S-1 1 fs12023_machnatural.htm REGISTRATION STATEMENT

As filed with the U.S. Securities and Exchange Commission on September 22, 2023.

Registration No. 333-              

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

__________________________________________

Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

__________________________________________

Mach Natural Resources LP
(Exact name of registrant as specified in its charter)

__________________________________________

Delaware

 

1311

 

93-1757616

(State or other jurisdiction of
incorporation or organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification No.)

14201 Wireless Way, Suite 300
Oklahoma City, Oklahoma 73134
(405) 252-8100
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

__________________________________________

Tom L. Ward
Chief Executive Officer
14201 Wireless Way, Suite 300
Oklahoma City, Oklahoma 73134
(405) 252-8100
(Name, address, including zip code, and telephone number, including area code, of agent for service)

__________________________________________

Copies to:

Julian J. Seiguer, P.C.
Michael W. Rigdon, P.C.
Kirkland & Ellis LLP

609 Main Street, Suite 4700

Houston, Texas 77002

(713) 836-3600

 

Joshua Davidson
Douglas V. Getten
Baker Botts L.L.P.

910 Louisiana Street

Houston, Texas 77002

(713) 229-1234

__________________________________________

Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

   

Non-accelerated filer

 

 

Smaller reporting company

 

           

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell the securities described herein until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell the securities described herein and it is not soliciting an offer to buy such securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED            , 2023

PRELIMINARY PROSPECTUS

Mach Natural Resources LP
Common Units
Representing Limited Partner Interests

__________________________________________

Mach Natural Resources LP is a Delaware limited partnership 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. This is the initial public offering of the common units of Mach Natural Resources LP. We are offering              common units representing limited partner interests. No public market currently exists for our common units. We expect the initial public offering price to be between $              and $              per common unit. We intend to apply to list our common units on the New York Stock Exchange, under the symbol “MNR.” We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act.

Investing in our common units involves risks. See “Risk Factors” beginning on page 27 of this prospectus.

These risks include the following:

        We 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.

        Oil, 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.

        Unless 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.

        Our operations are subject to stringent environmental laws and regulations that may affect our drilling and production operations and expose us to significant costs and liabilities that could exceed current expectations.

        Our general partner and its affiliates own a controlling interest in us and will 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.

        Our unitholders have limited voting rights and are not entitled to elect our general partner or its board of directors, which could reduce the price at which our common units will trade.

        Even if our unitholders are dissatisfied, they cannot remove our general partner without its consent.

        Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service were to treat us as a corporation for U.S. federal income tax purposes or if we were otherwise subject to a material amount of entity-level taxation, then cash available for distribution to our unitholders could be reduced.

        Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.

__________________________________________

PRICE $            PER COMMON UNIT

__________________________________________

 

Per Common
Unit

 

Total

Public offering price

 

$

 

 

$

 

Underwriting discount(1)

 

$

 

 

$

 

Proceeds, before expenses

 

$

 

 

$

 

____________

(1)      Includes an aggregate structuring fee equal to            % of the gross proceeds of this offering payable to Stifel, Nicolaus & Company, Incorporated and Raymond James & Associates, Inc. Please read “Underwriting.”

We have granted the underwriters a 30-day option to purchase up to an additional            common units on the same terms and conditions as set forth above if the underwriters sell more than            common units in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the common units on or about            , 2023.

__________________________________________

Joint Book-Running Managers

Stifel

 

Raymond James

__________________________________________

            , 2023

 

Table of Contents

TABLE OF CONTENTS

 

Page

INDUSTRY AND MARKET DATA

 

iii

TRADEMARKS AND TRADE NAMES

 

iii

BASIS OF PRESENTATION

 

iv

PROSPECTUS SUMMARY

 

1

Risk Factor Summary

 

9

Risks Related to Cash Distributions

 

9

Risks Related to Our Business

 

9

Risks Inherent in an Investment in Us

 

10

Tax Risks to Common Unitholders

 

11

Reorganization Transactions, Partnership Structure and Expected Refinancing Transactions

 

11

Ownership and Organizational Structure of Mach Natural Resources

 

12

Management of Mach Natural Resources LP

 

13

Our Sponsor

 

14

Implications of Being an Emerging Growth Company

 

14

Principal Executive Offices and Internet Address

 

15

Summary of Conflicts of Interest and Duties

 

15

The Offering

 

17

Summary Historical and Pro Forma Financial and Operating Data

 

20

Non-GAAP Financial Measures

 

22

Summary of Reserve, Production and Operating Data

 

25

RISK FACTORS

 

27

Risks Related to Cash Distributions

 

27

Risks Related to Our Business

 

28

Risks Inherent in an Investment in Us

 

53

Tax Risks to Common Unitholders

 

63

USE OF PROCEEDS

 

68

CAPITALIZATION

 

69

DILUTION

 

70

OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS

 

71

General

 

71

Unaudited Pro Forma Cash Available for Distribution for the Year Ended December 31, 2022 and the Twelve Months Ended June 30, 2023

 

73

Estimated Cash Available for Distribution for the Twelve Months Ending June 30, 2024

 

75

Assumptions and Considerations

 

78

Sensitivity Analysis

 

84

PROVISIONS OF OUR PARTNERSHIP AGREEMENT RELATING TO CASH DISTRIBUTIONS

 

87

Distributions of Available Cash

 

87

Distributions of Cash Upon Liquidation

 

87

SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

 

88

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

90

BUSINESS AND PROPERTIES

 

119

MANAGEMENT

 

150

Management of Mach Natural Resources

 

150

Executive Officers and Directors of Our General Partner

 

150

Reimbursement of Expenses of Our General Partner

 

152

Board of Directors

 

152

Director Independence

 

152

Committees of the Board of Directors

 

152

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Page

EXECUTIVE COMPENSATION AND OTHER INFORMATION

 

154

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

160

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

161

Distributions and Payments to Our General Partner and Its Affiliates

 

161

Agreements with Management

 

162

Agreements with Affiliates in Connection with the Reorganization Transactions

 

162

CONFLICTS OF INTEREST AND DUTIES

 

164

Conflicts of Interest

 

164

Duties of our General Partner

 

168

DESCRIPTION OF THE COMMON UNITS

 

171

The Units

 

171

Transfer Agent and Registrar

 

171

THE PARTNERSHIP AGREEMENT

 

173

Organization and Duration

 

173

Purpose

 

173

Capital Contributions

 

173

Limited Voting Rights

 

173

Applicable Law; Forum, Venue and Jurisdiction

 

175

Limited Liability

 

176

Issuance of Additional Partnership Interests

 

177

Amendment of the Partnership Agreement

 

177

Merger, Consolidation, Sale or Other Disposition of Assets

 

179

Termination and Dissolution

 

180

Liquidation and Distribution of Proceeds

 

180

Withdrawal or Removal of Our General Partner

 

180

Transfer of General Partner Interest

 

181

Transfer of Ownership Interests in Our General Partner

 

181

Election to be Treated as a Corporation

 

182

Change of Management Provisions

 

182

Limited Call Right

 

182

Meetings; Voting

 

183

Status as Limited Partner

 

183

Non-Citizen Unitholders; Redemption

 

183

Indemnification

 

184

Reimbursement of Expenses

 

184

Books and Reports

 

184

Right to Inspect Our Books and Records

 

185

Registration Rights

 

185

UNITS ELIGIBLE FOR FUTURE SALE

 

186

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

 

188

INVESTMENT IN MACH NATURAL RESOURCES BY EMPLOYEE BENEFIT PLANS

 

208

UNDERWRITING

 

210

VALIDITY OF THE COMMON UNITS

 

214

EXPERTS

 

214

WHERE YOU CAN FIND MORE INFORMATION

 

214

FORWARD-LOOKING STATEMENTS

 

215

INDEX TO FINANCIAL STATEMENTS

 

F-1

APPENDIX A — AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF MACH NATURAL RESOURCES LP

 

A-1

APPENDIX B — GLOSSARY OF OIL AND GAS TERMS AND OTHER TERMS

 

B-1

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Neither we nor the underwriters have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since such dates. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted.

