On Thursday, WhiteHawk Minerals (NYSE:WHK) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

WhiteHawk Minerals reported strong financial performance in Q2 2026 with a 57% increase in net production year-over-year and a 9% increase from Q1 2026.

The company executed acquisitions totaling nearly $112 million, expected to add significant cash flow and production by 2027.

WhiteHawk's strategic initiatives include a two-prong acquisition strategy and leveraging their position in the Marcellus and Haynesville Shales.

The company reported operating revenue of $25.7 million and adjusted EBITDA of $20.7 million, with a net loss of $39.2 million due to non-recurring costs.

Initiation of a quarterly dividend at $0.50 per share on an annualized basis, with a target to distribute at least 75% of cash available for distribution.

WhiteHawk maintains a strong balance sheet with net debt of $55.5 million and a conservative leverage target to support future acquisitions and shareholder returns.

Management highlighted significant future demand growth for natural gas, driven by LNG exports and power generation, positioning the company for long-term success.

Full Transcript

OPERATOR

We will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to John Ragazzino. Please go ahead.

John Ragazzino, Investor Relations

Good morning and welcome to WhiteHawk Minerals second quarter 2026 earnings conference call. Before we begin, please note that today's discussion may include forward-looking statements regarding the Company's financial condition, results of operations and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to WhiteHawk's SEC filings for a statement of discussion around these risk factors.

The Company undertakes no obligation to update these statements except as required by law. We may also reference certain non-GAAP financial measures; reconciliations to the most comparable GAAP measures are available in yesterday's earnings release on our website. With me on the call today are Daniel Herz, Chief Executive Officer, and Jeffrey Slaughterback, Chief Financial Officer. I'll now turn the call over to Daniel.

Daniel Herz, Chief Executive Officer

Thanks, John. Good morning and welcome to the inaugural WhiteHawk Minerals second quarter earnings call. Good to be back. To quote Plato from the Republic, the beginning is the most important part of the work. Plato's original meaning is of course much deeper than business and relates to education, character and the formation of the soul. I do believe this quote is directly applicable to WhiteHawk Minerals, though. We must create the right character and soul of our company, a character rooted in working every day to deliver for our shareholders, protecting the downside while benefiting meaningfully from the significant upside potential.

And we are off to an excellent start. 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 expenditures, this positions us to benefit from the tremendous work and capital deployment by EQT, Range, CNX, Antero, Expand and others, resulting in significant cash flow and dividends to our shareholders.

That means shareholders are directly tied to these operators while receiving significant returns through dividends and reinvestments through our acquisitions of additional minerals and royalties. We have previously discussed the two-prong acquisition strategy, strategic or larger acquisitions and ground game acquisitions. Since our initial public offering just two months ago, we have executed on both prongs, signing definitive agreements for acquisitions totaling nearly $112 million.

Those acquisitions, focused in the Marcellus Shale and Haynesville Shale, are expected to add approximately 16 million cubic feet per day in 2027, which we expect will add approximately $17 million of incremental cash flow. Further, we expect these assets to generate even more production and cash flow in 2028, placing the acquisitions squarely within and even to the low side of our 6 to 7 times acquisition cash flow multiple previously discussed.

When I consider the potential for WhiteHawk Minerals, I see several ways for us to succeed. First, our strategic and ground game acquisition strategy. Second, the exposure we have to the two most economic natural gas basins in the U.S. Third, our mineral and royalty ownership benefiting from the largest natural gas producers in the U.S. And fourth, the medium- and long-term significant tailwinds behind natural gas. While I consider these areas the primary drivers of value at WhiteHawk, I first and foremost balance that with protecting the downside risks, something we focus on every day and something I believe we have done a very good job at through our balance sheet and natural gas hedging strategy. I will discuss each of these drivers in more detail shortly, but first I want to briefly review our second quarter operation results and then later on hand it off to Jeff Slaughterback, our Chief Financial Officer, to review the financial results. We delivered a strong second quarter with net production of approximately 70 million cubic feet equivalents per day of natural gas. This was an increase of 57% over the same period in 2025 and a 9% increase over the first quarter of 2026.

We generated this production from our more than 11,500 producing wells. We have more than 500 gross line-of-sight wells positioning us for solid production from our asset base over the next year. We are then benefited from our more than 9,000 gross identified undeveloped locations across our 3.6 million gross unit acres in the Marcellus Shale. Ninety-six percent of our production came from EQT, Range, CNX and Antero. WhiteHawk currently receives royalties on 43% of their combined gross production.

