Permian Resources Corp Q4 FY2024 earnings call

• Q4 2024 was a record quarter in production and free cash flow per share, with oil production at 171,000 bbls/day and total production at 368,000 BOE/day.
• In 2024, the firm achieved nearly a 50% increase in results compared to 2023, with no increase in leverage, 275 wells drilled, and CapEx within guidance.
• Strong cash costs were delivered in Q4 with LOE of $5.42 per BOE, cash G&A of $0.93 per BOE, and GPT of $1.49 per BOE.
• 2025 plan focuses on the Delaware Basin drilling program, aiming for significant free cash flow per share growth, with total production and oil production ranges, a $2B capital program, and controllable cash cost of ~$7.75 per BOE.
• In 2024, the firm executed $1.2B of acquisitions for 50,000 net acres and ~20,000 BOE/day, with ability to replace drilled inventory.
• Cost controls led to lower DMC and controllable cash costs, with structural efficiency improvements and service cost deflation contributing.

In Q4 2024, Permian Resources Corporation achieved a record quarter with oil production of 171,000 barrels of oil per day and total production of 368,000 barrels of oil equivalent per day. For the full year 2024, the firm delivered outstanding results with nearly a 50% increase compared to 2023. CapEx remained well within the original guidance range of $1.9 billion to $2.1 billion. Adjusted operating cash flow was $904 million and adjusted free cash flow was $400 million in Q4. For 2025, the plan includes total production averaging between 300,000 and 380,000 BOE per day, oil production averaging between 170,000 and 175,000 barrels of oil per day, a capital program of approximately $2 billion with 80% allocated to drilling and completion operations, and controllable cash cost expected to be approximately $7.75 per BOE.

• Total production for 2025 is expected to average between 300,000 and 380,000 BOE per day.
• Oil production for 2025 is expected to average between 170,000 and 175,000 barrels of oil per day.
• Capital program for 2025 is approximately $2 billion, with 80% allocated to drilling and completion operations and 20% to infrastructure.
• Controllable cash cost for 2025 is expected to be approximately $7.75 per BOE.
• Balance sheet expected to exit 2025 at ~0.5 times levered with $3B liquidity including ~$500M cash.
• First $0.15 per share base dividend paid in November 2024, current yield over 4%.

• Market dislocations and commodity price cycles could affect actual results.
• Risks associated with forward-looking statements and non-GAAP measures.
• Uncertainties in M&A integration and execution.

Q: Can you give color around the target formations and co-development that provide confidence in the sustainability of the economics as you move forward and what is your visibility on that right now in terms of duration?

A: Will Hickey mentioned similar allocation across states, basins, and zones, with a high confident 15-year inventory where the first half shows little degradation from current operations.

Q: What is your view on larger scale M&A?

A: James Walter stated focus on smaller deals but open to bigger deals if they are the right fit in terms of quality and long-term value addition.

Q: Just around the operational efficiency as you continue this trend. Now do yourself. It is just sort of quarter in quarter, Adam. And is part of this driven by the continued integration of new assets? And does that help?

A: Will Hickey said it is a cultural thing with a highly motivated team working to better performance each quarter, with M&A allowing showcase of cost structure but day-to-day grinding out hours driving efficiency more than M&A itself.

Q: Is it fair to assume you could probably move the D&C cost lower as we move throughout the year?

A: Will Hickey said $7.50 per foot is achievable and they are there today, but there may be some further potential to cut costs but not as clear as before.

Q: Update on the Midland asset and how that fits into the portfolio?

A: James Walter said they are focused on the Delaware Basin, but the Midland asset is a good little asset where their team has applied their secret sauce, providing cash flow and gas price optionality.

Q: It looks like you are taking your efficiency gains and shorter cycle times from 2024 and using it to increase turning lines year over year. What is your thought process on activity levels?

A: Will Hickey said it is about per share growth, with the return profile of the business justifying a bit of growth, focusing on debt-adjusted per share growth.

Q: How are you guys able to mitigate taxes again this year and do you have any thoughts on how long you can kind of continue to defer the majority of your cash taxes?

A: Guy Oliphint said 2024 was due to optimized tax planning, with 2025 being a carryover, and cash taxes will be more meaningful in 2026 and closer to full cash taxpayer by 2027.

Q: Is it reasonable to think that you could continue to add 5,000 to 10,000 acres per year via grassroots leasing?

A: James Walter said high end is pretty high, but confident in continuing at a scale close to 5,000 acres plus or minus, with an incredible team on the ground.

Q: With respect to the capital efficiency measure, if you have seen it, I would love your take on it. And secondly, if you have a view on what crude price would deliver a similar level of free cash flow per share for you in 2025 if you have it?

A: James Walter said they like looking at free cash flow per share, and they think they could generate similar free cash flow in 2025 in the low to mid-sixties crude price range.

Q: What do you think the market needs to better understand to start thinking about Permian Resources Corporation differently and more in the context of other pure play Permian stories?

A: James Walter said Permian Resources Corporation is a relatively new story, and over time, the multiple uplift will come as people see consistent execution, with focus on growing free cash flow per share.

Q: Just talk about how you continue to drive higher lateral lengths and what is your approach to continue to extend those laterals?

A: Will Hickey said it is based on the acreage position and economics, with confidence in drilling longer laterals if it makes sense, as their team could drill longer if needed but it depends on acreage and economics.

Q: Just any sort of color you all can provide with respect to the magnitude of the non-op CapEx within that budget?

A: James Walter said non-op CapEx is pretty small, less than $50 million a year.

Q: Just kind of wondering if there has been any progress updates to kind of up on the gas netbacks front that you are able to speak to?

A: James Walter said gas realizations are a priority but real step change is expected in 2026 and beyond with longer-term deals.

Q: Mentioned potentially getting the balance sheet to half a turn of leverage by the end of this year. Do you see benefit in getting to this level from a rerating in the stock, or does it make sense to stay closer to one times and use that cash for buyback and acquisitions?

A: James Walter said balance sheet is positioned to optimize value creation in all environments, not for stock positioning, and they are comfortable at one times but will delever more quickly in 2025 absent extra acquisitions or buybacks.

Q: Are you thinking about potentially the drilling program this year, how much drilling is on that royalty acreage to enhance returns?

A: James Walter said activity goes towards highest rate of return development, with more capital allocated to higher return, high NRI packages.

Q: To achieve further efficiencies from here, do we really need to see more of a technological change at this point in time or are there other things that you could potentially do?

A: Will Hickey said there are small changes in drilling and completion, with big step changes from technological breakthroughs like new BHA or fluid swaps, and $7.50 per foot is the current guide.

Q: When you think about sort of possibly managing production, or, like, when you think about, like, a production number, does it make more sense to let efficiencies continue versus managing to a production number?

A: James Walter said it depends on market and returns, with focus on per share growth and a middle ground on organic growth, really focusing on per debt-adjusted share growth.

Q: Why did you keep your base dividend flat when you announced results?

A: James Walter said they paid the first $0.15 base dividend in November, and it just felt like the right status quo, with the dividend yield higher and only one quarter having passed.

Q: Do you have any thoughts on potentially implementing creative drilling solutions like u laterals?

A: Will Hickey said their land position doesn't require it much, but they have drilled a few u-turn wells with little incremental cost, and will do it when it makes sense.