INR - NYSE

Greetings, and welcome to Infinity Natural Resources Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greg Pipkin, Senior Vice President, Corporate Development and Strategy. Sir, you may begin.

Thank you, operator. Good morning, and thank you for joining our third quarter 2025 earnings results conference call. With me today are

Thank you, Greg, and welcome to Infinity Natural Resources Third Quarter 2025 Earnings Call. We're pleased to share our quarterly operational and financial performance with you today, along with an overview of our ongoing development program and our perspective on the remainder of 2025. Starting with the highlights from the third quarter. We delivered exceptional results that demonstrate our continued momentum across the Appalachian Basin. We achieved 39% total production growth year-over-year to 36.0 MBoe per day during the quarter. This included 70% growth in natural gas production compared to the third quarter of 2024, reflecting our increased focus on natural gas development during 2025. Our continued execution is driving operational momentum. We have experienced strong results on our recent projects, including our best producing projects in each of Ohio and Pennsylvania to date. Most notably, we achieved a single day net production record of 47.9 MBoe per day in October. This milestone reflects the consistent execution and commitment to operational excellence that has driven several new company records. Operationally, we had yet again a very strong quarter, demonstrating our consistent execution throughout 2025. In total, we placed 10 wells into sales during the third quarter comprised of 6 oil-weighted wells in the Ohio Utica and 4 natural gas wells in the Pennsylvania Marcellus. We drilled 93,000 lateral feet and completed 442 stages across 6 wells during the quarter. We continued to emphasize extended lateral development with an average well length of nearly 15,000 feet during the quarter. On the drilling side, our team improved efficiencies on casing running speed, decreasing the average time by more than 25%. On the completion side, we set a new record for stages pumped in 24 hours on one of our projects in Guernsey County, exceeding 16 stages in a 24-hour period, reflecting both the quality of our completions design and our team's operational expertise. On the strategic front, we continue to have success in the ground game acquiring approximately 3,000 net acres during the quarter across approximately 350 transactions, increasing working interest in our active development projects and enhancing future projects. These working interest additions are among the highest returning dollars we invest as we acquire more of each project we are already executing. Looking at our activity by state. In the Ohio Utica, we drilled 3 wells and completed 377 stages during the quarter, all in Guernsey County. We also turned into sales a 57,000 foot 3-well pad early in October resulting in the first production from our Muskingum Watershed Conservancy District acquisition we made earlier this year. In the Pennsylvania Marcellus, we drilled 3 wells and completed 65 stages. Specifically, in July, we began drilling operations on the 50,000-foot 3-well natural gas project that we elected to advance early in the second quarter. We are excited to announce that we plan to turn these wells to sales in the coming weeks representing approximately 6 months from FID to revenue generation. Taking a step back to look at 2025 as a whole, our team's execution and strong well performance has allowed us to increase our production guidance for full year 2025 to 33.5 to 35 MBoe per day, from 32 to 35 MBoe per day. We are also updating our full year total development capital expenditure guidance to a range of $270 to $292 million, which is inside the higher end of our combined D&C and midstream CapEx guidance. We are on track to have turned to sales 23 wells this year, 12 natural gas weighted wells, and 11 oil-weighted wells. This nearly 50-50 split is slightly more gas-heavy than our expectations coming into the year, but demonstrates the unique optionality our strategic positioning in Appalachia provides. With a balanced portfolio across oil-weighted Utica assets in Ohio and natural gas-weighted assets in Pennsylvania, we can adapt to varying commodity price environments and execute projects that maximize shareholder returns. The operational momentum we've built throughout 2025 combined with our strategic asset positioning across both oil and natural gas assets provides a solid foundation as we look ahead to 2026. The strength of our balance sheet remains an invaluable asset, and we will continue to be thorough and thoughtful as we evaluate organic and inorganic growth opportunities. With that, I'll turn the call over to David for a more detailed review of our financial results.

Thank you,

Thanks, David. To wrap up, our third quarter results reflect the strength and strategic value of our diversified Appalachian operations. Our success this quarter highlights what makes Infinity Natural Resources unique, our proven ability to optimize development across both our Ohio Utica oil properties and our Pennsylvania Marcellus natural gas assets. We demonstrated this flexibility by successfully executing our accelerated natural gas program while maintaining strong momentum on our oil development, positioning us to turn in line 23 wells in 2025 with a near 50-50 gas-to-oil production split. We are exceptionally well-positioned to sustain our active development pace into 2026 while continuing to deliver strong returns for our shareholders. Operator, you may now open up to Q&A.

[Operator Instructions] Your first question today comes from the line of Tim Rezvan from KeyBanc Capital Markets.

