Permian Resources (PR) Q2 Results - Aug 7

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2nd Quarter Financial and Operational Highlights

Reported crude oil and total average production of 152.9 MBbls/d and 338.8 MBoe/d during the quarter < Beat my Q2 forecast of 320,000 Boepd, with 152,000 barrels of oil per day.

Decreased controllable cash costs by 8% quarter-over-quarter to $7.45 per Boe, driven primarily by lower LOE < Outstanding!

Reduced second quarter D&C costs per foot by ~13% compared to 2023, driven by operational efficiencies < Well level economics continue to improve. BTW most of the companies are reporting lower completed well costs. New horizontal wells are paying out much faster, so well level economics at $75/bbl oil are as good or better than they were pre-pandemic at $100/bbl oil.

Announced cash capital expenditures of $516 million and adjusted free cash flow of $332 million ($0.43 per adjusted basic share)

Reported total return of capital of $193 million, or $0.25 per share, including $0.06 per share base dividend, $0.15 per share variable dividend and $30 million in share repurchases

Continued to drive shareholder value through accretive acquisitions:

Closed previously announced Eddy County bolt-on

Announced $817.5 million acquisition from Occidental, adding ~29,500 net acres and ~15,000 Boe/d (9,000 barrels of oil per day) directly offset existing operations < Expected to close in September, giving a big boost to Q4 production.

Increased mid-point of full year standalone oil and total production guidance by ~1.5% to 152 MBbls/d and 325 MBoe/d, driven primarily by continued strong operational performance

Management Commentary

"Our team and asset base continue to perform extremely well, and our continued focus on further improving our position as the low-cost leader in the Delaware Basin has paid-off across the board, from controllable cash costs to drilling, completions and other capex," said Will Hickey, Co-CEO of Permian Resources. "This has allowed us to increase our full year oil guidance for the second consecutive quarter, while maintaining our original capital outlook."

"We are proud to continue building upon our track record of consistent operational execution and cost reduction. This allowed us to generate $0.43 per share of adjusted free cash flow, or $332 million," said James Walter, Co-CEO of Permian Resources. "Our history of strong operational performance and accretive acquisitions has allowed us to grow adjusted free cash flow per share over 60% since the first quarter 2023, and we’ve continued that track record with our second quarter results and the recent Barilla Draw acquisition."

Operational and Financial Results

During the second quarter, average daily crude oil production was 152,883 barrels of oil per day ("Bbls/d"), a 1% increase compared to the prior quarter. Total production was 338,761 barrels of oil equivalent per day ("Boe/d"), a 6% increase compared to the prior quarter. Oil outperformance was driven by continued strong execution, with the outperformance in total production further enhanced by higher ethane recovery during the quarter.

The Company continues to increase operational efficiencies, driving down drilling and completions costs per foot. For the second quarter, drilling and completion costs per lateral foot were approximately $830, a 13% reduction from 2023. Total cash capital expenditures ("capex") for the second quarter were $516 million. "We have built on our momentum from the prior quarter. The second quarter represents our best D&C performance to-date, including averaging approximately 1,500 feet drilled per day per rig," said Will Hickey, Co-CEO.

The Company demonstrated strong cost control in the second quarter, with total controllable cash costs (LOE, GP&T and cash G&A) decreasing 8% quarter-over-quarter to $7.45 per Boe. Second quarter LOE was $5.18 per Boe, GP&T was $1.42 per Boe and Cash G&A was $0.85 per Boe.

"Our team has done a tremendous job demonstrating cost control and synergy realization," said Will Hickey, Co-CEO. "Less than nine months after closing the Earthstone acquisition, we’ve driven field costs back down to legacy PR levels. This is a testament to our operations team and clear demonstration of our track-record of capturing synergies."

Realized prices for the quarter were $80.10 per barrel of oil, $0.01 per Mcf of natural gas and $22.51 per barrel of natural gas liquids ("NGLs"), excluding the effects of hedges and GP&T costs. During the quarter, regional natural gas prices in the Permian Basin were negatively impacted as a result of pipeline capacity constraints, which are expected to be alleviated as additional pipeline capacity comes online later this year.

For the second quarter, Permian Resources generated net cash provided by operating activities of $938 million, adjusted operating cash flow1 of $849 million ($1.10 per adjusted basic share) and adjusted free cash flow1 of $332 million ($0.43 per adjusted basic share).

Recent Acquisition < Significantly increases PR's "Running Room"

On July 29, 2024, Permian Resources announced that it had entered into a definitive agreement with Occidental (NYSE: OXY) to purchase ~29,500 net acres, ~9,900 net royalty acres and ~15,000 Boe/d in the core of the Delaware Basin for $817.5 million. The acquired assets are concentrated directly offset Permian Resources’ existing position in Reeves County, Texas and Eddy County, New Mexico. Permian Resources has identified over 200 gross operated, high-NRI two-mile locations which immediately compete for capital.

The Company expects to begin development on the acquired properties during the fourth quarter 2024. The acquired assets in Reeves County also include a fully integrated midstream system which consists of over 100 miles of operated oil and gas gathering pipeline and over 10,000 surface acres, in addition to complementary water infrastructure including saltwater disposal wells, a recycling facility, frac ponds and water wells. The transaction is expected to close by the end of the third quarter 2024.

2024 Operational Plan and Target Update

Based on recent operational results, Permian Resources increased its 2024 standalone oil and total production targets by approximately 1.5% to 151-153 MBbls/d and 320-330 MBoe/d, respectively, based on the mid-point of guidance. < The acquisition from OXY should add ~4,000 Boepd to 2024 production.

The Company is also adjusting the expected number of turn-in-lines ("TILs") for 2024 to approximately 265 gross wells, as a result of higher operational efficiencies and reduced cycle times. There are no other changes to the Company’s standalone guidance ranges.

The recent Occidental acquisition noted above is expected to add approximately 15,000 Boe/d (~55% oil) of total production during the fourth quarter 2024. Notably, the potential impact of the recently announced acquisition is not included in the revised standalone guidance.