Executive Summary / Key Takeaways

• Infinity Natural Resources (INR) leverages a unique, balanced portfolio of oil-weighted assets in Ohio and natural gas-weighted assets in Pennsylvania, providing strategic flexibility to optimize development based on evolving commodity markets.
• The company demonstrated strong operational execution in Q1 2025, its most active quarter to date, achieving significant production and revenue growth driven by new wells brought online ahead of schedule and on budget.
• A robust balance sheet, significantly strengthened by $286.5 million in net proceeds from its recent IPO used to pay down debt, provides ample liquidity and flexibility for organic development and potential M&A.
• INR is maintaining its 2025 capital expenditure guidance ($240M-$280M D&C, $9M-$12M Midstream) and is strategically accelerating natural gas development in the second half of the year in response to more constructive gas price outlooks.
• Operational efficiency, including the development of long lateral wells and leveraging owned midstream infrastructure, contributes to competitive per-unit operating costs and high discounted returns on investment (DROIs), secured further by an active hedging program.

Setting the Appalachian Stage

Infinity Natural Resources, Inc. (INR) is an independent energy company focused on the acquisition, exploration, and development of oil, natural gas, and natural gas liquids (NGLs) within the Appalachian Basin. Since its founding in 2017, the company has strategically built a differentiated asset base spanning the Utica Shale's volatile oil window in eastern Ohio and the Marcellus and emerging deep dry gas Utica plays in southwestern Pennsylvania. This balanced portfolio, encompassing approximately 93,000 net surface acres, provides a deep inventory of high-return drilling locations. INR's operational model emphasizes disciplined development of low-risk assets, leveraging long lateral drilling techniques and company-owned midstream infrastructure to enhance project economics.

The Appalachian Basin is a dynamic and competitive landscape dominated by several larger players. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, INR operates alongside significant producers like CNX Resources (CNX), EQT Corporation (EQT), Chesapeake Energy (CHK), Antero Resources (AR), and Range Resources (RRC). Compared to these peers, INR positions itself as a growth-oriented entity with a unique degree of operational flexibility. While larger competitors like EQT and CNX benefit from scale and established cost efficiencies, INR's balanced exposure to both oil and gas allows it to pivot capital allocation more dynamically in response to market signals. INR's revenue growth rate, at 18.7% year-over-year (based on 2024 figures), outpaces some larger, more mature producers like CNX (12%) and EQT (15%), indicating strong top-line expansion. However, its net profit margin (13.2% TTM) trails the higher profitability demonstrated by some peers (e.g., CNX 15-20%, EQT 25%), suggesting areas for potential operational efficiency gains relative to the basin's cost leaders.

INR's competitive edge, or operational moat, stems from its integrated approach and focus on long lateral development. While not relying on proprietary patented technology, the company's expertise in executing complex horizontal drilling, including recent wells averaging approximately 19,000 feet in Ohio, contributes to higher resource recovery per well. Leveraging company-owned midstream assets in Pennsylvania for stacked Marcellus and Utica development further optimizes costs and enhances project economics. This operational capability allows INR to secure high discounted returns on investment (DROIs) for its projects. The ongoing evaluation of the deep dry gas Utica potential in Pennsylvania represents a key area for future inventory expansion, building on existing infrastructure and operational knowledge.

Performance Reflecting Strategic Execution

The first quarter of 2025 marked a significant period for INR, representing its most active operational quarter to date. The company successfully turned six wells into sales – one oil well in the Ohio Utica and five natural gas wells in the Pennsylvania Marcellus – bringing its total operated well count to 119. This activity drove a substantial increase in production volumes, averaging 26,546 Boe per day, a 25% increase compared to the first quarter of 2024. This growth was primarily fueled by the seven long lateral oil wells brought online in Ohio since late 2024 and the five Marcellus wells placed into production late in Q1 2025.

Financially, this operational momentum translated into robust revenue growth. Total oil, natural gas, and NGL sales surged by 69%, from $49.8 million in Q1 2024 to $84.2 million in Q1 2025. Oil revenues increased by 73% to $47.0 million, NGL revenues by 52% to $14.3 million, and natural gas revenues by 72% to $22.8 million.

While average realized oil prices decreased by 7% due to lower NYMEX WTI and wider regional differentials, higher average realized prices for natural gas (+82%) and NGLs (+3%), combined with the significant volume increases, more than offset this decline. Midstream activities also saw a notable increase, though remaining a smaller revenue component, growing from $0.4 million to $1.0 million.