Until             , 2023 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common units, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. Please read “Risk Factors” and “Forward-Looking Statements.”

INDUSTRY AND MARKET DATA

The market data and certain other statistical information included in this prospectus are based on a variety of sources, including independent industry publications, government publications and other published independent sources. Some data is also based on our good faith estimates, which have been derived from management’s knowledge and experience in the industry in which we operate. Although we have not independently verified the accuracy or completeness of the third-party information included in this prospectus, based on management’s knowledge and experience, we believe that these third-party sources are reliable and that the third-party information included in this prospectus or in our estimates is accurate and complete. While we are not aware of any misstatements regarding the market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the headings “Forward-Looking Statements” and “Risk Factors” in this prospectus.

TRADEMARKS AND TRADE NAMES

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names.

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BASIS OF PRESENTATION

Unless otherwise indicated, the historical financial information presented in this prospectus is that of BCE-Mach III LLC (“BCE-Mach III” or “predecessor”), a Delaware limited liability company, our predecessor for accounting purposes. The historical financial information of BCE-Mach LLC, a Delaware limited liability company, and BCE-Mach II LLC, a Delaware limited liability company, is also included herein as indicated.

This prospectus contains unaudited pro forma financial information, which presents certain financial information and operating data of our predecessor, BCE-Mach LLC and BCE-Mach II LLC on a pro forma combined basis to give effect to the initial public offering and the use of proceeds therefrom and the Reorganization Transactions as if they had occurred at the beginning of the periods presented. The production, reserve, acreage, well count, drilling locations, and other historical data in this prospectus are presented on a pro forma combined basis as if the Reorganization Transactions had occurred unless otherwise indicated.

Though the entities to be contributed in connection with the initial public offering and Reorganization Transactions have a high degree of common ownership, no individual or entity controls any of the entities and therefore the Reorganization Transactions are not accounted for as common control transactions.

Unless another date is specified, all production, reserve, acreage, well count and drilling location data presented in this prospectus is as of June 30, 2023.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. Because this is a summary, it may not contain all of the information that may be important to you and to your investment decision. The following summary is qualified in its entirety by the more detailed information and financial statements and notes thereto included elsewhere in this prospectus. You should read the entire prospectus carefully and should consider, among other things, the matters set forth in “Risk Factors,” “Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical and unaudited pro forma consolidated financial statements and the related notes to each of those financial statements included elsewhere in this prospectus before deciding to invest in our common units. Unless otherwise indicated, the financial and operating information as well as the estimated proved and probable reserve information presented in this prospectus gives pro forma effect to the initial public offering and the use of proceeds therefrom and the Reorganization Transactions described herein and presents the data of the Mach Companies on a combined basis.

The information presented in this prospectus assumes (i) an initial public offering price of $            per common unit (the mid-point of the price range set forth on the cover of this prospectus) and (ii) that the underwriters do not exercise their option to purchase up to an additional             common units, unless otherwise indicated. As used in this prospectus, the term “our general partner” refers to Mach Natural Resources GP LLC, a Delaware limited liability company, and the terms “Mach Natural Resources,” “partnership,” the “Company,” “we,” “our,” “us” or similar terms refer to Mach Natural Resources LP, a Delaware limited partnership, and its subsidiaries. We include a glossary of some of the oil and natural gas terms and other terms used in this prospectus in Appendix B. Our estimated proved and probable reserve information included in this prospectus is based on reports prepared by Cawley, Gillespie & Associates, Inc., our independent reserve engineers.

Our Company

We are 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. Our experienced management team, led by industry veteran Tom L. Ward, possesses deep operational and industry experience, particularly in Oklahoma and the Anadarko Basin. We leverage our extensive experience to identify the most attractive exploitation and development opportunities and optimize the production of current wells, efficiently drill our existing inventory of undeveloped locations and identify attractive low-risk acquisition opportunities.

Our partnership agreement requires us to distribute all of our cash on hand at the end of each quarter, less reserves established by our general partner, which we refer to as “available cash.” We believe the lower decline nature of our Legacy Producing Assets (as defined below) and large inventory of horizontal drilling locations with average royalty burdens of less than 25%, coupled with our lower cash operating costs and owned midstream infrastructure, will support our ability to make cash distributions to our unitholders. We expect to maintain a conservative capital structure with the long-term goal of remaining substantially debt free. Nevertheless, our quarterly cash distributions may vary from quarter to quarter as a direct result of variations in the performance of our business, including those caused by fluctuations in commodity prices. Any such variations may be significant, and as a result, we may pay limited or even no cash distributions to our unitholders.

We seek to maximize cash distributions to unitholders through a combination of the development of our existing properties, primarily using our cash flow from operating activities, and the acquisition of producing properties. Our current acreage position in the Anadarko Basin is characterized as oil-rich with considerable natural gas content, notable historical production, low decline rates and average royalty burdens of less than 25%. Through a series of acquisitions since our inception, we have accumulated an acreage position consisting of approximately 936,000 net acres, of which 99% is held by production, and over 2,000 identified horizontal drilling locations, of which more than 750 of these are located in the Oswego formation, a prolific reservoir in north-central Oklahoma. We consider our large inventory of horizontal drilling locations to be low-risk based on information gained from the large number of existing wells in the area, industry activity surrounding our acreage, and the consistent and

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predictable geology surrounding our positions. We believe the combination of our large inventory of low-risk drilling locations with the low decline production profile of our Legacy Producing Assets leads to a sustainable production profile.

We focus on controlling costs and maintaining financial discipline, which enables us to prudently develop our assets while generating significant cash available for distribution. Our strategy is to enhance existing production and reduce costs by right-sizing field operations to cost-effectively extract oil and natural gas from producing reservoirs. Our culture of cost control and production optimization has resulted in substantially lower cash operating costs than our peers.

We believe a key competitive advantage that we have over other operators is that we own an extensive portfolio of complementary midstream assets that are integrated with our upstream operations. These assets include gathering systems, processing plants and water infrastructure. Our midstream assets enhance the value of our properties by allowing us to optimize pricing, increase flow assurance and eliminate third-party costs and inefficiencies. In addition, our owned midstream systems generate third-party revenue, which effectively reduces the cost of operating our midstream assets and reduces our average breakeven costs compared to other operators. We believe the Anadarko Basin is uniquely positioned with legacy takeaway pipeline infrastructure enabling our oil, natural gas and NGLs to be easily transported to premium markets, such as Cushing, Oklahoma.

Our Properties

Our assets are located throughout Western Oklahoma, Southern Kansas and the panhandle of Texas and consist of approximately 4,500 gross operated PDP wells. Our average net daily production for the twelve months ended June 30, 2023 was approximately 65 MBoe/d. We define our Focus Drilling Area assets as all of our horizontal properties that are located in Kingfisher and Logan Counties, Oklahoma, which we define as the Focus Drilling Area, and we define our “Legacy Producing Assets” as all of our legacy producing properties which are not in the Focus Drilling Area, as shown in the chart below. Based on our reserve report as of June 30, 2023, 57% of our production is attributable to our Legacy Producing Assets, which have an average expected annual decline rate of approximately 15%. Our wells are located almost exclusively in the Anadarko Basin, which has a more predictable production profile compared to less mature basins. Our production benefits from both the diversity of our well vintage and the lack of concentration in any specific sub-area. Within our large and diversified PDP base, no single well accounts for more than 1% of our PDP PV-10.