First of all, I wanted to dig in with natural gas, looking more attractive. I know you've sort of pushed back plans to test the deep Utica to 2026. There's been strong comments from public peers. Can you talk about any plans you may have to test that into what's looking like a stronger natural gas price environment?

Sure. Thanks, Tim. I'll take that question. This is

Okay. Okay. That's fair. We'll stay tuned. We'll stay tuned. I just wanted to dig in, make sure I heard you correctly,

Great question. I want to maintain the statement that we are focused on both, the ground game and larger scale transactions. To answer your ground game question, we added 3,000 acres over the 350 transactions. I think that is an incredible testament to our team's ability to stay focused in areas where we see value. I think we have a strategic advantage by being located in the basin that gives us a unique opportunity to be in the neighborhoods and in the communities as we go out and talk to folks. Those transactions that we closed and those acres that we added additional working interest to projects that are incredibly meaningful to us. Projects that we are already developing at the back half of this year, we were able to increase our working interest due to the work that folks did. Really excited about that work, and we'll keep doing those ground game attacks in both areas, in Ohio and in Pennsylvania, and we'll keep looking at the larger scale M&A also.

Your next question comes from the line of John Freeman from Raymond James.

Nice to see the share repurchase plan, especially at these valuations. Just maybe how y'all think about the trade-off between share buybacks versus continued kind of ground game acquisitions.

Yes. John, this is David. I'll take that one. I think there's a couple of points on that. I think first and foremost, the share buyback will not impact our asset development or acquisition strategies at all. I think that's very much a testament to the team and the capabilities that we have and the assets that we're developing here. The second thing I'd say is the share price is significantly undervalued, and we're being opportunistic here given our long-term view of the business and our focus on allocating capital and maximizing shareholder returns at every step. It's a good opportunity for us, and we're excited about executing that alongside of all the other assets that we're developing.

Got it. And then my follow-up question, it looks like the amount of natural gas hedges kind of went down each quarter going forward. Maybe can you just speak to that decision?

Yes. We've been pretty well hedged on natural gas. The decline there on natural gas hedges as a percentage, is that your question, John, that a percentage of total natural gas bought?

It looked like, David, at the absolute like volume amount that you all have hedged versus your prior update had gone down the rest of 3Q, 4Q and then also for full year '26. Just the actual volumes that you all have gas hedges on, it looked like that went down.

Sure. We can circle back with you. I think first and foremost, we're pretty well hedged on natural gas through 2025, as you guys can see. I think the change in our percentages hedging has continued to highlight the strong well performance that we're having in Pennsylvania. Our strategy overall with regards to hedges, as we've kind of talked about at length before, is to really look at this kind of return on investment that we get on these projects and lock in some of those at an FID, and then we have sort of uptick those when we have the completion crews come. We'll continue to execute on that plan there, but we're pretty well hedged through 2025 in particular on natural gas and then have great exposure to natural gas uptick in the coming years.

Your next question comes from the line of Scott Hanold from RBC.

Yes. I appreciate the fact that it's probably too early for 2026 guidance, but I don't know,

Sure. I'll start by saying we aren't giving soft guidance yet for what 2026 will look like. We will provide guidance in Q1 to let everybody understand how we're approaching next year in our capital allocation and our pace of business. To kind of back up from that and just kind of give some framework for folks to be able to think about what our business could look like, though, as we still formulate all of our development plans. If we ran 1.2 rigs in 2025, I think you should expect that we remain at least that active in 2026. We are providing splits to our capital allocation right now between gas or oil, but we have very attractive returns in both commodities, and I would expect us to be active in both states next year.

Okay. Got that. And then just to clarify too, I think you said you all reached 47.9 MBoe per day in October. Just could you clarify that? Was that a peak rate or was that an average? Just help me kind of square the circle with, I think you said you expect to see some growth through the fourth quarter. I think guidance for something around 43 MBoe a day. If you were up around 48 MBoe, just kind of help us walk through the time of the tills and natural declines coming off of some of the pads you've done.

Sure. Specifically, that number was a daily spot rate that we reported there. We have six wells that we will be turning in line this quarter. Three of them have already happened. That number corresponded with those wells coming online. We have three additional gas wells that will come online here in pretty fresh time here in the next couple of weeks. We do not give quarterly production guidance, so I cannot really help you specifically get to what this quarter is going to be, but I just point you back to the production range that we set. I think those production -- sorry, I was just going to make a comment that we have been very happy with our recent well performance too, and that helps us hit those production records as we go.