Operating expenses reflected the increased activity and production. Gathering, processing, and transportation (GPT) costs rose in absolute terms to $12.1 million but decreased on a per Boe basis, benefiting from lower weighted average costs in Ohio's midstream systems. Lease operating expenses (LOE) saw a slight absolute increase to $7.4 million but a decrease per Boe, attributed to fixed and semi-variable costs spread across a higher well count. Depreciation, depletion, and amortization (DDA) increased to $21.3 million, primarily driven by higher production volumes and a higher average DDA rate. General and administrative (GA) expenses saw a substantial increase to $131.8 million, predominantly due to a one-time, non-cash stock compensation charge of $126.1 million associated with the IPO, in addition to higher payroll costs from increased headcount. The company also recognized a net gain on derivative instruments of $37.2 million in Q1 2025, reflecting changes in fair value and cash settlements.

Strengthening the Balance Sheet and Funding Growth

A pivotal event for INR was the completion of its initial public offering in February 2025. The IPO generated net cash proceeds of approximately $286.5 million, which the company strategically utilized to repay substantially all outstanding borrowings under its Credit Facility.

This significantly de-levered the balance sheet, resulting in minimal net debt ($7 million at quarter end) and boosting liquidity.

As of March 31, 2025, the company's Credit Facility, which was recently increased from $325 million to $350 million, had only $11.3 million outstanding, leaving $338.7 million of unused capacity. This strong liquidity position and minimal debt provide INR with significant financial flexibility. It enables the company to fund its planned capital expenditures primarily through a combination of cash flows from operations and additional borrowings under the Credit Facility, while also positioning it to evaluate strategic opportunities, including potential mergers and acquisitions, for both oil and natural gas assets. The company was in compliance with its Credit Facility financial covenants (current ratio not less than 1.00 to 1.00 and leverage ratio no greater than 3.00 to 1.00) at the end of the quarter.

Outlook and Strategic Optionality

INR is maintaining its previously provided full year 2025 capital expenditure guidance, with a drilling and completion budget of $240 million to $280 million and midstream capital expenditures of $9 million to $12 million. The company anticipates capital spending to remain elevated in the first half of the year due to the high activity levels in Q1 and planned completion activities in Q2, before declining in the second half as the operational cadence shifts to one rig and one frac crew.

Management's strategic response to the current commodity market environment, characterized by caution regarding oil prices and more constructive sentiment for natural gas, highlights the value of INR's balanced portfolio. The company has elected to accelerate a natural gas development project, originally slated for later years, with drilling expected to begin this summer. Concurrently, INR is reviewing its oil-weighted development plans for the second half of the year, maintaining flexibility to allocate capital based on estimated project returns. This dynamic approach allows INR to optimize returns as market conditions evolve, leveraging its deep inventory of approximately 325 undeveloped locations across both operating areas, which represents nearly two decades of high-quality development opportunities. The company's hedging program remains a key component of this strategy, securing high DROIs on planned projects and providing downside protection against price volatility.

Risks and Considerations

Despite the positive operational momentum and strengthened balance sheet, investors should be mindful of inherent risks in the E&P sector. Commodity price volatility remains the most significant factor influencing INR's revenues, profitability, and cash flows. While hedging mitigates some of this risk, it also limits upside potential. The cyclical nature of the industry can also lead to fluctuations in the cost and availability of oilfield goods and services, potentially exacerbated by inflationary pressures. Operational risks, including those associated with drilling and completion activities, weather conditions (as experienced in Q1), and supply chain disruptions, could impact production volumes and costs. Regulatory changes and environmental compliance obligations also pose potential challenges. Furthermore, while the company manages counterparty and customer credit risk, the concentration of sales among a relatively small number of customers is a factor to monitor.

Conclusion

Infinity Natural Resources has successfully transitioned to the public market, leveraging the IPO proceeds to significantly strengthen its balance sheet and enhance financial flexibility. The first quarter of 2025 demonstrated strong operational execution and growth, validating the company's development capabilities in the Appalachian Basin. INR's core investment thesis is underpinned by its unique, balanced portfolio of oil and natural gas assets, which provides strategic optionality in a volatile commodity price environment. The company's ability to dynamically allocate capital, coupled with its deep inventory of high-return locations and operational expertise in executing long lateral wells and utilizing owned infrastructure, positions it for continued growth. While exposed to inherent industry risks, particularly commodity price fluctuations, INR's proactive hedging strategy and robust liquidity provide resilience. The company's focus on disciplined development and potential accretive M&A, supported by its strong financial position, suggests a compelling narrative for investors seeking exposure to a growth-oriented Appalachian E&P player with strategic flexibility. Monitoring the execution of its accelerated gas development plan and its approach to oil projects in the second half of the year will be key for assessing future performance.