Earnings call transcript Q2 2023

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Operator

Good morning. And welcome to Permian Resources Conference Call to discuss its Second Quarter 2023 Earnings. Today’s call is being recorded. A replay of the call will be accessible until August 16, 2023 by dialing 877-674-7070 and entering the replay access code 908236 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. ahead. go Please

Hays Mabry

thank company’s And for us joining Thanks, quarter you earnings the second call. on Tina. all

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

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

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

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

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

on the actual or based of materially. expressed may are future they results assumptions, we believe differ not Although performance are expectations and reasonable developments guarantees

non-GAAP periods to refer that also comparisons measures across may We facilitate and help peers. our with financial

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

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

Will Hickey

Hays. Thanks,

better execution day. quarter consecutive we strong fourth since the getting our of Resources represents forming every quarter and merger announcing This are still and Permian

improvement D&C framework. return on seven to well to continue X% second to efficiencies results. from and from dropped our we QX in by we continued driven quarter During due capital QX, six the rigs of robust grew We production deliver by

on team to our to quarter achieve year track remain field in we targets. better and the fourth Our full executing and continues get

half you Wells can are the of slide online performance during perform, to five XXXX line of first over numbers. the with and production see consistent the placed from remainder performing results our in expect Our QX assets on the continue as we and year. year

surprise differently, from has we our targets Said forward. same no last in going you is are plan as essentially XXXX XXXX year. see same prosecuted what us to exact plan is areas development as same in multi-bench should This changed our not the development developing and the large-scale the expect we and philosophy

in the our On operations continues reduced times by to side, lower and better resulting increasing get team quarter-over-quarter costs. efficiencies, cycle

and fleet. department has Our reduced assemblies by our grading times hole further drilling rig our high flat bottom optimizing

side, quarter, the company day Bone a an X,XXX driven -- of completion X,XXX Spring in day Third an under hours increases just drilled we per our drilling Well XX on able average per days. pumping average were in per by the on of to During Similarly, Eddy day we feet dedicated and record feet complete in a two Sand County increasing X-mile set fleets. frac by

expanded Mexico. we and across our water Texas efforts significantly recycling have New both Lastly,

utilized During water operations. XX% completion our its the recycled quarter, team during completions

the first through of months and This not year. more sustainability also initiatives, Permian than last has pumped our companies year-to-date CapEx To Resources both six but predecessor already perspective, savings. all put water LOE only during the recycling water both our combined of into advances efforts year, provides recycled

level have that continue team This this execute I of will we we water operations team the testament use on feel to recycled our continue whenever able push in for to of a execution will place quality to the be is in confident possible more to We our operations. to goal. and and

comparing than drive down we year. today, we supply XX% to work With XXXX further across to when expect head into entire chain quality the greater we what continuing efficiency. well basis are of for per we forward, looking year from as know consistent bodes our XXXX. cost and with next of costs a asset philosophy the lateral this capital This development deflation Now start foot start the paired to on

will that, to cover returns for I Guy and turn over results it the quarter. financial capital to With

Guy Oliphint

Thanks, Will.

on We XX XXX was continue per over strong XXXX of QX plan $XXX to cash million. with production Production of and results. growth day QX deliver our oil day, well of result company a production per total expenditures MBOE of X% of MBO capital

per was the quarter. was generated SWD X% March. G&A company GP&T and $XXX costs The we to that LOE per per largely EBITDAX per QX, higher than of $X.XX BOE disposal higher BOE, $X.XX closed water due was LOE adjusted for our cash divestiture $X.XX million was BOE BOE. following in

total reminder, we of closing. million cash received a for at sale $XXX consideration that As

was absolute higher GP&T a sequential as pads QX a than areas. our production. result our costs coming unit both driven and on an basis certain higher GP&T on basis reducing G&A relentless focus in higher on in of per declined by

on flow cash million cash CapEx accrued basis. adjusted resulting for $XX $XXX an quarter of million on a Accrued free free reported adjusted basis. of cash We $XX the flow million, was CapEx in