Within our operating areas, our assets are prospective for multiple formations, most notably the Oswego, Meramec/Osage and Mississippi Lime formations. Our experience in the Anadarko Basin and these formations allows us to generate significant cash available for distribution from these low declining assets in a variety of commodity price environments.

In addition to our portfolio of producing wells, our properties include over 2,000 identified horizontal drilling locations that we believe will allow us to maintain our production and support future cash distributions to our unitholders.

Additionally, we own a portfolio of midstream assets which support our leases. As of June 30, 2023, approximately 75% of our operated PDP reserves (and approximately 66% of our total PDP reserves) are supported by Company-owned midstream infrastructure.

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The following table presents our historical estimated oil, natural gas and NGL proved reserves as of June 30, 2023.

 

Estimated Proved
Reserves

   

Proved
Developed
Reserves
(1)

 

Proved
Reserves
(1)

 

Estimated Probable
Reserves
(1)(2)

Oil (MBbl)

 

 

40,876

 

 

53,029

 

 

72,868

Natural gas (MMcf)

 

 

782,727

 

 

811,507

 

 

373,477

NGLs (MBbl)

 

 

50,190

 

 

50,911

 

 

19,576

Total equivalent (MBoe)(3)

 

 

221,520

 

 

239,191

 

 

154,690

PV-10 (in millions)(4)

 

$

2,131

 

$

2,435

 

$

1,039

Standardized Measure (in millions)(5)

 

$

2,131

 

$

2,435

 

 

____________

(1)      Our estimated net proved and probable reserves were determined using average first-day-of-the-month prices for the prior 12 months in accordance with SEC regulations. For more information on the prices used, see “— Summary of Reserve, Production and Operating Data — Summary of Reserves.”

(2)      All of our probable reserves are undeveloped. Estimates of probable reserves, and the future cash flows related to such estimates, are inherently imprecise and are more uncertain than estimates of proved reserves and the future cash flows related to such estimates but have not been adjusted for risk due to such uncertainty. Therefore, estimates of probable reserves and the future cash flows related to such estimates may not be comparable to estimates of proved reserves and the future cash flows related to such estimates and should not be summed arithmetically with estimates of proved reserves and the future cash flows related to such estimates. For more information regarding the presentation of probable reserves, see “Business and Properties — Our Operations — Preparation of Reserve Estimates.”

(3)      Presented on an oil-equivalent basis using a conversion of six thousand cubic feet of natural gas to one stock tank barrel of oil. This conversion is based on energy equivalence and not on price or value equivalence.

(4)      For more information on how we calculate PV-10 and a reconciliation of proved reserves PV-10 to its nearest GAAP measure, see “— Summary of Reserve, Production and Operating Data — Summary of Reserves” and “— Non-GAAP Financial Measures — Reconciliation of PV-10 to Standardized Measure.” With respect to PV-10 calculated as of an interim date, it is not practicable to calculate the taxes for the related interim period because GAAP does not provide for disclosure of Standardized Measure on an interim basis.

(5)      For more information on how we calculate Standardized Measure of proved reserves, see “— Non-GAAP Financial Measures — Reconciliation of PV-10 to Standardized Measure.”

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Our near-term drilling program is focused on horizontal development in Kingfisher and Logan Counties, Oklahoma. The two primary, productive formations in this area are the Oswego and Meramec/Osage. The Oswego is the most oil rich and economic formation within our inventory. In the early stages of the Oswego horizontal development, a mixture of standard completion fluids and proppant were utilized in the stimulation. We have successfully further lowered our well costs to $3.0 million per well in the Oswego by using drilling efficiencies and utilizing acid in lieu of proppant within the stimulation. As observed in the chart below, the 154 acid-only stimulated wells that we drilled are performing comparably to the proppant-stimulated 75 Oswego wells producing in Kingfisher County, Oklahoma. The below illustrates the average oil production results from the Oswego as of August 2023:

____________

(1)      Based on Management’s estimates.

(2)      Data and analytics derived from Enverus Core. Includes all offset horizontal wells drilled in Oswego formation with reported proppant loading. Normalized to 5,121 feet.

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In addition to the Oswego, there have been over 775 wells in the Meramec/Osage formations drilled and over 1,850 wells in the Mississippi Lime formation drilled on our acreage. Our assets have extensive production histories and high drilling success rates. Accordingly, we believe our acreage has been significantly delineated by our own drilling success and by the success of offset operators.

The below table summarizes our identified horizontal drilling locations as of June 30, 2023.

Target Horizontal Zones

 

Identified Horizontal Drilling Locations(1)(2)

Focus Drilling
Area Operated

 

Focus Drilling
Area
Non-Operated

 

Legacy
Producing
Assets

 

Total

Oswego

 

437

 

 

314

 

 

0

 

 

751

 

Meramec/Osage

 

265

 

 

228

 

 

0

 

 

493

 

Mississippi Lime

 

0

 

 

0

 

 

778

 

 

778

 

Total Horizontal Locations

 

702

 

 

542

 

 

778

 

 

2,022

 

Average Working Interest

 

82.6

%

 

16.4

%

 

29.7

%

 

44.5

%

Average Net Revenue Interest

 

69.0

%

 

14.1

%

 

24.0

%

 

37.0

%

____________

(1)      “Business and Properties — Our Operations” contains a description of our methodology used to determine our drilling locations.

(2)      The above table includes 1,357 of our total drilling locations that have been evaluated by Cawley, Gillespie & Associates Inc., our independent reserve engineer, along with 665 drilling locations that have not been evaluated by Cawley, Gillespie & Associates Inc. that were based solely on the internal evaluations of the Company’s management. The 665 drilling locations not evaluated by Cawley, Gillespie & Associates Inc. includes 440 non-operated wells in our Focus Drilling Area Non-Operated and 225 non-operated wells in our Legacy Producing Assets. All 702 of the drilling locations listed under the Focus Drilling Area Operated have been evaluated by Cawley, Gillespie & Associates Inc. See “Risk Factors — Risks Related to Our Business — A portion of our estimated drilling locations are based on our management’s internal estimates and were not based on evaluations prepared by Cawley, Gillespie & Associates Inc.”

We have estimated our drilling locations based on well spacing assumptions for the areas in which we operate and upon the evaluation of our horizontal drilling results and those of other operators in our area, combined with our interpretation of available geologic and engineering data. The drilling locations on which we actually drill will depend on the availability of capital, drilling rigs and labor, regulatory approvals, commodity prices, costs, actual drilling results and other factors. Any drilling activities we are able to conduct on these identified locations may not be successful and may not result in our ability to add proved reserves to our existing proved reserves. See “Risk Factors — Risks Related to Our Business — Our 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.”

STACK Area Gas Gathering & Processing (“G&P”) and Water Infrastructure

We own a significant complementary portfolio of midstream assets, including gas gathering and processing assets and water infrastructure assets, that supports the development of our properties in Kingfisher County in Oklahoma. For example, the recently constructed Lincoln gas processing plant that we acquired in 2020 has 260 MMcf/d of processing capacity, which is supported by approximately 460 miles of gas gathering lines with approximately 430 receipt point connections, and 27 compressors totaling 35,880 horsepower. Our processing complex has interconnects to both the Panhandle Eastern Pipeline (“PEPL”) and ONEOK Gas Transmission (“OGT”) system.

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Our STACK water infrastructure consists of approximately 300 miles of owned gathering pipeline, and our water disposal assets consist of 20 disposal wells with approximately 377,000 BWPD permitted capacity.

Other Gas Gathering & Processing and Water Infrastructure

In addition to our STACK midstream assets, we own and/or operate other midstream assets, including gas gathering and processing, water infrastructure and compression assets that provide additional margin enhancement for our upstream business.

