ZACKSยท2025-05-23 13:45Core Insights - PrimeEnergy Resources Corporation (PNRG) reported a 1.6% increase in shares since Q1 2025 results, outperforming the S&P 500's 1.8% decline during the same period [1] - The company achieved Q1 revenues of $50.1 million, a 16.4% increase from $42.99 million in the prior year, driven by higher natural gas and NGL volumes despite a decline in oil revenues [2] - Net income decreased by 19.3% to $9.1 million, with diluted EPS falling 15.7% to $3.72 due to increased depreciation and interest expenses [2] Production and Revenue Growth - Oil production rose 6% year over year to 457,000 barrels, while natural gas output increased by 106.6% to 2.39 billion cubic feet, and NGL production surged 120.4% to 454,000 barrels [3] - Oil sales decreased by 1.9% to $32.7 million, but natural gas revenues more than quadrupled to $6 million, and NGL revenues increased by 95.4% to $8.5 million, leading to a total oil and gas revenue improvement of 21% year over year [4] Operating Expenses and Margins - Production costs rose 4.3% to $9.5 million, while depreciation, depletion, and amortization expenses nearly doubled to $20.4 million due to expanded asset base [5] - Interest expenses increased by 174.4% to $590,000, reflecting higher debt balances and interest rates [5] Management Commentary - The CFO described the quarter as showing "strong operational momentum," highlighting growth in gas and NGL volumes and ongoing capital returns through share repurchases [6] - Management emphasized the portfolio's resilience to commodity price volatility, supported by a mix of mature reserves and active development areas in Texas [6] Strategic Factors - Performance was influenced by robust development in West Texas, with participation in numerous new horizontal wells leading to production gains, particularly in natural gas and NGLs [7] - Weaker oil and NGL pricing partially offset revenue gains, while increased depreciation and interest costs impacted profitability [7] Guidance and Outlook - The company plans to invest $118 million in 38 horizontal wells in 2025, continuing aggressive capital deployment in the Midland Basin [8] - Management intends to fund capital needs primarily through operating cash flows and a $300 million credit facility, with $108.5 million remaining available [8] Shareholder Returns - In the quarter, PrimeEnergy repurchased 47,970 shares for $9.17 million, continuing its share repurchase program, with a total of $112.6 million returned to shareholders through buybacks [10] - A gain of $619,000 was recorded from the sale of a workover rig, reflecting ongoing portfolio optimization [10] Overall Assessment - Despite a decline in earnings due to increased investment and rising costs, underlying growth in production and revenues, along with continued capital returns, indicate confidence in the company's long-term strategy [11]