Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to Permian Resources Conference Call to discuss its First Quarter 2023 Earnings. Today's call is being recorded. A replay of this call will be accessible until May 23, 2023, by dialing (877) 674-7070 and entering the replay access code 425142 or by visiting the Company's website at www.permianres.com.

At this time, I will turn the call over to Hays Mabry, Permian Resources Senior Director of Investor Relations, for some opening remarks. Please go ahead, sir.

Hays Mabry

you earnings joining call. thank Company's on and quarter first Anis, all us for the Thanks,

our and On and Officer. Chief Oliphint, James call Walter, Financial the today our Executive are Officers; Chief Garrison, our Matt Will Hickey Chief Operating Officer; Guy

May Form with release filed an the Company. a results first quarter for we X, earnings Yesterday, X-K reporting

We reference during will also that website we posted an our earnings call. presentation to today's

at News www.permianres.com. presentation on our homepage and You Events the section can the find or website under

the I note are comments statements our later the XX-Q actual Form which uncertainties XX, factors sections to control Many would Exchange this that during is are statements our affect be and beyond plans. Securities could expected and risk and March detail the filings like of with the discussed the including of the many our that are SEC more these risk report of earnings our Commission, forward-looking to call and XXXX, that this quarter risks afternoon. ended results in involve in and quarterly with for on forward-looking filed

actual refer believe or materially. that are the expectations and reasonable may across our on they developments help not to periods also non-GAAP we comparisons guarantees financial future We facilitate performance, based may are differ of with peers. Although assumptions, expressed results measures and

a the website. earnings corresponding nearest our use, to GAAP be reconciliation available measure presentation, or release our we which found can For in any are non-GAAP on measure both

over With Hickey, Co-CEO. that, Will to call I turn the will

William Hickey

thanks for joining Hays. QX and our Thanks, Good call. morning,

shareholder is sheet cash successfully plan, commitment to continued free business optimizing returns, quarter, delivering high-quality strength our Basin and maintaining generating on balance Delaware asset our which During the to flow, focused our base. we execute

on plan we barrels equivalent of in the production were a strong total delivered of achieve expectations. day, production outlined February. of ahead of quarter barrels per line capital track XX,XXX in of $XXX of accrued guidance which and QX, our with million, oil oil We XXX,XXX company XXXX expenditures day remain full-year with per very oil results to Following all first of on or the

company million ranges was trend came are for year. $X.XX cash and $XXX as as also within Total course and future costs in $X.XX the per GP&T $X.XX BOE. The was BOE guidance increase quarters the G&A lower production expected was expected of EBITDAX adjusted the and XXXX we in generated of cash quarter. per BOE, LOE over per to see

will relating You in line notice to disclosure a new CapEx. our item

quarterly our We earnings have statement. presentation in that CapEx our cash a tracks figure added cash flow

For QX, capital CapEx we in normal cash working CapEx, changes that accrued was than normalize over time. course will by expect driven lower

free and on flow an cash utilized our dividend on basis. We've on as variable we million also returns. cash We've the cash provided CapEx both $XXX CapEx with it million $XXX with adjusted our accrued cash figure better basis aligns on focus basis CapEx a calculate believe to

date is over The past to testament their professionalism we did a a amazing team and job dedication integration during Our the have shareholder executing work, XX value. to challenging to hard months. success driving process seen an

Permian We us, behind direct on is can Colgate our are integration excited forward. we value creating sole and the that and of for focus shareholders Centennial Resources going

well in reduction and at the that as improvement closing, as achieved overall an business our cash with makes outlined we drilling and times, completion costs, more targets efficient. costs that operating cycle have We significant synergies in

our shareholders. additional costs for flow to opportunities team continue reduce that cash incremental improve free efficiency to look capital and can return will so we Our talented that to

our over call the and will quarter. to I capital Guy strategy cover that, for to return financial With the turn results

Guy Oliphint

Thanks, Will.

