United States securities and exchange commission logo
July 25, 2023
Tom L. Ward
Chief Executive Officer
Mach Natural Resources LP
14201 Wireless Way, Suite 300
Oklahoma City, Oklahoma 73134
Re: Mach Natural
Resources LP
Draft Registration
Statement on Form S-1
Submitted June 28,
2023
CIK No. 0001980088
Dear Tom L. Ward:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Our Properties, page 2
1. Please expand your
disclosure to clarify what percentage of your leases are supported by
your midstream
infrastructure. In that regard, we note you state that one of your strengths
is that your midstream
infrastructure significantly reduces lifting costs relative to other
operators.
Tom L. Ward
FirstName LastNameTom L. Ward
Mach Natural Resources LP
Comapany
July NameMach Natural Resources LP
25, 2023
July 25,
Page 2 2023 Page 2
FirstName LastName
Our Business Strategies, page 7
2. We note you disclose that your average cash operating costs during the
year ended
December 31, 2022, including the benefit of your midstream
infrastructure assets, were
$10.90 per barrel of oil equivalent, which is 27% lower on average
than other
unconventional focused operators, and 64% lower on average than other
conventional
focused operators during the same period. Please provide the basis for
this statement and
discuss whether such information is specific to comparable operations
in the area in which
your assets are located.
Risk Factor Summary, page 9
3. Please expand your disclosure to highlight the risk that your general
partner has a limited
call right that may require investors to sell their common units at an
undesirable time or
price and that even if your unitholders are dissatisfied, they cannot
remove your general
partner without its consent.
Reconciliations of Adjusted EBITDA and Cash Available for Distribution to GAAP
Financial
Measures, page 22
4. The table on page 22 presently shows reconciliations between net
income, Adjusted
EBITDA, and cash available for distribution; and would therefore
appear to require
disaggregation into separate reconciliations, each starting with the
most directly
comparable GAAP measure, to comply with Item 10(e). In this regard,
you state on page
21 that the GAAP measures most directly comparable to cash available
for distribution are
net income and net cash provided by operating activities. Revise your
disclosure to
separately reconcile net income to cash available for distribution.
Risk Factors
Declining general economic, business or industry conditions and inflation may
have a material
adverse effect on our results of operations..., page 41
5. We note you disclose that you expect to experience supply chain
constraints and
inflationary pressure on your cost structure and that these pressures
will likely continue to
adversely impact your operating costs. Please update this risk factor
in future filings if
recent inflationary pressures have materially impacted your operations
and identify the
types of inflationary pressures you are facing and how your business
has been affected.
Our Cash Distribution Policy and Restrictions on Distribution, page 68
6. You disclose that your cash distribution policy is subject to various
restrictions on
distributions, including the financial tests and covenants that you
must satisfy under the
New Credit Facility. Please expand your disclosure to discuss these
financial tests and
covenants and if these expected covenants would have impacted the cash
distributions on
a pro forma basis for the last completed fiscal year and last twelve
months, or may
Tom L. Ward
Mach Natural Resources LP
July 25, 2023
Page 3
threaten to impact the forecasted period.
Business and Properties
Proved Undeveloped Reserves (PUDs), page 116
7. The explanation accompanying the reconciliation of the changes that
occurred in proved
undeveloped reserves presented on page 116 indicates the overall
change due to revisions
of previous estimates (+37,468 MBoe) results from the change due to
higher commodity
prices (+1,446 MBoe) and various other changes including changes in
the development
plan, quantity estimates and forecast revisions (+36,022 MBoe).
Please expand your explanation of the changes associated with the
development plan,
quantity estimates and forecast revisions to separately identify and
quantify each
contributing factor, including offsetting factors, so the change is
fully reconciled. Refer to
the disclosure requirements in Item 1203(b) of Regulation S-K. This
comment also applies
to the explanation of the changes in total proved reserves that
occurred due to revisions
and for each period presented on pages F-5 to F-6, F-32, F-56 and
F-80,
respectively. Refer to the disclosure requirements in FASB ASC
932-235-50-5.
Developed and Undeveloped Acreage
Undeveloped Acreage Expirations, page 120
8. We note your disclosure of near-term undeveloped acreage expirations.
Please expand
your disclosure to clarify if any proved undeveloped reserves have
been assigned to
locations on this acreage which are scheduled to be drilled after
lease expiration. If there
are material quantities of net proved undeveloped reserves related to
such locations,
expand your disclosure to explain the steps necessary to extend
acreage expiration dates.
Refer to Rule 4-10(a)(26) of Regulation S-X.
Drilling Results, page 120
9. Please expand your disclosure to identify any present activities,
including wells in the
process of being drilled, completed or waiting on completion and other
operations or
related activities of material importance. Refer to the disclosure
requirements in Item 1206
of Regulation S-K.
10. We note the presentation of your drilling results appears to be limited
to the operated
wells drilled during the year ended December 31, 2022. Please expand
your disclosure to
FirstName LastNameTom L. Ward
include the information required in Item 1205 of Regulation S-K relating
to the drilling
Comapany NameMach
activities NaturalinResources
that occurred each of theLPlast three fiscal years,
including wells, if any, drilled
July 25,by2023
operators
Page 3other than you.
