Permian Resources (US:PR)2023-05-12 18:14Financial Data and Key Metrics Changes - The company reported adjusted free cash flow of $146 million on a cash CapEx basis, with a base dividend of $0.05 per share amounting to $28 million deducted from this figure [2][83] - Total company production was 154,000 barrels of oil equivalent per day, with oil production at 78,000 barrels per day, and accrued capital expenditures of $360 million, all aligning with or exceeding expectations [21][22] - Adjusted EBITDAX for the quarter was $499 million, with total cash costs within 2023 guidance ranges, expected to trend lower as production increases [91] Business Line Data and Key Metrics Changes - The company executed a variable return program, delivering $85 million in total shareholder returns while reducing overall debt and completing accretive acquisitions [23][24] - The integration of Colgate and Centennial has been completed, leading to significant improvements in drilling and completion costs, cycle times, and overall cash operating costs [22] Market Data and Key Metrics Changes - The company added 3,000 barrels per day in oil swaps for the second half of 2023 at $77 per barrel, with hedges in place for approximately 30% of expected crude oil production at a weighted average floor price slightly above $82 [11] - The average net royalty interest across the portfolio is 78%, which allows for additional production and free cash flow for the same capital spend, significantly improving capital efficiency [28] Company Strategy and Development Direction - The company is focused on generating free cash flow, delivering shareholder returns, maintaining balance sheet strength, and optimizing its high-quality Delaware Basin asset base [8] - The strategy includes a commitment to return 50% of free cash flow to shareholders through dividends or buybacks, with a preference for variable dividends as the default method [10][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year guidance despite a down quarter in Q1, anticipating a production growth of about 10% from Q4 of the previous year to Q4 of the current year [32] - The company views hedges as a strategic tool to ensure a baseline of free cash flow and to act opportunistically in the event of market downturns [53] Other Important Information - The company completed over 45 smaller transactions, with nearly 100% of acquired interests expected to be developed in the next 12 months, enhancing overall corporate returns [12][13] - The company has reduced net revolver borrowings by 20%, approximately $65 million during the quarter, and has over $1 billion of liquidity on its revolving credit facility [25] Q&A Session Summary Question: Discussion on royalty acreage value - Management highlighted the importance of higher net royalty interest (NRI) in realizing additional production and free cash flow, emphasizing the capital efficiency of their business model [19][31] Question: Production growth expectations - Management confirmed that while Q1 saw a down quarter, they are on track for a 10% production growth, with expectations for a linear increase through the year [32][63] Question: Return of capital strategy - The company reiterated its commitment to a balanced return of capital strategy, with a focus on variable dividends as the primary method, while remaining opportunistic with share buybacks [36][48] Question: Operational efficiencies and rig management - Management confirmed ongoing efficiencies that support the plan to drop one rig midyear while still achieving production targets [61][63] Question: Hedges and financial positioning - Management explained that hedges are a strategic part of their philosophy, providing a baseline for free cash flow and allowing for opportunistic actions in volatile markets [53][64] Question: Service provider negotiations and cost management - Management indicated that rig and frac pricing has stabilized, with no increases observed in recent quarters, contributing positively to their capital expenditure guidance [66][73]