Permian Resources Corporation (“Permian Resources”) (NYSE: PR) announced its first quarter 2024 financial and operational results and revised 2024 guidance.
Recent Financial and Operational Highlights
- Delivered Permian Resources’ best quarter to-date:
- Production outperformance due to accelerated Earthstone efficiencies and continued strong well results
- Robust free cash flow driven by operational execution and realization of cost synergies
- Earthstone integration completed ahead of schedule
- Earthstone annual synergy target increased by $50 million to $225 million
- Executed ~$270 million of additional bolt-on acquisitions in core operating areas
- Reported crude oil and total average production of 151.8 MBbls/d and 319.5 MBoe/d (~48% oil) during the quarter
- Announced cash capital expenditures of $520 million, net cash provided by operating activities of $648 million and adjusted free cash flow1 of $324 million ($0.42 per adjusted basic share)
- Reported total return of capital of $185 million, or $0.24 per share, implying a total annualized return yield of ~5.7%2:
- Quarterly base dividend of $0.06 per share
- Variable dividend of $0.14 per share
- Repurchased 2.0 million shares for $31 million
- Added ~11,200 net acres and ~110 locations in the Delaware Basin through recent transactions
- Increased mid-point of full year oil and total production guidance by 2% to 150 MBbls/d and 320 MBoe/d
Management Commentary
“In our first full quarter post closing Earthstone, Permian Resources delivered strong operational and financial results, building upon our operational momentum from last year,” said Will Hickey, Co-CEO of Permian Resources. “Outstanding well results and higher operational efficiencies across both legacy Permian Resources and Earthstone assets drove robust production during the quarter. This outperformance provided us with the confidence to increase standalone production guidance and represents a solid start to the year.”
“This quarter’s strong results allowed us to generate $324 million of adjusted free cash flow, or $0.42 per share,” said James Walter, Co-CEO of Permian Resources. “Additionally, we continue to enhance our position through strategic leasehold and bolt-on acquisitions, adding high-quality inventory directly offset our most capital efficient asset that immediately competes for capital. We believe Permian Resources’ leading cost structure, basin knowledge and balance sheet strength will continue to drive attractive opportunities to grow our already deep inventory position in an accretive manner.”
Operational and Financial Results
Permian Resources continued the efficient development of its core Delaware Basin acreage position in the first quarter, delivering excellent well results while successfully integrating the Earthstone acquisition. During the quarter, average daily crude oil production was 151,794 barrels of oil per day (“Bbls/d”), an 11% increase compared to the prior quarter. First quarter total production averaged 319,514 barrels of oil equivalent per day (“Boe/d”). “Our strong first quarter production results were primarily driven by better than expected well performance, strong production runtimes and acceleration from continued operational efficiencies,” said Will Hickey, Co-CEO.
The Company was able to accelerate activity due to strong drilling and completion (“D&C”) synergy capture, driving increased D&C efficiencies program-wide. As of May 1, the Company is no longer utilizing any Earthstone drilling rigs or completion crews, and the Earthstone assets are fully integrated from a D&C perspective. Total cash capital expenditures (“capex”) for the first quarter was $520 million.
Realized prices for the quarter were $76.13 per barrel of oil, $1.24 per Mcf of natural gas and $26.47 per barrel of natural gas liquids (“NGLs”), excluding the effects of hedges and GP&T costs. First quarter total controllable cash costs (LOE, GP&T and cash G&A) were $8.11 per Boe. LOE was $5.80 per Boe, GP&T was $1.34 per Boe and Cash G&A was $0.97 per Boe.
For the first quarter, Permian Resources generated net cash provided by operating activities of $648 million, adjusted operating cash flow1 of $844 million ($1.09 per adjusted basic share) and adjusted free cash flow1 of $324 million ($0.42 per adjusted basic share).
Permian Resources continues to maintain a strong financial position and low leverage profile. At March 31, 2024, the Company had $13 million in cash on hand and $60 million drawn under its revolving credit facility. Net debt-to-LQA EBITDAX1 at March 31, 2024 was approximately 1x. Permian Resources recently completed its spring borrowing base redetermination process, whereby elected commitments increased to $2.5 billion from $2.0 billion, providing an additional $500 million of liquidity. The borrowing base remains unchanged at $4.0 billion. Also subsequent to quarter-end, the Company redeemed the $356 million aggregate principal amount of 6.875% Senior Notes due 2027.
