MACH NATURAL RESOURCES LPMNR
MACH NATURAL RESOURCES LP Stock Compensation Disclosure
Equity Compensation Plans
Equity-based compensation includes unit-based payment awards that are issued to employees and non-employees in exchange for services provided to the Company. Equity-classified unit-based payment awards are recognized at fair value on the grant date and amortized over the requisite service period. For awards with service-based vesting conditions only, the Company recognizes compensation cost using straight-line attribution. The Company uses accelerated attribution for awards that contain market or performance-based vesting conditions. The Company recognizes forfeitures as they occur. Equity-based compensation is presented within general and administrative expense on our consolidated statements of operations.
Post-Offering Grants
On October 27, 2023, the Company adopted a new long-term incentive plan (the “Long-Term Incentive Plan”) for employees, consultants and directors in connection with the Offering. The Company issues phantom units (“Time-Based
Phantom Units”) to certain employees of Mach Resources LLC (“Mach Resources”) and directors of the Company as compensation for services rendered to the Company. The Time-Based Phantom Unit awards for all employees of Mach Resources vest ratably on the first anniversaries of the date of the grant, subject to the employee’s continued employment. Within 60 days of the vesting of a Time-Based Phantom Unit, the employee will receive a common unit of the Company. Each Time-Based Phantom Unit was granted with a corresponding distribution equivalent right (“DER”), which entitles the employee to receive a payment equal to the total distributions paid by the Company in respect of a common unit of the Company during the time the applicable phantom unit is outstanding. Payment of a DER occurs when its corresponding phantom unit vests, and in the event such phantom unit is forfeited, the corresponding DER is also forfeited.
| Time-Based Phantom Units | Weighted Average Grant Date Fair Value | Performance Phantom Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Unvested at December 31, 2023 | 709,545 | $ | 18.80 | — | $ | — | |||||||||||||||||
Granted1 | 626,109 | $ | 16.44 | 47,796 | $ | 25.21 | |||||||||||||||||
| Vested | (292,493) | $ | 18.80 | (7,242) | $ | 29.02 | |||||||||||||||||
Forfeited/Cancelled2 | (19,841) | $ | 18.75 | (1,932) | $ | 20.44 | |||||||||||||||||
| Unvested at December 31, 2024 | 1,023,320 | $ | 17.36 | 38,622 | $ | 24.88 | |||||||||||||||||
| Granted | 1,220,591 | $ | 12.93 | 72,759 | $ | 19.61 | |||||||||||||||||
| Vested | (424,753) | $ | 17.40 | — | $ | — | |||||||||||||||||
Forfeited/Cancelled2 | (70,651) | $ | 16.22 | (19,853) | $ | — | |||||||||||||||||
| Unvested at December 31, 2025 | 1,748,507 | $ | 14.31 | 91,528 | $ | 21.44 | |||||||||||||||||
| (1) | For performance phantom units, the impacts of performance share unit grants that vested higher than 100% of the target are included in this row. | ||||
| (2) | For performance phantom units, the impacts of performance share unit grants that vested at 0% are included in this row. | ||||
Total non-cash compensation cost related to the Time-Based Phantom Units was $8.5 million and $6.1 million for the years ended December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, there was $22.5 million of unrecognized compensation cost related to phantom units that is expected to be recognized over a weighted average period of approximately 2.26 years.
The aggregate fair value of share based awards that vested during the year ended December 31, 2025 was approximately $5.3 million based on the unit price at the time of vesting.
The Company has awarded performance based phantom units (“Performance Phantom Units”) to certain of its executive officers under the Long-Term Incentive Plan. The number of common units issued pursuant to each Performance Phantom Unit award agreement will be from 0% to 200% of the target number of Performance Phantom Units thereunder based on a combination of the Company’s (i) total shareholder return (“TSR”), (ii) relative TSR compared to the TSR of the companies in the Company’s designated peer group and (iii) total recordable incident rate, in each case, for the applicable performance period. The Performance Phantom Unit awards are broken into two categories: long-term performance units, which have a three-year performance period, and short-term performance units, which are broken into separate one-year tranches with performance periods in each one-year period. Performance Phantom Units vest based on the achievement of the applicable performance metrics at the end of the applicable performance period, subject generally to the applicable executive officer’s continued employment through such performance period. Within 60 days of the vesting of a Performance Phantom Unit, the executive officer will receive a common unit of the Company. Each Performance Phantom Unit was granted with a corresponding DER. Payment of any such DER occurs when its corresponding Performance Phantom Unit vests, and in the event such Performance Phantom Unit is forfeited, the corresponding DER is also forfeited. The grant date fair values of the Performance Phantom Units with market conditions were determined using the Monte Carlo simulation method and are being recorded ratably from the grant date to the end of the applicable performance period.
The table below summarizes the assumptions used in the Monte Carlo simulation to determine the grant date fair value of Performance Phantom Units granted during the years ended December 31, 2025 and 2024:
| Grant date | May 3, 2024 | January 1, 2025 | |||||||||
| Period for volatility, correlations, and risk-free rate | 2.66 years | 3.00 years | |||||||||
| Risk-free interest rate | 4.61% | 4.23% | |||||||||
| Implied equity volatility | 57.25% | 50.57% | |||||||||
| Unit price on date of grant | $20.44 | $17.18 | |||||||||
Total non-cash compensation cost related to the Performance Phantom Units was $0.9 million and $0.4 million for the years ended December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, there was $1.0 million of unrecognized compensation cost related to phantom units that is expected to be recognized over a weighted average period of approximately 1.64 years. The Long-Term Incentive Plan initially authorized the Company to issue 9.5 million units, and the total amount authorized increases by 5% of the outstanding units at the end of each year.
Predecessor Grants
As part of the Predecessor’s amended and restated LLC agreement as of March 25, 2021, incentive units (Class B Units) and Class A-2 Units were issued to certain employees of Mach Resources as compensation for services to be rendered to the Predecessor. In determining the appropriate accounting treatment, the Predecessor considered the characteristics of the awards in terms of treatment as stock-based compensation.
The incentive units were subject to graded vesting over a period of approximately 3 years (subject to accelerated vesting, as defined by the incentive unit agreement) and a holder of incentive units would forfeit unvested incentive units upon ceasing to be an employee of Mach Resources, excluding limited exceptions. Holders of incentive units were able to participate in distributions upon the Predecessor meeting a certain requisite financial internal rate of return threshold as defined in the Predecessor’s amended LLC agreement.
A summary of the Predecessor’s incentive unit awards as of December 31, 2025 is as follows:
| Predecessor Class B Units | Weighted Average Grant Date Fair Value | ||||||||||
| Unvested at December 31, 2022 | 6,668 | $ | 2,378.80 | ||||||||
Vested | (6,668) | $ | 2,378.80 | ||||||||
| Unvested at December 31, 2023 | — | N/A | |||||||||
On October 25, 2023, all unvested Class B Units immediately vested and were exchanged for common units in the Company as part of the Corporate Reorganization. Total consideration transferred in the exchange of Class B Units for common units was $302.7 million. All unrecognized compensation costs were expensed upon the vesting of the Class B Units. As of December 31, 2025, there was no unrecognized compensation cost related to incentive units.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.