Permian Resources Announces Second Quarter 2023 Results

Permian Resources Corporation (“Permian Resources” or the “Company”) (NYSE: PR) today announced its second quarter 2023 financial and operational results.

Second Quarter Financial and Operational Highlights

• Increased both crude oil and total average production by 8% quarter-over-quarter to 84.4 MBbls/d and 165.9 MBoe/d, respectively
• Announced cash capital expenditures of $371 million and accrued capital expenditures of $386 million
• Reported net cash provided by operating activities of $448 million and adjusted free cash flow¹ of $80 million (cash capital expenditures)
• Continued to realize significant operational efficiency gains, driving meaningful improvements in drilling and completion cycle times
  • Increased average completed and drilled feet per day by 31% and 13%, respectively, compared to third quarter 2022
• Delivered total return of capital of $57 million, or $0.10 per share:
  • Quarterly base dividend of $0.05 per share
  • Variable dividend of $0.05 per share

Management Commentary

“Permian Resources had a strong operational and financial quarter, driven by robust well results across both Texas and New Mexico. Over halfway through the year, our asset base is performing as expected, with year-to-date well productivity in-line with last year’s,” said Will Hickey, Co-CEO of Permian Resources. “Additionally, we recently reduced our operated rig count from seven to six rigs due to continued efficiency gains and remain on pace to achieve our full-year and fourth quarter production targets, highlighting the strength of our operations.”

“We are proud to continue building upon our track record of operational execution and returning capital to shareholders. For the second quarter, we delivered $57 million to shareholders through the base and variable dividends,” said James Walter, Co-CEO of the Company. “Given our expected production growth profile and reduced capital spending for the remainder of the year, we expect to generate significantly more free cash flow during the third and fourth quarters, assuming current strip pricing.”

Operational and Financial Results

Permian Resources continued the efficient development of its core Delaware Basin acreage position in the second quarter, delivering strong well results and driving meaningful operational efficiencies. During the quarter, average daily crude oil production increased 8% compared to the prior quarter to 84,393 barrels of oil per day (“Bbls/d”). Second quarter total production also increased 8% quarter-over-quarter and averaged 165,850 barrels of oil equivalent per day (“Boe/d”). “Strong well results drove a significant increase in production for the quarter and further demonstrate our continued execution in the field,” said Will Hickey, Co-CEO.

Second quarter average realized prices were $71.52 per barrel of oil, $1.24 per Mcf of natural gas and $20.73 per barrel of natural gas liquids (“NGLs”), excluding the effects of hedges and GP&T expenses.

Second quarter total controllable cash costs (LOE, GP&T and cash G&A) were $8.11 per Boe. Second quarter LOE was $5.50 per Boe, an increase of 2% compared to the prior quarter, which was primarily driven by higher water handling costs. As a reminder, the Company closed the divestiture of a portion of its saltwater disposal wells in March. Second quarter GP&T was $1.44 per Boe. Cash G&A decreased 14% quarter-over-quarter to $1.17 per Boe. “Our cash G&A metrics demonstrate the Company’s relentless focus on being a low-cost leader in the Permian Basin,” said James Walter, Co-CEO. “On a per unit basis, our cash G&A ranks lowest compared to similar sized, oily peers².”

Second quarter total cash and accrued capital expenditures (“capex”) were $371 million and $386 million, respectively, and included higher drilling and completion activity compared to the prior quarter. As previously disclosed, accrued capex during the second half of 2023 is expected to be lower than the first half of the year primarily as a result of reduced drilling capex.

Since closing the merger in September of 2022, Permian Resources has continued to capture significant synergies, driven by higher operational efficiencies and lower costs. Through completion design modifications and quality control initiatives, the Company’s average completed feet and pump hours per day for the quarter increased by 31% and 25%, respectively, compared to the third quarter of 2022. Second quarter drilled feet per day increased by 13% compared to the third quarter of 2022, as a result of the Company high-grading its drilling fleet and optimized drilling practices. Additionally, Permian Resources recently set a new Company drilling record, reaching spud-to-total depth on a two-mile lateral in Eddy County, New Mexico in under eleven days.

“These operational efficiencies have resulted in a meaningful improvement to our cycle times,” said Will Hickey, Co-CEO. “As a result, we recently reduced our operated rig program to six compared to seven during the first half of the year, while maintaining our fourth quarter crude oil production growth target of approximately 10% compared to the prior year period.”

For the second quarter, Permian Resources generated net cash provided by operating activities of $448 million and adjusted free cash flow¹ of $80 million, utilizing cash capex, or $65 million, utilizing accrued capex. The Company also reported net income attributable to Class A Common Stock during the second quarter of $73 million, or $0.23 per basic share. Second quarter adjusted net income¹ was $150 million or $0.27 per adjusted basic share.

Permian Resources continues to maintain a strong financial position and low leverage profile. At June 30, 2023, the Company had $18 million in cash on hand and $300 million in borrowings outstanding under its revolving credit facility. Total liquidity was approximately $1.2 billion, including letters of credit. Net debt-to-LQA EBITDAX¹ at June 30, 2023 was approximately 1.1x, and the Company has no maturities of long-term debt until 2026.