That is, WhiteHawk receives 43% of their combined gross production. In the Haynesville Shale, 58% of our production came from Expand, Mitsubishi, Adamas, Comstock and Tokyo Gas. WhiteHawk currently receives royalties on 45% of their combined gross production. For the quarter, approximately 55% of our production came from the Marcellus and Utica Shale in Appalachia, with an additional 25% from our Haynesville Shale assets. Our line-of-sight wells carry a similar basin weighting and of course, as a reminder, we receive royalties on 13% of total U.S. natural gas production, making us what I believe is the premier natural gas mineral and royalty owner. Now to dig in deeper on how I expect WhiteHawk to succeed and outperform. With respect to our acquisition strategy and opportunities, we see between $3 billion and $5 billion of strategic acquisition opportunities in front of us in the Marcellus, Utica and Haynesville Shale. These are larger opportunities owned by private equity firms or funds later in their fund life.

We have limited competition for these opportunities and I believe our acquisition announcement today demonstrates the depth of our relationships and ability to execute. Furthermore, the ground game opportunity, where we buy from individual mineral owners, is well over 35 times our existing asset base or over $30 billion. We currently own a 0.51% royalty interest on our gross acreage position out of an average 17% royalty rate. And of course there are additional minerals surrounding our position that we are interested in purchasing.

To that point, given our massive footprint, we have tremendous data on our operators and on all of the wells on our position and the surrounding position, which I believe provides a unique data advantage. And not only do I believe it is a significant advantage to have the amount of information that we have, some of our operators agree and have entered into partnerships with us to buy on the ground ahead of the drill bit in defined areas—opportunities that augur well for WhiteHawk's acquisition future.

Next, being exposed to the two most economic natural gas basins has several benefits to WhiteHawk. First, development activity remains robust in both high and low natural gas price environments, which helps mitigate downside at WhiteHawk. Second, because we are in a power race, situating new natural gas power generation next to the most economic areas not only makes sense, it is exactly what is currently happening. There are 21 announced new or planned natural gas power plants to support data center and AI power demand surrounding our Appalachian assets, which is expected to add 7 billion cubic feet per day of natural gas demand in the Marcellus Shale by 2031. Finally, having our production and footprint in the Haynesville Shale gives us direct access to the growing liquefied natural gas export markets. Currently, there are 14 billion cubic feet per day of LNG export facilities under construction which should be online by 2030. So in total we expect 21 billion cubic feet per day of natural gas demand growth by 2031, much of which will be met by growth in the Marcellus, Utica and Haynesville Shale.

Third, our current and future production is tied to the largest natural gas producers in the United States. These operators spend billions of dollars per year developing our position, working with power companies, hyperscalers, LNG export facilities and many others to ensure both production and demand is balanced not just over the next year, but over the next decade and beyond. Benefiting from EQT, Range, Antero, CNX and Expand uniquely positions WhiteHawk to benefit from their expected growth.

And finally, the macro tailwinds of natural gas are very strong. I often say I want WhiteHawk to do well when prices go up and when prices go down. But with that said, when we look out over the next five years, it is extremely encouraging. I have touched on this already, but when we look at the demand growth from LNG exports and power generation for data centers and AI, we see a natural gas price environment which will demand higher prices to incentivize operators—our operators—to develop their position more quickly to meet that demand.

It is that simple and WhiteHawk Minerals will benefit. So we are off to a good start. But let's be clear, we are just getting started. There is a lot more to do on the acquisition side. We will remain disciplined, but we will take advantage of the opportunities as they come. Our asset base will then be even larger when the macro tailwinds develop into a higher natural gas price environment which should further drive shareholder returns beyond just the immediate accretion to cash flow and net asset value per share.

And in the meantime we will continue to work to drive our cash flow per share and grow our dividends to shareholders. With that, I will hand it over to Jeff to review the financial results.

Jeffrey Slaughterback, Chief Financial Officer

Thank you, Daniel, and good morning everyone. I appreciate you all joining us today for WhiteHawk's first earnings call as a public company. Over the next several minutes I'll walk you through our second quarter results starting with our operating revenue and cash flows. I'll also cover the initiation of our quarterly dividend and close with a look at our balance sheet and liquidity before we open the line for questions. During the second quarter 2026, our average realized natural gas price for the quarter was $3.43 per Mcf including hedge settlements, compared to $2.42 per Mcf before the effect of those hedge settlements.

