Infinity Natural Resources, Inc. Class A

Operator, good morning and thank you for joining our first quarter 2025 earning results conference call. With me today are Zach Arnold, President and Chief Executive Officer. And David Sproul, Executive Vice President and Chief Financial Officer. In a moment, Zach and David will present their prepared remarks with a question and answer session to follow. An updated investor presentation has been posted to the investor relations portion of our website, and we may reference. Certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening. I'd like to remind you that today's call may contain forward looking statements. All statements that are not historical facts are forward looking statements. Forward looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. That could cause actual results to materially differ from these forward looking statements. Please review our earnings release and the risk factors discussed in our SEC filings. We will also be referring to certain non gap financial measures. Please refer to our earnings release and investor presentation for important disclosures regarding such measures, including definitions and reconciliations to the most comparable gap financial measures. Now over to Zach.

Thanks, Greg. And welcome to Infinity Natural Resources, first quarter 2025 earnings call. I'm pleased to share our operational and financial results for the quarter as well as provide an update on our development activities and outlook. I first want to say how proud I am of my team's execution during the first quarter. Aside from all the work associated with the IPO. The first quarter of 2025 was the most active operational quarter in our history. We executed and we delivered. Moreover, it was the first harsh winter we've experienced in quite some time up here in Appalachia. Being able to drill and complete our projects as well as maintain uptime on our producing wells in such an environment is a testament to the capabilities and experience of our highly skilled team. With regards to our first quarter performance, we achieved strong operational execution across our portfolio. As I just noted, the first quarter was our most active quarter to date. We turned into sales 6 wells during the period. One in the vault oil window in the Ohio Utica and 5 natural gas wells in the Marcellus Shale in Pennsylvania. We continue to increase our production volumes. Our production averaged 26.5 thousand barrels of oil equivalent per day in Q1. A 13% increase compared to fourth quarter 2024. The 5 natural gas wells were turned in line only days away from the end of the quarter. As such, our production growth in Q1 was largely attributable to our recent oil weighted development in Guernsey County, Ohio. Where we have added 7 long laterals since Thanksgiving 2024. Including the one well that we turned into sales in early January. Operationally, we ran two rigs for most of the quarter drilling 8 wells. We TD'd 4 of the wells totaling 62,000 lateral feet during Q1 and finished drilling the remaining 4 in early Q2. On the completion side, we stimulated 7 wells, completing 522 stages while pumping 4.6 million barrels of water. As an aside, most of those barrels were pumped in below freezing temperatures. Further breaking down activity by region. In the Ohio Utica, we drilled 4 wells during the first quarter. As a result, we have now drilled 34 wells into the volatile oil window totaling 420,000 lateral feet. We continue to extend our laterals with our most recent Ohio pad being our longest wells drilled to date. Averaging approximately 19,000 feet per well. With the addition of the one well we brought online in Q1, our total operated well count stood at 119 to end the quarter. Further, we exited the quarter with 3 drilled and completed wells that we have yet to bring online. 2 ducks and 2 whips in Guernsey County. All of these wells brought online or in development in Ohio are well hedged. In Pennsylvania, the 5 natural gas weighted Marcellus wells that we turned to sales totaled 67,000 lateral feet in Indiana and Armstrong Counties. That project was brought online ahead of schedule and in line with our cost expectations. While we are early in production, we are encouraged by the well results to date. Additionally, we opportunistically contracted a second drilling rig in Q1 for our next Marcellus project. The 4 well project, totaling approximately 54,000 lateral feet, is anticipated to be online this summer. Remember, this pad was a farmer's field back in November 2024. We are very proud of our team's ability to accelerate and execute on projects like these. We are continuing to ramp our natural gas assets, delivering growth within cash flow while securing high EROIs. All of these projects are well hedged, again securing the economics we saw at FID. As a reminder, our hedging program remains a key component of our risk management strategy for our near term development projects. We secured hedges covering a substantial portion of anticipated 2025 production, providing meaningful downside protection while maintaining upside exposure. This strategy has allowed us to lock in the attractive economics that we saw. We expect to continue to maintain a dynamic hedging strategy that locks in returns at key stages of a project cycle. Looking at the second quarter, we're executing as planned and remain on track with the development program embedded in the full year 2025 outlook we provided on our Q4 2024 earnings goal. This includes reducing our operated rig count to one rig and moving our drilling operations to our next oil weighted project. A three well padding currency county totaling 57,000 lateral feet. On the oil and natural gas projects that we drilled in Q1, we're moving ahead with our planned completion activities across those eight wells during Q2 with two frankers. Turning now to our full year 2025 development plan. As you're aware, the macro landscape has shifted since our last update about six weeks ago. Market sentiment remains cautious about the outlook for oil prices in the back half of this year. However, the market remains more constructive regarding natural gas prices. Our unique asset composition and limited obligations allow us to allocate capital as the market dictates. Optionality to advance gas or oil projects rapidly is necessary today more than in prior periods. In response to the current environment, we have elected to bring forward our next natural gas project. We will be constructing this pad during the second quarter and expect to begin drilling these wells this summer. Concurrently, we are reviewing our oil weighted development plans in the second half of the year and will be flexible with our operations depending on estimated project returns as we progress through our one rig schedule. Taking a step back, what we are experiencing today again highlights the value of our differentiated business model. Our strategic positioning in Appalachia with a balanced portfolio across oil weighted Utica assets in Ohio and natural gas weighted assets in Pennsylvania provides unique optionality in varying commodity price environments. Our strong balance sheet and development planning have allowed us to quickly pull forward projects as highlighted previously that were originally slated for later years. With approximately 60,000 net horizon acres in Pennsylvania and 63,000 in Ohio, we built our success on developing long ladder wells, maintaining a deep inventory of high quality locations, and efficiently allocating capital between commodities based on market conditions. Our long standing relationships with key service providers combined with the dynamic nature of the Appalachian service market enable us to optimize costs while maintaining access to high quality equipment and crews. We continue working closely with our service providers to identify additional efficiency opportunities. Zooming out even further, our foundation remains strong with 325 undeveloped locations across both operating areas. We have nearly two decades of high quality development opportunities. This deep inventory coupled with our proven operational expertise and successful track record of acquiring and integrating assets positions us well for sustainable growth. Our financial position further strengthens the outlook for our business. With approximately $7 million in net debt and $344 million in liquidity at quarter end, our balance sheet provides significant flexibility to evaluate strategic opportunities, including M&A for both oil and natural gas weighted deals while maintaining our commitment to discipline growth. With that, I'll turn the call over to David for a more detailed review of our financial results.