As of on we per basis figure focus income. free and cash we cash reported We with variable QX, cash as CapEx of adjusted aligns CapEx believe returns. flow it share a in calculate per discussed share on net our cash dividend $X.XX our the we to better $X.XX have utilized adjusted

on shareholder four, see total we in As returns can are delivering $XX you of QX. slide million

that by dividend cash with million. We amount of calculation $XX Our quarterly base share or million. free adjusted $X.XX $XX flow per our begins reduced

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

achieving This that quarter, per are $X.XX target share. of dividend variable with a we

a eight. maintaining as program. flexibility, supports as remain shareholder focused our Turning return balance strategic on well to strong sheet slide We that

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

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

the in a oil weighted downturn. desire line event average hedges of our strategy and floor $XX. our hedging existing is included the with where These hedges expected opportunistically the for act to be consistent able remainder price approximately summary year will with our of you we to production have at of are approximately for in in hedge appendix, of see Our in place the XX% crude a

that, I over will With James. it to turn

James Walter

Guy. Thanks,

We make that progress are in the of the We to have goal an entire industry operator being to report Permian. of our LOE, D&C, and across be cost towards proud ultimately capital. strive cost to cost continued structure, lowest we leader the G&A

year-over-year Slide G&A seven continued and BOE. per in our quarter-over-quarter highlights improvement

resulted We quarter. in compared have million This G&A G&A for improvement Centennial’s per standalone $X.XX of $X.XX quarter free by an incremental when the from QX approximately lowered $XX XX% to flow to per in cash BOE XXXX. in BOE

compared a performance, but have highly to efficient a we to on is jumped historical per operations. a basis, which we basis, have to per and talented leading position improved to G&A quickly as only further compared testament operated as G&A a our BOE team well Not our peers, our

looking cost enhance well and our entire across for to Our for shareholders. free team efficiencies our flow cash is structure always further drive value

close progress prepared to goals our we the I’d where against recap by today nine, provide and of the out quick like today. slide those turning goals year our a remarks earlier set to in we

full of pro our to well XX% deliver of result track a year a performance, growth organic forma XX% on remain on as production oil exit-to-exit peer-leading consistent basis. we or over and robust First,

$XXX execute our repurchase dividend to returning base shareholders or million we continue share per of our program. and through to Two, $X.XX spectrums capital variable dividend all on share return approximately program,

Three, practices execution, more driven have business through our efficiencies, the reduced times have our overall we shared significant made combination of which efficient. capital structure, best operational ultimately cycle lowered operational cost and and

have driving acquired portfolio, quality value our our optimize meaningful position bolt-on Delaware. the to continue offsetting core X,XXX we over of the Four, high and acquisitions shareholders. game, Between ground acres we our for in active

a $XXX premium multiple. County to We our in current have representing also non-core assets significant million, successfully divested SWD Reeves for trading

perhaps sheet will while a but of we and executed have allow our Lastly, commodity in thrive environment. all to which the create importantly, any with outsized business value balance ample most strong shareholder maintaining price above liquidity,

We stands where we and the like about significant as business half momentum year. we of have into the feel head back are excited today the

to the execute we on Our team together year. laid plan and out we well start to has come the continue

positioned to while We robust free returns are valuation. shareholders, well significant long-term cash generate deliver flow and to maximizing

our Garrison, be departing put our company Operating will on personal reasons. we press in Matt it’s Xst Officer, yesterday the afternoon, as Chief noting worth for September release that out Finally,

As earnings has that last I his reflect to sit it’s here call, be Permian would contribution in with taking Resources. Matt, the on what worth moment the tremendous a commentary made on to

friend. Permian and working He and been company, has Resources, as both the shown great to predecessor, alongside Permian at X the partner enjoyed business Will, sleeves a myself rolling He’s year, our up past as years have contributor, well team our Resources the prior incredible dedication entire and Centennial. during and Matt. leadership this

be about background, we and operational direct With Matt’s standpoint, between Hickey allow and natural a report Will something communication fit CEO. will as operational it organizational will the streamlined an will Will’s the excited all forward. field decision-making to and more quicker From for reports going this are

