Permian Resources Q1 2025 Earnings Report

Permian Resources EPS Results

• Actual EPS: $0.42
• Consensus EPS: $0.44
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $0.25

Permian Resources Revenue Results

• Actual Revenue: $1.38 billion
• Expected Revenue: $1.37 billion
• Beat/Miss: Beat by +$6.07 million
• YoY Revenue Growth: +10.70%

Permian Resources Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 10:00AM ET

Permian Resources (NYSE:PR), an independent oil and natural gas company, focuses on the development of crude oil and related liquids-rich natural gas reserves in the United States. The company's assets primarily focus on the Delaware Basin, a sub-basin of the Permian Basin. Its properties consist of acreage blocks in West Texas, Eddy County, Lea County, and New Mexico. The company was formerly known as Centennial Resource Development, Inc. and changed its name to Permian Resources Corporation in September 2022. Permian Resources Corporation was incorporated in 2015 and is headquartered in Midland, Texas.

Permian Resources Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to the Permian Resources Conference Call to discuss its First Quarter twenty twenty five Earnings. Today's call is being recorded. A replay of the call will be accessible until 05/22/2025, by dialing (888) 660-6264 and entering the replay access code 27785 or by visiting the company's website at www.permeonrest.com. At this time, I will turn the call over to Hayes Mabry, Permian Resources' Vice President of Investor Relations, for some opening remarks. Please go ahead, sir.

[Hays Mabry, VP - IR at Permian Resources]

Thanks, Angeline, and thank you all for joining us. On the call today are Will Hickey and James Walter, our chief executive officers and Guy Olfant, our Chief Financial Officer. I would like to note that many of the comments during this call are forward looking statements that involve risk and uncertainties that could affect our actual results or plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward looking statements of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results may differ materially.

[Hays Mabry, VP - IR at Permian Resources]

We may also refer to non GAAP financial measures. For any non GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure, can be found in our earnings release or presentation. With that, I will turn the call over to Will Hickey, Co CEO.

[Will Hickey, Director & Co-CEO at Permian Resources]

Thanks, Hayes. There is a lot we're excited to talk about today. We delivered another strong quarter, outperforming expectations and achieving the highest free cash flow per share in PR history of $0.54 per share, driven by lower per unit cost and solid production performance. We did all this while strengthening the balance sheet with the highest liquidity, most cash and lowest leverage in PR history. All the work we've done to date has put us in an incredibly strong position, not just to navigate the current market, but to capitalize on it.

[Will Hickey, Director & Co-CEO at Permian Resources]

And we've used this strength to start executing our downturn playbook already with our first opportunistic share buyback and the announcement of a New Mexico bolt on, both which James will hit in more detail. Moving to Q1 performance. Production exceeded expectations with oil production of 175,000 barrels of oil per day and total production of 373,000 barrels of oil equivalent per day. Our strong production performance is mainly attributable to outperformance from our twenty twenty four acquisitions, driven by artificial lift optimization and stronger than expected well performance. In addition to wins on the production side, our operations team continued to drive down costs.

[Will Hickey, Director & Co-CEO at Permian Resources]

Compared to Q4, we reduced controllable cash costs by 4% and D and C costs by 3%, landing at $750 per foot for the quarter. Strong production performance and further extending our Delaware Basin cost leadership resulted in adjusted operating cash flow of $900,000,000 and adjusted free cash flow of $460,000,000 with $500,000,000 of cash CapEx. Our outstanding operating performance and conservative financial strategy further enhanced our fortress balance sheet. During the quarter, robust free cash flow generation drove an increase in cash on the balance sheet from $479,000,000 at year end to approximately $700,000,000 on March 31. We also redeemed $175,000,000 in principal at the nine seveneight high interest legacy Earthstone notes, which will save us approximately $17,000,000 per year in reduced interest expenses.

[Will Hickey, Director & Co-CEO at Permian Resources]

These actions reduced leverage from 1x at year end to 0.8x at the end of Q1. We also highlight our updated credit ratings from BA1 from Moody's and BB plus from S and P. With Fitch already at BB plus we are one notch away from our investment grade goal at all three rating agencies. And you'll see in this presentation our credit metrics compare favorably to our investment grade peers. Turning to Slide five.

[Will Hickey, Director & Co-CEO at Permian Resources]

When we started the predecessor company Colgate back in the twenty fifteen-twenty sixteen downturn, we built the company on a strategy of being prepared to play offense in any market. That mindset has benefited us tremendously in previous downturns and remains a core part of PR's DNA today. While we've been executing on an accretive consolidation strategy, we've also been pulling every lever to make sure we are ready for the next downturn. Since year end 2023, we have decreased leverage to 0.8 times and increased liquidity to $3,200,000,000 all while more than doubling the size of the business. Looking at our current hedge book, we have approximately 25% of 2025 oil production hedged at a price just above $73 per barrel.

[Will Hickey, Director & Co-CEO at Permian Resources]

This hedging strategy allows PR to be more opportunistic during a downturn when investments can earn the highest return. In addition, our high returning asset base and our ability to drive costs out of the business allows us to maximize cash return from every dollar invested. That's not just a talking point, it's material. At our current cost structure and consistent well performance, we can generate the same free cash flow this year if oil remains at $60 that we did last year at $75 Thanks to our strategy, our people and our relentless execution, PR is in the strongest position in company history to operate effectively and create value through a down market. With that, I'll turn it over to James to walk through our downturn strategy in more detail.