Within these other midstream assets, our 56% owned and operated Laredo gas gathering system, located in Roger Mills County, Oklahoma and Hemphill County, Texas, has approximately 166 MMcf/d of gathering capacity, which is supported by approximately 160 miles of pipeline. Our 50% owned and contract operated McLean processing facility, located in Gray County, Texas, has approximately 23 MMcf/d of processing capacity and is supported by our wholly owned McLean gathering assets consisting of approximately 510 miles of pipeline spanning seven counties in western Oklahoma and the Texas Panhandle. Our 50% owned and contract operated Madill processing facility, located in Marshall County, Oklahoma, has approximately 40 MMcf/d of processing capacity and is supported by our wholly owned Madill gathering assets consisting of approximately 180 miles of pipeline spanning Marshall and Bryan Counties, Oklahoma. Our wholly owned and operated Elmore City gas gathering and processing facility, located in Garvin County, Oklahoma has approximately 30 MMcf/d of processing capacity supported by approximately 60 miles of pipeline. Our 50% owned Mississippi Lime water infrastructure, located in Alfalfa, Woods and Grant Counties, Oklahoma, aids in the disposal of produced water generated by our operations

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consisting of approximately 580 miles of pipeline and 35 disposal wells with approximately 300,000 BWPD permitted capacity. Our compression assets consist of a well site compression fleet of approximately 500 units with approximately 89,000 aggregate horsepower.

Development Plan and Capital Budget

Historically, our business plan has focused on acquiring and then exploiting the development and production of our assets. Funding sources for our acquisitions have included proceeds from borrowings under our revolving credit facilities, contributions from our equity partners and cash flow from operating activities. We spent approximately $290.6 million in 2022 on development costs and our budget for 2023 is approximately $316.2 million (of which $207.6 million has been incurred as of June 30, 2023). For purposes of calculating our cash available for distribution, we define development costs as all of our capital expenditures, other than acquisitions. Our development efforts and capital for 2023 is focused on drilling Oswego wells given their high oil reserves and low breakeven costs.

During the year ended December 31, 2022, we spent approximately $270.2 million to drill 87.9 net wells and on related equipment, $9.1 million on remedial workovers and other capital projects, $11.3 million on midstream and other property and equipment capital projects, and $142.9 million on acquisitions. During the six months ended June 30, 2023, we spent approximately $182.0 million to drill 50.4 net wells and on related equipment, $18.4 million on remedial workovers and other capital projects, $7.2 million on midstream and other property and equipment capital projects, and $1.5 million on acquisitions.

Based on current commodity prices and our drilling success rate to date, we expect to be able to fund our 2023 capital development programs from cash flow from operations.

Our development plan and capital budget are based on management’s current expectations and assumptions about future events. While we consider these expectations and assumptions to be reasonable, they are subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The amount and timing of these capital expenditures is largely discretionary and within our control. We could choose to defer a portion of these planned capital expenditures depending on a variety of factors, including, but not limited to, the success of our drilling activities, prevailing and anticipated commodity prices, the availability of necessary equipment, infrastructure, drilling rigs, labor and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions and drilling and completion costs.

Our Business Strategies

Our primary business objective is to maximize cash distributions to our unitholders over time. To achieve our objective, we intend to execute the following business strategies:

        Focus on low decline Legacy Producing Assets with additional meaningful horizontal development inventory.    Our ability to generate significant cash flow is supported by the predictable low decline production profile of our Legacy Producing Assets, which have an average expected annual decline rate of approximately 15%. Based on our reserve report as of June 30, 2023, 57% of our production is attributable to our low decline Legacy Producing Assets. In addition, we believe we have the ability to maintain or modestly grow our average annual production with the development of our horizontal Focus Drilling Area inventory. We have identified over 2,000 horizontal drilling locations within our 936,000 net acre position, of which at a 10% internal rate of return, over 770 are currently economic at $50 per barrel of oil, over 1,100 at $70 per barrel of oil and over 2,000 at $90 per barrel of oil, each assuming a flat natural gas price per Mcf of 1/20th of the assumed oil price.

        Maximize well economics by leveraging midstream infrastructure.    Our midstream infrastructure assets both reduce our overall upstream costs and generate incremental third-party revenue. In our Oswego formation drilling locations, we estimate that, the oil price necessary to yield a 10% rate of return on invested capital would be approximately $45.47 per barrel of oil equivalent without our midstream assets. We estimate that our complementary midstream assets reduce our average breakeven costs for our Oswego formation drilling locations tied to our owned midstream infrastructure by approximately $4.18 per barrel of oil equivalent to approximately $41.29 per barrel. This reduction consists of the average net cost savings attributable to our working interest resulting from the utilization of our owned midstream infrastructure for gas processing and transportation and water disposal, and the

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addition of the incremental third-party midstream revenue attributable to the non-operated portion of the working interest that we do not own. After adding the benefit of our midstream infrastructure, we believe these breakeven costs have comparable economics to the Midland and Delaware Basins.

        Maintain low operating cost structure to support meaningful cash available for distribution.    Our average cash operating costs during the twelve months ended June 30, 2023, including the benefit of our midstream infrastructure assets, were $12.51 per barrel of oil equivalent, which is 16% lower on average than other unconventional focused operators, and 58% lower on average than other conventional focused operators during the same period. We believe that our low cost structure will help enable us to make unitholder cash distributions during a negative commodity cycle.

        Leverage industry expertise to improve operations and pursue opportunistic acquisitions in Oklahoma.    Led by industry veteran Tom L. Ward, our senior management team has built lasting relationships with sellers and operators throughout the Anadarko Basin and has developed a track record of acquiring assets at consistently attractive valuations. We believe we can continue to execute opportunistic and accretive transactions that complement our operations in the Anadarko Basin, utilizing our technical expertise to identify acquisition opportunities where our production and cost optimization strategies will yield the greatest returns.

        Ensure financial flexibility with conservative leverage and ample liquidity.    We intend to conduct our operations through cash flow generated from operations with a focus on maintaining a disciplined balance sheet with little to no outstanding debt. Due to our historically strong operating cash flows and liquidity, we have substantial flexibility to fund our capital budget and to potentially accelerate our drilling program as conditions warrant. Our focus is on the economic extraction of hydrocarbons while maintaining a strong liquidity profile and remaining substantially debt free. Further, to mitigate the risk associated with volatile commodity prices and to further enhance the stability of our cash flow available for distribution, from time to time we may opportunistically hedge a portion of our production volumes at prices we deem attractive.

Our Strengths

We have a number of differentiated strengths that we believe help us successfully execute our business strategy, including:

        Strong production and cash flow across a large acreage position.    Our average net daily production for the twelve months ended June 30, 2023 was approximately 65 MBoe/d, with approximately 4,500 gross operated wells, and an average working interest of approximately 75%. We own extensive acreage in the Anadarko Basin, with approximately 936,000 net acres, approximately 99% of which is held by production. We believe our large acreage position enables us to optimize our development plan and support significant cash flow generation. For the six months ended June 30, 2023 and year ended December 31, 2022, on a pro forma basis, we generated $196 million and $639 million of net income, respectively, $256 million and $714 million of Adjusted EBITDA, respectively, and $43 million and $402 million of cash available for distribution, respectively. See “— Non-GAAP Financial Measures” and “Our Cash Distribution Policy and Restrictions on Distributions — Unaudited Pro Forma Cash Available for Distribution for the Year Ended December 31, 2022 and the Twelve Months Ended June 30, 2023.”

        Attractive portfolio of large and contiguous core acreage blocks supported by company owned midstream infrastructure.    Since our founding, we have accumulated an acreage position consisting of approximately 936,000 net acres, of which 99% is held by production, and over 2,000 identified horizontal drilling locations, of which more than 750 are located in the Oswego formation. This large acreage position provides flexibility to accelerate our drilling program or execute opportunistic developments as conditions warrant. In addition, we own substantial gathering and processing assets, which improves our cost structure and enhances the stability of our hydrocarbon flows. We believe our acreage footprint and midstream systems allows us to monetize our production at favorable realized prices and reduces our operating costs while providing us with additional incremental third party revenue streams.

