NYSE:PR Permian Resources Q3 2023 Earnings Report $11.52 +0.50 (+4.54%) As of 03:58 PM Eastern Earnings HistoryForecast Permian Resources EPS ResultsActual EPS$0.36Consensus EPS $0.39Beat/MissMissed by -$0.03One Year Ago EPSN/APermian Resources Revenue ResultsActual Revenue$758.54 millionExpected Revenue$721.55 millionBeat/MissBeat by +$36.99 millionYoY Revenue GrowthN/APermian Resources Announcement DetailsQuarterQ3 2023Date11/7/2023TimeN/AConference Call DateWednesday, November 8, 2023Conference Call Time10:00AM ETUpcoming EarningsPermian Resources' Q1 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled on Thursday, May 8, 2025 at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Permian Resources Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 8, 2023 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Morning, and welcome to Permian Resources Conference Call to discuss its Third Quarter 2023 Earnings. Today's call is being recorded. A replay of the call will be accessible until November 22, 2023, by dialing 877-674 7,070 and entering the replay access code 6,08, within the company's website at www.permianres.com. At this time, I will turn the call over to Hays Mabry, Permian Resources' Senior Director of Investor Relations for some opening remarks. Please go ahead. Speaker 100:00:43Thanks, Lester, and thank you all for joining us on the company's 3rd quarter earnings call. On the call today are Will Hickey and James Walter, our Chief Executive Officers and Guy Ollison, our Chief Financial Officer. Yesterday, November 7, we filed a Form 8 ks with an earnings release reporting 3rd quarter results for the company. We also posted an earnings presentation to our website that we will reference during today's call. You can find the presentation on our website homepage or under the News and Events section at www.permianres.com. Speaker 100:01:33I would like to note that many of the comments during this earnings call are forward looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the Risk Factors and the Forward Looking Statements sections of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10Q for the quarter ended September 30, 2023, which is expected to be filed with the SEC later this afternoon. Although we believe the expectations expressed are based on reasonable assumptions, They are not guarantees of future performance and actual results or developments may differ materially. We may also refer to non GAAP financial measures that help facilitate comparisons across periods and with our peers. For any non GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release for presentation, which are both available on our website. Speaker 100:02:51With that, I will turn the call over to Will Hickey, Co CEO. Speaker 200:02:57Thanks, Hayes. Before we jump into the slides, I want to take a moment to thank our team for delivering the best operational quarter we have ever had as a company, which I will expand on in more detail in a moment. It's easy to get distracted when a big deal is announced, and our team didn't take their eyes off the ball. From accounting to IT to all of the operational groups, great work from top to bottom. Having a strong underlying business is critical as we expand our focus to integration, and we have a great team that exceeded expectations so far in 2023. Speaker 200:03:27I want to spend a few minutes talking about the Earthstone acquisition, which we closed last week on November 1. As we stated during the announcement, we believe that the Earthstone deal provided a unique combination of significant near term and long term accretion, Permian Basin scale, High quality assets in the core of the Northern Delaware Basin and accelerated return of capital, all while allowing us to maintain a strong pro form a balance sheet. Importantly, we were able to complete the transaction at a purchase price and structure that will provide significant value to our combined shareholder base and are looking forward to delivering on the $175,000,000 annual synergy target laid out in August. We spent the past few months Working with the Earthstone team and preparing for integration and synergy capture phase of the acquisition. M and A integration is something we consider a core competency at Permian Resources, and we have already hit the ground running to leverage the playbook and lessons learned from the Colgate Centennial merger last year. Speaker 200:04:23As we have begun integrating Earthstone's assets and team, We are more excited than ever about the improvement to our already great business that the combination provides. Shifting back to Permian Resources' 3rd quarter. I'm proud to announce that our team continued to deliver strong results. Operational outperformance across the board drove a meaningful increase in free cash flow for the quarter, resulting from a combination of wins. 1st, strong well results led to meaningful oil growth in the quarter with our new wells continuing to impress. Speaker 200:04:522nd, continued operational execution in the field lowered controllable costs despite summer weather in Texas, which is a real testament to how prepared and dedicated our field team is every single season. Weather in Texas is extreme, but predictable and our team has worked hard to put equipment and processes in place to mitigate downtime. 