[James Walter, Director & Co-CEO at Permian Resources]

Thanks Will. We've discussed our views on balance sheet and cost leadership, but the third part of our strategy is opportunistically investing during the down cycle. If we step back for a second, we recognize that the oil and gas industry will always have volatility, and it is our belief that this volatility creates the potential for outsized value creation. We firmly believe that investments made during lower commodity prices drive greater long term shareholder value. But to capitalize on that opportunity, you have to have both the balance sheet capacity and the willingness to deploy capital when it is the natural reaction to pull back.

[James Walter, Director & Co-CEO at Permian Resources]

During times like this, our goal is to buy the highest quality assets with long dated, low breakeven inventory in the bottom half of the commodity cycle. And we've recently done that in two ways. First, with our buyback of PR shares in early April and second, with our New Mexico bolt on we announced yesterday. We'll hit both of those in more detail now. Yesterday, we announced the six zero eight million dollars bolt on acquisition in New Mexico directly offsetting and overlapping our existing acreage and operational footprint.

[James Walter, Director & Co-CEO at Permian Resources]

This acquisition was entirely in Eddy And Lea Counties and consists of approximately 12,000 BOE a day, 13,300 net acres and 8,700 net royalty acres. The proximity of these assets to our legacy position will allow us to quickly and efficiently bring our peer leading cost structure to bear on the newly acquired assets further enhancing returns. This acquisition also adds over 100 new gross operating locations in our core operating areas that immediately compete for capital, while also materially increasing working interest in existing legacy PR units. In addition, the acquisition comes with another 4,500 non op acres that provide the opportunity to leverage our highly effective ground game to maximize value through trades and further consolidation. The existing production has a lower decline than most acquisitions we have evaluated recently, but what really differentiates these assets is the quality and duration of the inventory.

[James Walter, Director & Co-CEO at Permian Resources]

Strong well productivity combined with high NRIs and low development costs allow these acquired locations to breakeven as low as $30 per barrel. This combination of high return investments and low declines will allow us to maintain production with just a 35% reinvestment rate over the long term. We're excited about the opportunity to invest in our core operating areas at below mid cycle prices and think the purchase price metrics reflect that value proposition. The $6.00 $8,000,000 purchase price implies an attractive value of approximately $12,500 per net acre and $6,000 per net royalty acre. This works out to about $2,000,000 per net location and all in we expect the deal to generate in excess of 5% free cash flow per share accretion in the near term, mid term and long term.

[James Walter, Director & Co-CEO at Permian Resources]

We'd like to reiterate that we've been maintaining a very disciplined and consistent approach to M and A during our seven years as a private company and nearly three years as a public company. And as such, Slide eight should be familiar to all of you. Given the high quality of our business today and specifically the depth of our low breakeven inventory, the bar is very high acquisitions. But we are confident this acquisition exceeds all of our rigorous investment criteria. First, we acquired these assets at an attractive valuation where we are highly confident we can exceed our return thresholds.

[James Walter, Director & Co-CEO at Permian Resources]

Second, this transaction is accretive to all key financial metrics. Third, this allows us to add very high quality inventory that competes for capital immediately in areas that we know well. Fourth, we're able to execute this opportunity while maintaining our fortress balance sheet and expect it to exit the year with over $3,000,000,000 in liquidity and leverage below one times. But finally and most importantly, we believe this transaction makes our business better and will increase free cash flow per share and returns to investors over the long term. We have a very long and successful track record of M and A that creates value for our shareholders and are highly confident that this transaction builds upon that.

[James Walter, Director & Co-CEO at Permian Resources]

Turning to Slide nine, we want to continue to emphasize that protecting the balance sheet is a key component of our long term strategy. Pro form a for the New Mexico bolt on, our balance sheet remains strong at current prices with leverage less than one times and a dividend breakeven of approximately $40 comparing very favorably to our historical metrics and our peers. We are confident we have the dry powder to continue to execute on acquisitions or share buybacks and scale if additional opportunities were to arise. The final piece of our downturn strategy is opportunistic share buybacks and we've been consistent and disciplined in our approach to buybacks since PR's inception. What we want to accomplish with buybacks is to increase ownership in our business in a cost effective manner.

[James Walter, Director & Co-CEO at Permian Resources]

To put it simply, we can buy back more shares with the same amount of money during a downturn when prices are lower. And in a volatile industry like ours, we are confident that the dislocations and opportunities will always present themselves over time. Having prepared accordingly, we executed buybacks immediately during the period of heightened volatility in early April. In a relatively small window, we bought 4,100,000 shares at an average price of $10.52 We want to use buybacks as efficiently as possible and we'll be ready to lean in during the next clear market dislocation. We are very fortunate that our team's focus on balance sheet strength has left us in a position to not treat buybacks or acquisitions as an either or, but where we can execute on both in scale as opportunities present themselves in 2025 and beyond.

[James Walter, Director & Co-CEO at Permian Resources]

Turning to Slide 11, we're excited to roll out a revised plan where we project more production and lower CapEx than the original plan we rolled out in February. Our recent production outperformance allows us to reduce our capital budget by $50,000,000 while maintaining production at the high end of our guidance range. This reduction in CapEx will come from a combination of reductions in completion and drilling activity in the second half of the year. As such, we still expect Q2 to be the highest CapEx quarter of the year with a step down in CapEx in the second half.

