WHK Q3 2026 earnings call transcript, November 13, 2026

Thank you all for joining us. With me on the call today are Daniel Herz, Chief Executive Officer, and Jeffrey Slotter. Chief Financial Officer. Daniel will start by discussing the highlights of the quarter, including key operational and strategic developments. Jeff will then take you through our third quarter financial results in more detail, and Daniel will wrap up with some closing thoughts on our outlook and priorities. After that, we'll open the call for your questions. Before we begin, I'd like to remind everyone that today's discussion may include forward-looking statements regarding White Hawk's financial condition, results of operations, business strategy, and future performance. These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For complete discussion of these risks and uncertainties, please refer to the caution. statement regarding forward-looking statements and risk factors section in Whitehawk's filings with the U.S. Securities and Exchange Commission. The company undertakes no obligation to update any forward-looking statements except as required by law. We will also discuss certain non-GAAP financial measures such as adjusted EBITDA and cash available for distribution. These measures should not be considered in isolation from or as a substitute for the most directly comparable GAAP measures.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our third quarter earnings release issued last night, which is available on our investor relations section of our website. With that, I'll now turn the call over to Daniel.

Good morning and welcome to the White Hawk Minerals third quarter earnings call. To quote Aristotle, we become just by the practice of just actions. Self-controlled by the exercising of self-control and courageous by performing acts of courage. To simplify, I will quote Will Durant's excellent summary of Aristotle. Quote, we are. What we repeatedly do. Excellence then is not an act, but a habit. End of quote. And excellence is exactly what we are striving for in everything we do at White Hawk. And we are. Doing it through habit. Over the last three months, since our last earnings call, we have signed and or completed 13 new acquisitions, totaling $45.5 million. In total, since our IPO, just five months ago. We have signed and or completed 22 acquisitions, totaling more than $157 million. These acquisitions are expected to drive cash available for distribution per share higher in 20. 27 and 2028. Jeff will get into further detail, but I'm pleased that we are executing on the plan we have laid out for our investor partners. And I look forward to sharing the results. Of this execution over the coming quarters. Of course, Matt and the entire team are working every day to continue to execute on our two-pronged acquisition strategy of both ground game. And large strategic transactions.

Thank you to all of the White Hawk team members for your unrelenting hard work to drive value for our investor partners. Okay. During the. Third quarter of 2026, we generated 65 cents per share of free cash flow or cash available for distribution or $2 and 60 cents on an annualized basis. This includes only five days. of contribution from our SJM II acquisition, which we closed on September 25th, and the weighted average shares outstanding during the quarter. If we include the entire SJM II cash flow for the third quarter and the total shares outstanding, we generated $0.68 per share of cash available for distribution, or $2.72 per share on an annualized basis. Operationally, we delivered a strong third quarter with net production of approximately 71 million cubic feet equivalents per day of natural gas. This was an increase of 10% over the same period of 2025 and a 2% increase over the second quarter of 2026. Again, and importantly to note, this production only included five days of production related to the $105 million SJM II acquisition closed on September 25th. We generated this production from our more than 11,700 producing wells. We have approximately 500 gross line-of-site wells, positioning us for solid production from our base assets over the- next year. We also benefit from our more than 9,300 gross-identified undeveloped locations across our 3.6 million gross-unit acres.

In the- Purcellus Shale, 95% of our production came from EQT, Range, CNX, and Antero. Whitehawk currently receives royalties on 46% of their combined gross production. Following the closing of the EQT acquisition of Range, we expect EQT to represent approximately 67% of our Appalachia production. In the Haynesville Shale, 65% of our production came from Xpand, Adamus, Comstock, and Apex. Whitehawk currently receives royalties on 47% of their combined gross production. For the quarter of approximately 59% of our production came from the Marcellus and Utica Shale in Appalachia, with an additional 22% from the Haynesville Shale. And our line of site wells carry a similar basin weight. Whitehawk is uniquely positioned across our 3.6 million gross unit acres to benefit directly from the largest operators in the most economic natural gas basins. With zero... capital expenditures and minimal operating expenses. This positions us to benefit from the tremendous work in capital deployment by EQT Range, CNX, Intero, Expand... and others while incurring zero capital expenditures, resulting in significant cash flow to our shareholders. That means shareholders are directly tied to those operators while receiving... ...significant returns through both dividends and reinvestments through acquisition of additional minerals and royalties. A couple of weeks ago, two of our largest operators, EQT and Rain...

...announced their agreement to combine, which I'm sure most of you know about. We view this as highly favorable for Whitehawk. We currently receive royalties of approximately 49% of both EQT... ...and ranges production. So about half of each of their position pays us royalties. We believe there's no better operator in the U.S. than EQT. And this act... ...inquisition should over time drive both production higher as they increase in-basin demand for power generation for data centers, which should further drive natural gas prices as basis difference... ...contract even further. A double benefit for the transaction and for us, and I suspect there will be even more for us over time. As a reminder, White Hawk Minerals has several ways to succeed. Or win for our shareholders. Those include our strategic and ground game acquisition strategy. The exposure we have to the two most economic natural gas basins in the U.S. are mineral... ...and royalty ownership benefiting from the largest natural gas producers in the U.S., and the medium and long-term significant demand tailwinds behind natural gas. And, of course, we have mitigated short-term price... ...with attractive natural gas hedges, including a weighted average NYMEX hedge price of $3.80 per MMBTU for 2027, and continue to protect... ...with our balance sheet with less than one times debt to EBITDA. With respect to our acquisition strategy and opportunities, we continue to see between $3 billion and $5 billion of strategic...

