Permian Resources Corp (PR) Q4 2024 Earnings Call Highlights: Record Production and Strategic Acquisitions Propel Growth

Permian Resources Corp (PR) reports a robust quarter with significant free cash flow growth and strategic acquisitions, setting the stage for continued success in 2025.

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Feb 27, 2025
Summary
  • Q4 Oil Production: 171,000 barrels of oil per day.
  • Total Q4 Production: 368,000 barrels of oil equivalent per day.
  • Q4 CapEx: $504 million.
  • Adjusted Operating Cash Flow: $904 million in Q4.
  • Adjusted Free Cash Flow: $400 million in Q4.
  • Q4 LOE: $5.42 per BOE.
  • Cash G&A: $0.93 per BOE in Q4.
  • GP&T: $1.49 per BOE in Q4.
  • 2024 Free Cash Flow Per Share Growth: Nearly 50% increase compared to 2023.
  • 2024 Oil Production Increase: 8% higher than original guidance.
  • 2024 Acquisitions: $1.2 billion for 50,000 net acres and 20,000 BOE per day.
  • 2025 Expected Total Production: 360,000 to 380,000 BOE per day.
  • 2025 Expected Oil Production: 170,000 to 175,000 barrels of oil per day.
  • 2025 Capital Program: Approximately $2 billion.
  • 2025 Controllable Cash Cost: Approximately $7.75 per BOE.
  • 2024 Liquidity Increase: Approximately $1 billion.
  • 2024 Leverage: Maintained at 1x.
  • 2025 Expected Leverage: Approximately 0.5x.
  • 2025 Base Dividend Yield: Over 4%.
  • Post-Dividend Free Cash Flow Breakeven: Approximately $40.
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Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Permian Resources Corp (PR, Financial) reported a record quarter in both production and free cash flow per share in Q4 2024.
  • The company achieved a nearly 50% increase in free cash flow per share compared to 2023 without increasing leverage.
  • PR's 2025 plan is expected to continue generating significant free cash flow per share growth.
  • The company executed approximately $1.2 billion of acquisitions in 2024, effectively replacing drilled inventory with high-return assets.
  • PR maintained a strong financial position with $3 billion in liquidity, including $500 million in cash, allowing for opportunistic actions in commodity price cycles.

Negative Points

  • Despite strong performance, PR's stock trades at a two-turn discount compared to some peers.
  • The company faces potential challenges in maintaining low D&C costs due to factors like tariffs and service cost fluctuations.
  • PR's gas strategy improvements are expected to materialize more in 2026 and beyond, indicating a delay in optimizing gas netbacks.
  • The company anticipates becoming a full cash taxpayer by 2026, which could impact future cash flows.
  • PR's focus on smaller M&A deals may limit opportunities for larger scale acquisitions that could enhance scale and inventory duration.

Q & A Highlights

Q: Can you provide more details on your 2025 plan and the sustainability of your economics?
A: William Hickey, Co-CEO, explained that the 2025 plan is similar to previous years, focusing on the same zones in New Mexico, Texas, and the Midland Basin. The company has successfully replaced its drilled inventory for two consecutive years, maintaining a high-confidence 15-year inventory with minimal degradation.

Q: What is your view on larger scale M&A, and how does it fit into your strategy?
A: James Walter, Co-CEO, stated that while the company has focused on smaller deals, they are open to larger acquisitions if they align with their long-term business improvement goals. The current focus remains on smaller, high-quality inventory deals.

Q: How are you achieving operational efficiencies, and what drives these improvements?
A: William Hickey emphasized that the company's culture of continuous improvement drives operational efficiencies. M&A allows them to leverage their cost structure, but the core improvements come from a motivated team focused on optimizing operations.

Q: Can you discuss your approach to shareholder returns and the sustainability of your dividend strategy?
A: James Walter highlighted the importance of a strong base dividend, which was first paid in November. The company aims to increase the base dividend annually, with additional capital allocation decisions based on the highest return opportunities, including potential buybacks or strategic acquisitions.

Q: What are the drivers behind your D&C cost reductions, and how sustainable are these improvements?
A: William Hickey noted that over 50% of the cost reductions come from efficiency gains, particularly in drilling. The remaining reductions are due to material cost deflation. The company is currently achieving $750 per foot in D&C costs and aims to maintain or improve this level.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.