3rd and finally, our drilling and completions team has relentlessly continued to drive down cycle times and well costs throughout the quarter. As a result, PR delivered total production of 172,000 barrels of oil equivalent per day and oil production of 90,000 barrels of oil per day, Which represent 4% and 6% increases respectively compared to the 2nd quarter. It's worth noting that we hit our Q4 24% to Q4 2023 growth target of 10% a quarter early due to strong operational performance. Speaker 200:05:42The company generated adjusted EBITDAX of $584,000,000 for the quarter. Total controllable cash costs were $7.92 per BOE, Which decreased slightly quarter over quarter. Overall, LOE, GP and T and cash G and A were in line with our expectations. We reported adjusted free cash flow of $165,000,000 based on cash CapEx of $380,000,000 in the quarter. Lastly, we reported $0.29 of adjusted Free cash flow per share on a cash CapEx basis and $0.39 per share of adjusted net income. Speaker 200:06:15Diving into the operations a little more, Our team increased efficiencies across the board, continuing our positive momentum from the previous quarter. The drilling team increased drilled feet per day by 14% quarter over quarter by continuing to refine best practices. In addition, the completions team delivered their best quarter to date with 18 80 completed feet per day and over team pumping hours per day, which we believe are some of the best performance metrics in the Delaware Basin. Overall, these efficiencies meaningfully reduced cycle times to the quarter, Resulting in slightly higher CapEx spend for the quarter, but lower per unit well costs. This is a winning combination and these sustained efficiencies Speaker 300:07:01Increased free cash flow allowed us to deliver total return of capital of $0.17 per share to shareholders during the quarter. Our calculation begins with adjusted free cash flow of $165,000,000 We reduced that amount by our $0.05 per share base quarterly dividend or 28,000,000 We have committed to pay 50% of the remainder of free cash flow to shareholders via dividends or buybacks. This quarter, we achieved that target with both. The share repurchase represents 2,200,000 shares that we bought back for $28,000,000 alongside a sponsor secondary offering during the quarter. Additionally, we will pay a variable dividend of $0.07 per share, bringing the all in quarterly return of capital to $0.17 per share. Speaker 300:07:41Consistent with our goal of delivering sustainable long term base dividend growth, we plan to increase our base dividend by 20% from $0.05 to $0.06 per share beginning in Q1. An overview of our balance sheet and hedge book can be found in the appendix. Our 3rd quarter results both as a standalone company and combined with Earthstone demonstrate our continued ability to maintain a strong balance sheet that supports strategic flexibility while pursuing accretive consolidation opportunities such as Earthstone. We have no near term maturities and approximately $1,500,000,000 of liquidity on our RBL. We expect to continue to utilize excess free cash flow to pay down debt over time. Speaker 300:08:19Notably, our credit ratings were upgraded by all three agencies at closing of the Earthstone transaction, furthering our goal of achieving an investment grade credit rating within 12 to 18 months. With that, I'll turn it over to James. Speaker 400:08:31Thanks, Guy. As you have all heard from both the Earthstone announcement call and this morning's earnings call, we are incredibly excited about the future of our business with the addition of Earthstone. We're excited to get the deal closed last week and to begin to welcome the Ersan employees to the Permian Resources team. We view this transaction as consistent with our ultimate goal to do whatever it takes maximize shareholder value creation. Our business today is better than it's ever been and we expect to find ways to continue to improve it going forward. Speaker 400:08:57On Slide 10, we look back at a few of the key takeaways from our Urstone acquisition. First, we acquired Urstone at a very attractive valuation, where we are highly certain that we can exceed our return thresholds. Our purchase price at the time of announcement represented a slight discount to proved developed PV-ten while adding significant high quality Delaware inventory at little or no cost. 2nd, the transaction is accretive to all key financial metrics before synergies and highly accretive with synergies, near term, long term and mid term. But finally and most importantly, we firmly believe this transaction will continue our track record of enhancing shareholder value to increase free cash flow per share and returns to investors. Speaker 400:09:34It's worth noting that this transaction makes Permian Resources the 2nd largest remaining Permian pure play, One of the largest operators in the Permian Basin. Although we have been very clear we would never do a deal just to get bigger, we do expect to benefit from enhanced economies of scale and the strategic benefits of being the 2nd largest Permian pure play. Before we move to Q and A, I'd like to take a quick second to