Permian Resources - Divestiture Midstream Gathering Systems

[Petroleum economist]

Apologies, I posted this earlier, but I deleted this by accident.

MIDLAND, Texas – Permian Resources Corporation (NYSE: PR) (“Permian Resources” or the “Company”) today announced it has entered into a definitive agreement to sell its natural gas and oil gathering systems primarily located in Reeves County, Texas to Kinetik Holdings Inc. (NYSE: KNTK) (“Kinetik”) for a total cash consideration of $180 million, subject to customary post-closing adjustments. The divested natural gas and oil pipeline systems include a combination of both recently purchased and legacy company-owned midstream infrastructure and exclude any water infrastructure or surface acreage.

“We are excited to announce another divestiture of non-core assets at a price that is accretive over both the short and long-term, further streamlining our business and driving value for investors,” said James Walter, Co-CEO of Permian Resources. “The sale of these non-core infrastructure assets will allow us to continue our relentless focus on being the Delaware Basin’s lowest cost operator.”

“Kinetik has a strong track-record of operating midstream assets across the Delaware Basin, and we are pleased to partner with them on this transaction. Their extensive infrastructure and logistics expertise will continue to support the development of our high-return drilling inventory,” said Will Hickey, Co-CEO of Permian Resources.

This transaction will also allow Permian Resources to increase the amount of residue natural gas sold at Gulf Coast pricing over time, further reducing the Company’s exposure to in-basin Waha pricing. Additionally, the Company expects the transaction to have essentially no impact to its best-in-class cash operating costs. The transaction is expected to close during the first quarter of 2025, subject to regulatory approval.

Jefferies LLC acted as financial advisor and Kirkland & Ellis LLP acted as legal advisor to the Company in connection with the transaction.

About Permian Resources

Headquartered in Midland, Texas, Permian Resources is an independent oil and natural gas company focused on the responsible acquisition, optimization and development of high-return oil and natural gas properties. The Company’s assets and operations are concentrated in the core of the Delaware Basin, making it the second largest Permian Basin pure-play E&P. For more information, please visit www.permianres.com.

[dan_s]

This is relatively small transaction, which does not impact my valuation of $23/share.
It has no impact on 2024 results. It lowers interest expense in 2025, but increases gathering, processing and transportation expense by about the same amount (my WAG).

TipRanks: "In the last 3 months, 14 ranked analysts set 12-month price targets for PR. The average price target among the analysts is $18.54." The five most recent price targets are $17, $18, $19, $21 and $21.

All 14 analysts rate PR a BUY, which is rare to see during these "Days of Uncertainty".

PR closed yesterday at $15.02.

I like PR because it is an Aggressive Growth company that pays a decent dividend of $0.15/Qtr. for annualized yield of ~4%.
Year-over-year production growth:
2022A: 56.6% to 95,453 Boepd
2023A: 103.5% to 194,200 Boepd
2024E: 75.8% to 341,342 Boepd < Q4 estimated production mix of 46.8% crude oil, 28.5% natural gas & 24.7% NGL.

Q4 2024 production will be ~360,000 Boepd and my 2025 forecast is based on 365,000 Boepd. < My 2025 forecast is probably too conservative based on this year's excellent well results

In 2022, PR's realized natural gas price (including cash settlements on hedges) was $4.15/mcf. In 2024, PR's realized natural gas price will end up being around $0.73/mcf. If they can get back to just $2.00/mcf, it will increase the Company's revenues by approximately $300 million. PR's NGLs sold for $38.71/bbl in 2022. PR's 2024 NGLs are selling for approximately $22.00/bbl.

All of the Sweet 16 will benefit from higher natural gas and NGL prices in 2025.

My updated forecast/valuation model for PR will be posted to the EPG website this afternoon.