FirstName LastName
Tom L. Ward
FirstName LastNameTom L. Ward
Mach Natural Resources LP
Comapany
July NameMach Natural Resources LP
25, 2023
July 25,
Page 4 2023 Page 4
FirstName LastName
Executive Compensation and Other Information
Equity Incentives, page 139
11. We note you disclose that your Named Executive Officers received
one-time awards of
Mach Company Class B Units and that in connection with the completion
of this offering,
any unvested Mach Company Class B Units held by the Named Executive
Officers are
expected to fully vest immediately prior to the consummation of the
offering. We also
note you disclose on page F-29 that the Class B Units allow the holder
to participate in
distributions once the company's Class A shares have met a certain
requisite financial
internal rate of return in accordance with the LLC agreement. Please
revise to clarify the
material terms of the Class B Units, the significance of vesting and
who will be
responsible for any distributions made in connection with the Class B
Units or tell us why
you do not believe such information is material. In addition, file as
exhibits the
agreements governing the terms of the incentive units held by
management. Refer to Item
601(b)(iii)(A) of Regulation S-K.
Certain Relationships and Related Party Transactions
Agreements with Affiliates in Connection with the Reorganization Transactions,
page 146
12. Please revise to provide all of the disclosure required by Item 404 of
Regulation S-K and
describe all material terms of the Contribution Agreement and
Management Services
Agreement.
Appendix B
Glossary of Oil and Gas Terms and Other Terms, page B-1
13. We note the definition for an exploratory well excludes the second
sentence of the SEC
definition. Please expand the definition to include the remaining
sentence. Also, expand
your glossary to include the definition for an extension well. Refer
to the definitions in
Rule 4-10(a)(13) and (a)(14) of Regulation S-X.
Pro Forma Financial Statements, page F-2
14. We note you disclosed on page F-2 that although all entities to be
contributed in the
Reorganization Transactions have a high degree of common ownership, no
individual
controls any of the entities, therefore the transactions will not be
accounted for as common
control transactions. You identified BCE- Mach III LLC as the
Predecessor and disclosed
that the acquisitions of BCE-Mach LLC and BCE-Mach II LLC by BCE-Mach
III LLC
will be accounted for at fair values in accordance with the business
combination guidance
in ASC 805. Please address the following:
Tell us how you determined that BCE-Mach III was the Predecessor for
accounting and
reporting purposes.
Tom L. Ward
Mach Natural Resources LP
July 25, 2023
Page 5
Provide to us your accounting analysis that supports your conclusion
that none of the
contributed entities are under common control, including a detailed
organizational
diagram depicting the ownership structure and related ownership
percentages of the
contributed entities both before and after the Reorganization
Transactions and the
offering. Please refer to ASC 805-50 for guidance including the
examples in ASC 805-
50-15-6.
If your analysis responding to the above comment still concludes no
common control,
then tell us how you have considered the guidance in ASC 805-50-05-7
and ASC 805-50-
30-7 pertaining to the formation of a master limited partnership in
concluding that a new
basis of accounting was appropriate for BCE-Mach and BCE-Mach II.
15. On page 146 you disclose that in connection with this offering, the
Company will enter
into a management services agreement ( MSA ) with Mach Resources.
Tell us whether
there are significant differences in the fee or cost structure of the
new MSA compared to
the existing MSAs for which pro forma adjustments, including
explanations for any
assumptions involved, would be required pursuant to Rules 11-01(a)(8)
and 11-02(a)(8) of
Regulation S-X.
Mach Natural Resources LP
Notes to Pro Forma Financial Statements
3. Supplementary Disclosure for Oil and Gas Producing Activities, page F-5
16. We note the reconciliation of the changes in the pro forma
standardized measure presented
on page F-7 appears to contain inconsistencies in the Pro Forma
totals. Please revise your
disclosure to resolve these inconsistencies or tell us why a revision
is not needed.
Exhibits
17. Please expand the disclosure in Exhibits 99.1, 99.2 and 99.3 to
explain the circumstances
for including future investments under the proved developed shut-in
category but no
corresponding reserve quantities resulting in the disclosure of
negative operating income
(BFIT) and negative net present worth discounted at 10%. Refer to the
requirements in
Item 1202(a)(8)(v) of Regulation S-K.
18. We note separate disclosure in Exhibit 99.3 of the net revenues from a
company-owned
plant, gas gathering and water disposal system that appear to be
incorporated into the
composite economic forecasts for BCE-Mach III LLC.
Please expand the disclosure in Exhibit 99.3 to further clarify, if
true, that these revenues
FirstName LastNameTom L. Ward
are limited to BCE-Mach III s direct ownership interests in the
processed volumes and
Comapany NameMach
excludes Naturalresulting
any revenues Resources LPvolumes processed on behalf of
other parties. Refer
from
July 25,to2023
the requirements
Page 5 in Rule 4-10(a)(26) of Regulation S-X.
FirstName LastName
Tom L. Ward
FirstName LastNameTom L. Ward
Mach Natural Resources LP
Comapany
July NameMach Natural Resources LP
25, 2023
July 25,
Page 6 2023 Page 6
FirstName LastName
General
19. Please provide us with supplemental copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
have presented or expect to present to potential investors in reliance
on Section 5(d) of the
Securities Act, whether or not you retained, or intend to retain,
copies of the
communications. Please contact the staff member associated with the
review of this filing
to discuss how to submit the materials, if any, to us for our review.
You may contact Lily Dang, Staff Accountant, at 202-551-3867 or Robert
Babula, Staff
Accountant, at 202-551-3339 if you have questions regarding comments on the
financial
statements and related matters. For engineering related questions, contact
Sandra Wall,
Petroleum Engineer, at 202-551-4727 or John Hodgin, Petroleum Engineer, at
202-551-3699.
Please contact Michael Purcell, Staff Attorney, at 202-551-5351 or Karina
Dorin, Staff
Attorney, at 202-551-3763 with any other questions.
Sincerely,
Division of
Corporation Finance
Office of Energy
& Transportation
cc: Michael Rigdon