look back at 2023 so far. This past February, our team put out a very strong and well received full year 2023 plan that maximized free cash flow for shareholders through high return, cost effective development. Since February, our team has executed extremely well and we are exceeding expectations against that budget. Speaker 400:10:13We will not be providing a stand on PR look back in our Q4 earnings call February, since we have 2 months of contribution from Earthstone included in our financials, but it's worth noting and giving our team credit for the fact that PR standalone is on track to deliver an excellent and outperforming year and its 1st full year as a public company. We will not be addressing our 2024 plan on this call today, We expect to release an updated business plan and guidance on our next regularly scheduled call in February. Investors can rest assured that our philosophy has not changed. We'll be building a development plan that maximizes value for our shareholders over the near and long term. As we decide activity levels, we will put together a plan that solves the highest free cash flow over the next 12 to 24 We believe that by waiting until February, we'll have a much better idea of what that reinvestment environment looks like and be able to come to the market with a plan that maximizes value for shareholders in a way that we could not do as effectively if we rolled out a plan today. Speaker 400:11:06As always, our focus is on long term value creation. Thank you for tuning in today. And now we will turn it back to the operator for Q and A. Operator00:11:17Thank you. The question and answer session will be conducted electronically. One moment for your first question. First question comes from Zack Parham from JPMorgan. Your line is now open. Speaker 500:11:44Hey, guys. Congrats on the quarter and thanks for taking my question. I guess first just a question Like you mentioned, you hit the 10% exit to exit growth target of full quarter in advance. Can you just give us Some more detail on what drove that outperformance in 3Q. Was it well productivity? Speaker 500:12:03Was it cycle times that allowed you to To bring wells online earlier or any other factors you would point to that allowed you to deliver that oil well above expectations? Speaker 200:12:14Yes. Thanks, Zach. It was really 3 things you hit on 2 of them, well side, the kind of acceleration of wells into the quarter just given the operational And then improved downtime numbers. We just we saw kind of record downtime numbers For the year in Q3, just due to what the operational team did. And so kind of add all three of those together and it leads to what was a pretty big beat on the oil side. Speaker 600:12:43Got it. Thanks for that. Speaker 500:12:44And then just one more on the CapEx side. You talked about CapEx being a little higher than in 3Q because of those efficiency gains and getting more wells drilled and completed, but that well costs were also lower. Maybe could you quantify where leading edge D and C cost per foot are and maybe give us some thoughts on where those costs could go In 2024 given deflation and efficiency gains as well. Speaker 200:13:10Yes. Just as you think about inflation, kind of as we discussed last quarter, I think we were trending for next year to see about 5% deflation year over year on the consumable side, primarily driven by casing and then hoping to get kind of a little bit On top of that via some of the services or things like sand, etcetera. So I think that's still consistent today. Obviously, the commodity price moving around a lot and people are putting out full year budget, which I think will drive kind of a lot of changes in that in either direction. But kind of call it 5% plus on the deflation side feels like a safe Assumption for next year. Speaker 200:13:43And then on the operational efficiencies, the things we did in Q3 to reduce cycle times, faster drilling, faster frac times, Etcetera are the small little things that are really sticky. So I think our expectation is we'll be able to kind of continue that pace, drill more wells with less equipment and Kind of add to that 5 plus percent on the deflation side, just be a better overall kind of operational efficiencies to drive well cost down even lower. Speaker 500:14:10Got it. Thanks. And then any color on where leading edge D and C costs are currently? Speaker 200:14:21I think kind of if you think about relative to where we were in kind of earlier this year, it's probably down 10%, something like that. Speaker 500:14:29Okay. Thanks for that color. Thank you, guys. Operator00:14:36Your next question comes from Gabe Daoud from Citi Cowen. Your line is now open. Speaker 600:14:43Thanks. Hey, good morning, everyone. I was hoping that we could maybe get a bit more color on how you guys are thinking about Just at a high level, exit to exit growth going forward. I know the goal is to always maximize free cash flow with maybe growth being an output of that. But just curious Now as a larger entity, how you guys think about growth on an exotaglia basis? Speaker 400:15:08Yes. I mean, I think we've been pretty clear with the market that we're not going to put out a 2024 plan at this point. We don't think that's advantageous