Thanks, Zach. And again, hello to everyone. I wanted to start by reiterating some of the themes from Zach's remarks. Our execution in the first quarter was based on a combination of our operational expertise and financial approach. We are prudently developing our assets based out of cash flow, focusing always on discounted returns on investment and payback periods while preserving our balance sheet strength. We secure our wealth high rates of returns through an active hedge program that Zach noted earlier while allowing our industry leading growth profiles to provide additional commodity exposure and upside. Now turning to our first quarter 2025 results, we are very proud of our team's performance during this period. We continue to execute our plan. We increase our net production 13% from the fourth quarter 2024 to 26.5 and BOE per day. We increased our adjusted EBITDA to $57 million, representing an $11 million increase compared to the fourth quarter 2024. Moreover, we further expanded our adjusted EBITDA margin to $23.96 per BOE or $1.73 per BOE increase quarter over quarter. As we've noted in the past, we believe our EBITDA margin remains the best among our Appalachian peers. Operating costs on a per unit basis declined during the first quarter to $8.42 per BOE compared with $9.41 per BOE in the first quarter 2024. This decline was largely attributable to a decline in GPNT costs, reflecting a greater waiting towards Guernsey County, Ohio production, where GPNT per unit cost is lower versus Carroll County, Ohio. Moreover, we continue to anticipate further declines in our per unit cost structure as we increase our natural gas production from Pennsylvania during the remainder of the year. As Zach noted, the first quarter represented one of the most active periods in our company's history. We incurred $78 million in DNC capital expenditures during the first quarter. We anticipate capital spending to remain elevated during the first half of the year before beginning to decline. Turning to the balance sheet, our financial position remains very strong. We have minimal debt outstanding under our credit facility, which we feel is a significant competitive advantage. We have ample liquidity of $344 million, affording us operational and strategic flexibility. We are developing out of cash flow and will continue to position the company, take advantage of opportunities via acquisitions or asset acceleration as the market dictates. Thank you. I'll now turn it back over to Zach for some closing thoughts. Zach?