...acquisition opportunities in front of us in the Marcellus, Utica, and Haynesville shale. Furthermore, the ground game opportunity, which continues to pick up momentum, where we buy from individual mineral owners, is well over... ...35 times our existing asset base, or over $35 billion. Excellence, not by a single act, but by habit. We do this one day at a time, focused on production. ...our expenses, and executing on our dual-pronged acquisition strategy. I like where we are, but I'm even more pleased as to where we're headed. The future for Whitehawk looks to be... ...brighter than ever. With that, I will hand it over to Jeff to review the financial results. Jeff?

Thank you for your participation in Whitehawk's third quarter earnings call. Over the next several minutes, I'll walk you through...

For context, Henry Hub first-of-the-month pricing averaged $2.96 per MMBTU. For the quarter, our natural gas volumes were 96% hedged at $4.50 per MCF. $4.05, while our oil volumes were 90% hedged at $63. We hedge a substantial portion of our expected production on a rolling basis, specifically to protect our downside, secure predictable cash flows, and enhance the visibility. of our dividend. Pro forma for the acquisitions announced yesterday, we are currently hedged for 90% of 2027, over 80% of 2028, and approximately 45% of 2029. Our hedging strategy is intended to keep protecting our downside while retaining asymmetrical exposure to the upside from our acquisition strategy, our operators continued development of their positions, and the long term tailwinds from natural gas demand. Including increased AI power demand and LNG exports. Our adjusted EBITDA, which is effectively comprised of our operating revenue less G&A expenses, was $21.1 million for the second quarter. After giving effect to our $1.8 million of cash G&A expense, which excludes certain non-recurring IPO and other transaction related costs. Our cash available for distribution for the third quarter was $18 million after giving effect to net cash interest expense of $1.7 million, preferred dividends of $1.4 million, and less than $50,000 in cash paid for income taxes. When giving effect to a full quarter of contribution from the acquisitions closed during the third quarter, our acquisition-adjusted EBITDA was $25 million for the quarter, and acquisition-adjusted.

Cash available for distribution was $20.8 million. The acquisition-adjusted EBITDA and cash available for distribution for the third quarter represented a 21% and 20% increase, respectively. Over the second quarter of 2026. On a per-share basis, our cash available for distribution for the third quarter was $0.65 per share, based on our 27.8% increase. $2.9 million weighted average shares outstanding. As a reminder, we issued 2.9 million Class A common shares on September 21st for $75 million of gross proceeds to partially fund our September SJM2 acquisition at a $26.10 per share price. On an adjusted basis, our $20.8 million of acquisition adjusted cash available for distribution equates to $0.68 per share on the fully diluted 30.4 million common shares outstanding at the end of the period, or an 8% increase from our reported $0.62. of cash available for distribution per share in the second quarter. Adjusted EBITDA, cash available for distribution, and cash available for distribution per share are non-GAAP measures, reconciliations to their most directly comparable GAAP measure are available in our earnings release, investor presentation, and on our website. On a GAAP basis, net income for the period was 6.9 million. Our income for the period was impacted, in part, by certain non-GAAP measures. Cash charges, including the aforementioned items, as well as our depletion expense and the change in the fair value of our earn-out liability.

On November 12th, our board approved a quarterly cash dividend. Of $0.50 per share or $2 per share on an annualized basis. The dividend is payable on November 30th to shareholders of record as of the close of business on November 23rd. $0.50 dividend implies a 1.3 times coverage ratio from cash available for distribution on a per share basis.

Before we open the line for questions, please allow me to review our capital transactions during the quarter. And our financial position as of September 30th. In addition to the $75 million common equity issuance I referenced previously, we funded the September SJM II acquisition through the issuance of $50 million. of Series E preferred equity. The Series E preferred will initially bear a 10% annual dividend and can be redeemed at any time. On September 30th, we repaid an additional $6.3 million in debt, reduced our notes outstanding to approximately $62 million at the end of the quarter. We exited the third quarter with $23.6 million of cash on our balance sheet, and we were 0.4 times levered. In connection with the acquisition closing in September, we also completed our fall borrowing-based redetermination with our revolving credit facility banks. We increased the commitments on the RBL from $150 million to $150 million. to $175 million and remained fully undrawn as of the end of the quarter. Yesterday's acquisition closing was funded through a combination of cash on hand and borrowings on our revolving credit facility. We are committed to a conservative program. balance sheet and we target long term leverage of approximately one times adjusted EBITDA inclusive of yesterday's acquisition closing. We remain well under that target. With that, I thank you for your time this morning.

I turn the call back to Daniel for a few closing thoughts.

Your first question comes from John Freeman.

Raymond James. Your line is open. Please go ahead.

And I want to thank again the entire White Hawk team. For the truly unrelenting work over the last five months and really over the last five years, I want to thank you all as our partners, shareholders, and everyone who works to drive value for White Hawk. We look forward to speaking to you over the coming days, weeks, and months. Bye.