the right thing for our shareholders over the long term, but I do think that growth could certainly as we're bigger continue to be a part of the mix. I think we pride ourselves our ability to be flexible and react to Whatever the investment environment looks like at the time and I think that could be in a less attractive environment kind of lower 0 growth and in a higher Better return environment, it could Speaker 300:15:38be as high as the Speaker 400:15:39kind of 10% we'd outlined previously. I think despite additional scale, we've We have an incredible high return inventory base and our philosophy on that front hasn't changed. Speaker 600:15:50Understood. Thanks for that. And then you mentioned the ground game in the quarter, 20 Grassroots transactions. Just curious How you guys think about larger scale M and A at this point? You noted the attractiveness and the Strategic value of being a large Permian pure play. Speaker 600:16:08So just curious how that lends itself to your thinking on M and A? Speaker 400:16:13Yes. I mean, I think the ground game is something we do quarter in, quarter out and I think something we do exceptionally well and can be a real differentiator Over time, as we've mentioned time and again, those are, I think, the most attractive acquisition opportunities we look at often right ahead of the drill bit and really, really accretive. I think on the larger stuff, To be really clear, the first focus for us today is on integration of the Earthstone business, which we closed last week and Continuing to execute. I think we have a saying on here, if we can't execute, we can't do anything else. I'd say larger stuff at some point down the road could make Since again, I'd say for us, we are highly focused on our asset quality and I think remaining a Permian Basin pure play is important to us. Speaker 400:16:56I think that probably does narrow the potential scope of larger deals in the future, but we're going to continue to keep our eyes open. And as we've always said, we're going to do whatever makes the most sense for shareholders. Speaker 600:17:08Awesome. Great. Thanks, guys. Operator00:17:13Next question comes from Neal Dingmann from Zuwirth Securities. Your line is now open. Speaker 700:17:19Good morning, guys. Thanks for the time. My first question is on the I'm just wondering, Will, I know you're definitely not giving 24, but I'm just wondering sort of broadly speaking, are you able to say just In broad strokes, how much of the total activity by mid-twenty 24 these assets could represent? And I'm just also wondering, would you consider at this point, I know it's early, what would you consider sort of the initial low hanging fruit with that operations? Speaker 200:17:48Yes. Thanks, Neil. As far as activity goes, I think we've been pretty clear that we're going to kind of move rigs from Midland and reallocate that capital to Delaware. So Our development plan will be very Delaware focused, kind of 90 plus percent Delaware based will be where the I'd like to spend as I think kind of within the Delaware as you think about capital allocation to the Earthstone assets, I think plus or minus a third is probably the right Range, it may be a little less than that kind of at times, but I think kind of over the course of the year, that's probably a safe bet as to where it will shake out. And then Loeing, if you're on the operational side, I think everything we laid out in our rollout call around synergies is We're still very convicted that that was those synergies are very achievable and ones that we could even go beat. Speaker 200:18:37So the quickest wins are going to be on just pricing, pricing on Things like sand, fuel, frac, wireline, etcetera are wins that we were able to get kind of the day after we closed. Probably followed up by that, it will be rigs. I think we'll be able to go get efficiencies either by swapping out rigs or kind of applying best practices real fast or short etcetera with kind of the economies of scale of the business. And then kind of I think what will bring up the rear will be the LOE changes. A lot of those are kind of Water disposal, contractual based type deals or things that take a little more time. Speaker 200:19:12But we're 1 week in today and I think we are feeling as confident as ever Speaker 700:19:20Yes, certainly a lot of upside. And then James, maybe my second one for you just on shareholder return. Just wondering, do you believe the current your current 50 Free cash flow payout will remain optimal going forward as you all get larger, as production increases, as debt even goes down further? Or is there any reason you'd see to maybe step that up in that case or potentially even lowered if you want to decide to boost production? Speaker 400:19:45I think we really like our framework. I think what we came out with a year and a half ago or so was really the right balance and we're trying to strike the right balance of Making sure we maintain operational and strategic flexibility to take advantage of the opportunities that we see in whatever environment we're in, but while also returning Capital to shareholders in a way that's really meaningful and substantial. So I think we nailed it with the plan and we have no plans to change it. Speaker 