In closing, he’s thank Matt PR. like I’d for at to done everything again

forward going future. his to best and him wish him miss the will the We family in

for turn it now Q&A. Thank to and back listening you I the will Operator for

Operator

line Securities. [Operator Dingmann first from Thank Please comes from And the Neal question ahead. of Truist you. Instructions] go your

Neal Dingmann

well to Good very is all question appears slide am quarters, couple of consistency. even basis? By morning, what’s just driving on guys. the this, and is to at intervals the a the the looking or first continue last looks or this continue consistent both target My wells to wondering, quarter. My key certainly I some -- nice and on five. GOR like completions strong you it can speak your very it as you of spacing production be see

Will Hickey

Yeah. mean, that what -- a keep really done. haven’t that have changed of bench We things driving or fortunate position any are listed. we a all in inventory really, of just to always you it doing kind those we got what’s of Thanks, I is deep Neal. have we we significantly at I think,

cost, little those in areas same and we try have change same any that’s had the are made kind still nothing of targets any tweaks some to So drilling to completion to drive designs to but productivity. we

have short forward. years are what So what kind of this should you we doing we for next story and the going expect few done is is always the just

Neal Dingmann

see, to on maybe of the see the what what’s guess, equipment high some spec advantage the see all asking equipment? can lesser on as and side you high of lesser am improvement you the cost or quality like, lower what Yeah. efficiencies. am I on cost potentially some of is the going cost potential you if place just It’s number you question on you where your seeing do high I D&C to then great when slide six. graded to see the I the And just are and as my consistency. this, services. OFS operational wondering, second mentioned have of much wondering you do results the is am spec I type on

Will Hickey

No.

I think right. that’s

think the low-spec industry, between of I that down will have we across on start have some drive on is stuff first year. the high costs the stuff that the seen kind spec the the cost kind of to down we and end of come now hope and

is cycle kind our have out just on drilling premium equipment. ability cut and more Really, seen offsets for we side, we to pay days of to times continue kind site what have intent to that reduce of than that the

of we I on between what maybe have we are the cut year. stuff the high reductions days looks spec, and with both evaluating kind that to and of always kind and cost kind of always versus will like of structure overall cost spec lower high get as the continue looks beginning spec like, But of we next mean, been, now what some kind equation hopefully,

Neal Dingmann

Thanks, Great Will. details.

Will Hickey

Thank you.

Operator

line Thank ahead. the from next comes Zach And your go of from you. Please Parham JPMorgan. question

Zach Parham

question. Thanks trajectory. on guess, my for production I first, guys. Hey, taking the just

exit production You where talk sense growth like, just what goes here? a guidance. trying XQ rate all about reaffirmed to little the from on you Can oil get bit looks a of

Will Hickey

Yeah. Sure.

rate the year. percentage to higher I to QX get the think kind QX exit to at be expertise we single-digit in we and of from QX ultimately XQ were percentage So from beginning of slightly of that kind of the more discussed growth that QX kind growth where so will low then

Zach Parham

guess Thanks, on up I Got Will. it. deflation. just Neal’s question on following cost

cost that We now you larger seeing number heard Does mention any are seeing to XXXX. on to reasonable items? X% substantial if can others X% lower declines what are you, on maybe you any well you have year-over-year talk of seem through just deflation and ticket the costs in

Will Hickey

the kind we that based think I based we two-wheelers of end I mean, will high to I today, that casing primarily reduction which we Yeah. X% driven QX. the run we seeing be range are what at mean, on by point would today, and in on of can purchasing just casing. ultimately are

fine things bag have chip in completion So away X% to kind got across side of are we of the the starting the of and at kind AFE. other items and now we on kind whole

So hoping we we we when beat we today, now get got I year. back think on am good and and what of number between seeing line have I and call next then are to that more sight of kind can to based of hopefully XX% kind

Zach Parham

great Will. color. Thanks, That’s

Will Hickey

Yeah.