[James Walter, Director & Co-CEO at Permian Resources]

As we have outlined for

[James Walter, Director & Co-CEO at Permian Resources]

the past several years, our reinvestment and capital allocation decisions are very dynamic and we adjust our plans to reflect the returns we anticipate in the coming environment. Our business remains highly flexible to react to the ever changing macro and we will continue to monitor all of the moving pieces and adopt a plan that maximizes long term shareholder value. We believe this strategy will position us to further our track record of outsized value creation for shareholders. Thank you for tuning in today, and now we will turn it back to the operator for Q and A.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Session. Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

[Neil Mehta, Analyst at Goldman Sachs]

Good morning, James and Guy and Will and team. Just would love to build on your comments on the bolt on in New Mexico. Just curious, how does this deal stack up against the recent deals that you've done as you think about, what it brings to the table? And, you know, spend a little bit more time kind of flushing out what you think, might be underappreciated here.

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. No, Neil. Great question. We we're really excited about this deal. I think it fits with exactly what we're trying to do with our kind of m and a strategy, which is make our business better.

[James Walter, Director & Co-CEO at Permian Resources]

And I think as the market evolves, I think one of the hardest things to continue to find is is inventory that competes with what we've already gotten our base business. And I think that's, to us, the best part about this deal. I think we love the low decline PDP base. I think I mentioned in my prepared remarks that the the base declines here are lower than anything we've looked at in quite some time. But what we really like here is the kind of higher weighting of the purchase price to inventory and the quality of that inventory.

[James Walter, Director & Co-CEO at Permian Resources]

I think we haven't seen deals that have breakevens in the low 30s like this a little bit of time and kind of really excited about what it does. And you know, it really does compete for capital. I think we've got a great inventory base to build upon, and and this fits fits great with our stack.

[Neil Mehta, Analyst at Goldman Sachs]

And in terms of what do you think is kinda underappreciated in in in the asset or from an operational standpoint? What's got you excited about it?

[James Walter, Director & Co-CEO at Permian Resources]

Yes. I mean, this kind of fits with what we've talked about for a while in our Parkway asset in Eddy County. I think what's been underappreciated by the market about this area is the oil productivity is strong, but I think what really differentiates this area from a rate of return perspective is just how low the cost structure is. I think what our team has been able to do in Parkway and Eddy County, you know, we're we're kind of approaching Midland Basin level cost with what the team is doing out there. And, you know, I think that really does help help generate some of those outsized returns we referenced.

[Neil Mehta, Analyst at Goldman Sachs]

Awesome. And then the follow-up just on share repurchases. You guys got, were aggressive in terms of starting to, following, early early April sell off and were able to pick off stock at a really good price. So just think about maybe talk about your capacity to continue to buy back stock here with shares certainly trading at a discounted valuation.

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think from our perspective, we have ample capacity to both pursue further acquisitions if the opportunities were to present themselves or to buy back shares in scale or or really to do both. Like I said, we don't think there's an either or proposition, but we've been really patient on the share buybacks. I people have seen that over the last two and a half years and expect to continue to be patient. I'd say we kind of started to dip our toe in the share buybacks that first week in April as we kind of thought we could be at the beginning of a longer term downturn.

[James Walter, Director & Co-CEO at Permian Resources]

And I'd say kind of if the market kind of went back to those levels or below that, we'd be kind of watching it and ready in the right environment. But I'd say it's also there's a lot that goes into the decision to purchase three shares. It's what does the balance sheet look like, what's our take on the longer term macro and what's our broader opportunity set. So it's not going to be a kind of perfect to pin down formula, but I think what you'll hear from us is we're gonna continue to watch the market. We'll be patient.

[James Walter, Director & Co-CEO at Permian Resources]

And I think when we do see opportunities, you should expect us to hit them pretty aggressively.

[Neil Mehta, Analyst at Goldman Sachs]

Awesome. Thanks, guys.

[Will Hickey, Director & Co-CEO at Permian Resources]

Thank you.

[Operator]

Thank you. The next question comes from Kevin McCurdy with Pickering Energy Partners. Please go ahead.

[Kevin MacCurdy, Managing Director at Pickering Energy Partners]

Hey, good morning guys. Maybe to stick with the acquisition, can you share anything on how this deal came about? Was this a process or a negotiated deal? And then maybe where these assets fit into the development queue?

[James Walter, Director & Co-CEO at Permian Resources]

Yes, sure. So these are some assets we've had our eye on for a long time. I think we've been in some discussions with the sellers on a smaller scale going back several years. I'd say for us, this discussion is probably going on again in earnest the last six to nine months. We had some conversations around potential trades, other ways to work together.

[James Walter, Director & Co-CEO at Permian Resources]

Obviously, we're two large players in the Permian that have a lot of respect for what the other ones are doing. But ultimately, did morph into something that I would call a process and we're able to reach a deal that makes sense for us. Think largely on the backs of our peer leading cost structure. I think these assets were really interesting where a good chunk of the acreage is an existing Permian Resources units that were on the near term drill schedule for us. So I think we had a nice competitive advantage there.

[James Walter, Director & Co-CEO at Permian Resources]

And the newly acquired inventory competes for capital day one. I think we'll probably over allocate to some of these assets in the near term just given how low the breakevens are and how quick the payouts are.

