Permian Resources (PR) - 2023 Q1 - Quarterly Report

Glossary of Units of Measurements and Industry Terms This section defines key abbreviations and terms used in the oil and natural gas industry throughout the report - This section provides definitions for abbreviations and terms commonly used in the oil and natural gas industry that are referenced throughout the report, such as Bbl (barrel), Boe (barrel of oil equivalent), and WTI (West Texas Intermediate)[9][10][24] Cautionary Statement Concerning Forward-Looking Statements This statement highlights that forward-looking projections are subject to significant risks and uncertainties, including commodity price volatility - This report contains forward-looking statements regarding the company's strategy, future operations, financial position, and other projections. These statements are based on current expectations and are subject to risks and uncertainties[26] - Key risks and uncertainties that could cause actual results to differ materially include commodity price volatility, inflation, environmental risks, drilling and operating risks, regulatory changes, and the uncertainty in estimating reserves[27][28] Part I—FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited Q1 2023 financial statements show significant growth in assets, equity, net income, and operating cash flow driven by increased oil and gas sales Consolidated Balance Sheets The balance sheet as of March 31, 2023, shows total assets increased to $8.72 billion, with equity rising to $5.81 billion Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $443,995 | $463,790 | | Total Property and Equipment, net | $8,132,568 | $7,889,399 | | TOTAL ASSETS | $8,723,158 | $8,492,592 | | Total Current Liabilities | $681,998 | $605,569 | | Long-term debt, net | $2,042,916 | $2,140,798 | | TOTAL LIABILITIES | $2,914,472 | $2,836,296 | | TOTAL EQUITY | $5,808,686 | $5,656,296 | Consolidated Statements of Operations Q1 2023 operations show oil and gas sales surged 77% to $616.3 million, driving net income to $219.8 million from $15.8 million year-over-year Consolidated Statement of Operations Summary (in thousands) | Account | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Oil and gas sales | $616,268 | $347,277 | | Total operating expenses | $380,134 | $182,222 | | Income from operations | $236,200 | $165,137 | | Net gain (loss) on derivative instruments | $54,512 | $(129,523) | | Net income (loss) | $219,801 | $15,802 | | Net income attributable to Class A Common Stock | $102,120 | $15,802 | | Basic EPS (Class A) | $0.35 | $0.06 | | Diluted EPS (Class A) | $0.31 | $0.05 | Consolidated Statements of Cash Flows Q1 2023 operating cash flow significantly increased to $438.2 million, fully funding investing activities, while financing activities led to a net cash decrease Consolidated Statement of Cash Flows Summary (in thousands) | Account | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $438,213 | $160,120 | | Net cash used in investing activities | $(292,128) | $(84,088) | | Net cash provided by (used in) financing activities | $(189,863) | $(34,788) | | Net increase (decrease) in cash | $(43,778) | $41,244 | Notes to Consolidated Financial Statements Notes provide detailed information on significant accounting policies, financial instruments, and key Q1 2023 transactions including acquisitions, divestitures, and capital returns - On February 16, 2023, the company acquired approximately 4,000 net leasehold acres and 3,300 net royalty acres for an unadjusted purchase price of $98 million in Lea County, New Mexico[63] - On March 13, 2023, the company sold its saltwater disposal wells and associated infrastructure for $125 million in cash, with $60 million being contingent on future performance obligations[67] Long-Term Debt Summary (in thousands) | Debt Instrument | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Credit Facility due 2027 | $285,000 | $385,000 | | Senior Notes, net | $1,757,916 | $1,755,798 | | Total long-term debt, net | $2,042,916 | $2,140,798 | - In March 2023, the company declared and paid a cash dividend of $0.05 per share of Class A Common Stock and a distribution of $0.05 per Common Unit, totaling $28.1 million[147] - During Q1 2023, the company repurchased 2.8 million Common Units (and underlying Class C Common Stock) for $29.4 million under its stock repurchase program[149] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 revenue growth driven by production volume increases, offsetting lower commodity prices, with capital expenditures fully funded by operating cash flow Results of Operations Q1 2023 net revenues rose 77% due to a 151% production increase, despite lower commodity prices, while operating expenses increased with scale Production and Revenue Comparison | Metric | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Oil and gas sales (in thousands) | $616,268 | $347,277 | 77% | | Total Net Production (MBoe) | 13,844 | 5,522 | 151% | | Average Daily Production (Boe/d) | 153,822 | 61,359 | 151% | Average Realized Sales Price Comparison | Commodity | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Oil (per Bbl) | $74.38 | $89.17 | (17)% | | Natural Gas (per Mcf) | $1.81 | $3.93 | (54)% | | NGL (per Bbl) | $27.12 | $49.37 | (45)% | Operating Expense Comparison (per Boe) | Expense | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Lease operating expenses | $5.38 | $5.20 | 3% | | Gathering, processing & transportation | $1.12 | $3.96 | (72)% | - Interest expense increased by $23.6 million year-over-year, primarily due to $16.1 million in interest from senior notes assumed in the Merger and $7.6 million from higher borrowings and interest rates on the credit facility[204] Liquidity and Capital Resources Q1 2023 operating cash flow of $438.2 million fully funded capital expenditures, with $1.2 billion available under the credit facility for future liquidity - Total capital expenditures incurred for Q1 2023 were $359.8 million, funded entirely from cash flows from operations[212] - The company plans to return capital to shareholders via base dividends, variable dividends, and share repurchases. In Q1 2023, it paid $28.1 million in dividends/distributions and repurchased $29.4 million of stock[213] Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $438,213 | $160,120 | | Net cash used in investing activities | $(292,128) | $(84,088) | | Net cash used in financing activities | $(189,863) | $(34,788) | | Net increase (decrease) in cash | $(43,778) | $41,244 | - As of March 31, 2023, the company had $1.2 billion in available borrowing capacity under its credit facility, which has a borrowing base of $2.5 billion and elected commitments of $1.5 billion[73][221] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from commodity price volatility and interest rate fluctuations, mitigated by derivative instruments and impacting revenues and interest expense - Based on Q1 2023 production, a 10% change in commodity prices would impact quarterly oil and gas sales by: - Oil: $52.4 million - Natural Gas: $3.2 million - NGLs: $6.0 million[240] - As of March 31, 2023, the company had substantial derivative contracts in place for crude oil and natural gas, including swaps and collars, extending into 2025 to hedge against price volatility[242][243] - The company had $285.0 million of variable-rate debt outstanding as of March 31, 2023. A 1.0% change in the weighted average interest rate would impact annual interest expense by approximately $2.9 million[253] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2023[256] - No changes occurred during Q1 2023 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[257] Part II—OTHER INFORMATION Legal Proceedings The company is involved in a legal dispute regarding Winter Storm Uri, with a potential loss ranging from zero to $7.6 million considered reasonably possible - The company is involved in a lawsuit with a transportation provider regarding unutilized pipeline capacity during Winter Storm Uri. A loss is considered reasonably possible, with potential exposure ranging from zero to $7.6 million[166] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - The company states there have been no material changes in its risk factors from those described in its 2022 Annual Report[261] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2023, the company repurchased 2.75 million shares for $29.4 million, with $470.6 million remaining available under the repurchase program Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | Jan 2023 | — | $— | $— | | Feb 2023 | — | $— | $— | | Mar 2023 | 2,750,000 | $10.70 | $29.4 | - The stock repurchase program was increased to $500 million and extended through December 31, 2024, in connection with the Merger. As of March 31, 2023, $470.6 million remained available under the program[263] Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments and officer certifications