Shareholder Returns

Permian Resources announced today that its Board of Directors (the “Board”) declared a quarterly base cash dividend of $0.05 per share of Class A common stock, or $0.20 per share on an annualized basis. Additionally, based upon second quarter financial results, the Board has declared a quarterly variable cash dividend of $0.05 per share of Class A common stock. Combined, the base and variable dividends represent a total of $0.10 per share. The base and variable dividends are payable on August 23, 2023 to shareholders of record as of August 15, 2023.

“Consistent with our game plan, we continue to return 50% of our quarterly free cash flow after the base dividend to shareholders through dividends and share repurchases. As a result, we’ve returned approximately $200 million, or $0.35 per share, to shareholders since announcing our capital returns framework late last year,” said James Walter, Co-CEO.

Leadership Change

Permian Resources announced today that Matt Garrison will be departing his role as Chief Operating Officer for personal reasons, effective September 1, 2023. At that time, Mr. Garrison’s direct operational reports will report to Will Hickey, Co-CEO. Permian Resources believes this structure will streamline the Company’s reporting process and provide for direct communication from individual operational departments to the Co-CEOs.

“On behalf of the Board and the entire organization, I want to thank Matt for his leadership and dedication,” said Will Hickey, Co-CEO. “Matt’s contribution was fundamental to the successful integration between Colgate and Centennial. We will miss working with him and wish him the best in the future.”

“The past seven years at Permian Resources and its predecessor company have been incredibly rewarding. I am proud of the accomplishments of the entire Permian Resources team and grateful for the relationships built over that time. I wish Permian Resources continued success going forward,” said Matt Garrison.

Quarterly Report on Form 10-Q

Permian Resources’ financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, which is expected to be filed with the Securities and Exchange Commission (“SEC”) on August 3, 2023.

Conference Call and Webcast

Permian Resources will host an investor conference call on Thursday, August 3, 2023 at 10:00 a.m. Central (11:00 a.m. Eastern) to discuss second quarter operating and financial results. Interested parties may join the webcast by visiting Permian Resources’ website at www.permianres.com and clicking on the webcast link or by dialing (888) 886-7786 (Conference ID: 63908236) at least 15 minutes prior to the start of the call. A replay of the call will be available on the Company’s website or by phone at (877) 674-7070 (Access Code: 908236) for a 14-day period following the call.

About Permian Resources

Headquartered in Midland, Texas, Permian Resources is an independent oil and natural gas company focused on the responsible acquisition, optimization and development of high-return oil and natural gas properties. The Company’s assets and operations are located in the core of the Delaware Basin. For more information, please visit www.permianres.com.

Cautionary Note Regarding Forward-Looking Statements

The information in this press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included in this press release, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this press release, the words “could,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “goal,” “plan,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

Forward-looking statements may include statements about:

• volatility of oil, natural gas and NGL prices or a prolonged period of low oil, natural gas or NGL prices and the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries (“OPEC”), such as Saudi Arabia, and other oil and natural gas producing countries, such as Russia, with respect to production levels or other matters related to the price of oil;
• political and economic conditions in or affecting other producing regions or countries, including the Middle East, Russia, Eastern Europe, Africa and South America;
• the effects of excess supply of oil and natural gas resulting from reduced demand caused by the COVID-19 pandemic and the actions taken in response by certain oil and natural gas producing countries;
• our ability to realize the anticipated benefits and synergies from the recently-closed merger and effectively integrate the assets of Centennial and Colgate;
• our business strategy and future drilling plans;
• our reserves and our ability to replace the reserves we produce through drilling and property acquisitions;
• our drilling prospects, inventories, projects and programs;
• our financial strategy, return of capital program, liquidity and capital required for our development program;
• our realized oil, natural gas and NGL prices;
• the timing and amount of our future production of oil, natural gas and NGLs;
• our ability to identify, complete and effectively integrate acquisitions of properties or businesses;
• our hedging strategy and results;
• our competition and government regulations;
• our ability to obtain permits and governmental approvals;
• our pending legal or environmental matters;
• the marketing and transportation of our oil, natural gas and NGLs;
• our leasehold or business acquisitions;
• costs of developing or operating our properties;
• our anticipated rate of return;
• general economic conditions;
• weather conditions in the areas where we operate;
• credit markets;
• uncertainty regarding our future operating results;
• our plans, objectives, expectations and intentions contained in this press release that are not historical; and
• the other factors described in our most recent Annual Report on Form 10-K, and any updates to those factors set forth in our subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil and natural gas. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, risks relating to the merger of the company with Colgate Energy Partners III, LLC (the “Merger”), environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks described in our filings with the SEC.

Reserve engineering is a process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact way. The accuracy of any oil and gas reserve estimate depends on the quality of available data, the interpretation of such data, and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil and natural gas that are ultimately recovered.

Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release.

1) Adjusted Net Income, Adjusted Free Cash Flow and Net Debt-to-LQA EBITDAX are non-GAAP financial measures. See “Non-GAAP Financial Measures” included within the Appendix of this press release for related disclosures and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP.