[Kevin MacCurdy, Managing Director at Pickering Energy Partners]

Appreciate that. And and then as a follow-up, I mean, it looks like to us that production is trending better than expected to start the year. Any observations on what is driving that better production compared to original expectations?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yes. I tried to hit a little on my prepared remarks, but I'd say the majority of the Q1 outperformance is outperformance localized to two of the larger twenty twenty four acquisitions we did. Just we've now had those kind of under our wing with our operating practices for kind of three months and nine months respectively. And we've been able to swap out artificial lift and get our first kind of larger pads drilled on both of them. And I think what we've been surprised by is that the performance was better than expected and some of the artificial lift swaps had a meaningful uplift in production.

[Will Hickey, Director & Co-CEO at Permian Resources]

So I think these are the

[Will Hickey, Director & Co-CEO at Permian Resources]

kind of the a little bit of

[Will Hickey, Director & Co-CEO at Permian Resources]

the good assets tend to outperform more often. And we think that the deals we did in 2024 were on good assets and we had now had enough time to get our hands around them. You saw the cost cutting immediately, and now you're seeing the production uplift three to six months later.

[Kevin MacCurdy, Managing Director at Pickering Energy Partners]

Thank you and great quarter.

[Will Hickey, Director & Co-CEO at Permian Resources]

Thank you.

[Operator]

Thank you. The next question comes from John Freeman with Raymond James. Please go ahead.

[John Freeman, Managing Director at Raymond James Financial]

Congrats on the acquisition. On the roughly one third of this bolt on deal that's non op, can you speak to the, the line of sights you've got on being able to to to work some trades to to increase your interest in the operated units?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. Sure. I mean, I I think with our existing footprint, we have meaningful overlap with every operator of scale in the Delaware Basin today, which is great. I'd say we we really do have active ongoing trade discussions with, I think, everyone who's relevant and active in in the Delaware Basin. So as you take the roughly 4,500 non op acres we've acquired here, that just fits right into the discussions that we're already having.

[James Walter, Director & Co-CEO at Permian Resources]

And frankly, I think should allow us to help optimize both the assets we're newly acquiring as well as some of the legacy PR assets that we've been working to kind of trade and consolidate. So I think that's a great component of the deal. I think we also like some of the consolidation and buying opportunities around what may appear to be a non op asset today, may very well not be a non op when we unleash our land team and our business development team, which I think are the best in the business on on growing some of those positions. I think a lot of what we underwrote is non op acres could very well end up being operated, you know, in not in not too much time.

[John Freeman, Managing Director at Raymond James Financial]

Got it. And then, can you all speak to kinda how y'all think about the the trade offs of, you know, depending on what the the oil price does from here, but just how y'all think about the trade offs of responding to, like, a weaker oil price environment with reduced activity versus not wanting to slow efficiency gains and all the momentum that you all built up if you all were sort of oscillating activity kind of up and down with the macro?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yes. I mean, I think at the very core, our development program and capital allocation through the drill bit is a very returns focused equation. And that hasn't changed in the new commodity price. I'd say returns are obviously getting somewhat compressed given oil is down, however much you want to think, fifteen, twenty a barrel. But the returns of our program are extremely resilient.

[Will Hickey, Director & Co-CEO at Permian Resources]

Like if you go look at wellhead breakevens are in the low 30s, corporate breakeven right around 40. So I mean we are still generating great returns through the drill bit. For us, I think what you see us doing this year is just given the overall macro backdrop, we've let the improvements in capital efficiency of the business accrue to less CapEx. And so that's why you see us as opposed to letting it accrue to production and kind of blowing out the high side of our original production guide. I think where we're headed is we're going to hold the line on production and let it accrue to less CapEx for the year.

[Will Hickey, Director & Co-CEO at Permian Resources]

Also, I think there's a we can thread the needle of doing this in a way where we maintain kind of maximum flexibility with the ability to hit the gas pedal anytime between now and next year, early next year, if we see things turn around. And similarly, we run our business with very few long term contracts. And so if we see kind of things get worse from here, we are prepared and able to dial it back. So it's not a perfect equation you can plug into, but it's kind of a starts with the overall returns of the program, and then kind of after that trying to maintain flexibility to react to what's been a pretty volatile market.

[John Freeman, Managing Director at Raymond James Financial]

Thanks guys. Well done.

[James Walter, Director & Co-CEO at Permian Resources]

Thanks John.

[Operator]

Thank you. The next question comes from Scott Hanold with RBC. Please go ahead.

[Scott Hanold, Managing Director - Energy Research at RBC Capital Markets]

Yes. Hi, thanks. If I could build on John's question there. And just as you see, obviously, you talked about you're going to be tapering some of your activity in the back half of the year with that reduction. Does that keep your volumes on a fairly stable rate into 2026?

[Scott Hanold, Managing Director - Energy Research at RBC Capital Markets]

So it's sort of a question on how you're positioned to heading into 2026. Is the back half of the year still a pretty good maintenance mode into the next year?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yes. I think relatively flat from where we were at Q1 is fair. This is not a we're not gonna exit the plan as it seems is not to exit q four at some meaningful decline from what we printed in q one, if that's the question you're asking.