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        Optimized operations designed to make cash distributions to unitholders.    Our entrepreneurial culture focuses on operational optimization, cost-minimization, and nimble development to ultimately deliver cash distributions to unitholders across commodity cycles. Our asset profile consists of a large, low cost, and low declining PDP asset, complemented by low-cost horizontal development inventory. Our significant operating experience in the Anadarko Basin and economic advantage conferred by our midstream infrastructure significantly reduces lifting costs relative to other operators. For example, for the twelve months ended June 30, 2023, we achieved a cash operating cost of approximately $12.51 per barrel of oil equivalent, inclusive of the benefit received from our midstream assets. Further, in the early stages of the Oswego horizontal development, a mixture of standard completion fluids and proppant were utilized in the stimulation. Since 2021, we have successfully further lowered our well costs to $3.0 million per well in the Oswego by using drilling efficiencies and utilizing acid in lieu of proppant within the stimulation. Due to our low completion costs, low operating costs, and our midstream advantage, we believe the average breakeven price for our Oswego drilling locations is $41.29 price per barrel of oil.

        Experienced management team with established track record of value creation.    We believe our management team’s experience in the Anadarko Basin offers a distinguishing advantage. The members of management have an average of 32 years of experience in the oil and gas industry and have successfully executed on a strategy of acquiring and exploiting long-lived and low decline assets. Additionally, our Chief Executive Officer, Tom L. Ward, has over a 40-year history in the oil and gas industry. Further, through our team’s history of operating in Oklahoma, we have built lasting relationships with sellers and developed a track record of successfully acquiring and integrating assets at attractive valuations. From January 2018 to August 2023, we have successfully executed 16 acquisitions for an aggregate purchase price of approximately $960 million, increasing our net acreage to 936,000, and our average net daily production to approximately 65 MBoe/d for the twelve months ended June 30, 2023. Additionally, during the same period, we distributed approximately $630 million in cash to our members. We believe our management team has the experience, expertise and commitment to create significant value in the form of cash distributions to our unitholders.

        Conservatively capitalized balance sheet and strong liquidity profile.    Since our founding, we have practiced financial conservatism and maintained a strong balance sheet with low leverage. Due to our significant existing low-decline production base, our business generates significant operating cash flow. Upon consummation of this offering, we expect to have little debt and substantial liquidity, which will provide us further financial flexibility to fund our capital expenditures and execute our strategic plan.

Risk Factor Summary

An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units, among other things. You should carefully consider the risks described in “Risk Factors” and the other information in this prospectus before investing in our common units. Some of the most significant challenges and risks we face include the following:

Risks Related to Cash Distributions

        We 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.

        The 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

        Oil, 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.

        Currently, our producing properties are concentrated in the Anadarko Basin, making us vulnerable to risks associated with operating in a limited number of geographic areas.

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        Drilling 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.

        Our 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.

        The development of our estimated proved and probable undeveloped reserves may take longer and may require higher levels of capital expenditures than we currently anticipate. Therefore, our estimated proved and probable undeveloped reserves may not be ultimately developed or produced.

        The 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.

        Reserve 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.

        We depend on Mach Resources LLC (“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.

        The 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.

        Restrictions in our existing and future debt agreements could limit our growth and our ability to engage in certain activities.

        Events outside of our control, including widespread public health crises, epidemics and outbreaks of infectious diseases such as COVID-19, or the threat thereof, and any related threats of recession and other economic repercussions could have a material adverse effect on our business, liquidity, financial condition, results of operations, cash flows and ability to pay distributions on our common units.

        Our business is subject to climate-related transition risks, including evolving climate change legislation, fuel conversation measures, technological advances and negative shift in market perception towards the oil and natural gas industry, which could result in increased operating expenses and capital costs, financial risks and reduction in demand for oil and natural gas.

        Increased scrutiny of environmental, social, and governance (“ESG”) matters could have an adverse effect on our business, financial condition and results of operations and damage our reputation.

Risks Inherent in an Investment in Us

        Our general partner and its affiliates own a controlling interest in us and will 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.

        Our partnership agreement does not restrict the Sponsor (as defined below) from competing with us. Certain of our directors and officers may in the future spend significant time serving, and may have significant duties with, investment partnerships or other private 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.

        Our 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.

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        Our unitholders have limited voting rights and are not entitled to elect our general partner or its board of directors, which could reduce the price at which our common units will trade.

        Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price.

        Even if our unitholders are dissatisfied, they cannot remove our general partner without its consent.

        We may issue an unlimited number of additional units, including units that are senior to the common units, without unitholder approval.

Tax Risks to Common Unitholders

        Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service were to treat us as a corporation for U.S. federal income tax purposes or if we were otherwise subject to a material amount of entity-level taxation, then cash available for distribution to our unitholders could be reduced.

        Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.

Reorganization Transactions, Partnership Structure and Expected Refinancing Transactions

Each of the following transactions (collectively, the “Reorganization Transactions”) have occurred or will occur immediately prior to the closing of this offering:

        BCE through its affiliate holding companies will contribute 100% of its membership interests in BCE-Mach, BCE-Mach II, and BCE-Mach III (collectively, the “Mach Companies”) not already owned by BCE-Mach Aggregator LLC (“BCE-Mach Aggregator”) to BCE-Mach Aggregator in exchange for additional membership interests in BCE-Mach Aggregator;

        Each of BCE-Mach Aggregator, the Management Members and Mach Resources will contribute 100% of their respective membership interests in the Mach Companies to the Company in exchange for a pro rata allocation of 100% of the limited partner interests in the Company;

        The Company will contribute 100% of its membership interests in the Mach Companies to Mach Natural Resources Intermediate LLC (“Intermediate”) in exchange for 100% of the membership interests in Intermediate; and

        Intermediate will contribute 100% of its membership interests in the Mach Companies to Mach Natural Resources Holdco LLC (“Holdco”) in exchange for 100% of the membership interests in Holdco.

Except where specified otherwise, the disclosure in this prospectus gives effect to the Reorganization Transactions.

Expected Refinancing Transaction

As of September 1, 2023, we had (i) $17.1 million of outstanding borrowings under the BCE-Mach II credit facility, (ii) $65.0 million of outstanding borrowings and $5 million in outstanding letters of credit under the BCE-Mach credit facility and (iii) $91.9 million of outstanding borrowings under the BCE-Mach III credit facility. We intend to use a portion of the net proceeds of this offering to repay in full and terminate the BCE-Mach II credit facility and repay in full and terminate the BCE-Mach credit facility, with any remaining net proceeds used to repay a portion of the BCE-Mach III credit facility and to purchase common units from the existing common unit owners as described herein. Please see “Use of Proceeds” for additional information.

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We are currently negotiating a new credit facility (the “New Credit Facility”) with prospective lenders that we anticipate entering into after the completion of this offering. The amount, maturity, interest rates and other terms of the New Credit Facility are under negotiations with prospective lenders; however, we expect the aggregate commitments thereunder will be in the range of $150 million to $200 million, that the New Credit Facility will be secured by substantially all of our assets and the covenants in the New Credit Facility will be on substantially the same terms as the BCE-Mach III credit facility. For a description of the covenants under the BCE-Mach III credit facility, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 — Debt Agreements — Existing Credit Facilities.” Borrowings under the New Credit Facility may vary significantly from time to time depending on our cash needs at any given time. Once we have entered into the New Credit Facility, we expect to use borrowings under the New Credit Facility to repay in full and terminate the BCE-Mach III credit facility.

