Mach Natural Resources (MNR) risk factors, FY2024 10-K

Risks Related to Cash Distributions

1. 01We may not have sufficient available cash to pay any quarterly distribution on our common units following the payment of expenses, funding of development costs and establishment of cash reserves
2. 02The amount of our quarterly cash distributions from our available cash, if any, may vary significantly both quarterly and annually and will be directly dependent on the performance of our business. We will not have a minimum quarterly distribution and could pay no distribution with respect to any particular quarter

Risks Related to Our Business

1. 03Oil, natural gas and NGL prices are volatile. A sustained decline in prices could adversely affect our business, financial condition, results of operations, liquidity, ability to meet our financial commitments, ability to make our planned capital expenditures and our cash available for distribution
2. 04Currently, our producing properties are concentrated in the Anadarko Basin, making us vulnerable to risks associated with operating in a limited number of geographic areas
3. 05Drilling for and producing oil, natural gas and NGLs are high risk activities with many uncertainties that could adversely affect our business, financial condition or results of operations
4. 06Our identified drilling locations are scheduled out over many years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling
5. 07Properties that we decide to drill may not yield oil and natural gas in commercially viable quantities
6. 08Properties we acquire may not produce as projected, and we may be unable to determine reserve potential, identify liabilities associated with the properties that we acquire or obtain protection from sellers against such liabilities
7. 09The 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
8. 10Part of our business strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application
9. 11The marketability of our production is dependent upon gathering, treating, processing and transportation facilities, some of which we do not control. If these facilities are unavailable, our operations could be interrupted and our revenues could decrease
10. 12If third-party pipelines or other midstream facilities interconnected to our gathering systems become partially or fully unavailable, our revenues and cash flows and our ability to make cash distributions to our unitholders could be materially adversely affected
11. 13Reserve estimates depend on many assumptions that may turn out to be inaccurate. Any material inaccuracies in reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves
12. 14The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved reserves
13. 15Unless we replace our produced reserves with acquired or developed new reserves, our reserves and production will decline, which would adversely affect our future cash flows, results of operations and cash available for distribution
14. 16Competition in the oil and natural gas industry is intense, making it more difficult for us to acquire properties, market natural gas, secure trained personnel and raise additional capital
15. 17Our midstream services contracts are generally structured as short-term and long-term, fixed-fee contracts, which may negatively impact our operating margins and cash flow during periods of lower oil and natural gas prices
16. 18The loss of senior management or technical personnel could adversely affect operations
17. 19We 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
18. 20Certain factors could require us to write down the carrying values of our properties, including commodity prices decreasing to a level such that our future undiscounted cash flows from our properties are less than their carrying value
19. 21We may incur losses as a result of title defects in the properties in which we invest
20. 22We own non-operating interests in properties developed and operated by third parties and some of our leasehold acreage could be pooled by a third-party operator. As a result, we are unable, or may become unable as a result of pooling, to control the operation and profitability of such properties
21. 23We may be unable to make accretive acquisitions or may make opportunistic dispositions. Any such acquisitions, if not integrated or conducted successfully, or such dispositions, if not conducted successfully, may disrupt our business and hinder our growth potential
22. 24Our development projects and acquisitions require substantial capital expenditures. We may be unable to obtain any required capital or financing on satisfactory terms, which could lead to a decline in our production and reserves
23. 25Increased costs of capital could adversely affect our business
24. 26We could experience periods of higher costs if commodity prices rise. These increases could reduce our profitability, cash flow and ability to complete development activities as planned
25. 27The unavailability or high cost of drilling rigs, frac crews, equipment, supplies, personnel and oilfield services could adversely affect our ability to execute our development plans within our budget and on a timely basis
26. 28We depend upon several significant purchasers for the sale of most of our oil, natural gas and NGL production. The loss of one or more of these purchasers could, among other factors, limit our access to suitable markets for the oil and natural gas we produce
27. 29Our leverage and debt service obligations may adversely affect our financial condition, results of operations and business prospects
28. 30Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities
29. 31In addition, the Credit Agreements require us to maintain compliance with certain financial covenants
30. 32Any significant reduction in our borrowing base under the Revolving Credit Agreement as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations
31. 33Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly
32. 34The credit risk of financial institutions could adversely affect us
33. 35Our ability to obtain financing on terms acceptable to us may be limited in the future by, among other things, increases in interest rates
34. 36Our derivative activities could result in financial losses or could reduce our earnings
35. 37The failure of our hedge counterparties, significant customers or working interest holders to meet their obligations to us may adversely affect our financial results
36. 38Declining general economic, business or industry conditions and inflation may have a material adverse effect on our results of operations, liquidity and financial condition