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. And I think as you think about 2026, I think our goal is to position ourselves to be able to, like Will said, quickly react to what the environment looks like at that time. We've obviously never given 2026 guidance, but wanna be in a position if if the market is calling for it and and returns are high enough, we could return to growth, which we've done really successfully the last few years. And if it looks like like something like today's environment, likely something more more flat. And if things had really gotten worse, we'd consider even further reductions activity.

[James Walter, Director & Co-CEO at Permian Resources]

So I think our position heading into the year will be one of kind of perfect flexibility where we can quickly react to whatever the market looks like.

[Scott Hanold, Managing Director - Energy Research at RBC Capital Markets]

Got it. Thank you for that. And, you know, just maybe your perspective on the broad m and a landscape. I mean, you all have done a a very good job over the last several years of not only doing a lot of ground game activity, but, you know, mid to to larger size transactions. In in this environment, like, what is, you know, your real time dealers, you know, telling telling you that that's out there?

[Scott Hanold, Managing Director - Energy Research at RBC Capital Markets]

And and what do you think the market looks like, say, in the next six months if if things are status quo from where they are today?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think kind

[James Walter, Director & Co-CEO at Permian Resources]

of starting probably longer dated. I think we expect to continue to see opportunities like this size deal over the long term in the Delaware Basin. I think we've seen a ton of Permian consolidation in the last three years of a major scale. And I think on the back of consolidation historically, you've seen noncore asset sales come out of it. I think this probably fits that bill and you'll see more of it.

[James Walter, Director & Co-CEO at Permian Resources]

But I don't think we see anything like this coming down the pipeline in the next six months. I think the likely opportunity set for PR in that shorter time period is really more of the ground game. I think we've had a really active ground game in the last several years. I actually think in a downturn like this, there's a potential for that activity to actually pick up as you have potentially more motivated sellers. And I also think a big part of the ground game for us is gonna be we got a lot bigger ground game footprint as as we've mentioned on the call today, like a lot more chips to play with, a lot more areas to go focus on.

[James Walter, Director & Co-CEO at Permian Resources]

So I I don't think it probably shows up next quarter. But in the six to nine month time period, back half of the year, I think we will really see a lot of opportunities on the ground game side to kinda grow the business organically, is something we've done really well. And and I think some of the best best return opportunities that we tend to see.

[Scott Hanold, Managing Director - Energy Research at RBC Capital Markets]

Appreciate the color. Thank you.

[Operator]

Thank you. The next question comes from Zach Parham with JPMorgan. Please go ahead.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Thanks for taking my question. Given the activity drops we've seen across the industry already and there's probably more to come, can you talk about what you're seeing on the service cost side at this point? Have those started to move lower yet?

[Will Hickey, Director & Co-CEO at Permian Resources]

I'd say that, yeah, they're just starting to kinda move lower, Zach. You know, exactly where it settles out, I think it's it's too early to say. But,

[Will Hickey, Director & Co-CEO at Permian Resources]

you

[Will Hickey, Director & Co-CEO at Permian Resources]

know, very much with the activity drop, I I'd say service providers are are aware, and and there's some that are taking a strategy if they'd like to kind of keep their market share and and keep all their crews busy. And with those, we're getting some price concessions. And there are others who are, you know, more drawing a hard line if they'd rather drop activity themselves as opposed to give price concessions. And so I you know, exactly how it shakes out, think, is TBD, but there was a a little bit left to get, it feels like, on that side, and and we're starting to see it.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Thanks, Will. Next, just wanted to ask on OpEx. You were in the lower half of the full year range in 1Q. Can you talk about what drove OpEx lower? And maybe give us some thoughts on how you expect OpEx to trend through the rest of the year?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yes. We have, again, just integration of the deals we bought and kind of overall just good operating practices that led to a good quarter. The biggest drive on the OpEx on a per BOE basis down is just going to be the outperformance on the oil side. Just the fixed cost nature of some of those LOE costs when you add more barrels, we just saw cost come down a little bit.

[Zach Parham, Executive Director at JP Morgan Chase & Co]

Thanks a Yep.

[Operator]

Thank you. The next question comes from Gabe Daoud with D. D. Cohen. Please go ahead.

[Gabe Daoud, Managing Director, Energy Equity Research at TD Cowen]

Thanks. Hey, morning everyone. I appreciate all the prepared remarks so far. I was hoping we could go back to the acquisition. I was curious if you could just refresh us on some of the targets up there near and around the Parkway asset and what you guys are doing from a a spacing standpoint up there?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think kind of

[James Walter, Director & Co-CEO at Permian Resources]

the the primary zones we've been the most active in the last couple of years are the the second Bone Spring Sands, the third Bone Spring Sands, and the X Y. That's kind of where the bulk of our activity has been and kind of will be for the foreseeable future. I think those are the best returning targets. But I think I I probably should have said this on one of the earlier questions. I think one of other things that's underappreciated, there really is a lot a lot more beyond just those zones as you move further north and maybe a little further down the stack for us, really good targets like the First Bone Spring Sand, the Harkey, which is a little more regional, but but we've drilled a handful of good Harkie wells and then some of the deeper targets in the Wolfcamp.

[James Walter, Director & Co-CEO at Permian Resources]

So I think it's an area that has a lot to continue to give, and we're excited about what that looks like, not just near term, but long term.

[Gabe Daoud, Managing Director, Energy Equity Research at TD Cowen]

Got it. Got it. Okay. Yes. No, great to hear.