you and delivered as debt executing on year, initiation million the is highlights the lowest we of on the return our for the that of while point being for our return and program, our In capital a Slide production $XX see accretive of our overall can total acquisitions. anticipate we of X. quarter quarter reducing returns One variable shareholder

is we thought dividend, first our it you to calculation. quarter of total helpful paying a return would our this Since capital variable walk be through

calculation our cash dividend, our begins First, amount basis. a $XX share free that of with $XXX base on reduced adjusted million or flow per CapEx million. We by cash $X.XX

dividends committed of cash the remainder to or have shareholders to XX% pay free via We flow of buybacks.

see stock $XX we quarter, repurchased during shares million million. the for X.XX As can of you

per variable So to a achieve the of the $X.XX share. as remainder dividend target, XX% return we will

reminder, of and NGP a million share was part secondary the executed as Riverstone. by XX a As buyback offering

As million shares this the balance and XXX our activity publicly we shares sheet by monetization approximately a on representing of increasing from of have transaction, XX%. demonstrated number remain this total strength, debt to pleased as having sponsor Having future time, template reducing decreased process emphasized organized from our potential are to of over a result thoughtful our We million, transactions. objective sponsors quarter, and reduction hedging. an established for XXX to of committed the

focus, Turning to during net able quarter. $XX X, borrowings reduce we debt to continued revolver Slide by the XX%, approximately million repayment and remains a or were

billion have well our liquidity We maturities on of near-term $X no and over RBL.

time. to cash continue to net flow debt utilize to expect over We reduce free

OPEC and second per up production on X,XXX the top in day X, barrels XXXX to this XXXX. we Slide for added in of XXXX swaps a additional hedges oil of cut as took half at well of on half as April for announcement see second barrel. the We $XX You'll advantage recently the year

$XX. remainder our hedges year oil of at additions, average these act production opportunistically able to XX% the above the of are to in of hedges weighted event place of with existing a with downturn. result a in our price be These floor a line consistent slightly for crude hedging the expected for approximately desire strategy, have in we As our

With that, to over it I will turn James.

James Walter

to where you X in optimization Slide I'll we discuss point more portfolio ongoing start off, Thanks, Guy. our To detail. efforts

closed we are earnings Lea very last acreage we our County, our and the County that QX, transactions SWD Reeves on on sale in referenced excited during the about. system two acquisition both of call, we As

also completed offset and the new type highly operated of allowed our shareholders. high expect one transaction units. making an We created County us in activity the development locations best this in in grade trade operator drilling XX several large working Notably, to inbound of acreage interest that assets. we over Eddy half months, to increased of approximately return accretive trade our further This with to high acres begin X,XXX next a

XXX% to the be the interest acquired XX months. next the going developed over deals giving evaluate. business, In smaller of the this return are an grassroots based of acquisitions being addition, smaller Midland is XX approach These for that highly amongst game we in ground active we to completing credit on side the in edge in us where remain nearly transactions of growing business. the rate highest We

the corporate our in, increase QX of focus of returns. net optimization over cash effect royalty All acres, us to all enhancing net in X,XXX overall These net net business efforts million. acres generating increase on and while was portfolio core transactions while in an an X,XXX of our leasehold allow over $XX approximately proceeds

quick and a our portfolio Turning to rather Slide interests. take mineral the to large royalty We to spotlight second of wanted X. shine on

in NRI the footprint with our to this has that than is Permian, This the at eight across operated additional in the higher free guidance, vast average development. XX% in dollars efficiency You've cash a seen majority but past an improving the NRI become XX%. invest capital standard of for acreage portfolio and flow significantly us allows we spend, of production realize same of capital the the our

to payback of of increase from we don't X% royalty incremental a well while months net an of the XX worth separate same entity viewed interest well to over perspective, of pointing free the in reduces cash on in year typical standalone business, $XX per that if Wolfcamp IRR currently It's XX. the royalty flow over it put that out XX% think a million as adds To basis. is generating X/Xth our a that and period

capital-efficient reasons both which Our and production have compounding returns. one returns business, high nets support several can on their fulsome of we high-return and a effects that highly are shareholder growth

for Finally, Slide our current XX future to value proposition and helps reemphasize investors.