Thank you, David. In conclusion, I'm extremely pleased with our first quarter performance, during which we demonstrated exceptional operational execution despite one of the most challenging winter seasons we've faced. Our ability to bring wells online ahead of schedule showcases the strength of our operational capabilities and deep relationships with service providers in Appalachia. What truly sets Infinity Natural Resources apart, and what I'm particularly excited about, is our unique ability to dynamically shift between oil and natural gas development within the same region. This flexibility is proving invaluable in today's volatile commodity price environment. We're actively demonstrating this advantage by maintaining our planned second quarter activities while accelerating our natural gas development plan for the second half of the year. With our robust inventory and strong balance sheet, we have optionality to optimize returns as market conditions evolve. This strategic positioning in both commodities within Appalachia is a true differentiator for our company and our shareholders. Operator, we may now begin the Q&A session.

Thank you. As a reminder, to ask a question, please press star, followed by the number one on your telephone keypad to enter the question queue. Once again, that is star, followed by the number one. Our first question comes from the line of Scott Hanold with RBC Capital Markets. Your line has opened.

Thanks. Good morning, all. Just to give a little context around, obviously, pulling forward again some of your gas weighted activity. It sounds like obviously you'll do some of that at some point in time, summer or fall this year. Just give us a sense of from your original plan, I'm assuming that's replacing some Utica activity. When do you think that's going to have an impact on the production mix? Is it more of a 2026 sort of event that shows up?

Yeah, thanks for the question, Scott. So I think you're right. I'm thinking about that timing is we've done now twice this year. We've taken gas projects that were going to be done later in our development cycle, pulled them forward in response to the commodity environment that we've seen. And I think as you think about production and mix for the first part of this year, it's going to be driven by the projects that we're completing and bringing online, obviously already or in the next quarter and projects like that that come online at the back of the year. We're going to have more of an impact for next year than they will this year.

Okay, thanks for that. And I guess the other piece of it is obviously the Tortola pad, I think it was the pad you all put online in the Marcellus in March. Can you give us some sense of how those are performing initially to your expectation? And is it a read through of some of the stuff that you plan here throughout the summer and the fall? And how do you plan to get into next year?

Sure. So I'll start by saying that Tortola Wells came online ahead of schedule and in line with our budgets and they're currently meeting our expectations. And it'll also take a second to complement the work that was done to make that happen for a well to come online ahead of schedule like it did in late March. That meant that all the completion activities that were occurring in January and February went off without a hitch. So the team did a fantastic job helping us deliver those volumes sooner. As far as production goes, they are meeting our expectations. We're very excited about that. And I think that just gives us further confidence in how we view production in that area and would expect future wells to perform similarly. Thank you.

Our next question comes from the line of Michael Schiava with Stevens. Your line is opened.

Good morning. I want to just get your thoughts on how deal flow looks in both your core areas right now. Anything you could say about the acquisition opportunities you're looking at?

Sure. So I kind of go back to the roadshow view that we had and think about just being able to deliver growth organically off of our assets for when deals don't come as quickly. So we're really proud of that ability to grow. But we did go public to get that currency to help some deal flow come to us. And we have an incredibly strong balance sheet. So where does that put us today? That puts us very active in processes, yet the ability to be patient and not do deals that don't make sense for us. Our exposure to both oil and gas and our interest in acquiring assets in both of those areas increases our asset opportunities and really lets us continue to be focused on M&A in a time in which commodities are highly variable. And that makes occasionally the bid ask spread tougher on one side or the other. So we remain very excited about the opportunities that are here in the basin and you're going to see us continue to be involved in any process that we can find our way into.