[Gabe Daoud, Managing Director, Energy Equity Research at TD Cowen]

And then a follow-up also just sticking to that region. Could you maybe discuss what the gas processing capacity looks like around there? I know one of your providers is bringing on, an additional capacity pretty soon, but just curious if you can maybe speak to that as well.

[James Walter, Director & Co-CEO at Permian Resources]

Yes. Mean, I'd say we've

[James Walter, Director & Co-CEO at Permian Resources]

had no issues historically with gas processing capacity in the Delaware Basin. I think we've been really fortunate that we partnered up with kind of some of the biggest and the best gas processors in both Lee and Eddy County. So I I think kudos to those guys. They've been growing alongside us, spending capital kind of prudently ahead of the drill bit that we've never had any gas processing or gas egress issues whatsoever and don't anticipate having any going forward.

[Gabe Daoud, Managing Director, Energy Equity Research at TD Cowen]

Okay. Great. Great to hear. Thanks, guys.

[Operator]

Thank you. The next question comes from Leo Mariani with Roth. Please go ahead.

[Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Hi, guys. Let me just kind

[Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

of sticking with the gas marketing side of the business here. Know you guys had brought on some more folks to try to kind of maximize the value of the gas molecules. Just kind of curious just kind of where you are in that process. Have you seen any progress at this point? And obviously, a lot of players are talking about trying to participate with data center deals and things like that in the Permian.

[Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

So just trying to get a sense of where you think PR could fit in.

[James Walter, Director & Co-CEO at Permian Resources]

Leo, thanks. That's a great question. And I think kind of something I'd say more to come there. I'd say it's absolutely been a focus of ours the last six to nine months. I think we've said a lot of lot of times on calls like this that that getting better prices for all of our molecules is a key part of our go forward strategy.

[James Walter, Director & Co-CEO at Permian Resources]

That's that's both kind of in basin gas, but also crude and and frankly, NGLs downstream as well. So we're doing a ton of work in the background. Don't have a ton to share with you guys in kind of specific updates this quarter. I think when we're we're having the same call in August, I think we do expect to have some meaningful updates that could kind of change our longer term trajectory. But again, this stuff takes time.

[James Walter, Director & Co-CEO at Permian Resources]

You know, I think actually thoughtfully, kind of downstream marketing and maximizing value of all your molecules is not something that kinda gets done as quickly as maybe we'd like, but I think we've got a really good long long term plan and should have more to share in in the near term.

[Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Appreciate that. And I guess just in terms of your comment about returns on the business being fairly similar in the $60 oil world to what they were twelve months ago in a $75 oil world. Can you provide a little bit more detail and kind of what the key sort of quantifiable items are around that statement on the returns?

[Will Hickey, Director & Co-CEO at Permian Resources]

Yeah.

[Will Hickey, Director & Co-CEO at Permian Resources]

I mean, the the biggest driver by far is gonna be just the amount

[Will Hickey, Director & Co-CEO at Permian Resources]

of cost we cut out

[Will Hickey, Director & Co-CEO at Permian Resources]

of the business. Like, if you follow, you know, from our previous earnings decks, what CapEx has done on a cost per foot basis is I mean, we have meaningfully reduced CapEx per foot over the last eighteen months. And I'd say that reduction almost by itself offsets the reduction in crude prices. So similar to just longer laterals, same well productivity on a per foot basis with significantly less cost, you kind of add all those together and and that that'll bridge the gap.

[James Walter, Director & Co-CEO at Permian Resources]

And kind of and kind of not not the same degree of impact, but continue to make really meaningful kind of per unit improvements on controllable cash cost as well. And it's kind of this is the kind of business that, you know, every penny adds up, and we think our team's really optimizing across the entire value chain.

[Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

K. So, I mean, outside of cost, there hasn't been any kind of shift or anything to target, you know, certain zones or kind of wider spacing or anything like that. It's really just a cost issue. It's what I was getting at.

[James Walter, Director & Co-CEO at Permian Resources]

Oh, yeah. We we said a lot of pricing in it. We're kinda doing the same thing this year we did last year as we did the year before, and we're gonna be doing the same thing next year and the year after that. It's kinda steady as she goes.

[Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Thank you.

[Operator]

Thank

[Operator]

you. The next question comes from John Annes with Texas Capital. Please go ahead.

[John Annis, Vice President at Texas Capital]

Hey, good morning guys and congrats on the strong quarter. For my first one, focusing in on the New Mexico bolt on, I was wondering if you could help frame how the D and C design and well spacing from the legacy operator compares to that of your existing assets in the Northern Delaware? And are there any specific items that you would highlight that could drive cost savings or productivity improvements?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think I actually think the legacy operator did pretty similar from a development spacing, especially in the Parkway area to what we're gonna do. It's it's been pretty well delineated across zones for several years. And I think if you look at the results that well productivity from the legacy operating these assets was actually really strong. So I think, you know, I think they're kind of we're explicitly familiar with their cost structure.

[James Walter, Director & Co-CEO at Permian Resources]

I think any changes is probably gonna be to just apply the kind of peer leading Permian Resources DNC cost structure to what was a similar spacing and and kind of development program.

[John Annis, Vice President at Texas Capital]

Got it. For my follow-up, you you've certainly had success adding inventory through m and a and and your ground game. My question is, how do you see the opportunity for organic inventory expansion through additions and secondary zones like the second Bone Spring Shale or Wolfcamp D driving inventory expansion from here?

