstream oil and gas company, focuses on the acquisition, development, and production of oil, natural gas, and natural gas liquids reserves in the Anadarko Basin region of Western Oklahoma, Southern Kansas, and the panhandle of Texas. It also owns a portfolio of midstream assets, as well as owns plants and water infrastructure. The company was incorporated in 2023 and is headquartered in Oklahoma City, Oklahoma.
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