Operator

And next you. your comes Daniel Please line Jay Thank of the question go ahead. Partners. from from Energy Geoff

Geoff Jay

you in Hey, curious, the that and are guys. I in I and notion a till other the M&A on there’s lot guys of front. guess, the seeing pretty about on sort over what’s know was in of picked of Permian there’s left, lot of I particular, all left that this just a been not the calls some kind commentary with it’s

So or land the sense there? I was was wondering land of what your

Will Hickey

I mean, like acquisitions I effort saw, this finding opportunities starting grassroots did that the our as drill think, kind ahead and blocking incredibly I we the great are bit, smaller we in does that Yeah. quarter. team still with and tackling you of think think well,

continue rate for We are attractive, years confident of those of that highly that highest something highly acquisitions can and are most look, the return we eight every have do. really we quarter some find. And can we done to

on the there, you stuff seen stuff, think, bigger a I I still think there’s of out transactions lot in Permian. have

said have have for we bar a that got everything, acquisitions safe it’s to good the high. really but we business I we and looking as before, are at think sets really say

of have bases got the one out inventory we say I’d quality highest there.

only compete to better I think are and inventory business we the gets, that is. capital for that the that going So do deals harder provide our

was are better, looking, But business at so on point, to be accretive, that we just this we working good. we I business, to and we were find if on think, than our more would pursue stay it. make happy to we something excited think confident are and can I it’s our But sidelines the base also because keep

Geoff Jay

Yeah. That’s perfect. Appreciate it. guys. Thanks,

Operator

your Paul you. Please from go next from ahead. line Thank comes Citi. Diamond question the of And

Paul Diamond

for my taking Thanks all. morning, Good call.

we guys understanding a noted go get it of in should guess quick about of how you do Just one, the to drop increase kind if back a that think or kind LOE I of I expect X% handling that water an -- expenses. forward on to should down? wanted sticky you or trend

Will Hickey

Yeah. -- I mean, so that divestiture. specifically, that’s the SWD

those will this for I obviously, assets expect it year. sold are you is, and to what end part So, us half that of us of LOE But high the puts probably sticky. the think of the range that be would so from back

be we of But to down the able if production. base do few LOE nature the as the grow we we expect production to the of of continue and given grow to those that I will kind base next kind do grow years, over some just fixed look and continue as out of cost you costs, drive

Paul Diamond

quick Understood. follow-up. one Maybe just

dropping holding guys on up. production You are efficiency, rig to steady a

Just -- move? on there that order growth, to rig out whether you what for that in would have any make there XXXX a or of is back bring term, in beyond are longer what bogeys kind to see need we a

Will Hickey

we Yeah. us clear. have I pretty I mean for been think

outlook of kind on to this not point. are any providing at We XXXX

the we I will as think market year. we get clear closer to decision that been we make really with have that’s next a

near- decisions free any decrease be for us, to or XX to what I driven maximizes our cash are have activity by months, flow for mid-term said increase think as investors. the kind of we to for past going

early like. to it’s too today looks think what XXXX tell I And

a commodity probably way, see and if think cost other low service with things I activity. think a price, I towards I higher think that and environment you leans dial back us growth the could go

planning of year. around react think to in early got plan today, a I We watching the quickly team next So have it’s tell, right asset and base. but constantly too kind are closer we put we it’s out as something and the can we to

Paul Diamond

for Understood. clarity. Thanks

Operator

the next your And ahead. question comes from go you. of Subash Benchmark. Please Chandra Thank from line

Subash Chandra

Yeah. Two you. questions. Thank

you as being we math is be plans, looking of XXXX do the about think of we that should talk is, First the as sort XQ-to-XQ sort of benchmark at?

