Permian Resources Corp (PR) (Q1 2024) Earnings Call Transcript Highlights: Strong Performance ...
Total Production: 320,000 barrels of oil equivalent per day.
Oil Production: 152,000 barrels per day.
CapEx: $520 million for the quarter.
Adjusted Operating Cash Flow: $844 million, or $1.9 per share.
Adjusted Free Cash Flow: $324 million, or $0.42 per share.
Leverage: Approximately one times.
Liquidity: Increased to over $2 billion.
Credit Facility: Increased lender commitments from $2 billion to $2.5 billion, with a borrowing base of $4 billion.
Base Dividend: Increased to $0.06 per share, a 20% increase.
Share Repurchases: 2 million shares repurchased in the quarter.
Variable Dividend: $0.14 per share, total quarterly return of capital $0.24 per share.
Synergies: Achieved $175 million per year, increased target to $225 million annually.
Production Efficiency: 18% reduction in drilling days per well, 50% reduction in completion days per well.
Margin Improvement: Expected to improve by approximately $1 per BOE by year-end.
Acquisitions: Announced $270 million worth, adding over 11,000 net leasehold acres and approximately 110 gross operated locations.
Production Guidance: Increased to 150,000 barrels of oil per day and 320,000 barrels of oil equivalent per day.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Permian Resources Corp exceeded Q1 production expectations with a total production of 320,000 barrels of oil equivalent per day.
Achieved significant operational efficiencies, including an 18% reduction in drilling days per well and a 50% reduction in completion days per well.
Increased annual synergy target by $50 million due to successful integration and operational improvements.
Strengthened financial position with leverage at approximately one times and increased liquidity to over $2 billion.
Enhanced shareholder returns with an increased base dividend and continued share repurchases, demonstrating strong commitment to returning capital to shareholders.
Negative Points
Facing challenges with gas takeaway capacity at Waha, which could impact gas sales and pricing.
Anticipate a flat to modestly lower production profile in the second half of the year due to normal fluctuations in working interest.
Potential ongoing challenges with power infrastructure in the Permian region, which could affect operational efficiency.
While operational efficiencies are improving, there is still a gap in lease operating expenses (LOE) between legacy Earthstone and Permian Resources operations.
Dependence on successful integration of acquisitions to maintain and enhance production and operational efficiencies.
Q & A Highlights
Q: Neal Dingmann asked about Permian Resources' drilling and completion (D&C) plans, specifically if the company plans to reduce rigs or spreads given their efficiency improvements. A: William Hickey, Co-CEO, explained that with the current efficiencies, it's realistic that the company could continue executing its plan with fewer units, potentially reducing from 12 to 11 or somewhere in between. He emphasized that production levels are more of an output of their operational strategy, influenced by market conditions and service costs.
Q: John Freeman inquired about the remaining efficiency gaps between legacy Earthstone and Permian Resources, particularly in drilling, completion, and production operations. A: William Hickey noted that the efficiency gap on the D&C side is minimal or closed, but there is still some room for improvement in lowering lease operating expenses (LOE), particularly in areas like staffing and disposal agreements.
Q: Scott Hanold asked about the outlook for the rest of the year and how Permian Resources views its business trajectory, considering the improved cycle times. A: William Hickey responded that production is an output driven by returns, and the company's plan could vary between maintaining or adjusting rig counts based on commodity prices. He clarified that the slight production decline expected in the second half of the year is due to normal fluctuations in working interest during large-scale development.
Q: Gabe Down questioned if the anticipated CapEx for 2025 might be lower given the synergy capture and efficiency gains achieved this year. A: William Hickey confirmed that the maintenance CapEx for 2025 would likely be lower than the current year, reflecting the efficiencies and improvements realized.
Q: Oliver Wang asked about the focus on Eddy County and the factors driving increased activity there. A: William Hickey highlighted the company's active operations and proprietary data in Eddy County, which provide a competitive edge. He mentioned that the area offers high-return opportunities and that the company's presence and efficiency in Eddy County have allowed it to secure attractive deals.
Q: Kevin McCurdy inquired about the potential differences in opportunities between the Northern and Southern Delaware basins and how the company views these areas. A: William Hickey noted that while there have been more consolidation opportunities historically in Texas, the company is open to opportunities in both the Northern and Southern Delaware basins. He emphasized that the company's strategy is to enhance its business and generate high returns, regardless of the specific location within the Delaware Basin.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