Earthstone Integration Update
The integration of Earthstone is complete, and synergy capture is meaningfully ahead of schedule. Overall, the Company’s success in both the acceleration and magnitude of synergies captured to-date has resulted in an increase of $50 million to the previously stated annual synergy target of $175 million, bringing the updated synergy target to $225 million per year.
As a result of the successful integration and synergy realization, during the quarter the Company reduced average spud-to-rig release days by 18% per well and average completion days by 50% per well on legacy Earthstone acreage compared to Earthstone’s results from the first half of 2023. Additionally, Permian Resources has improved legacy Earthstone runtimes, benefiting overall production volumes, and realized approximately $1 per Boe of LOE and margin synergies through workover, compressor and midstream optimization initiatives.
“We are pleased to have achieved our original synergy target ahead of schedule and excited to increase our annual target to $225 million,” said James Walter, Co-CEO. “I’m incredibly proud of both legacy companies’ employees for ensuring such a smooth integration. Their hard work and dedication were key to such an efficient synergy capture.”
Recent Acquisitions
Permian Resources continues to strengthen its acreage position in the core of the Delaware Basin, announcing two bolt-on acquisitions and additional properties acquired through its ongoing grassroots program.
The Company recently executed two separate bolt-on transactions located in Eddy County, New Mexico from undisclosed third-parties. The acquired properties consist of predominantly undeveloped acreage offset Permian Resources’ highly capital efficient Parkway asset. Inventory on the acquired acreage comprises two-mile locations with high NRIs which immediately compete for capital. The Company closed upon the first transaction during the first quarter, and the second transaction is currently pending with closing expected to occur late in the second quarter.
“The acquired acreage is analogous to our high-quality Parkway position. This area represents one of the highest returning assets within our portfolio, with returns driven by reduced D&C costs and strong oil cuts. We are excited to begin development on the acquired acreage later this year,” said Will Hickey, Co-CEO.
Additionally, Permian Resources continues to be highly successful executing upon its ground game, consisting of smaller grassroots acquisitions and leasehold transactions. During the first quarter of 2024, the Company completed approximately 150 grassroots leasing and working interest acquisitions. The majority of these acquisitions are slated for near-term development, making them highly accretive.
Combined, the Company added approximately 11,200 net leasehold acres and 4,500 net royalty acres for total consideration of approximately $270 million, reflecting an acquisition value of approximately $9,500 per net leasehold acre and approximately $5,000 per net royalty acre after adjusting for production value. Permian Resources has identified approximately 110 gross operated locations on the acquired properties. In total, these acquisitions contributed less than 100 Boe/d of total production in the first quarter.
(The transactions referenced in this press release are additive to the Company’s Portfolio Optimization Transactions which were announced on January 30, 2024. For maps and further details summarizing Permian Resources’ recent transactions, please see the presentation materials on its website under the Investor Relations tab.)
2024 Operational Plan and Target Update
Based on recent operational results, Permian Resources increased its 2024 standalone oil and total production targets by approximately 2% to 148-152 MBbls/d and 310-330 MBoe/d, respectively, based on the mid-point of guidance. There are no other changes to the Company’s standalone guidance ranges.
The recent acquisitions noted above are expected to add approximately 3,500 Boe/d (~45% oil) of total production during the second half of 2024. The Company expects approximately $50 million of incremental capital expenditures associated with wells spud on the newly acquired acreage during the second half of 2024. Notably, the potential impact of the recently announced acquisitions is not included in the revised standalone guidance.
Shareholder Returns
Permian Resources announced that its Board of Directors (the “Board”) declared a quarterly base cash dividend of $0.06 per share of Class A common stock, or $0.24 per share on an annualized basis. This represents a 20% increase in the Company’s base cash dividend compared to the prior quarter. Additionally, based upon first quarter financial results, the Board has declared a quarterly variable cash dividend of $0.14 per share of Class A common stock. Combined, the base and variable dividends represent a total cash return of $0.20 per share. The base and variable dividends are payable on May 29, 2024 to shareholders of record as of May 21, 2024. Permian Resources returned additional capital to shareholders in the first quarter by repurchasing 2.0 million shares of common stock for $31 million. The Company’s first quarter total return of capital, inclusive of the base dividend, variable dividend and share repurchases, was $0.24 per share.
Quarterly Report on Form 10-Q
Permian Resources’ financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, which is expected to be filed with the Securities and Exchange Commission (“SEC”) on May 8, 2024.