and outpaced since that to the our this value closing XXX the as business Permian the of peer believe we a has index. to market continues compared on outperformance, both Permian and As with recent S&P group Resources the peers seen slide, Even compelling merger. the this our represent broader

our Not a great allocation, business our a believe any sector. organic has we can shareholders and oil believe a outsized sector. across gas returns operations, to investors. continue leader quality, track great combined strength, create Leading business We growth, continuing solidifying capital low-cost of but all value to asset the for record these balance energy delivering position this cultivate great our business, attributes sheet to we in of that a thoughtful attributes, and as with of the while business. enhance just By

Thank will for now operator listening, back you to and the it Q&A. turn for we

Operator

gentlemen, you, ahead. with go from The comes Markets. Scott sir. Hanold Capital will question begin first now and Instructions] question-and-answer Ladies Thank the [Operator session. Please we RBC

Scott Hanold

Hey. all. Thanks

any Just that the give that? into find I being guess, point Or with is wanted paths acreage. portfolio. some an could to NRI? if talk you emphasis just opportunity efforts royalty there's in us inference the Is touch based – to sense of kind of that I kind on grassroots lower around to the, or build just value to there of – higher a with is out about monetization there there other if that just And that guess that the royalty

James Walter

looking we're got accretive lot a it. things traditional is to a for blocking helpful that ways and override maybe of But development. We for separate reason less to More think kind I'd to And a I goes just of just spend. be of with good find about highly we tackling widget, a first, I and of it'd efficient shine highlighting increase developing. Yes. really some the components I you to very that that upstream of outperformance. I'd of a thought think of just be and or questions non-operated and understood, I there's that bit our last got is, capital mean, this looking a nets we've this kind answer our business. we've drive you the that question normal how that to always on say light most not can we're little capital say one that I'd accretively say different think a is But lot that first wells will. build portfolio if our twofold. kind foremost, business was

or your whole. strategic non-operated kind down are that big today. be like our like of do monetize, not some especially We I overrides And the does valued question, I a the portfolio having I what final think to kind kind this think business fully for opportunities there in coming could to pipeline. think and of of But as the of nothing it

Scott Hanold

follow-up. cadence but I we're Appreciate you as upward was on that. give Could of production, well to of a kind And first year of cash through kind us trajectory. The then down the a capital my production? be spending an quarter as assume going as

If any can you well on variable kind that circle capital capital of we working for payout. expectations us so expenditures as as help that could out cash with cadence square the with just nuances

William Hickey

Will. Yes, this is

of production but kind We the and QX QX on starting – had this of down achieve of of we it from in to track growth year the you right. the the how XX% last I talked QX year. on So that's – now QX, quarter point. And production kind is side, think ending to still follow point said have if about you to that you we're a QX

it's quite see will really feel we but you If our can not you we hit good linear, guidance. that follow, full-year

the you so starting have bump But to the ultimately, point. QX. a get bit and have you little ending And there, into have bigger to point

solve for middle. the can You

on then in pace the from outlined perspective. we're expecting guidance to the side, CapEx think And on we CapEx and say for of same I total a CapEx I'd what be we're cash over accrued kind and time,

both it's track slightly last just year, QX, side. on that giving the of – above cash of CapEx given the to guidance but call, are accrued expectations and kind under of that came in are outlined timing for quarter rest the production and the on in things going probably the kind for be some we on that accrued So we

Scott Hanold

the it, a other I one just And the at quarter when that up. XQ? a nuance than to production, bigger be there on of pads any of you in Okay. about XQ, bump kind in getting bit little is going talked of you terms linear? makes Is being out But XQ, curiosity, put guess, like place somewhat look

William Hickey

is I starting point. think somewhat linear the right

Scott Hanold

Thank that. Appreciate you. Okay.

William Hickey

bet. You

Operator

you. Thank

with Stifel. Derrick Your comes ahead. from question Please go next Whitfield

Derrick Whitfield

second on quarter. morning Good Congrats solid a all.