For context, Henry Hub first-of-the-month pricing averaged $2.90 per MMBtu for the quarter. Our natural gas volumes were 96% hedged at $4.02, while our oil volumes were 83% hedged at $62. 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. On a forward-looking basis, we look to lock in through fixed price swaps 90% of our production for the next 12 months, 80% of our production for the following 12 months and 60% of our production in year three.

The intent is to keep protecting our downside while retaining exposure to the upside from our acquisition strategy, our operators' continued development of their positions, and the long-term tailwinds for natural gas supply and demand. Moving to our financial results, our operating revenue, which includes the realized gains on our hedging instruments, was $25.7 million for the second quarter. Total asset cash flow was $22.4 million for the quarter, including the $3.3 million, or $0.52 per Mcfe, of operating expenses incurred during the period which are included within revenue on our income statement.

Total asset cash flow for the second quarter represented a 10% increase from $20.4 million realized in the first quarter of this year. On a GAAP basis, our total revenue was $29.1 million, including an additional $6.7 million in unrealized mark-to-market hedge gain. Our adjusted EBITDA, which is effectively comprised of our asset cash flows less G&A expenses, was $20.7 million for the second quarter after giving effect to our $1.78 million of G&A expense, which excludes certain non-recurring IPO and other transaction-related costs below EBITDA.

Let me cover our financing costs and taxes for the period, which our earnings release presents as adjusted for the effects of the IPO. Concurrent with the closing of the IPO, we reduced our senior notes to $75 million outstanding which bore interest at an 8.5% effective rate, giving an implied net interest expense of $1.6 million for the quarter. Also pro forma for the IPO, we have $46 million of Series B preferred stock outstanding which pays a 10% coupon, or $1.2 million for the quarter.

During the second quarter, we paid $550,000 of estimated cash income taxes during the period related to 2026. In total, our cash available for distribution for the second quarter was $17.4 million, or $0.63 on a per share basis, based on our $20.7 million of adjusted EBITDA for the period. 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 and on our website.

On a GAAP basis next, net income for the period—which includes costs associated with our IPO and the internalization of our former external manager—specifically, $21.7 million non-recurring loss on the extinguishment of debt, $15.8 million of non-recurring management and incentive fees, and a $1.7 million non-cash change in the fair value of our earn-out liability—resulted in a net loss of $39.2 million. Which brings me to our dividend. On August 12th, our board approved the initiation of our first quarterly cash dividend at a rate of $0.50 per share, or $2.00 per share on an annualized basis.

This initial dividend has been prorated for the period from the closing of the IPO on June 10th through quarter end, resulting in an initial declared dividend of $0.11 per share. That dividend is payable on August 28th to shareholders of record as of the close of business on August 24th. Our $0.50 dividend implies 1.3 times coverage by cash available for distribution per share on a full quarter basis and reflects our expectation to pay out at least 75% of our cash available for distribution as a public company.

Finally, before opening the line for questions, let me turn to our balance sheet and liquidity. In June, WhiteHawk completed its IPO, generating gross proceeds of over $220 million, including our exercise of the green shoe over-allotment. With the IPO proceeds, we repaid more than $162 million in debt in total, reducing our notes outstanding to $68.7 million. At quarter end, we fully retired $37.8 million of our Series B preferred equity and additionally redeemed approximately $10 million of our Series B preferred equity.

We exited the quarter with net debt of just $55.5 million and maintained an undrawn $150 million revolving credit facility. As of quarter end, we were 0.67 times levered. In order to fund the approximately $112 million in acquisitions signed since our IPO, we have received commitments to fund a $50 million Series E preferred at closing of the SJM2 acquisition in late September. The Series E preferred will initially bear a coupon of 10% and can be redeemed at any time.

We are committed to a conservative balance sheet and we target long-term leverage of approximately one times adjusted EBITDA. Maintaining that discipline protects our dividend, preserves our flexibility to act quickly on acquisition opportunities, and is fundamental to how we intend to build long-term per share value for our shareholders. With that, I thank you for your time this morning. Rebecca, could we please open the line for questions?

OPERATOR

We will now begin the question and answer session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Wayne Cooperman with Cobalt Capital.

Please go ahead.

Wayne Cooperman, Analyst at Cobalt Capital

Hey, guys. Congratulations. Good first quarter. My question is kind of longer term on your hedging strategy. There's a pretty strong case out there that gas prices are going to be materially higher a few years from now. At what point do you kind of pull back from hedging, or do you just think that the future curve will get it right and you'll just keep riding the curve?

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.