We have not yet obtained binding commitments for the New Credit Facility. If we are unable to obtain binding commitments for the New Credit Facility on acceptable terms or at all, the BCE-Mach III credit facility, and potentially the BCE-Mach credit facility depending on the net proceeds of this offering, will remain outstanding after this offering. We cannot assure you that after this offering we will obtain binding commitments for the New Credit Facility sufficient to refinance in full and terminate the BCE-Mach III credit facility. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt agreements”, “Risk Factors” and “Use of Proceeds.”

Ownership and Organizational Structure of Mach Natural Resources

The diagram below depicts our organization and ownership before giving effect to the offering and the Reorganization Transactions.

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(1)      Collectively refers to our current officers and employees who own direct and indirect equity interests in the Mach Companies.

(2)      Investment funds managed by Bayou City Energy Management, LLC own their interests in BCE-Mach LLC, BCE-Mach II LLC and BCE-Mach III LLC through certain holding companies in which investment funds managed by Bayou City Energy Management, LLC hold a majority interest.

(3)      Mach Resources is owned 50.5% by Tom L. Ward through the Tom L Ward 1992 Revocable Trust and 49.5% by WCT Resources LLC which is owned by certain trusts owned by certain of Tom L. Ward’s family members. We will contract with Mach Resources for our employees and other services. See “Certain Relationships and Related Party Transactions.”

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The diagram below depicts our organization and ownership after giving effect to the offering and the Reorganization Transactions and assumes that the underwriters do not exercise their option to purchase additional common units.

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(1)      Mach Resources is owned 50.5% by Tom L. Ward through the Tom L Ward 1992 Revocable Trust and 49.5% by WCT Resources LLC which is owned by certain trusts owned by certain of Tom L. Ward’s family members. We will contract with Mach Resources for our employees and other services. See “Certain Relationships and Related Party Transactions” and “Risk Factors — Risks Related to Our Business — We 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.”

(2)      Collectively refers to our current officers and employees who own direct and indirect equity interests in the Mach Companies.

(3)      Investment funds managed by BCE will own their interests in Mach Natural Resources LP through BCE-Mach Aggregator LLC, a holding company in which investment funds managed by Bayou City Energy Management, LLC hold a majority interest.

(4)      BCE-Mach Aggregator LLC and Mach Resources collectively wholly own Mach Natural Resources GP LLC, our general partner.

Management of Mach Natural Resources

We are managed and operated by the board of directors (the “Board”) and executive officers of our general partner, Mach Natural Resources GP LLC. Our unitholders will not be entitled to elect our general partner or its directors or otherwise participate in our management or operations. For information about the executive officers and directors of our general partner, please read “Management.”

The members of our general partner are (i) BCE-Mach Aggregator, the majority of the membership interests of which are owned by investment funds managed by Bayou City Energy Management, LLC and its affiliates, which we refer to collectively as the Sponsor, and (ii) Mach Resources, which is controlled by Tom L. Ward, with such membership interests and Board appointment rights of such members held in proportion to their respective limited partnership interest ownership in us. As a result, the Sponsor will control our general partner and will be entitled to appoint four members of the Board initially and Mach Resources shall be entitled to appoint one member of the Board initially, who shall be Tom L. Ward.

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Our operations are conducted through, and our assets are currently owned by, various subsidiaries. Although all of the employees that conduct our business are either employed by Mach Resources or its subsidiaries, we sometimes refer to these individuals in this prospectus as our employees.

Our Sponsor

Our Sponsor was founded in 2015 by Will McMullen and is a leading upstream-focused private equity firm with $2.2 billion in assets under management. BCE targets control-oriented investments in free-cash-flow focused assets in partnership with best-in-class management teams. BCE has invested approximately $1.0 billion in the Mid-Continent region, and has an investment team with diverse experience across the sector. We believe our relationship with our sponsor gives us access to a highly accomplished and aligned investment partner.

Implications of Being an Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as we are an emerging growth company, unlike other public companies that are not emerging growth companies under the JOBS Act, we are not required to:

        provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;

        provide more than two years of audited financial statements and related management’s discussion and analysis of financial condition and results of operations nor more than two years of selected financial data in a registration statement on Form S-1;

        comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; or

        provide certain disclosure regarding executive compensation required of larger public companies required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

We will cease to be an emerging growth company upon the earliest of:

        the last day of the fiscal year in which we have $1.235 billion or more in annual revenues (as such amount may be adjusted by the SEC for inflation);

        the date on which we become a “large accelerated filer” (the fiscal year-end on which the total market value of our common equity securities held by non-affiliates is $700 million or more as of June 30 of such year);

        the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period; or

        the last day of the fiscal year following the fifth anniversary of our initial public offering.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. We have elected to avail ourselves of the provision of the JOBS Act that permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. We intend to take advantage of the other exemptions discussed above, both in this prospectus and in future filings with the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, the information contained herein and that we provide to our unitholders from time to time may be different than the information you receive from other public companies. For additional information, see the section titled “Risk Factors — Risks Inherent in an Investment in Us — For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements that apply to other public companies, including those relating to auditing standards and disclosure about our executive compensation. Taking advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards applicable to emerging growth companies may make our common units less attractive to investors.”

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Principal Executive Offices and Internet Address

Our principal executive offices are located at 14201 Wireless Way, Suite 300, Oklahoma City, Oklahoma 73134 and our telephone number at that address is (405) 252-8100. Our website address is www.machresources.com. We expect to make our periodic reports and other information filed with or furnished to the SEC available free of charge through our website as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on, or otherwise accessible through, our website or any other website is not incorporated by reference into, and does not constitute a part of, this prospectus.

Summary of Conflicts of Interest and Duties

Under our partnership agreement, our general partner has a duty to manage us in a manner it believes is not adverse to our best interests. However, because our general partner is owned by BCE-Mach Aggregator and Tom L. Ward through his ownership of Mach Resources, the officers and directors of our general partner also have a duty to manage the business of our general partner at the direction of BCE-Mach Aggregator and Tom L. Ward through his ownership of Mach Resources. As a result of this relationship, conflicts of interest may arise in the future between us and our unitholders, on the one hand, and our general partner and its affiliates, including the Sponsor and Tom L. Ward in his capacity as a member of our general partner through his ownership of Mach Resources, on the other hand; provided, however, that upon our adoption of our code of business conduct, we would expect that any such member of our management, so long as they are an executive officer, will be required to avoid personal conflicts of interest and not compete against us, in each case unless approved by the Board. For example, our general partner is entitled to make determinations that affect our ability to generate the cash flow necessary to make cash distributions to our unitholders, including determinations related to:

        purchases and sales of oil and natural gas properties and other acquisitions and dispositions, including whether to pursue acquisitions that may also be suitable for the Sponsor or any affiliate of the Sponsor;

        the manner in which our business is operated;

        the level of our borrowings;

        the amount, nature and timing of our capital expenditures; and

        the amount of cash reserves necessary or appropriate to satisfy our general, administrative and other expenses and debt service requirements and to otherwise provide for the proper conduct of our business.

For a more detailed description of the conflicts of interest and duties of our general partner, please read “Risk Factors — Risks Inherent in an Investment in Us” and “Conflicts of Interest and Duties.”

Our partnership agreement can generally be amended with the consent of our general partner and the approval of the holders of a majority of our outstanding common units (including any common units held by our general partner and its affiliates). Upon consummation of this offering and the application of the use of proceeds as described under “Use of Proceeds,” our general partner will continue to be controlled by the Sponsor and Tom L. Ward through his ownership of Mach Resources, who will own and control the voting of an aggregate of approximately             % and             %, respectively, of our outstanding common units (or             % and             %, respectively, of our outstanding common units if the underwriters exercise in full their option to purchase additional common units). Assuming that we do not issue any additional common units and the Sponsor and Tom L. Ward through his ownership of Mach Resources do not transfer their respective common units, the Sponsor and Tom L. Ward will have the ability to control any amendment to our partnership agreement, including our policy to distribute all of our available cash to our unitholders. Please see “Risk Factors — Risks Inherent in an Investment in Us” and “The Partnership Agreement — Amendment of the Partnership Agreement.”

