Permian Resources Corporation (“Permian Resources” or the “Company”) (NYSE: PR) today announced its third quarter 2023 financial and operational results.
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Recent Financial and Operational Highlights
- Closed $4.5 billion Earthstone acquisition on November 1, enhancing Permian Resources’ position as the second largest Permian pure-play E&P with a ~$15 billion enterprise value
- Delivered strong well results, which drove crude oil and total average production higher by 6% and 4%, respectively, quarter-over-quarter to 89.8 MBbls/d and 172.0 MBoe/d (~52% oil)
- Continued to realize significant operational efficiency gains, resulting in meaningful improvements to drilling and completion cycle times
- Increased average drilled and completed feet per day by 14% and 4%, respectively, compared to second quarter 2023
- Efficiencies resulted in higher operational activity for the third quarter
- Announced accrued capital expenditures of $367 million and cash capital expenditures of $380 million
- Reported net cash provided by operating activities of $481 million and adjusted free cash flow1 of $165 million (cash capital expenditures)
- Delivered total return of capital of $96 million, or $0.17 per share:
- Quarterly base dividend of $0.05 per share
- Variable dividend of $0.07 per share
- Share repurchases of 2.2 million shares for $27.9 million
- Added ~740 net acres in the Delaware Basin through ~20 grassroots transactions during the quarter, demonstrating continued ground game success
- Published inaugural Corporate Sustainability Report, highlighting Permian Resources’ commitment to environmental stewardship, social responsibility and corporate governance
Management Commentary
“Permian Resources delivered an outstanding operational and financial quarter, with the combination of strong well performance, decreases in controllable cash costs and continued quarter-over-quarter improvements in our drilling and completions efficiencies driving significantly higher free cash flow per share,” said Will Hickey, Co-CEO of Permian Resources. “In addition, we are extremely excited to have closed the Earthstone transaction earlier this month, and our teams have hit the ground running on integration efforts, keeping us on-track to achieve meaningful synergies through leveraging our deep Delaware Basin experience.”
“This quarter’s strong results and increased free cash flow have allowed us to return approximately $0.17 per share, or approximately $100 million, of capital to shareholders between the base dividend, variable dividend and share buybacks,” said James Walter, Co-CEO of the Company. “One of the key drivers of the recently closed Earthstone acquisition was its meaningful accretion to free cash flow per share, and we are excited to return additional capital to shareholders under our existing return of capital framework as we integrate and develop these high-return assets in the core of the Delaware Basin.”
Operational and Financial Results
Permian Resources continued the efficient development of its core Delaware Basin acreage position in the third quarter, delivering strong well results and driving meaningful operational efficiencies. During the quarter, average daily crude oil production was 89,824 barrels of oil per day (“Bbls/d”), a 6% increase compared to the prior quarter. Third quarter total production increased 4% quarter-over-quarter and averaged 171,966 barrels of oil equivalent per day (“Boe/d”). “Our robust production results during the quarter were primarily attributable to better than expected well performance, in addition to higher production runtime and increased activity due to reduced cycle times,” said Will Hickey, Co-CEO.
The Company also delivered outstanding results from both its drilling and completions operations, carrying forward its operational momentum from the prior quarter. Permian Resources continued to drive operational improvements in the third quarter, with drilled and completed feet per day increasing by 14% and 4%, respectively, quarter-over-quarter. During the quarter, the drilling team’s continued refinement and distribution of best practices across the field contributed to a reduction in drilling durations compared to the prior quarter. Furthermore, the completion team’s focus on efficiency drivers and enhancement of completion design resulted in a significant increase in runtime, averaging over 19 pumping hours per day during the quarter. “Ultimately, higher efficiencies and shorter cycle times are key contributors to the Company’s goal of decreasing well costs per lateral foot. As the Delaware Basin’s lowest-cost operator, we will continue to prioritize and execute upon these initiatives in the field,” said James Walter, Co-CEO.
Total cash and accrued capital expenditures (“capex”) for the third quarter were $380 million and $367 million, respectively, and included a modest shift of fourth quarter planned capex into the third quarter due to efficiency-driven activity acceleration. “As a result of our team’s continued momentum realizing operational efficiencies, we completed a higher number of wells than expected during the third quarter, positioning us for a strong fourth quarter to close the year,” said Will Hickey, Co-CEO.
Third quarter average realized prices were higher than the previous quarter, due in part to improved commodity prices. Realized prices for the third quarter were $79.92 per barrel of oil, $1.93 per Mcf of natural gas and $23.67 per barrel of natural gas liquids (“NGLs”), excluding the effects of hedges and GP&T costs, which represent 12%, 56% and 14% increases compared to the previous quarter, respectively.
Third quarter total controllable cash costs (LOE, GP&T and cash G&A) were $7.92 per Boe, a 2% decrease compared to the prior quarter. Third quarter LOE was $5.42 per Boe, GP&T was $1.31 per Boe and cash G&A was $1.19 per Boe.
For the third quarter, Permian Resources generated net cash provided by operating activities of $481 million and adjusted free cash flow1 of $165 million (or $178 million, utilizing accrued capex). The Company also reported net income attributable to Class A Common Stock during the third quarter of $45 million, or $0.14 per basic share. Third quarter adjusted net income1 was $220 million or $0.39 per adjusted basic share.
In addition, on September 12, 2023, the Company closed an offering of $500 million in aggregate principal amount of 7.0% senior notes due 2032 that were issued at par. The net proceeds from this offering were used to repay indebtedness, which included amounts outstanding under Permian Resources’ credit facility in addition to credit facility borrowings assumed in connection with the closing of the Earthstone acquisition. Following the bond offering, Permian Resources has approximately $1.5 billion of liquidity as of November 1, 2023 with aggregate lender commitments under the credit facility increasing from $1.5 to $2.0 billion at the close of the Earthstone transaction.
At September 30, 2023, the Company had $212 million in cash on hand. Net debt-to-LQA EBITDAX1 at September 30, 2023 was approximately 0.9x, and the Company has no maturities of long-term debt until 2026. Additionally, the acquisition of Earthstone materially enhances Permian Resources’ credit profile and decreases its overall cost of capital, as larger scale and higher production levels accelerate its path to investment grade.
Earthstone Integration Update
On November 1, 2023, Permian Resources announced the closing of the $4.5 billion Earthstone transaction that was announced on August 21, 2023. The acquisition enhances Permian Resources’ position as a leading Delaware Basin independent with over 400,000 Permian net acres and approximately 300 MBoe/d of total production on a pro forma basis. The Company plans to utilize its extensive Delaware Basin expertise and incremental scale to drive value for the combined shareholder base through synergies, accelerated return of capital and significant accretion to all relevant metrics.
Integration of Earthstone’s assets and teams is underway, and Permian Resources remains on-track to deliver a minimum of $175 million in annual operational, G&A and financial synergies. Permian Resources has a proven integration track record and plans to implement the Company’s peer-leading efficiency practices and cost structure across the Earthstone platform to drive lower well costs, operating costs and cycle times.
“The Earthstone transaction increases the overall quality of our business, enhancing our core Delaware assets, increasing our potential for organic growth, leveraging our efficient operations and strengthening our solid financial position,” said James Walter, Co-CEO. “We look forward to executing another successful integration and synergy capture in the coming months.”
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