Good. Thank you. You had some capital expenditures for land in the quarter. Can you characterize what that was? Was it mostly just filling into length and laterals or was that actually adding acreage in new areas? And is that maybe a good run rate for? Those kind of expenditures for the remainder of the year.

That's another great question Mike. So I think that that's an appropriate number for a company our size and the type of work that we're doing in this quarter. I think that the acres we were adding are always going to be focused on helping us either increase working interest in units, lengthening laterals, or adding new inventory adjacent to the inventory that we're already developing. So I think that helps you kind of get a sense as to what we did and what a burn rate might be. But we're going to continue to look at things that might fall into more of an acquisitions category that we'll talk about when those things happen that might be in excess of a number like that.

Understood. Thanks, Zach.

Our next question comes from the line of John Freeman with Raymond James. Your line is open.

Good morning, guys. Just following up on Scott's earlier question, if I kind of go to the slide for y'all got in your presentation, the original plan was to be kind of a 60-40 split on pills between oil and gas. And I guess I'm just trying to make sure that I understand the moving parts here where you bring forward the natural gas pad and then you're reviewing your oil activity in the second half of the year. So it's on that slide where it basically just says it's kind of 40-40 and then there's kind of this wedge that's sort of, I guess, not quite firmed up yet. Just maybe how we should think about kind of that mix of pills kind of shaking out on that slide for it, if you're able.

Sure, John. This is David Spro. I think first and foremost, every project that we do is based upon our view of this kind of return on investment that we get. We are very well hedged. And as you well know, when we enter into these projects, we lock in them, secure those DROIs as we develop our projects. You know, when we look at the back half of the year, we are excited by both our oil and gas projects. But as we kind of did in 2024, one commodity was stronger than the other near term. And so we allocated capital accordingly. We have elected to pull forward an additional gas pad that would be slated to come on during the fourth quarter or early 2025. It just depends on that execution for us. And that would reflect that change in the sort of 60-40 split, if you will, where we've elected to supplant one oil project and defer that for later in the development schedule for us.

Okay. And then just, I guess, a follow up on that because you mentioned, you know, it is, you know, the flexibility y'all got is quite unique. And like you said last year when oil was telling me gas is weak, y'all only brought online oil wells and not trying to jump too far ahead to 2026. But just based off of what's on that slide, I mean, it's clear like at the strip right now, next year, you know, the gas returns are off the charts good. Would there be anything else that we should be considering that may either from a delineation perspective, the Utica or something like that, that would potentially cause the mix next year to not be just driven pretty hard on the gas side, just given where the returns are. Is there some other factor that goes into y'all's kind of decision process?

Sure. I think there's a couple things to remember is that, you know, first and foremost with our oil projects, these are very long projects in terms of the lateral length that we're developing. A lot of those projects have costs that are already incurred from other projects that were developed in a different period of time. So pad costs and stuff like that is already related to some of those oil projects in particular. It's never as good as you think and it's never as bad as you think when it comes to commodities. And so you have to maintain the flexibility to move quickly. If commodities are telling us to do natural gas projects, we'll do more of those into the future. Commodities are telling us to do, you know, oil will do those. I think we will continue to execute on some of our oil projects into the future because we are seeing discounted returns on investments that are exceeding these because the laterals are longer and the costs are lower. But that doesn't mean that we wouldn't develop natural gas. As you know, John, the natural gas returns that we have are pretty frosty right now with the market that we're exhibiting and seeing. And so you should anticipate us developing additional gas assets into the future.

Yeah, I'd appreciate it. Thank you.

Once again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Our next question comes from the line of Kalei Akamini with Bank of America. Your line is open.

Hey, good morning, guys. My first question is on capital as we're kind of heading into, or as we're kind of thinking about 2026 here. So as you work on kind of reshaping your drilling program in the second half of 25, are you also considering reshaping how you're thinking about the capital levels for 2026? The way that we've seen it kind of come together here is that 25 is kind of a growth year. 26 is kind of a harvest year. Do you agree with that set up? And are you still trackling along that path?