Delaware law provides that Delaware limited partnerships may, in their partnership agreements, expand, restrict or eliminate the fiduciary duties owed by the general partner to limited partners and the partnership. Our partnership agreement contains various provisions replacing the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing the duties of our general partner and contractual methods of resolving conflicts of interest. The effect of these provisions is to restrict the duties owed and remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of its fiduciary duties. Our partnership agreement also provides that affiliates of our general partner, including the Sponsor and

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its affiliates, are not restricted from competing with us, and neither our general partner nor its affiliates have any obligation to present business opportunities to us. By purchasing a common unit, the purchaser agrees to be bound by the terms of our partnership agreement, and pursuant to the terms of our partnership agreement, each holder of common units consents to various actions and potential conflicts of interest contemplated in our partnership agreement that might otherwise be considered a breach of fiduciary or other duties under Delaware law. Please read “Conflicts of Interest and Duties — Duties of Our General Partner” for a description of the duties imposed on our general partner by Delaware law, the replacement of those duties with contractual standards under our partnership agreement and certain legal rights and remedies available to holders of our common units.

In connection with this offering, the Company will enter into a management services agreement (“MSA”) with Mach Resources. Under the MSA, Mach Resources will manage and perform all aspects of oil and gas operations and other general and administrative functions for the Company. On a monthly basis, the Company will reimburse Mach Resources for certain costs and expenses related to its performance under the MSA. For a description of our other relationships with our affiliates, please read “Certain Relationships and Related Party Transactions.”

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The Offering

Common units offered by us

 

            common units representing limited partner interests (            common units if the underwriters exercise in full their option to purchase additional common units).

Units outstanding after this offering

 

            common units representing limited partner interests in us (            common units if the underwriters exercise their option in full to purchase additional common units).

Use of proceeds

 

We expect the net proceeds from the offering to be approximately $            million ($            million if the underwriters exercise their option to purchase additional units in full), based upon the assumed initial public offering price of $            per common unit (the mid-point of the price range set forth on the cover of this prospectus), after deducting underwriting discounts and estimated expenses. We expect to use approximately $            million of the proceeds from this offering as follows: to (i) repay in full and terminate the BCE-Mach II credit facility under which approximately $17.1 million was outstanding as of September 1, 2023 and (ii) repay in full and terminate the BCE-Mach credit facility under which approximately $65.0 million was outstanding as of September 1, 2023. Following the application of such proceeds, we expect to use the remainder to (i) repay a portion of the BCE Mach III credit facility under which $91.9 million was outstanding as of September 1, 2023 and (ii) purchase common units from the existing common unit owners on a pro rata basis for $            million (the “Exchanging Members”) (at a purchase price per unit based on the initial public offering price, net of underwriting discounts and commissions), with any remainder for general partnership purposes. To the extent the number of units in the offering is increased or decreased, the number of units purchased from the Exchanging Members will increase or decrease in the same proportion as the total number of units in the offering is increased or decreased. We are currently negotiating the New Credit Facility with prospective lenders and if we enter into the New Credit Facility after the closing of the offering, we would use borrowings under the New Credit Facility to repay in full and terminate the BCE-Mach III credit facility. See “Reorganization Transactions, Partnership Structure and Expected Refinancing Transactions — Expected Refinancing Transactions” for additional information.

If the underwriters exercise their option to purchase additional common units in full, the additional net proceeds would be approximately $            million. The net proceeds from any exercise of such option will be used to purchase            common units from the Exchanging Members (at a purchase price per unit based on the initial public offering price, net of underwriting discounts and commissions). See “Use of Proceeds.”

Cash distributions

 

Within 60 days after the end of each quarter (other than the fourth quarter) and within 90 days after the end of the fourth quarter, beginning with the quarter ending            , 2023, we expect to pay distributions of our available cash to unitholders of record on the applicable record date.

The Board will adopt a policy pursuant to which distributions for each quarter will be paid to the extent we have sufficient cash after establishment of cash reserves and payment of expenses, development costs and fees, including payments to our general partner and its

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affiliates. Our ability to pay such cash distributions is subject to various restrictions and other factors described in more detail under the caption “Our Cash Distribution Policy and Restrictions on Distributions.” We will prorate the amount of our distribution payable for the period from the closing of this offering through            , 2023, based on the actual length of that period.

   

Our partnership agreement generally provides that we will distribute all available cash each quarter to the holders of common units, pro rata.

   

Pro forma cash available for distribution generated during the year ended December 31, 2022 and twelve months ended June 30, 2023 was approximately $402.0 million and $220.6 million, respectively. As a result, for the year ended December 31, 2022 and twelve months ended June 30, 2023, we would have generated available cash sufficient to pay a cash distribution of $             and $            per unit per quarter, respectively ($             and $            on an annualized basis, respectively). For a calculation of our ability to pay distributions to our unitholders based on our pro forma results for the year ended December 31, 2022 and twelve months ended June 30, 2023, please read “Our Cash Distribution Policy and Restrictions on Distributions — Unaudited Pro Forma Cash Available for the Year Ended December 31, 2022 and Twelve Months Ended June 30, 2023.”

We believe, based on our financial forecast and the related assumptions included under “Our Cash Distribution Policy and Restrictions on Distributions — Estimated Cash Available for Distribution for the Twelve Months Ending June 30, 2024,” that we will have sufficient cash available for distribution to make cash distributions of $            per unit on all common units (on an annualized basis) for the four quarters ending June 30, 2024. We will not have a minimum quarterly distribution nor is there any guarantee that we will make any particular amount of distributions or any distributions to our unitholders in any quarter. Please read “Our Cash Distribution Policy and Restrictions on Distributions.”

Issuance of additional units

 

We can issue an unlimited number of additional units, including units that are senior to the common units in right of distributions, liquidation and voting, on terms and conditions determined by our general partner, without the approval of our unitholders. Please read “Units Eligible for Future Sale” and “The Partnership Agreement — Issuance of Additional Partnership Interests.”

Limited voting rights

 

Our general partner will manage us and operate our business. Unlike stockholders of a corporation, our unitholders will have only limited voting rights on matters affecting our business. Our unitholders will have no right to elect our general partner or its board of directors on an annual or other continuing basis. Our general partner may not be removed except by a vote of the holders of at least 66⅔% of the outstanding units, including any units owned by our general partner and its affiliates, voting together as a single class. Upon consummation of this offering and the application of the use of proceeds as described under “Use of Proceeds,” affiliates of our general partner (including the Sponsor and Tom L. Ward through his ownership of Mach Resources) will own an aggregate of approximately            % of our common units (or              % of our common units if the underwriters exercise in full their option to purchase additional common units) and, therefore, will be able to prevent the removal of our general partner. Please read “The Partnership Agreement — Limited Voting Rights.”

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Limited call right

 

If at any time our general partner and its affiliates own more than             % of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a purchase price not less than the then-current market price of the common units, as calculated pursuant to the terms of our partnership agreement. Upon consummation of this offering, affiliates of our general partner (including the Sponsor and Tom L. Ward through his ownership of Mach Resources) will own an aggregate of approximately            % of our common units (or              % of our common units if the underwriters exercise in full their option to purchase additional common units). Please read “The Partnership Agreement — Limited Call Right.”

