Permian Resources (PR) Valuation Update - Feb 28

[dan_s]

At the time of this post PR was trading for $15.55

I have updated my forecast/valuation model for their Q4 2023 results, which beat my forecast, and their detailed guidance for 2024.
I have increased my current valuation by $2 to $21.50. < A lot of the Wall Street Gang was on the Q4 conference call and the tone was very upbeat. I expect some upgrades for PR from the Gang today.

My updated forecast for PR will be posted to the EPG website later this morning.

Key for this one is the closing of the merger with Earthstone Energy on 11-1-2023 and the smooth transition of the acquired assets and staff. It takes good people and hard work to get deals of that size closed.

PR should deliver steady production growth from 285,161 Boepd in Q4 2023 to a 2024 exit rate over 330,000 Boepd. Production mix s/b ~47% crude oil, 23% NGLs and 30% Ngas.

PR has a lot of high-quality "Running Room" in New Mexico, which will be the focus of this year's drilling program. We can expect to see strong well results quarter-after-quarter. Some of the best rock in Permian Basin is in New Mexico.

2024 operating cash flow should be $3.4 to $3.5 billion, with free cash flow of $1.3 to $1.6. FCF will be impacted by lower completed well costs this year. 50% of FCF after the Base Dividend will be returned to shareholders as variable dividends and stock buybacks.

Northern Oil & Gas (NOG) owns a significant non-op working interest in a lot of the Delaware Basin leasehold acquired by PR in the ESTE merger. This is one of primary reason that I am bullish on NOG.