700:20:12Yes, I think it's very steady. It makes a lot of sense for you all. Thank you so much. Speaker 500:20:17Thanks, Neil. Thanks, Neil. Operator00:20:21Your next question comes from Scott Hanold from RBC Capital Markets. Your line is now open. Speaker 800:20:29Thanks. Hey, you obviously all identified some opportunities For the synergies, especially in the operating cost side. And I know you've only had Earthstone for about a week, but like big picture, how quickly do you think you can get The Earthstone operation is up to speed to your standards and especially on the OpEx side, which has been certainly an area That's run high for Stone. Speaker 200:20:59Yes. I kind of break into 3 parts. I think If you're thinking about just overall synergies from a cost perspective, there's some just kind of economies of scale pricing corrections that we are already getting that Showing up kind of day 1. Just we're running 2 to 3 frac fleets from the same company and there's some benefits from doing that that we'll get immediately. I think the rest of kind of the efficiencies on the D and C slide probably come next. Speaker 200:21:26If you think about in the last merger we did with Colgate and CDEV, we were able to drop kind of down to rigs, call it 6 to 9 months post close and here we are a year post close seeing kind of better efficiencies than either company had on a standalone basis. So I think kind of call it Plus or minus 6 to 9 months on the kind of D and C side and then the LOE will be the slowest. I think that that will take Time just because a lot of that's contractual and things that we'll have to go work through on combining contracts and renegotiating things like that. But If you think about it, we lined out that we could achieve this $175,000,000 run rate by the end of the year next year. And I think we are, From everything we've seen, very confident that we will both be able to get that, likely get more than that and maybe even be able to get it quicker. Speaker 200:22:11So That's kind of how they would line out over time. Speaker 800:22:14Yes. And so on the operating cost side, just Clarify, you see more of that is contractual versus operational like that. You don't need to go out in the field No change, plumbing and everything else on those wells that you're inheriting? Speaker 200:22:31No, absolutely. There's a lot of That as well. I just think of it as if I think about the big needle movers being kind of artificial lift optimization failure rate, which is what you just described, that's In the field best practices, that will be stuff that we'll go kind of we're starting to work through in real time today. But the other big piece is water disposal. And water disposal is going to be more of a little longer lead time, finding the optimal SWD disposal or recycling process and kind of working through some small contracts along the way. Speaker 200:23:04So a little bit of both, I guess, to be the short answer. Speaker 800:23:08Okay. And just to follow-up on and I know obviously we'll get the better 2024 outlook as we get into early next year and I appreciate The need, it's a very dynamic market. But like when you think about whether you look at a 0% or 10% kind of growth rate range, Can you talk about the factors like is it some of it is at fundamental macro or is it price And how do you think about hedging as you kind of think about that? Like if for example, if you were able to hedge a high enough price, would you say go to the higher end of growth Regardless of what the macro looks like. So any kind of color on how you think about that strategy? Speaker 400:23:47Yes. I mean, I think our hedging strategy would be Pretty clear how we think about it, but no, you're right. I'd say we'd be biased to hedge more and grow more at higher commodity prices. I think that's Just good basic business sense, but as we see higher commodity prices, I think we've always said we're going to be opportunistic and would look to layer in incremental hedges both on the crude side and the gas side. I'd say and then I think as I think about growth, it's really how good is the reinvestment widget. Speaker 400:24:13And I'd say that's a combination of really equal parts that drive the What are the commodity prices we expect to realize next year and probably the following? And then what What does the service cost environment look like? I mean, we've seen over the past 2 years a wide range of service costs and kind of input costs that ultimately impact The rate of return and the payout of our projects in our development plan. So I'd say lower services costs, Higher commodity prices is a better reinvestment environment and going Speaker 300:24:44to push us to the higher of Speaker 400:24:45that range. And if you have the opposite, it pushes lower. Speaker 900:24:49Appreciate that. Thank you. Operator00:24:55Your next question comes from Derrick Whitfield from Stifel. Your line is now Speaker 900:25:00open. Good morning all and congrats on another solid quarter. Speaker 200:25:05Thanks. Speaker 900:25:07Starting with a bigger picture longer term outlook question on your pro form a asset base. In recent quarters, there's been a heightened investor Focus on asset productivity and durability with the benefit