[James Walter, Director & Co-CEO at Permian Resources]

Yeah. I mean, I think that's something I I think if there's one thing that surprised everybody to the upside of the Delaware Basin year in, year out is that we continue to add inventory at a pace that that frankly has astounded me. It seems like we find a new zone that's not a secondary, tertiary zone. It's like a true core competes with capital zone every year. You know, I think I think for us, what's maybe a little bit different than that is we're kind of accruing those zones.

[James Walter, Director & Co-CEO at Permian Resources]

What I would say is more to the back end of our inventory. Like, we've got such a high rate of return program today that, yeah, we're adding sticks to inventory and and zones like you referenced today, but we're not we're not really making them a meaning part of our program because what we have, you know, in our base case is so good. But, yeah, I think we're really excited about kind of the deeper Wolfcamp stuff, the c, the d in both New Mexico and Texas and some of the shales, the second Bone Shale, the third Bone Shale in both Texas and New Mexico. And, you know, I think a couple of those are still, I'd say, in the early innings of delineation, but I think excited about that pace continuing. I would have told you five years ago that it's going to be hard to keep adding zones at the pace we've added, but it really hasn't slowed down yet.

[James Walter, Director & Co-CEO at Permian Resources]

And I think we're hopeful that that organic inventory additions continues. And frankly, in the Delaware Basin, we haven't touched the really deep stuff at all. I think there's been a lot of trends in the Midland Basin going deeper and deeper and we're probably not even in the first inning of that in the Delaware. So I think for us, Pierre is in a fortunate position. We're not developing a lot of those zones today because we've got our consistent plan we've been doing the last couple of years and and that's worked really well.

[James Walter, Director & Co-CEO at Permian Resources]

But I think over time, continuing to inexpensively or or basically for free adding additional inventory is a a great part of the value creation story for a company like PR.

[John Annis, Vice President at Texas Capital]

Great color. Thanks guys.

[Operator]

Thank

[Operator]

you. The next question comes from Droff Jape with Daniel Energy Partners. Please go ahead.

[Geoff Jay, Partner at Daniel Energy Partners]

Quick question about sort of the acquisitions impact on your CapEx in the back half of the year. Just curious, I know it competes for capital. So I guess I'm curious if you sort of suspect you'll add some activity on that acreage or if you'll likely just shift some things around from existing acreage to work up there.

[James Walter, Director & Co-CEO at Permian Resources]

Yes. I mean I think the 20,000,000 the kind of $20,000,000 we outlined is kind of pre baked stuff that was, I call it, in the pipeline from the legacy operator. And I think for us, before we really can kinda put our mark on the assets, it's probably gonna be $20.26 before you see that. But, yeah, I do think this asset is good enough. You may see, like I said, a little overweight activity to this asset and, you know, tiny modest pullback somewhere else.

[James Walter, Director & Co-CEO at Permian Resources]

I think it kinda depends on how the full year 2026 shakes out, but I do think this is an the kind of asset that, you know, should be neutral to overweight as we think about capital allocation next year just given how truly how high the NRIs are and how low the breakevens are.

[Geoff Jay, Partner at Daniel Energy Partners]

Got you. And then I was curious too, just given how contiguous, the bolt on is to your existing acreage. I mean, do you foresee eventually kind of migrating to longer laterals up there or no?

[Will Hickey, Director & Co-CEO at Permian Resources]

We've drilled some three milers up there, which which we may, at time to time, drill. But, you know, you're that area is pretty shallow. And so you I think anything longer than three miles in in that area is off the table just given the TBD is such that, you know, you you don't have the same amount of weight down there on the bit to to go out longer than three. So it's a two to three mile area. There are some areas where, you know, maybe we were a mile and a half and this section here allows us to go to two and a half or two, which is a lot of the synergies as part of the deal.

[Will Hickey, Director & Co-CEO at Permian Resources]

But I wouldn't expect that we're gonna go to kind of anything crazy from a ladder link perspective up there.

[Geoff Jay, Partner at Daniel Energy Partners]

Excellent. Thank you.

[Will Hickey, Director & Co-CEO at Permian Resources]

Thanks, Jeff.

[Operator]

Thank you. Your next question comes from Paul Diamond with Citi. Please go ahead.

[Paul Diamond, Analyst at Citigroup]

Thank you. Good morning. Thanks for taking the call. Just a quick one, want to talk about the kind of progression of your cost per lateral foot. Made some really good progress, 3% in the last quarter.

[Paul Diamond, Analyst at Citigroup]

How should we think about that going forward? Is that more linear? Should we be expecting that to kind of flatten out? Just kind of how do you view that?

[Will Hickey, Director & Co-CEO at Permian Resources]

I mean, had you asked me two months ago, I would have said it would have been flattening out, and then I'd expect kind of step changes in time with just kind of operational breakthroughs. It's just kinda how we've seen the efficiency side of the equation go where you you find big wins and then you kind of flatten out for a few quarters and find big wins. I think the one change that is just the body has changed so much and activity drops are happening so quickly that I do think we'll get a modest amount of service cost reductions kind of from now to the end of the year. And, you know, that that obviously would help on the well cost side. So kinda adding those together, maybe there's a expectation of a slight reduction from the $7.50 a foot that shows up in kinda q three, q '4 with hopefully an operational kind of win somewhere over the next six to nine months on top of it.

