Mach Natural Resources (MNR) risk factors, FY2025 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. 04Drilling 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
3. 05Our 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
4. 06Properties that we decide to drill may not yield oil and natural gas in commercially viable quantities
5. 07Properties 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
6. 08The 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
7. 09Part of our business strategy involves using some of the latest available horizontal drilling and completion techniques, which involve risks and uncertainties in their application
8. 10The 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
9. 11If 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
10. 12Reserve 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
11. 13The standardized measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved reserves
12. 14Unless 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
13. 15Competition 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
14. 16Our 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 prices26% rewritten
15. 17The loss of senior management or technical personnel could adversely affect operations
16. 18We 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
17. 19Certain 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
18. 20We may incur losses as a result of title defects in the properties in which we invest
19. 21We 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
20. 22We 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
21. 23Our 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
22. 24Increased costs of capital could adversely affect our business
23. 25Changes in the global trade environment, including the imposition of tariffs, could adversely affect our businessNew
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 prospects90% rewritten
28. 30qualifications and exceptions, and indebtedness incurred in compliance with these restrictions could be substantial. Additionally, the New Credit Agreement permits us to incur certain amounts of additional indebtednessNew
29. 31Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities
30. 32In addition, the New Credit Agreement requires us to maintain compliance with certain financial covenants
31. 33Any significant reduction in our borrowing base under the New Credit Agreement as a result of the periodic borrowing base redeterminations or otherwise may negatively impact our ability to fund our operations
32. 34Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly
33. 35The credit risk of financial institutions could adversely affect us
34. 36Our ability to obtain financing on terms acceptable to us may be limited in the future by, among other things, increases in interest rates
35. 37Our derivative activities could result in financial losses or could reduce our earnings
36. 38The failure of our hedge counterparties, significant customers or working interest holders to meet their obligations to us may adversely affect our financial results
37. 39Declining general economic, business or industry conditions and inflation may have a material adverse effect on our results of operations, liquidity and financial condition
38. 40Oil 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
39. 41We 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
40. 42Extreme 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
41. 43Our 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 expectations26% rewritten
42. 44Climate 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 business81% rewritten
43. 45Change. At the same time, various state and local governments have committed to furthering the goals of the Paris AgreementNew
44. 46Increased scrutiny of ESG matters could have an adverse effect on our business, financial condition and results of operations and damage our reputation68% rewritten
45. 47which we can operate, and reduce our oil and natural gas production, which could adversely affect our production and businessNew
46. 48Legislation 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
47. 49Limitation or restrictions on our ability to obtain or dispose of water may have an adverse effect on our operating results
48. 50We are responsible for the decommissioning, abandonment, and reclamation costs for our facilities, which could decrease our cash available for distribution
49. 51Restrictions on drilling activities intended to protect certain species of wildlife may adversely affect our ability to conduct drilling activities in areas where we operate33% rewritten
50. 52The 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
51. 53We may be involved in legal and regulatory proceedings that could result in substantial liabilities
52. 54Loss 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
53. 55We 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
54. 56Our 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
55. 57Please read “Certain Relationships and Related Party Transactions and Director Independence” included in Item 13 of Part III of this Annual Report88% rewritten
56. 58potential future affiliations, they may have duties to present potential business opportunities to those entities prior to presenting them to us, which could cause additional conflicts of interest. The Sponsor will be under no obligation to make any acquisition opportunities available to usNew
57. 59Our 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
58. 60Our 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
59. 61Increases in interest rates could adversely impact our unit price and our ability to issue additional equity and incur debt
60. 62Our 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
61. 63Unlike 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
62. 64Even if our unitholders are dissatisfied, they cannot remove our general partner without its consent22% rewritten
63. 65Control of our general partner may be transferred to a third party without unitholder consent
64. 66We may issue an unlimited number of additional units, including units that are senior to the common units, without unitholder approval
65. 67Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units
66. 68Affiliates 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 units40% rewritten
67. 69Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price77% rewritten
68. 70ability to choose the judicial forum for disputes with us or our general partner or its directors, officers or other employeesNew
69. 71The 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
70. 72Our unitholders’ liability may not be limited if a court finds that unitholder action constitutes control of our business
71. 73Our unitholders may have liability to repay distributions that were wrongfully distributed to them
72. 74If our common unit price declines, our unitholders could lose a significant part of their investment
73. 75If 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 units24% rewritten
74. 76Our 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
75. 77We incur increased costs as a result of being a publicly traded partnership
76. 78If 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
77. 79Tax Risks to Common Unitholders
78. 80The 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
79. 81Certain 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
80. 82We 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
81. 83A 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
82. 84Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us
83. 85Tax gains or losses on the disposition of our common units could be more or less than expected
84. 86Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us
85. 87Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them
86. 88We 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
87. 89Our 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
88. 90We 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