William Hickey

Derrick. Thanks,

Derrick Whitfield

capital and level, your At QX. a was high dividends return repurchases between share in fairly variable of balanced

over think you could on framework on about quarters, of for return your preference the the prosecuting and comment current valuations? repurchases you the share As capital program at coming

James Walter

of first this mean, what Guy said, excited have I sure. kicked I'd all, to and Yes, say we're finally program. variable return off super echo

way about core that's months. are think default consistent kind something opportunistic. return at of clear us of changed over over But framework be guys of business, our we've return is say all hasn't shareholders for be shareholders broader to on nine going safest, who our view with been pretty the the at I'd is that's you long-term. past variable think that investors kind most As to with we I'd we We capital the returning really to Permian the the capital capital to you kind Resources. dividend. say the will strategy and to and the

we've authorization think got I a reason, on for think a opportunistic and take here. can share flavors out two there I buyback

orderly in you a the we thoughtful saw to to kind of a non-disruptive think I we've over in and time. think been really exit And of kind sell-down QX, that sponsors thoughtful, sponsor one, I clear which our way. business expect ensure

seen we And in second dislocations kind stock if we the of that came kind in second and clear since out is we've of Resources, and Permian been we severe fortunate September. trading haven't one, the see of it

a the opportunities. everyone expect time, is a for the this could business, time, we've very severe the dislocations. I see think also case think and those think you when the see But I buyback lean those kind over and we dividend. we I of should volatile variable And as to will think I default us be all said into base aggressively

Derrick Whitfield

the follow-up, you We ability market basin your a guys Permian guys to yesterday, talk you the side. affords have And I done you Terrific. on organic ground see mature to in to adds the focus as and to it Resources? joked team about and support my could on wanted continue the that work portfolio game that structure opportunity for hard-to-earn out you grind very but

James Walter

our on mean, sure. Yes, with having it having in and ground really whole presence being team I I of the think a starts boots based Midland, here. really kind

core strategy. of part our kind the that's think I first kind of of

see a we've built fully business sole a the out got doing team slide. transactions Second, developed that's – is development fully purpose on like what you

full-time development So Resources nine from broader I resources fully eight think Group. that to ability probably people they dedicated the it's but in team, the pool or business Permian have

opportunities any at real acquisitions it, returns of I smaller us. specific in that real a focus amongst And long these that local we've these having presence attractive on has the been and a acquisition of a say I'd I deals a most of combination the think think type time. ground-gate kind mentioned I are differentiator here And for but looked

Derrick Whitfield

time. Thanks for your Agree.

James Walter

Thanks, Derrick.

Operator

Thank you.

Dingmann from Please with comes Neal Truist ahead. Securities. question go next Your

Neal Dingmann

morning, guys. efficiencies, I first Will, you is question, one's guess for different. for you. question the just Thanks my little really My continue all Good bit probably operational which see to on a time.

six Specifically, could maybe the the seven you think rig. about are talk the to going? going the about one, of just I talk how number year, There's from things remainder for

pretty to just of Are and when do – formational sort able or What Will, when sort one at just getting it's you still sort then to is think that about? going you regional different mean, Mexico good seeing the like look the was New the remainder just continued thinking of efficiencies I'm the focus, the I for lumpiness it just the that? at to get sounds but look any And be out? of anything anything of quarters? Texas lastly, of at, to sort trying be you ramp, at stick might I to near-term plan year, of

William Hickey

Neal. Thanks, Yes.

to of in TILs say efficiencies outlined still I'd one, need the plan confident drop been signing then your to it's feel XX we on the first model since to of very, all the lumpiness any that seeing that the places rig right we where seen processes the of people I nothing think there's of the it with happy since we of thing, drive seventh that we that as of and kind kind And to kind around kind the best it months we what our kind year. signed and little beginning we with XXX from at the through get linear would So the the hit since production in we're with kind all on in of up kind midyear over were we're the we've we up put merger. remarks, see we for less strategy the efficiencies deal, kind can. to ramp the relatively opening working very us of QX. the kind we we've QX head right been I how hit down, for closed, to of months but significant It's of a XX do the in And QX.