[Will Hickey, Director & Co-CEO at Permian Resources]

You know, again, I'm here I'm kinda putting my crystal ball and speculating here a little bit, but we're hoping to get $7.50 a foot for the year. We achieved that in q one, and I think there's more downward pressure from there just given where the the overall macro sits.

[Paul Diamond, Analyst at Citigroup]

Got it. It. Makes sense. And now just a quick follow-up. And now is with this deal, you guys have added again to your non op position.

[Paul Diamond, Analyst at Citigroup]

I just want to get an understanding of how you think about that longer term. Is that more, you know, designed to, you know, help the land guys and the ground game with acreage swaps? There could be other some type of, you know, monetization event then or in the future.

[James Walter, Director & Co-CEO at Permian Resources]

You know, for us, Knob's still a really small part of our portfolio. Our team's done such a good job of turning Knob into Op that, you know, it's not something that is even a, you know, a meaningful part of our go forward, you know, CapEx programs, etcetera. I think, you know, for us, the goal is to have more pieces that we can feed our land team to go do trades and convert non op into op in a way that makes sense. You know, I think the Delaware Basin is a great place because I think there's a lot of win wins out there like this transaction on a broader scale, but on trades on the smaller scale. And, you know, I think for us, the overarching goal is we want to operate because we think our cost structure and our execution products truly is differentiated.

[James Walter, Director & Co-CEO at Permian Resources]

So the way to maximize value for PR is going to be overwhelming to operate. So I think that's the goal here, and this is a great package of assets to kinda replenish the the inventory of trade bait and and things that we're constantly working. And, you know, I think our team will be all over it, you know, post close.

[Paul Diamond, Analyst at Citigroup]

Got it. Makes sense. Appreciate the time. I'll leave it there.

[James Walter, Director & Co-CEO at Permian Resources]

Thanks, Paul.

[Operator]

Thank you. The next question comes from Oliver Hoang with TPH. Please go ahead.

[Oliver Huang, Director at TPH&Co]

Good morning, James, Will, Guy and team and thanks for taking the questions. Just had a couple around the acquired assets. First off, just any sort of color you can provide on what the working interest on the operated locations look like compared to the existing portfolio? And if you could maybe remind us how well cost up in that Parkway area compared to your average $7.50 per foot just given the shallower depth?

[James Walter, Director & Co-CEO at Permian Resources]

Yes. Sure. On the working interest, it's going to end up being at least at close lower. The new operated location requirement or lower working interest than our average program, kind of call it 50 something percent working interest. But I think for us, that's again part of the opportunity here, part of the opportunity to trade into that or to to buy out the additional working interest in those operated units.

[James Walter, Director & Co-CEO at Permian Resources]

So kinda call it 50 something percent today. But I think over time, we're confident we can get that to 75% plus like the rest of our program. And then on cost, it depends a little bit kinda what zone you're talking and and where you're comparing to, but call it a hundred dollars a foot cheaper than the the broader program in in Parkway, which which obviously makes a big difference on returns and breakevens.

[Oliver Huang, Director at TPH&Co]

Awesome. That's helpful color. And maybe for another follow-up, just looking at the acquired assets, is there a similar optimization aspect like we saw that drove the Q1 beat on some of the recent deals you did last year on the p d p on the p d p side?

[Will Hickey, Director & Co-CEO at Permian Resources]

I think, like, from a straight production win, a lot of the previous operators' practices in the Parkway area are very similar to ours. So I don't expect we'll see like a big uplift from switching out artificial lift. Based on the work we did in the underwriting, I don't think we have any plans to change it out. I think really the wins in this package is taking that 35% of the acres that are non op and trading them into operated acres, whether that's operated within this package or operated elsewhere in the PR portfolio to kind of extract the maximum amount of value from every acre we bought. So that win probably shows up in ways that are less easy to quantify on a quarter to quarter basis, but just kind of overall adds more high quality, low, you know, low breakeven top quartile inventory for the business.

[Oliver Huang, Director at TPH&Co]

Awesome. Thanks for the time.

[Operator]

Thank

[Operator]

you. There are no further questions at this time. I would now like to turn the call over to James Waller, Co CEO for closing remarks. Please go ahead, sir.

[James Walter, Director & Co-CEO at Permian Resources]

Thanks everyone. As you can tell by today's call, we're really excited with our team's performance during the first four months of the year. Our operational momentum builds on the progress we made last year and we are excited about the opportunities that recent volatility has presented to Permian Resources. We truly believe that it's during times like these that the strongest companies can differentiate themselves and create outsized value for shareholders that compounds over the long term. Thanks everyone for joining the call today and following the Permian Resources story.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Hays Mabry, VP - IR
• Will Hickey, Director & Co-CEO
• James Walter, Director & Co-CEO

Analysts

• Neil Mehta, Analyst at Goldman Sachs
• Kevin MacCurdy, Managing Director at Pickering Energy Partners
• John Freeman, Managing Director at Raymond James Financial
• Scott Hanold, Managing Director - Energy Research at RBC Capital Markets
• Zach Parham, Executive Director at JP Morgan Chase & Co
• Gabe Daoud, Managing Director, Energy Equity Research at TD Cowen
• Leo Mariani, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC
• John Annis, Vice President at Texas Capital
• Geoff Jay, Partner at Daniel Energy Partners
• Paul Diamond, Analyst at Citigroup
• Oliver Huang, Director at TPH&Co