Permian Resources (US:PR)2023-08-03 20:30Part I—FINANCIAL INFORMATION This section provides the company's unaudited financial statements, management's analysis of operations and liquidity, market risk disclosures, and internal controls assessment Item 1. Financial Statements (Unaudited) This section presents Permian Resources Corporation's unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes on accounting policies and key financial components Consolidated Balance Sheets The company's total assets increased to $8.93 billion as of June 30, 2023, from $8.49 billion at year-end 2022, primarily driven by an increase in net oil and natural gas properties Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $18,280 | $59,545 | | Total current assets | $426,037 | $463,790 | | Total property and equipment, net | $8,334,178 | $7,889,399 | | Total Assets | $8,926,325 | $8,492,592 | | Liabilities & Equity | | | | Total current liabilities | $722,724 | $605,569 | | Long-term debt, net | $2,060,070 | $2,140,798 | | Total Liabilities | $3,000,315 | $2,836,296 | | Total Equity | $5,926,010 | $5,656,296 | Consolidated Statements of Operations For the second quarter of 2023, oil and gas sales increased to $623.4 million from $472.7 million year-over-year, but net income attributable to Class A Common Stock decreased to $73.4 million ($0.21/share diluted) from $191.8 million ($0.60/share diluted) Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Oil and gas sales | $623,398 | $472,654 | $1,239,666 | $819,931 | | Total operating expenses | $431,990 | $189,560 | $812,124 | $371,782 | | Income from operations | $191,408 | $281,688 | $427,608 | $446,825 | | Net income (loss) | $148,954 | $191,826 | $368,755 | $207,628 | | Net income attributable to Class A | $73,399 | $191,826 | $175,519 | $207,628 | | Diluted EPS | $0.21 | $0.60 | $0.52 | $0.66 | Consolidated Statements of Cash Flows For the six months ended June 30, 2023, net cash from operating activities significantly increased to $886.7 million from $455.1 million in the prior year period, while net cash used in investing activities also rose to $699.4 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $886,704 | $455,099 | | Net cash used in investing activities | ($699,386) | ($228,603) | | Net cash provided by (used in) financing activities | ($238,401) | ($34,784) | | Net (decrease) in cash | ($51,083) | $191,712 | Notes to Consolidated Financial Statements The notes detail significant accounting policies, including a $98 million asset acquisition and $125 million divestiture, a $2.5 billion credit facility, commodity hedging, and a $7.6 million legal contingency related to Winter Storm Uri - In February 2023, the company acquired approximately 4,000 net leasehold acres and 3,300 net royalty acres for an unadjusted price of $98 million66 - In March 2023, the company sold its operated saltwater disposal wells and associated infrastructure for $125 million, with $60 million being contingent on future performance obligations68 - As of June 30, 2023, the company's credit facility had a borrowing base of $2.5 billion and elected commitments of $1.5 billion, with $300 million of borrowings outstanding73 - The company faces a potential loss ranging from zero to $7.6 million related to a lawsuit from a third-party transportation provider concerning unused pipeline capacity during Winter Storm Uri in February 2021171 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased production and revenue driven by the Colgate merger and new wells, higher operating expenses due to expanded scale, a $1.25-$1.45 billion 2023 capex budget, and a strong liquidity position with $1.2 billion available on its credit facility Results of Operations For Q2 2023 versus Q2 2022, total production increased 136% to 165.9 MBoe/d, driving a 32% rise in oil and gas sales to $623.4 million, partially offset by lower commodity prices and significantly higher operating expenses Production and Revenue Comparison (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Daily Production (Boe/d) | 165,850 | 70,240 | +136% | | Oil and Gas Sales (in thousands) | $623,398 | $472,654 | +32% | | Avg. Realized Oil Price ($/Bbl) | $71.52 | $104.69 | -32% | | Avg. Realized Gas Price ($/Mcf) | $1.24 | $6.22 | -80% | Operating Expense Comparison (Q2 2023 vs Q2 2022) | Expense (in thousands) | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Lease operating expenses | $82,991 | $28,900 | +187% | | Severance and ad valorem taxes | $48,927 | $34,695 | +41% | | Depreciation, depletion and amortization | $215,726 | $82,117 | +163% | - The increase in production volumes is primarily attributed to wells acquired in the Merger with Colgate and placing 140 new wells online since Q2 2022199 Liquidity and Capital Resources The company's primary liquidity sources are cash flow from operations and its revolving credit facility, with a 2023 capital expenditure budget of $1.25 billion to $1.45 billion expected to be fully funded by operating cash flow - The total capital expenditures budget for 2023 is expected to be between $1.25 billion and $1.45 billion, funded entirely from cash flows from operations239 - Shareholder returns in the first six months of 2023 included $85.5 million in dividends and distributions and $29.4 million in share repurchases240194 - As of June 30, 2023, the company had $300 million of borrowings outstanding and $1.2 billion in available borrowing capacity on its credit facility248 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are commodity price volatility and interest rate fluctuations, mitigated by derivative instruments and with $300 million in variable-rate debt outstanding - A 10% change in commodity prices, based on H1 2023 production, would impact annual oil and gas sales by approximately $107.4 million for oil, $5.6 million for natural gas, and $11.0 million for NGLs268 - The company utilizes commodity derivative instruments, including swaps and collars, to mitigate price risk. As of June 30, 2023, significant volumes of crude oil and natural gas were hedged for future periods extending into 2025269270 - The company has $300 million in variable-rate debt outstanding. A 1.0% change in the weighted average interest rate would result in an approximate $3.0 million annual change in interest expense281 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of June 30, 2023284 - No material changes were made to the internal control over financial reporting during the six months ended June 30, 2023285 Part II—OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, key personnel changes, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is involved in a legal dispute related to Winter Storm Uri with a potential loss of up to $7.6 million and agreed to a $600,000 penalty for a flaring violation in New Mexico - The company is subject to a lawsuit from a transportation provider related to Winter Storm Uri, with a reasonably possible loss estimated to be up to $7.6 million171287 - In Q3 2023, the company agreed to a $600,000 penalty to resolve a flaring violation in New Mexico289 Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K and other SEC filings were reported - No material changes in risk factors were reported from those described in the 2022 Annual Report290 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2023, the company did not repurchase any of its Common Stock in the open market under its stock repurchase program - The company did not purchase any Common Stock in the open market during Q2 2023 under its repurchase program291 Item 5. Other Information This section discloses key leadership changes, including the departure of COO Matt Garrison and the retirement of CAO Brent Jensen, who will be succeeded by Robert Shannon, with no Rule 10b5-1 trading plan changes reported - Chief Operating Officer Matt Garrison will depart effective September 1, 2023, for personal reasons. His role will not be replaced293 - Chief Accounting Officer Brent Jensen will retire on November 30, 2023, and will be succeeded by Robert Shannon, the current EVP of Corporate Services295 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the quarter ended June 30, 2023292 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the third amendment to the credit agreement, the 2023 Long Term Incentive Plan, and various officer certifications required by the Sarbanes-Oxley Act