Neal Dingmann

– or had improved ability the as secondly, guess for Great. just my the position. really add about have change those, financial why I James, I sort have guys on predicting But such great financial on of you recent mean, position? question's then you hedges given I the a always operationally, needed. then downside. understand You've a you But now And even comment to Guy's maybe added. even even Guy, why

those up hedges if add just more at even on little all. color give could you a So step – maybe even why

Guy Oliphint

great Yes. That's question. a

us, part hedges our important I philosophy. of think are for

of last we've two, the is and business, months come. And kind kind volatility to flow everyone I value of think see hedges to forward to ensuring a hedges. our volatile baseline super free think and more week provide the frankly, looking that kind of and of that over certain a amount see strategic or cash first, real great this expect I seen in And years this, we knows a but in quarters. future

a I have them to need been that's hedges sheet? is the balance think have think like core protect we us. do something I balance strong the to or sheet to And technically extremely obviously having

hedges allow no. I another think and a the answer at I is we opportunistic this to be us think probably that can and aggressive view point, if that at where we're really place we strategic, But to downturn. as have

think our to years hedges I them So expect I coming to we've forward. how of work seen be over think just an strategy in important and us continue the that's kind the business. going in we you should see favor past hedges layer the And to run of the part because

Neal Dingmann

Well forward James. guys. said, to all Look upside, the Thanks.

James Walter

Thanks, Neal.

Operator

you. Thank

Your Huang TPH. Oliver next from Please question comes ahead. go with

Oliver Huang

taking for thanks and my all, question. morning Good

If fairly Just had through are we the any on might see the terms correctly, in to potential capture moving well one of I that services deflation all year. positioned able front. you remember being

grab from and seeing long-term roll you what side. wanted negotiations offs with contract the of both should crew all just are I be and So the terms we rig about latest in to service how thinking on providers

William Hickey

good Yes, question.

pretty reminder, well rigs I'd as say yes, So are a staggered. our

current we one-year of of more, deal. about deal third a a So under under a have, I seven of multiyear them them of the and a third them call of pad-to-pad third under it kind kind of it's deals, rigs

kind like pricing and months, it stands of moving over has seen cut. Having we've cuts potentially to say reductions. And we'll favor before how in that, of last before were rigs in of there can I'd super even needs come of I'd material said it see there kind more as rig OPEC price indicators But yet. feel kind leading we are our on market's you the market, does now no available which the close of see the today, been so that Look, say the spec kind goes. few

pricing were. It's good. on that, the increases a our from And frac in And frac we seen it's – flattened the – is increased quarter. to kind then of frac that's And previous we've very seen had of quarterly. I row pricing. last I'd similar. We've over side, revisit we think we where six say seen no quarters

capital tailwinds of So the as all kind we this probably our than take point, we good about yet program. it at on really the CapEx nothing can headwinds feel feel I'd that kind side, to as does far but like together, guidance say that year's and of there's more bank this

Oliver Huang

Awesome. Thanks the time. for

Operator

questions to this are Thank There you. no at Walter, time. you. over back Mr. further

James Walter

Midland. I to address regarding recently article Before a we briefly wanted today's conclude call, published

here While it great highlights a city, real have facing several that namely place article community Midland that live, failed to that we the the people live the qualities our challenges present the to make and day but strategic to and Midland that real call together. families in to have business, we and our Being headquartered meaningful raise see proud chosen Midland has in home. we here advantages every our are

Resources entire through center Permian basin community efforts supporting civic make from to and to causes. local schools of everything the live childcare countless development a place financially Airport better at to a the Midland and our supports the work, grassroots

are the of that substantially in safety has proud Permian in Strategic member care $XXX and Permian. large are focused education, One we the over is Basin. organization which the Permian million are Partnership, life throughout quality by efforts such of bolstered improving which invested Our on organizations the a health

the industry on We are and take not challenges be time, and to to improve them. our will and taking Permian are but fighting fact the accustomed immune that our overcoming hard to region

Thank today. listened Resources earnings you into who to everyone Permian call

proud of on accomplished year over to track past our equity of and and execution to record value are We continue has creation. excited team build what the our

call. over now conclude operator I'll it hand the to back to today's

Operator

call today. conference that your you for a lines. concludes We thank participating this ask Have your for disconnect you please day. and gentlemen, and Ladies great

Permian Resources (PR) 9 May 232023 Q1 Earnings call transcript