37. 39Oil and gas exploration and production companies are frequently subject to litigation claims from landowners, royalty owners and other interested parties, particularly during periods of declining commodity prices
38. 40We maintain insurance against some, but not all, operating risks and losses. Losses and liabilities arising from uninsured and underinsured events could materially and adversely affect our business, financial condition or results of operations
39. 41Extreme weather conditions and the physical risks of climate change could adversely affect our ability to conduct drilling activities in the areas where we operate and the operations of our gathering and processing facilities and have a negative impact on our business and results of operations
40. 42Our operations are subject to stringent environmental laws and regulations that may affect our operations and expose us to significant costs and liabilities that could exceed current expectations
41. 43Climate change legislation or regulations restricting emissions of GHGs or requiring the reporting of GHG emissions or climate-related information could result in increased operating costs, impact the demand for the oil and natural gas we produce, and adversely affect our business
42. 44Increased scrutiny of ESG matters could have an adverse effect on our business, financial condition and results of operations and damage our reputation
43. 45Legislation or regulatory initiatives intended to address the disposal of saltwater gathered from our drilling activities could limit our ability to produce oil and natural gas economically and have a material adverse effect on our business
44. 46Limitation or restrictions on our ability to obtain or dispose of water may have an adverse effect on our operating results
45. 47We are responsible for the decommissioning, abandonment, and reclamation costs for our facilities, which could decrease our cash available for distribution
46. 48Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in areas where we operate
47. 49The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the effect of commodity price, interest rate and other risks associated with our business
48. 50We may be involved in legal and regulatory proceedings that could result in substantial liabilities
49. 51Loss of our information and computer systems could adversely affect our business. Our business could be negatively impacted by security threats, including cyber-security threats and other disruptions
50. 52We are subject to a number of privacy and data protection laws, rules and directives (collectively, data protection laws) relating to the processing of personal data
51. 53Our 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
52. 54Please read “Certain Relationships and Related Party Transactions and Director Independence” included in Item 13 of Part III of this Annual Report
53. 55private 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
54. 56Our partnership agreement replaces our general partner’s fiduciary duties to us and our unitholders with contractual standards governing its duties, and restricts the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty
55. 57Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow our reserves and production and make acquisitions
56. 58Increases in interest rates could adversely impact our unit price and our ability to issue additional equity and incur debt
57. 59Our general partner may amend our partnership agreement, as it determines necessary or advisable, to permit the general partner to redeem the units of certain non-citizen unitholders
58. 60Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business
59. 61Even if our unitholders are dissatisfied, they cannot remove our general partner without its consent
60. 62Control of our general partner may be transferred to a third party without unitholder consent
61. 63We may issue an unlimited number of additional units, including units that are senior to the common units, without unitholder approval
62. 64Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units
63. 65Affiliates of our general partner may sell common units in the public markets, which sales could have an adverse impact on the trading price of the common units
64. 66Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price
65. 67on 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
66. 68The NYSE does not require a publicly traded limited partnership like us to comply, and we do not intend to comply, with certain of its governance requirements generally applicable to corporations
67. 69Our unitholders’ liability may not be limited if a court finds that unitholder action constitutes control of our business
68. 70Our unitholders may have liability to repay distributions that were wrongfully distributed to them
69. 71If our common unit price declines, our unitholders could lose a significant part of their investment
70. 72If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our units
71. 73Our general partner may elect to convert or restructure us from a partnership to an entity taxable as a corporation for U.S. federal income tax purposes without unitholder consent
72. 74We incur increased costs as a result of being a publicly traded partnership
73. 75If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our units or if our operating results do not meet their expectations, our unit price could decline
74. 76Tax Risks to Common Unitholders
75. 77The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis
76. 78Certain U.S. federal income tax incentives currently available with respect to oil and natural gas exploration and production may be reduced or eliminated as a result of future legislation
77. 79We prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred
78. 80A successful IRS contest of the U.S. federal income tax positions we take may adversely impact the market for our common units and the cost of any IRS contest will reduce our cash available for distribution to unitholders
79. 81Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us
80. 82Tax gains or losses on the disposition of our common units could be more or less than expected
81. 83Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us
82. 84Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them
83. 85We will treat each purchaser of our common units as having the same tax benefits without regard to the common units purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units
84. 86Our unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of an investment in our common units
85. 87We have adopted and will continue to adopt certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methods or the resulting allocations and such a challenge could adversely affect the value of our common units