of the Earthstone transaction, is it reasonable to assume your Reinvestment 1 year out assessment looks very similar to your 2 5 year out assessments? Speaker 200:25:30Yes, I think that's a fair assumption. We'd agree with that. Speaker 900:25:34Terrific. And then maybe staying on operations. Long lateral development has been a growing theme over the last couple of quarters. As you look out over the next couple of years, what are your thoughts on the risk reward, Really, metrics associated with integrating more 3 Mile Lateral Development into your operations? Speaker 200:25:54Look, we're watching this closely. We've seen what others have done in other basins and then some in the Delaware. I'd say our position Kind of has the benefit of it's set up extremely well for 2 mile development across the whole position. We worked kind of very hard over the last 5 to 10 years to set it up accordingly. So I think as you kind of scan both ours and Earthstone Physicians pro form a just from a map perspective, you'll see that It's set up really well for 2 mile development, which I think makes it just less likely and there's less opportunity to go ahead and extend to 3 miles. Speaker 200:26:29I also think it is our belief still today that 2 Mile Lateral is the optimal kind of most capital efficient or risk adjusted return Later linked in the Delaware. I do think as technology continues to get better and we get better continue to get better at drilling wells that, that may shift to 2.5 or 3 over the near term. So Look, we're going to stay we're going to keep watching it. We'll be fast followers. I think there's probably some small places where we could do things to incorporate longer rattles if we chose to do so, but That's not a big part of the near term business plan for us. Speaker 400:26:59And Derek, I think a lot of where you've seen the most important push to the extra long 3 mile plus laterals has been in Plays where people are really pushing the margins of the basin and they're well into the kind of next tier of inventory and we're in the fortunate position. We're still drilling Our core of the core acreage that's extremely high quality will be for the long time. So I think for us, we're in the fortunate position that we don't need to do that and really like the value proposition of the 2 Myers we have set up for today. Speaker 900:27:30That's a fair point. Congrats again on the quarter guys. Speaker 400:27:35Thanks, Derek. Operator00:27:42Your next question comes from Philip Johnston from Capital One. Your line is now open. Speaker 1000:27:50Hey, guys. Thanks. I realized you guys won't have detailed 'twenty four guidance until February. But now that the Airstone deal is closed, can you maybe just Frame up Q4 a bit and give us a sense for either what volumes might look like today or what kind of year end exit rate we should be Steering towards, especially considering, I guess, the improvement in efficiencies that led to higher activity and volumes in Q3. Speaker 200:28:19Yes. I can give you kind of a few points I think will be helpful. Starting with just PR standalone, as you think about it, so we hit We kind of hit the Q4 target in Q3, so I think it'd be safe to assume we were kind of trending towards on a standalone basis kind of A slight beat for Q4 oil productivity or production. CapEx, I think similar story. We accelerated some wells from Q4 into Q3, so you're probably turning towards a slight beat on the CapEx side as well for PR standalone. Speaker 200:28:49And then as you think about Earthstone, what will be in that Q4 will be 2 months of Earthstone, so kind of the last 2 months of the year of the Earthstone assets. And Earthstone had a guide out there alongside their Novo acquisition that I think is still the right guide to use. So kind of Taking those pieces, you can do kind of PR plus 2 thirds Earthstone to get to what I think is a decent kind of round number for where we'll be in Q4. Speaker 1000:29:15Okay. So this might be too granular, but it looks like leading edge estimates for the quarter are sort of in a 2.60 to 2 70 day range for oil equivalent and 1.25 to 1.30 day for oil. Do those seem reasonable or is that a little bit $2 for you? Speaker 200:29:33I think that's too granular for me, but I'm sure you can have a follow-up with Hays or somebody if you're make sure that you're not missing something. Speaker 1000:29:40Yes, okay. Sounds good. And then maybe just a modeling housekeeping question. Your natural gas differential Step down in Q3 versus kind of where it was in the prior two quarters. Is that kind of a trend we should extrapolate going forward? Speaker 1000:29:55Or Were there some one off factors in the quarter that sort of drove that? Speaker 300:30:00Yes. Just on commodity mix, generally, Oil is up really just strong well productivity. Gas and NGL trends are really just a combination of oil cut in the areas where we're drilling. Specifically on NGLs, it's kind of the content of the gas where we're popping wells and the associated midstream contracts with a little bit of midstream constraint. I don't I think you'll see some fluctuation there, but not kind of a persistent trend off of 1 quarter. Speaker 1000:30:27Okay, sounds good. Thank you. Operator00:30:35Your