8-K: Permian Resources Exceeds Expectations in Q2 2024, Raises Full-Year Guidance

Permian Resources reported strong second-quarter 2024 results, driven by increased production and reduced costs, leading to an increase in full-year production guidance.

Summary

• Permian Resources announced its second quarter 2024 financial and operational results, showcasing a strong performance.
• The company's average daily crude oil production reached 152,883 barrels, a 1% increase from the previous quarter, while total production was 338,761 barrels of oil equivalent per day, a 6% increase.
• Controllable cash costs decreased by 8% quarter-over-quarter to $7.45 per Boe, primarily due to lower lease operating expenses.
• Drilling and completion costs per lateral foot were reduced by approximately 13% compared to 2023, reaching $830 per foot.
• The company reported cash capital expenditures of $516 million and adjusted free cash flow of $332 million, or $0.43 per adjusted basic share.
• Permian Resources returned $193 million to shareholders, or $0.25 per share, through dividends and share repurchases.
• The company also announced a significant acquisition from Occidental for $817.5 million, adding approximately 29,500 net acres and 15,000 Boe/d of production.
• Due to strong operational performance, the mid-point of full-year standalone oil and total production guidance was increased by approximately 1.5% to 152 MBbls/d and 325 MBoe/d, respectively.
• The company funded the Barilla Draw acquisition by issuing 26.5 million shares of Class A Common Stock to raise approximately $403 million and $1 billion of 6.25% senior notes due 2033.
• Permian Resources is targeting investment grade credit ratings in 2025.

Sentiment

Score: 9

Explanation: The document conveys a very positive sentiment due to strong operational and financial results, increased guidance, and strategic acquisitions. The company's focus on cost reduction and shareholder returns further enhances the positive outlook.

Positives

• The company demonstrated strong operational performance, leading to increased production and reduced costs.
• Permian Resources successfully reduced drilling and completion costs by 13% year-over-year.
• The company generated significant free cash flow of $332 million.
• Permian Resources is actively returning capital to shareholders through dividends and share repurchases.
• The acquisition of assets from Occidental is expected to be accretive and add significant production.
• The company has increased its full-year production guidance.
• Permian Resources is targeting investment grade credit ratings in 2025.
• The company has successfully reduced field costs back to legacy levels after the Earthstone acquisition.

Negatives

• Regional natural gas prices were negatively impacted by pipeline capacity constraints.
• The company's natural gas sales were reduced by $23.031 million due to gathering, processing and transportation costs.
• The company's NGL sales were reduced by $18.8 million due to gathering, processing and transportation costs.

Risks

• The company is exposed to commodity price volatility, particularly in oil, natural gas, and NGL prices.
• There are risks associated with integrating acquisitions, including the recent Occidental purchase.
• The company faces competition in the oil and natural gas industry for assets, materials, and personnel.
• Regulatory changes, including those related to climate change, could impact operations.
• The company is subject to risks related to the availability of drilling and production equipment and services.
• The company is subject to risks related to the availability of transportation and storage capacity.
• The company is subject to risks related to security threats, including evolving cybersecurity risks.

Future Outlook

Permian Resources increased its 2024 standalone oil and total production targets by approximately 1.5% and expects the Occidental acquisition to add approximately 15,000 Boe/d of total production during the fourth quarter 2024. The company is targeting investment grade credit ratings in 2025.

Management Comments

• 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, said Will Hickey, Co-CEO of Permian Resources.
• 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 weve continued that track record with our second quarter results and the recent Barilla Draw acquisition, said James Walter, Co-CEO of Permian Resources.
• 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.
• 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, weve 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, said Will Hickey, Co-CEO.
• We are proud of our financial strength and have comparable attributes to our investment grade peers. As a result, we are targeting investment grade credit ratings in 2025, said Guy Oliphint, Chief Financial Officer.

Industry Context

This announcement highlights Permian Resources' strong performance in the Permian Basin, a key oil and gas producing region. The company's focus on cost reduction and operational efficiency aligns with industry trends aimed at maximizing profitability in a volatile commodity market. The acquisition from Occidental is a strategic move to consolidate assets in the core of the Delaware Basin, a trend seen among other operators in the region.

Comparison to Industry Standards

• Permian Resources' 13% reduction in drilling and completion costs per lateral foot is a significant achievement, placing them among the leaders in cost efficiency in the Permian Basin. Companies like EOG Resources and Pioneer Natural Resources are also known for their focus on cost control, but specific metrics vary.
• The company's adjusted free cash flow of $332 million is a strong result, indicating a healthy financial position. This compares favorably to other mid-sized Permian operators, though larger companies like ExxonMobil and Chevron generate significantly higher absolute free cash flow due to their scale.
• The increase in production guidance by 1.5% demonstrates Permian Resources' ability to execute on its operational plans, which is a key differentiator in the industry. Many companies struggle to consistently meet production targets, making this a positive sign for investors.
• The company's focus on returning capital to shareholders through dividends and share repurchases is in line with industry trends, as investors increasingly demand returns in addition to growth. Companies like Devon Energy and Diamondback Energy have also emphasized shareholder returns in recent quarters.

Stakeholder Impact

• Shareholders will benefit from increased dividends and share repurchases.
• Employees may benefit from the company's strong performance and growth.
• Customers will benefit from the company's increased production capacity.
• Suppliers may benefit from increased business with the company.
• Creditors will benefit from the company's strong financial position and reduced debt.

Next Steps

• The company expects to close the Occidental acquisition by the end of the third quarter 2024.
• Permian Resources will begin development on the acquired properties during the fourth quarter 2024.
• The company will file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, on August 7, 2024.
• Permian Resources will host an investor conference call on August 7, 2024, to discuss second quarter 2024 results.

Key Dates

Keywords

Permian Resources, Oil and Gas, Production, Delaware Basin, Acquisition, Free Cash Flow, Dividends, Share Repurchase, Cost Reduction, Operational Efficiency