Yes. And just to clarify, am I correct, though, the implied kind of 4Q guidance is around 43-ish, somewhere around there? That if I take your full year or less, what you've done year to date?

Yes. I don't know. We don't have a specific quarter number because we haven't necessarily spoken about that, but I would just keep you thinking about how the 33.5 to 35 represents our view of production for the year.

Your next question comes from the line of Michael Scialla from Stephens.

I wanted to ask on your D&C CapEx guide for the year. You took that up at the midpoint a bit. I just want to see how well costs and the pace of development are trending versus your prior expectations.

I think a couple of things there. We've been really happy and proud of our operational team. They have not only delivered this year, but they delivered in an expedient fashion. We're kind of seeing some of that come through with the numbers there. Obviously, tariffs affect things, but I would tell you that our dollar per foot basis here is great and actually tracking extremely well to what we anticipated back in March. I think some of the things that you're seeing with a higher level of spend is reflecting a couple of fronts. One is,

Sounds good. And I know you had some midstream constraints that you talked about last quarter. At this point, are you running into any kind of constraints midstream or otherwise that could impact your operations going forward?

No. No midstream constraints. We are really excited about the midstream that we are building out on our own for gas assets, as David talked about, spend money there preparing for this year's gas volumes and next year's gas volumes. We are well positioned there. Our near-term development in Ohio is all from pads that are tied into pipeline already. No anticipated midstream issues at all.

Your next question comes from the line of Paul Diamond from Citi.

Just wanted to touch back on the share buyback and just kind of the strategy around execution. I mean, you stated you think the shares are undervalued. I guess at what point would you lean further in? Is there a marker you have out there, or is it just more relative well or against an internal model? Just how to think about the pace and timing of that, I guess.

Yes. Paul, this is David. I think first and foremost, I do not think it is surprising to anybody listening on this call that we think that our shares are undervalued. I do not think we are going to give today any view of where we would opportunistically utilize our buyback authorization, if you will, at this stage. We obviously are really happy and excited about the business that we have, the long-term generation of cash that we anticipate here, and think that the shares are significantly undervalued, and we are just going to be opportunistic about rolling them back into the company.

Got it. Makes perfect sense. Since IPO early this year and kind of as you have really commenced on that 1, 1.5 kind of drill pace, can you talk about anything that might have either the upside or the downside surprised you about well results versus the original expectations, the decline rates in line, the IPs, EURs, all that stuff?

I think it's important to note that we've been incredibly spot on with our budgeting of these projects from a CapEx perspective and a production perspective. We've been very pleased with the team's ability to predict and forecast what these wells are going to do. We are really happy with a couple of the recent projects that are outperforming our base type of assumptions. Those are always nice to have, those surprises to the positive. I'll compliment the team that they've done a tremendous job in preparing for the IPO and executing this year at planning our business and putting out a budget that we can meet.

[Operator Instructions] Your next question comes from the line of Nicholas Pope from ROTH Capital.

Another question about the share repurchase. I was just curious, and the comment is that it's for Class A shares. I was curious if there was a mechanism for conversion of the Class B shares to be a part of the share repurchase, or do they need to be completely separated in kind of the approval process?

I think, Nick, this is David. I think first and foremost, our investors, our legacy investors, I should say, are really bullish on this story for us. I do not think you should anticipate any of that anytime soon. I think with regards to the share repurchase, the program is targeted in around the Class A shares. Those are the economic shares that are trading, obviously. We have about 15.6 million shares that are trading. I think it is important to note at yesterday's close of roughly $11.50, that would be in the execution of a $75 million share repurchase program, that would effectively claw back or repurchase north of 40% of the Class A shares. It is a pretty impactful share repurchase program for us, but again, it is just targeted on the shares that are actively trading in the market today.

Makes sense. As you kind of look at that share repurchase and kind of how things are going to progress going forward, is it primarily going to be focused on the free cash flow that the company's generating? I just want to make sure it's not anything as you're going through the development process or spending development capital that this isn't something that's going to increase debt, that it's mostly going to be coming from the generation of free cash flow.

I think from our standpoint, Nick, none of the share repurchase program will impact the asset development and strategies of the development plans of the company. For us, I think that's the most critical aspect of the company that we have. We have a very strong balance sheet. We intend to maintain a very strong balance sheet. We think that it's a strategic strength of us to utilize that balance sheet, when appropriate and prudent. Again, none of the activities announced with the share repurchase program will impact our ability to execute on our plan.

And there are no further questions at this time. I will now turn the call back over to

Well, thank you very much for joining us today as we shared our Q3 results. We appreciate your time and your interest in INR. Have a great day.