That's a great question, Kalei. Thanks for asking that. So I think you're spot on with the beginning and that we are maintaining our capex guidance for this year. It's important to know that if we transition from one commodity to the other, it doesn't make a material impact on our capital needs because the unit cost and cost per foot, cost construct pads, etc. are very comparable from one to the other. So as we remain flexible there, you don't have to think very hard about what that means to a capex guide. So that's a great question. I think that's something that we're going to constantly evaluate. I think right now we are a growth company and that's going to continue to be a big part of our story. We'll look at the returns that we're seeing on all of our projects as we continue to get those ready. And as we kind of move through the next quarter or two, we'll get a firm plan together with the board and start communicating what we think 2026 looks like. But we like the projects that we'll have ready and I think we'll be able to continue to execute on high return projects like this. David said on both sides of our asset base, whether it's gas as right now looks fantastic or whether it's oil as some days looks more exciting than others.

I appreciate that. My follow up question is a follow up on the M&A question and I'm going to ask it a little bit differently. So over the last six months or so, we've seen a handful of assets transacted in the Northeast kind of around your footprint and you guys have been open about your willingness to be acquisitive here. What do these deals tell you about the valuations in this market and do you think that you're well positioned to create value through M&A with deals in this range?

Yeah, I'll take the first part of that and talk a little bit about how what I think it says about marketing and all that David talked about. That's how we're positioned to do some of these things. So as we approach deals, it keeps going back to where we were on the road back in January and talk about how as we view and evaluate assets, it's important for us to understand what we're doing. What we're going to be able to do with that asset, whether that means it has undeveloped locations that we're going to attack or operational improvements that we're going to be able to bring to bear. We get really excited when we think we can put our fingerprints on something that we transact on. I think that the assets that have traded give us encouragement that gas assets can move in Appalachia as that's not always been the case as you look back through history. So while we haven't acquired the couple that you're thinking about, it gives us a lot of confidence that there are the gap between bid and ask is being bridged in the strip environment that we're seeing today.

Yeah, I mean, I think in terms of valuations, I think we are uniquely positioned. Obviously, you'd always prefer to acquire things that lower and lower multiples. But even at the multiples of which the transactions that you're kind of noting have traded at, those transactions would have been significantly accretive to us. So from a valuation standpoint, I don't think any of that, those values then discourage us in any capacity. I do think also for every one of these deals that you see on the headline kind of number, there's also a plethora of deals that you're not seeing that are smaller in scale and scope that we also are exploring and evaluating as well. So deals will go up and down on valuation. But as Zach is kind of noting, it really depends on not just the sort of the initial multiple, but what you can do with the assets to generate. We are a very unique position with our balance sheet. Be patient and make sure that the asset that we acquire in addition to our high growth organic storage complements what we're doing and allows us to drive the additional shareholder value through what we excel at, which is developing and enhancing assets.

Got it. In fact, David, I appreciate it. Thanks, guys. Yeah, the words.

Our next question comes from the line of Scott Hennel with RBC Capital Markets. Your line is open.

Hey guys, just had a couple quick follow ups here. The first is on the Utica deep gas potential in Pennsylvania. Can you give us your thoughts on when you guys think your first well might be drilled in and potentially brought online? And if you've seen anything on the ground in terms of the capital markets, in terms of performance of some nearby wells, I'd be glad to hear some of that

too. Great question, Scott. Thank you. So I'll start maybe with the second part of your question first and say that we're, you know, we are continuing to be encouraged and excited by the activity that we see from our offset operators, whether it's CNX, who has really led the way in this play, or Olympus, who's done some fantastic work since their formation and beginning of development activities in this play. So very encouraged and excited about that. I think the Olympus transaction indicates that there's value placed on the deep dry gas Utica. So from a macro perspective, we're very excited about what we're seeing surrounding us. And for us, we're incredibly excited and confident in the potential that this is going to open up even more inventory for us to develop. We're actively evaluating where to slot this into our plan. We want to be thoughtful and nimble. So that takes us a little bit of time to make sure we've got it exactly where we want it. I think it's important to know that our pads are constructed and our infrastructure is prepared for this. So when we pull the trigger and do this, we should be able to control our costs and execute it quite quickly. The rig we have running now and have had running for about two years now is capable of drilling these wells. So while we don't have it, and I can't give any specific guidance as to when we're going to do this, I think you should know that it's something we're incredibly excited about. We're prepared to execute it when we see the right time to drop it into our drilling program.