James Walter

a is, we our frank we simple the with have pro that last The real answer didn’t put clean, because year. forma QX-to-QX number was familiar market

talking think, I think growth we years, probably out we I start when talking shift we about and get when to a place rates. start annual will

year at I more belt I make simpler lot that will sense. cleaner have think full that’s time, now that will and a that and we our think, under a

kind So probably, the best growth the I merger. as of and future, us context I sense think But rates. of we made to to thinking look start everyone given annual the for QX-to-QX else think,

Subash Chandra

Got it.

seen think operators of oil Okay. cut, expected, maintenance guess, for I this in bit follow-up and about that but that My you do in across a we suppose, I reasons, how Permian multiple should be guys you have is a host a but of XXXX? declining

Will Hickey

I’d flat expect kind I price development a we commodity accordingly. looks of think got now if could outperformance like oil it kind that we kind XXXX. and of then obviously, the today, shift oil cut cuts we that But significant asset does gas the flat between of if base for saw base of case the is market have

Subash Chandra

Great. Thanks Perfect. so much.

Will Hickey

You bet.

Operator

the your And Instructions] question from line comes Josh [Operator of Please ahead. UBS. you. from Silverstein next Thank go

Josh Silverstein

guys. morning, Thanks. Good

the what you out what it. year some wondering lateral the a what may longer towards started average length XX,XXX foot of beyond am this or may have laterals little some offers look go if done, be like? inventory to and your laterals We even I more have hear guys Permian bit

Will Hickey

Yeah.

year kind this to-date feet, lateraling fits. of is X,XXX average our which So

X-mile majority on the across really well the our at up for If our of position sets development you look position.

that’s expect done we think I two last over should and So what going you forward. years what the have that’s

general, the just probably you the Basin, As than what less go efficient far laterals Midland as how given think, in slightly fluid they on much long. the Delaware wells just get when and overall it’s X-mile make, in would I of those you that productivity Basin

got we said can do Having it. team that, have that a

laterals We of and over -- have over year the X.X-mile of time. drilled this plenty kind

as you that I X-mile will most we answer we efficient very will year. are direction, watching kind base that a a it, case, development next company So capital the of that think confident is we feel that we keep move if should expect but

Josh Silverstein

Understood. on it. just cash sheet. Got on Yeah. then the And balance and the return capital to

still You plus have the XX% framework. on capital return

versus Just you maturity don’t that flow trading that ramping obviously, given just dividend, is hand? you curious base of variable share just the at dividend XXXX any the and and for about to and How cash, building do upside versus free because still have committed are a low multiple. until opportunity balance stock you cash but cash buybacks repurchases on and Thanks. guys

James Walter

No. Sure. Yeah.

dividend the right. what I is. think that’s Obviously, base it is

share I We going is driven. default to think and on going for to opportunity set the be us, just for variable the variable said that to be us I buyback, think, that’s dividend. say continue before versus the

opportunistic going an I But in if hard dislocations are I as has we organized we well. sell-down, because kind clear last the see But or opportunities really in buyback. stock advantage to of year, lead have effectuate we performed we we side to think and expect to to haven’t seen be buyback see the the kind that of of take to we think or on sponsor the market

I you right. got think it So think I

time, harden we buyback I be and dividend. those should the case arise. going think opportunities lean opportunities variable expect will the some to find But is the when I over risk

Josh Silverstein

Great. Thanks, guys.

James Walter

you. Thank

Operator

questions Thank at are time. Mr. this there Walter, continue. Please further you. no

James Walter

value compared returns Permian indexes. both we set believe represent sector and slide which compelling conclude But delivered to on our continues call our like high-quality a broader to current leading and market our the reemphasize for our have today’s XX, ago, helps to peer we investors. I’d future value and proposition business the outperformed to a closing our merger as almost Since S&P. that for conference year

attributes, solidifying that create strong as and to broader competitive sectors By energy leader such to but in we growth, more with while a business core for quality with ours shareholders, enhance market. believe that organic financial with position our rerate only our these assets, continuing positions can operations value cultivate we to and as believe in continue confirmed sector. peers, other not to the multiples, We the direct efficient also

again everyone your today. you for Thank time

Operator

for Thank you. participating. for Ladies gentlemen, today. all that conclude our does conference and Thank you

You may all disconnect.

Permian Resources (PR) 3 Aug 232023 Q2 Earnings call transcript