Energy Prospectus

Notes below are from Neal Dingmann at Truist Financial

Permian Resources Corporation (PR)
Stock Unaltered After Systematic Sale with Company Participation
Not surprisingly, Permian Resources priced a 21.45mm deal from existing holder NGP
Energy (Private) that was well-received given today's performance. We believe investors
continue to appreciate the operational prowess of PR along with their shareholder
alignment as seen by the 2.2mm shares repurchased with the latest deal along with senior
management’s stock ownership and compensation. We are raising our PT to $19 from $18.
We continue to consider the company one of the premiere producers as judged by their low
operating costs and solid organic/external execution. We believe PR is set up for a solid
2H23 along with '24 potentially achieving a +20% yield.

Orderly Overhang Process
We believe much of investors' future concerns over PR’s equity overhang should largely
be put to bed after seeing the results of the last two equity issuances. While ~41% of total
shares remain in private equity hands, we believe these sophisticated investors have a solid
relationship with PR as seen by Project Allies that enables future deals to be company
led/company marketed. As such, we think the likely result should be an orderly exit that
potentially has little impact on the share price much like the recent transaction.

Operations on Point
We estimate PR to achieve 10%+ exit to exit production growth with notable upside to come
as we expect Earthstone (ESTE, Buy) to close late this year contributing ~33% to total
earnings. Our well analysis suggests most PR wells continue to improve after a not surprising
relatively sluggish start this year. We continue to forecast stable linear growth that likely
will not change as ESTE is added. We suggest $150mm+ synergies post deal that should
continue to improve as PR brings wells online likely $1mm+ less than ESTE was previously
running. Further, in our view, the company is on track to likely recognize 10% YoY 2024
deflation that should boost upside even more.

Raising Price Target to $19 From $18
We have updated our model post the latest deal, which minimally changes our estimates.
We continue to include the ESTE acquisition in our model given our view of a high likelihood
of the deal closing. As stated in our prior note, we view the accretive deal as a smart way to
position the proforma company as one of the strongest Permian companies under coverage.
Our $19 price target is derived from two equally weighted methodologies, with the first
being our ’24 EV/EBITDAX multiple of 4.0x (3.8x peer group average) applied to our 2024E
EBITDAX estimate of $4,370MM (consensus of $3,966MM) and the second being a FCF/
EV Yield assumption of 13.0%.

13 % FCF yield …

I like to see someone buyout PR and pay 4 x - 5x EBITDAX

This may be a very basic question--- when an analyst gives a price target, I interpret that target as the expected future price assuming all underlying assumptions turn out to be correct. The price target should not be interpreted as the value that someone or some company would expect to pay today.

Is this not correct?

yes, Dan generally uses 4 x times ebitda

Recent actual deals area around 3 x, Vtle 2.9 x. So he is assuming the multiple will expand as oil goes higher and production increases happens,. He calls that the paradigm shift. Energy is under owned When everyone gets the message it's not going away they will bid prices higher

Most analysts call them 12-month price targets, but when you look at their models they look more like a current valuations.

Lots of variables, but production volumes and commodity price assumptions are the primary drivers for upstream oil & gas companies. My "current valuations" are based on what I think the company is worth today. My valuation multiples are based on strength of the balance sheet, ability to fund future growth with operating cash flow, dividend programs, stock buybacks and "running room" (deep inventory of low-risk development drilling locations). Prime Takeover Targets are companies with lots of running room.

IMO Permian Resource will be a Prime Takeover Target after they close the merger with Earthstone.

My forecast/valuation models are "tools" you should learn how to use. They are macro driven Excel spreadsheets, so if you change production and commodity price assumptions at the bottom, they automatically update revenues, net income, operating cash flow and stock valuations. I do show several other analysts' "price targets" on each model.

Dan, I really appreciate your analysis of all the companies. What is so very frustrating to all of us is that the stock price action is often hard to understand (as the last few days when several stocks have tanked such as SBOW). Also believe that stocks such as EOG, PXD, DVN, FANG are very under valued considering their size and safety. I own all of them in significant positions but my also have large positions in ESTE, VTLE, ZPTAF and KGEIF,

Just remember that oil & gas prices never move up or down in a straight line for very long. Also, stock prices don't always move in lockstep with the commodity prices.
> The commodity prices, especially oil, are determined on a daily basis by Paper Traders, many of which are Day Traders.
> The oil price you see here each day is the front month NYMEX contract. Leading up to the expiration date of the front month contract there can be some wild swings since the Paper Traders must close their positions. OCT23 for WTI expired yesterday. NOV23 is now the front month contract for WTI. If it goes up today, it will confirm that the oil price rally is still underway. The global oil market is EXTREMELY TIGHT and nothing that is going to change that anytime soon.
> Small-Caps like SBOW are high beta stocks because they have a relatively low share counts and low trading volume. VTLE is in the same boat.

I view SilverBow's recent equity raise as a good thing for two reasons.
> It needs to increase the number of outstanding shares to increase the trading volume.
> I prefer that small-caps make large acquisitions with a combination of debt & equity. It keeps the balance sheet "in balance". Would you rather see the Company load up on more debt? Not me.

Even with the equity raise, SilverBow only has 26 million shares outstanding. That is low for a company that will be producing over 100,000 Boepd soon after the Chesapeake South Texas Acquisition closes in November. This is a BIG DEAL for a company of this size. How "transformative" it actually is depends on where oil prices go from here. If WTI averages $90/bbl in 2024, SilverBow's revenues should be approximately $1.5 billion next year. The Company's total revenues (net of cash settlements on their hedges) were $336.6 million in 2021, $541.1 million in 2022, and they should be $782.1 million in 2023 (based on my forecast). SilverBow is a classic "Aggressive Growth" company. Hang tough.

>"several stocks have tanked"

Please use a softer term like "drifted substantially lower"

What I do when I see them go lower is I buy more assuming I buy in to the bull thesis. I like bargains

I added to a number of names this week

Baytex
Surge
Rok
Mgy
Ipoof
Gengf
MTDR

There's one name I sold which will remain nameless.