November 1, 2023
Mach Natural Resources launched an IPO this week, raising nearly $172MM. The new offering overlaps with two themes East Daley expects to highlight in this year’s Dirty Little Secrets annual report.
Tier-2 Basin Upside: Mach Natural Resources is a limited partnership based in the Anadarko Basin. The company reported roughly half of its 2022 revenue from oil sales and the other half from natural gas and NGLs, but recent earnings from natural gas have declined as prices fell in 2023 (East Daley predicted lower prices a year ago as part of the 2023 Dirty Little Secrets report).
However, another of EDA’s high-conviction calls for the next several years is a bullish outlook on Henry Hub prices in 2026-27 as LNG export demand ramps to record levels. We expect the demand pull will be so great that traditional gas-focused basins like the Haynesville and dry Eagle Ford will not be enough to meet new LNG exports.
EDA expects Tier 2 basins like the Anadarko/STACK and Western Rockies will need to step up in order to balance the market, which also means stronger pricing than what the Henry Hub forward curve currently offers. Mach is one of the few pure-play opportunities in the Anadarko Basin, and market fundamentals might provide tailwinds in 2026 and 2027.
Non-core Asset Potential: Mach Natural Resources also owns a smattering of small midstream assets in Oklahoma that could be picked up through consolidation or by midstream start-ups.
Notably, Kingfisher Midstream is now owned by Mach. The Kingfisher assets include a 260 MMcf/d gas plant and 300 miles of gas gathering. EDA estimates throughput at around 90 MMcf/d (see map).
Alta Mesa Resources constructed the Kingfisher system in 2017-18 with hopes of filling it with growth from the producer’s acreage plus several other operators in the area. However, excitement over the STACK play dissolved in 2019, even before COVID, due to geological/spacing issues and downside to natural gas prices.
A reset of the play and improvements in drilling might revive the area and bring Kingfisher Midstream back into consideration if macro fundamentals create an opportunity for natural gas growth in 2026-2027. For more details on East Daley’s outlook and risks to our Marco theory, watch for our 2024 Dirty Little Secrets launch in December 2023. – Ryan Smith.
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