So is it more of a sort of a risk sort of assessment you're making right now, like versus, you know, drilling the Marcellus Wells? It just, you just need to get comfortable with the profile and the risk assessment prior to making that decision?

I mean, there's risk there, as you know, and opposite operators know. I don't think we're making this decision based on a risk view. I think it's just the plan that we put in place right now has been to drill Marcellus Wells. We're executing on that plan and will remain flexible to tuck that in here. In the medium term to the future. And Scott, this is David. I think

the other side is remember, you know, when we've gone public, we are executing on the plan that we put forward in front of, you know, the research community. And it's kind of a trust and verify concept for us. So we've been executing on high DRY projects. We continue to do that. We are actively, actively evaluating that the Utica well. We are very excited about the prospectivity of it. And it's something that we'll consider in the future here.

Got it. Thanks for that. And really quickly, David, you know, give us a view of like, how you think about hedging into 2026, especially with, you know, obviously the pivot to more gas. Like, are you looking at, you know, getting a, you know, a little bit more done in 26 and maybe even 27 and, you know, a view on, you know, how you think about hedging oil given the volatility there. And this is more of like Ford stuff and they're like 26 and 27.

Sure, I think, you know, with our hedging strategy, we've been very consistent in our approach will continue to be such, you know, the projects that we have speaking on the oil side in particular. We will hedge those projects as we bring the rig in and stimulate activities and then bring it online. I think we have demonstrated that we have approached that and it's been a rewarding experience for us to lock in those DRYs and mitigate that commodity exposure on volatility. I think we'll again continue to do that again on the natural gas side. Our approach is very similar as well that we're looking at those projects and locking them in. We are excited about where the natural gas prices have moved to, but we're also cognizant of the history that we've seen in both commodities over time. And so our strategy has always been and will remain to be secure our DRYs, our high DRYs, and allow us and our investors the exposure to commodity upside through additional development that we have. Got

it. Thank you.

Our next question comes from the line of Michael Ciala with Stevens. Your line is open.

Thanks. Thanks. Just had a couple follow ups. I want to see if I can get a handle on your activity level. So I think you said you're at two rigs now and is the plan to let that second rig go after you're done drilling this Pennsylvania Marcellus pad that I think is the Josh Van Dyke pad. And then you said you're at two frat crews. Is the plan there to let that second crew go after you're done with sometime in the second quarter? Is that run through the third quarter as well?

That's a great question, Mike, and I appreciate the opportunity to sort of make sure that everybody understands our capital pace here. So first and foremost, I think falling back to the we are maintaining capex guides for the year, I think is important to know. Q1 was our most active quarter and company history. We ran two rigs and a frat crew and and brought a number of wells online. Q2 is going to be comparable and look similar as we drop one rig and that rig has now been released. So we're down to one rig as we said we would be back in Q1. But we're picking up a second frat group to sort of follow up on the completion activities that that that second regenerated. So that's going to lead to capex that elevated compared to what we're going to see in the back half of the year. And just to clarify the remainder of our year's cadence, we'll have one rig and a related track crew taking us through the end of the year.

I appreciate the clarification. Zach, you said that though well costs have been coming in relative in line with expectations. Are you seeing any changes in service costs or service availability in Appalachia at this point?

Another great question. So for us, I think it's important to know that our wells work really well in today's service cost environment. So we're not relying on any cost improvements to help us juice returns. This is a gas heavy basin and we're even getting a little bit gasser this year as we talked about. So as such, we're not really seeing an activity sort of slumping in the basin. So we're not we're not really focused on commodity driven capital improvements here. We're going to work with our ops team. We're going to work with our service providers to continue to seek efficiencies. We think that's where we've got the best gains that we can make in this year.

That makes sense.

Thanks. And there are no further questions at this time. I would like to hand things back over to Zach Arnol for some closing remarks.

Great. Thank you very much guys. I appreciate you joining us again today and we look forward to another successful quarter. So we'll talk to you all again soon.

And this concludes today's conference call. You may now disconnect.