2) Peer group includes Callon Petroleum, Earthstone Energy, Magnolia Oil & Gas, Matador Resources, PDC Energy and SM Energy. Please see the Company’s Earnings Presentation for more details.

Reconciliation of cash, cash equivalents and restricted cash presented on the Consolidated Statements of Cash Flows for the periods presented:

Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), our earnings release contains non-GAAP financial measures as described below.

Adjusted EBITDAX

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income attributable to Class A Common Stock before net income/loss attributable to noncontrolling interest, interest expense, income taxes, depreciation, depletion and amortization, impairment and abandonment expense, non-cash gains or losses on derivatives, stock-based compensation (not cash-settled), exploration and other expenses, merger and integration expense, gain/loss from the sale of long-lived assets and non-recurring items. Adjusted EBITDAX is not a measure of net income as determined by GAAP.

Our management believes Adjusted EBITDAX is useful as it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Our presentation of Adjusted EBITDAX should not be construed as an inference that our results will be unaffected by unusual or nonrecurring items. Our computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDAX to net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP:

Net Debt-to-LQA EBITDAX

Net debt-to-LQA EBITDAX is a non-GAAP financial measure. We define net debt as long-term debt, net, plus unamortized debt discount and debt issuance costs on our senior notes minus cash and cash equivalents.

We define net debt-to-LQA EBITDAX as net debt (defined above) divided by Adjusted EBITDAX (defined and reconciled in the section above) for the three months ended June 30, 2023, on an annualized basis. We refer to this metric to show trends that investors may find useful in understanding our ability to service our debt. This metric is widely used by professional research analysts, including credit analysts, in the valuation and comparison of companies in the oil and gas exploration and production industry. The following table presents a reconciliation of net debt to long-term debt, net and the calculation of net debt-to-LQA EBITDAX for the period presented:

⁽¹⁾ Represents adjusted EBITDAX (defined and reconciled in the section above) for the three months ended June 30, 2023, on an annualized basis.

Adjusted Shares

Adjusted basic and diluted weighted average shares outstanding ("Adjusted Basic and Diluted Shares") are non-GAAP financial measures defined as basic and diluted weighted average shares outstanding adjusted to reflect the weighted average shares of our Class C Common Stock outstanding during the period.

Our Adjusted Basic and Diluted Shares provide a comparable per share measurement when presenting results such as adjusted free cash flow and adjusted net income that include the interests of both net income attributable to Class A Common Stock and the net income attributable to our noncontrolling interest. Adjusted Basic and Diluted Shares are used in calculating several metrics that we use as supplemental financial measurements in the evaluation of our business.

The following table presents a reconciliation of Adjusted Basic and Diluted Shares to basic and diluted weighted average shares outstanding, which are the most directly comparable financial measure calculated and presented in accordance with GAAP:

Free Cash Flow and Adjusted Free Cash Flow

Free cash flow and adjusted free cash flow are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define free cash flow as net cash provided by operating activities before changes in working capital, less capital expenditures incurred/paid and adjusted free cash flow as free cash flow before non-recurring merger and integration expense.

Our management believes free cash flow and adjusted free cash flow are useful indicators of the Company’s ability to internally fund its future exploration and development activities, to service its existing level of indebtedness or incur additional debt, without regard to the timing of settlement of either operating assets and liabilities or its merger and integration costs and after funding its capital expenditures incurred or paid for the period. The Company believes that these measures, as so adjusted, present meaningful indicators of the Company’s actual sources and uses of capital associated with its operations conducted during the applicable period. Our computations of free cash flow and adjusted free cash flow may not be comparable to other similarly titled measures of other companies. Free cash flow and adjusted free cash flow should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as determined in accordance with GAAP or as indicators of our operating performance or liquidity.

Free cash flow and adjusted free cash flow are not financial measures that are determined in accordance with GAAP. Accordingly, the following table presents a reconciliation of free cash flow and adjusted free cash flow to net cash provided by operating activities, which is the most directly comparable financial measure calculated and presented in accordance with GAAP:

Adjusted Net Income

Adjusted net income is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. We define adjusted net income as net income attributable to Class A Common Stock plus net income/loss attributable to noncontrolling interest adjusted for non-cash gains or losses on derivatives, merger and integration expense, impairment and abandonment expense, gain/loss from the sale of long-lived assets and the related income tax adjustments for these items. Adjusted net income is not a measure of net income as determined by GAAP.

Our management believes adjusted net income is useful as it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers by excluding certain non-cash items that can vary significantly. Adjusted net income should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Our presentation of adjusted net income should not be construed as an inference that our results will be unaffected by unusual or nonrecurring items. Our computations of adjusted net income may not be comparable to other similarly titled measures of other companies.

Adjusted net income is not a financial measure that is determined in accordance with GAAP. Accordingly, the following table presents a reconciliation of adjusted net income to net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP:

The following table summarizes the approximate volumes and average contract prices of the hedge contracts the Company had in place as of July 31, 2023. There were no additional contracts entered into through the date of this filing:

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