Election to be treated as a corporation

 

If at any time our general partner determines that (i) we should no longer be characterized as a partnership but instead as an entity taxed as a corporation for U.S. federal income tax purposes or (ii) common units held by some or all unitholders should be converted into or exchanged for interests in a newly formed entity taxed as a corporation for U.S. federal income tax purposes whose sole asset is interests in us (a “parent corporation”), then our general partner may, without unitholder approval, reorganize us and cause us to be treated as an entity taxable as a corporation for U.S. federal income tax purposes or cause common units held by some or all unitholders to be converted into or exchanged for interests in the parent corporation. The general partner may take any of the foregoing actions if it in good faith determines (meaning it subjectively believes) that such action is not adverse to our best interests. Please read “Risk Factors — Risks Inherent in an Investment in Us — Our 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” and “The Partnership Agreement — Election to be treated as a Corporation.”

Eligible Holders and redemption

 

Our 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.

We have the right (which we may assign to any of our affiliates), but not the obligation, to redeem all of the common units of any holder that is not an eligible holder pursuant to our partnership agreement or that has failed to certify or has falsely certified that such holder is an eligible holder. The purchase price for such redemption would be equal to the then-current market price of the common units. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner. Please read “Description of the Common Units — Transfer Agent and Registrar — Transfer of Common Units” and “The Partnership Agreement — Non-Citizen Unitholders; Redemption.”

Estimated ratio of taxable income to distributions

 


We estimate that if our unitholders own the common units purchased in this offering through the record date for distributions for the period ending December 31, 2025, such unitholders will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be less than             % of the cash distributed to such unitholders with respect to that period. Please read “Material U.S. Federal Income Tax Consequences — Tax Consequences of Unit Ownership — Ratio of Taxable Income to Distributions” for the basis of this estimate.

Material tax consequences

 

For a discussion of other material U.S. federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read “Material U.S. Federal Income Tax Consequences.”

Listing and trading symbol

 

We intend to apply to list our common units on the NYSE under the symbol “MNR.”

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Summary Historical and Pro Forma Financial and Operating Data

Unless otherwise indicated, the historical financial information presented in this prospectus is that of our predecessor. The historical financial information of BCE-Mach LLC and BCE-Mach II LLC is also included herein as indicated.

The summary historical financial data set forth below as of and for each of the years ended December 31, 2022 and 2021 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary historical financial data set forth below as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 have been derived from our unaudited financial statements and related notes included elsewhere in this prospectus.

The summary unaudited pro forma financial data as of June 30, 2023 and for the six months ended June 30, 2023 and year ended December 31, 2022 are derived from the unaudited pro forma condensed combined financial statements of Mach Natural Resources included elsewhere in this prospectus, which reflect the historical results of our predecessor, BCE-Mach LLC and BCE-Mach II LLC on a pro forma basis to give effect to the following transactions, which are described in further detail below, as if they had occurred on June 30, 2023, for pro forma balance sheet purposes, and on January 1, 2022, for pro forma statements of operations purposes:

        the Reorganization Transactions as described in “— Reorganization Transactions, Partnership Structure and Expected Refinancing Transactions” elsewhere in this prospectus summary; and

        the issuance and sale by us to the public of common units in this offering and the application of the net proceeds as described in “Use of Proceeds.”

We have not given pro forma effect to the incremental general and administrative expenses that we expect to incur annually as a result of being a publicly traded partnership.

The unaudited pro forma historical financial data are presented for illustrative purposes only and are not necessarily indicative of the financial position that would have existed or the financial results that would have occurred if this offering and the Reorganization Transactions had occurred on the dates indicated, nor are they necessarily indicative of the financial position or results of our operations in the future. The pro forma adjustments, as described in the notes to the unaudited pro forma condensed combined financial statements, are preliminary and based upon currently available information and certain assumptions that our management believes are reasonable. The summary historical financial data are qualified in their entirety by, and should be read in conjunction with, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in this prospectus and the consolidated financial statements and related notes and other financial information included in this prospectus. Among other things, those historical financial statements and unaudited pro forma condensed combined financial statements include more detailed information regarding the basis of presentation for the following information. Historical results are not necessarily indicative of results that may be expected for any future period.

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The following table presents non-GAAP financial measures, Adjusted EBITDA and cash available for distribution, which we use in evaluating the financial performance of our business. These measures are not calculated or presented in accordance with generally accepted accounting principles, or GAAP. We explain these measures below and reconcile them to the most directly comparable financial measures calculated and presented in accordance with GAAP.

 


Predecessor Historical

 

Mach Natural Resources
Pro Forma

Six Months
Ended
June 30,

 

Year Ended
December 31
,

 

Six Months
Ended
June 30,
2023

 

Year Ended
December 31,
2022

(in thousands, except per unit amounts)

 

2023

 

2022

 

2022

 

2021

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil, natural gas and NGL sales

 

$

312,613

 

 

$

408,442

 

 

$

860,388

 

 

$

397,500

 

 

$

399,686

 

 

$

1,165,420

 

Midstream revenue

 

 

13,318

 

 

 

19,883

 

 

 

44,373

 

 

 

31,883

 

 

 

13,531

 

 

 

44,832

 

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

 

 

15,742

 

 

 

(72,857

)

 

 

(67,453

)

 

 

(67,549

)

 

 

22,618

 

 

 

(113,322

)

Product sales

 

 

17,421

 

 

 

47,960

 

 

 

100,106

 

 

 

30,663

 

 

 

17,421

 

 

 

100,106

 

Total operating revenue

 

 

359,094

 

 

 

403,428

 

 

 

937,414

 

 

 

392,497

 

 

 

453,256

 

 

 

1,197,036

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gathering and processing expense

 

 

17,510

 

 

 

20,812

 

 

 

47,484

 

 

 

27,987

 

 

 

33,430

 

 

 

87,887

 

Lease operating expense

 

 

60,615

 

 

 

39,592

 

 

 

95,941

 

 

 

45,391

 

 

 

87,439

 

 

 

145,267

 

Midstream operating expense

 

 

5,538

 

 

 

6,976

 

 

 

15,157

 

 

 

12,248

 

 

 

5,761

 

 

 

15,618

 

Cost of product sales

 

 

15,575

 

 

 

44,958

 

 

 

94,580

 

 

 

28,687

 

 

 

15,575

 

 

 

94,580

 

Production taxes

 

 

15,526

 

 

 

22,675

 

 

 

47,825

 

 

 

21,165

 

 

 

20,003

 

 

 

65,194

 

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

 

 

58,095

 

 

 

29,374

 

 

 

84,070

 

 

 

37,537

 

 

 

72,117

 

 

 

119,359

 

Depreciation and amortization expense – other

 

 

2,793

 

 

 

2,008

 

 

 

4,519

 

 

 

3,148

 

 

 

3,171

 

 

 

5,445

 

General and administrative
expense

 

 

9,905

 

 

 

13,648

 

 

 

25,454

 

 

 

60,927

 

 

 

11,750

 

 

 

19,278

 

Total operating expenses

 

 

185,557

 

 

 

180,043

 

 

 

415,030

 

 

 

237,090

 

 

 

249,246

 

 

 

552,628

 

Income from operations

 

 

173,537

 

 

 

223,385

 

 

 

522,384

 

 

 

155,407

 

 

 

204,010

 

 

 

644,408

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(3,789

)

 

 

(1,876

)

 

 

(4,852

)

 

 

(1,656

)

 

 

(3,117

)

 

 

(4,241

)

Other income (expense), net

 

 

(245

)

 

 

1,121

 

 

 

(691

)

 

 

1,023

 

 

 

(4,966

)

 

 

(1,083

)

Loss on contingent consideration

 

 

 

 

 

 

 

 

 

 

 

(16,400

)

 

 

 

 

 

 

Total other income (expenses)

 

 

(4,034

)

 

 

(755

)

 

 

(5,543

)

 

 

(17,033

)

 

 

(8,083

)

 

 

(5,324

)

Net income

 

$

169,503

 

 

$

222,630

 

 

$

516,841

 

 

$

138,374