Permian Resources (US:PR)2024-08-07 18:50Financial Data and Key Metrics Changes - The company reported Q2 oil production of 153,000 barrels per day and total production of 339,000 barrels of oil equivalent per day, exceeding expectations [7] - Q2 cash costs were significantly reduced, with workover costs down due to low failure rates on downhole lift equipment [9] - Adjusted operating cash flow was $849 million or $1.10 per share, and adjusted free cash flow was $332 million or $0.43 per share [9] Business Line Data and Key Metrics Changes - The company raised its full-year oil guidance by 4,500 barrels per day compared to initial guidance in February, with 3.7 thousand barrels per day of this increase attributed to base business outperformance [7][17] - D&C efficiencies drove a 13% cost improvement in Q2 compared to 2023 [8] - Strong performance in gas and NGL was noted, primarily due to gas processors switching to ethane recovery [8] Market Data and Key Metrics Changes - The company has hedged approximately 30% of expected oil production for the remainder of 2024 at $74 per barrel and over 40,000 barrels per day hedged for 2025 at $73 per barrel [14] - The company expects gas prices to recover as the year progresses, impacting future NGL volumes [37] Company Strategy and Development Direction - The company announced the acquisition of Barilla Draw assets from OXY for $817 million, which is expected to enhance production and free cash flow [11][12] - Maintaining a strong balance sheet is a top priority, with low leverage and a long-dated maturity profile [13][15] - The company plans to continue focusing on smaller bolt-on acquisitions while evaluating larger opportunities as they arise [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in operational efficiencies and the ability to maintain production levels post-acquisition [19][25] - The company anticipates a strong year in 2024, building on its track record of operational performance and financial discipline [17] - Management noted that the current commodity price environment may impact future M&A activities [63][64] Other Important Information - The company has reduced private equity ownership from over 50% to 15% through its Project Allies initiative, which is expected to lead to more long-term oriented shareholders [10] - The company received upgrades from both Moody's and S&P, targeting investment-grade credit ratings by 2025 [15] Q&A Session Summary Question: Operating efficiency and D&C activity - Management plans to maintain current rig and frac counts, with a focus on capital efficiency and cost reductions [19][20] Question: Royalty acres and monetization - The royalty portfolio is crucial for driving economics, and there are no immediate plans to monetize these assets [21][22] Question: Activity pace in Barilla Draw - Current activity is expected to be more than a maintenance case, with slight growth anticipated [24][25] Question: M&A landscape and appetite - The company remains focused on smaller opportunities but will evaluate larger acquisitions as they arise [27][28] Question: LOE improvement and integration - The gap in LOE has closed, and management expects future rates to align more closely with legacy PR [30][31] Question: Well costs and trends - Well costs are expected to remain around $830 per foot, driven by efficiency improvements [35][36] Question: Production guidance and NGL volumes - Production is expected to remain flat for the rest of the year, with potential growth from the OXY acquisition in Q4 [46] Question: Midland Basin position - The company is focused on the Delaware Basin but continues to evaluate the Midland Basin's performance [48] Question: Waha pricing and hedging strategy - The company expects improvements in gas pricing and plans to hedge basis alongside hub pricing [50][51]