Permian Resources (US:PR)2025-05-08 15:00Financial Data and Key Metrics Changes - The company achieved the highest free cash flow per share in its history at $0.54, driven by lower per unit costs and solid production performance [4] - Adjusted operating cash flow reached $900 million, and adjusted free cash flow was $460 million, with cash capital expenditures of $500 million [6] - Cash on the balance sheet increased from $479 million at year-end to approximately $700 million by March 31, and leverage decreased from 1x to 0.8x [6][7] Business Line Data and Key Metrics Changes - Oil production was 175,000 barrels per day, and total production was 373,000 barrels of oil equivalent per day, exceeding expectations [5] - Controllable cash costs were reduced by 4%, and drilling and completion costs decreased by 3%, landing at $750 per foot for the quarter [6] Market Data and Key Metrics Changes - Approximately 25% of 2025 oil production is hedged at a price just above $73 per barrel, allowing the company to be more opportunistic during downturns [9] - The company has maintained a strong balance sheet with updated credit ratings of BA1 from Moody's and BB+ from S&P, positioning it one notch away from investment grade at all three rating agencies [7] Company Strategy and Development Direction - The company is focused on opportunistic investments during downturns, aiming to acquire high-quality assets with low breakeven costs [11][12] - A recent acquisition in New Mexico for $608 million is expected to enhance returns and add over 100 new gross operating locations [12][14] - The company emphasizes maintaining a strong balance sheet while executing share buybacks and acquisitions simultaneously [18][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current market and capitalizing on opportunities, highlighting the importance of a strong balance sheet [4][10] - The company plans to reduce capital expenditures by $50 million while maintaining production at the high end of guidance, indicating a flexible approach to capital allocation [19][20] - Management noted that the oil and gas industry will always have volatility, which creates potential for outsized value creation [11] Other Important Information - The company has a disciplined approach to mergers and acquisitions, ensuring that any new acquisitions meet rigorous investment criteria [15][16] - The acquisition in New Mexico is expected to generate over 5% free cash flow per share accretion in the near, mid, and long term [14] Q&A Session Summary Question: How does the New Mexico bolt-on deal compare to recent deals? - Management expressed excitement about the deal, highlighting its fit with the M&A strategy and the quality of the inventory [22][24] Question: What is the capacity for continued share buybacks? - Management indicated ample capacity for both acquisitions and share buybacks, emphasizing a patient approach to market opportunities [27][28] Question: Can you share how the New Mexico deal came about? - The deal was a culmination of discussions over several years, with a competitive advantage due to existing operational familiarity [33][35] Question: What is driving better-than-expected production? - The outperformance is attributed to two larger acquisitions from 2024, with improved artificial lift and operational practices leading to higher production [37][38] Question: How do you view the trade-offs of responding to oil price changes? - Management emphasized a returns-focused approach, maintaining flexibility to adjust activity based on market conditions [45][46] Question: What is the outlook for service costs? - Service costs are beginning to move lower, with some price concessions being observed due to reduced activity in the industry [60][61] Question: How do you see organic inventory expansion opportunities? - Management is optimistic about continuing to add inventory through organic means, particularly in the Delaware Basin [85][88]