Infinity Natural Resources, Inc. Q3 FY2025 earnings call

• Achieved 39% total production growth year-over-year to 36.0 MBoe per day, with 70% growth in natural gas production.
• Placed 10 wells into sales during the quarter: 6 oil-weighted in Ohio Utica and 4 natural gas in Pennsylvania Marcellus.
• Drilled 93,000 lateral feet and completed 442 stages across 6 wells, with an average well length of nearly 15,000 feet.
• Improved drilling efficiencies with a 25% decrease in average casing running time and set a new record for stages pumped in 24 hours.
• Acquired approximately 3,000 net acres during the quarter across ~350 transactions, increasing working interest in active development projects.

In the third quarter, Infinity Natural Resources achieved a 39% total production growth year-over-year to 36.0 MBoe per day. Natural gas production saw a 70% increase year-over-year to 138 MMcf per day. In terms of product segments, there were 6 oil-weighted wells in the Ohio Utica and 4 natural gas wells in the Pennsylvania Marcellus placed into sales during the quarter. Absolute production: total production 36.0 MBoe per day, natural gas 138 MMcf per day. Revenue contribution percentages not explicitly stated but segments include Ohio Utica oil properties and Pennsylvania Marcellus natural gas assets.

• Raised full-year net daily production guidance to 33.5 to 35 MBoe per day from 32 to 35 MBoe per day.
• Updated full-year total development capital expenditure guidance to a range of $270 to $292 million, inside the higher end of prior guidance.
• Board of Directors authorized a $75 million share repurchase program, reflecting confidence in the business's long-term value.

Forward-looking statements are subject to risks and uncertainties beyond control that could cause actual results to materially differ from forward-looking statements. Please review earnings release and SEC filings for risk factors.

Q: 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?

A: Sure. We haven't announced anything specific to the development plan of the Deep Dry Gas Utica, and we haven't given any guidance on our 2026 development program at all. We are always evaluating what other operators are doing and think there's continued momentum for the Deep Dry Gas Utica in our South Bend area.

Q: I just wanted to dig in, make sure I heard you correctly, Zack. You said that 3,000 net acres that you added, I believe you said that's 350 transactions. I don't know if I heard that correctly, but you've added 4,300 year-to-date. Can you talk to kind of what the ground game, how that's evolving? I know it may be a little more challenging time to pursue sort of larger opportunities, but you talk about maybe how that's progressing and how you see that into next year.

A: Great question. We added 3,000 acres over the 350 transactions. We are focused on both the ground game and larger scale transactions. We have a strategic advantage by being located in the basin and our team has been able to stay focused in areas where we see value. We'll keep doing ground game attacks in both Ohio and Pennsylvania and look at larger scale M&A also.

Q: 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.

A: I think first and foremost, the share buyback will not impact our asset development or acquisition strategies at all. The share price is significantly undervalued, and we're being opportunistic given our long-term view of the business and focus on allocating capital and maximizing shareholder returns.

Q: It looked like the amount of natural gas hedges kind of went down each quarter going forward. Maybe can you just speak to that decision?

A: We've been pretty well hedged on natural gas through 2025. The decline in natural gas hedges as a percentage highlights the strong well performance in Pennsylvania. Our strategy is to look at return on investment on projects and lock in some at FID and uptick when appropriate. We're pretty well hedged through 2025 in particular on natural gas.

Q: I appreciate the fact that it's probably too early for 2026 guidance, but I don't know, Zack, could you kind of frame it up for us a little bit? Should we think about this kind of 1 to 1.5 rig pace you ran this year as a reasonable kind of trajectory in how you think about oil versus gas mix in general? Just help us frame up for what that means on the capital side too with the development efficiencies and everything else you're seeing.

A: We aren't giving soft guidance yet for 2026. If we ran 1.2 rigs in 2025, we expect to remain at least that active in 2026. We have attractive returns in both commodities and expect to be active in both states next year.

Q: 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.

A: A couple of things. Our operational team has delivered well and expediently. Dollar per foot basis is great and tracking well to March expectations. We've added additional acreage and working interests, effectively adding an additional well, and have pulled forward some natural gas projects and spent on infrastructure for 2026, which affects the overall spending channel.

Q: I 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.

A: I do not think we are going to give today any view of where we would opportunistically utilize our buyback authorization at this stage. We think our shares are significantly undervalued and we are just going to be opportunistic about rolling them back into the company.

Q: 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?

A: I think you should anticipate no conversion of Class B shares into share repurchase anytime soon. The share repurchase program is targeted on Class A shares, which are the actively trading economic shares. At yesterday's close of ~$11.50, a $75 million share repurchase program would repurchase north of 40% of Class A shares.