next question comes from Oliver Wang from TPH. Your line is now open. Speaker 1100:30:41Good morning, James, Will and team. Congrats on the solid quarter and thanks for taking my questions. Just wanted to Start out on the ops front with respect to the efficiencies that you all kind of gained over the quarter. What's the confidence level in being able to keep Q3 run rate going over the course of an entire year. And as we kind of think about how much activity a base program of 11 rigs could get done. Speaker 1100:31:06And also, is there any sort of inclination to do something similar like you all did with the Colgate deal in terms of just dropping a rig once efficiencies are achieved? Or would the thought process be to just kind of take advantage of those efficiencies to drive a little bit more pro form a growth? And I guess that kind of dovetails into Just kind of, just being tight lipped on the 2024 outlook at this point in time. Speaker 200:31:30Yes. I mean, I guess I'll give you some color around it. These efficiencies, a lot of them are just like small things. We're just continuing to get buy in from the field, driving down flat time on both the Drilling side and downtime on the frac side. So I think they're going to be pretty sticky. Speaker 200:31:46Q3 was a quarter where everything went right. Can we maintain that exact same run rate for a whole year? That may be a little bit ambitious, but at the same time, I think we'll continue to find Small things to improve upon. So I do think that the go forward efficiencies will look more like Q3 than they did any of the previous quarters. Kind of what does that mean for next year? Speaker 200:32:08Look, I think the way that we run our budget and think about it is we're going to solve for what's the right amount of capital to spend and Kind of that will be dictated by how James laid out what is the ultimate kind of return on that capital, kind of how efficient is that widget in the calendar year in which we're doing it. And then we'll leverage these efficiencies to right size the amount of equipment to hit that capital budget. So the answer is everything is on the table. We may Run less equipment and drill more wells because we're being more efficient. We may run the same amount of equipment and drill even more wells because we're trying to spend more capital because of the return on the capital, etcetera. Speaker 200:32:43So You can feel rest assured that we're going to keep these efficiencies and use the equipment that's generating these efficiencies, but How we use it and how much of it we use is still kind of things we're working through in real time. Speaker 1100:32:57Okay. That's helpful color. And just when we're kind of thinking about Q4, given the year to date outperformance on efficiencies, Are there any concerns with respect to budget exhaustion that might drive a loss of efficiency with having to pull back a rig or crew? And could you also remind us How many crews you'll have running on a pro form a basis when including Earthstone? And if there are any plans to pick back up a spot or full time crew for next year? Speaker 200:33:27Yes. We're not going to do anything that doesn't make sense operationally. We're not going to do it. We're not Drop a very efficient rig or anything like that to kind of stay within quarter to quarter budget constraints. We do have the benefit that we were always planning on we ran 3 frac fleets on PR standalone for the majority of Q3 and we were planning on dropping to 2 in Q4. Speaker 200:33:50Given the efficiency we saw on the frac side, we dropped down to 2 fleets a little bit earlier than expected in Q4. So I think this is going to be one of these where we didn't we were able to kind of do both. We're going to kind of have a drop in CapEx in Q4 that kind of keeps us In line with where consensus and kind of expectations were for full year CapEx on PR standalone, while also keeping all of our rigs And our 2 dedicated frac fleets that were able to achieve the efficiencies you saw. So hopefully that answers your question, but we're going to We're not going to drop rigs or frac fleets that have seen these crazy levels of efficiencies, it's kind of based on quarter to quarter budget. Speaker 1100:34:31Awesome. Thanks for the time. Operator00:34:38Your next question comes from Paul Diamond from Citi. Your line is now open. Paul Diamond from Citi, your line is now open. Speaker 100:35:02Hey, Paul. I think you're on mute if you're there. Operator00:35:08Your next question comes from Leo Mariani from Roth MKM. Your line is now open. Speaker 1200:35:16Guys, I was hoping you could maybe just discuss the M and A landscape a bit. Obviously, you guys have been pretty Quizitive throughout your history, going back to Colgate and now with PR. So How do you kind of see things out there now? Are there deals available? What's your appetite? Speaker 1200:35:37How would you kind of Characterize some of these deals out there, just any color would be great. Speaker 400:35:43Yes. And I said earlier, but I think worth emphasizing again, I'd say Very first priority and focus right now is on integration and execution. That comes first always. But I'd say, yes, you're right. We've been constantly in the market and understanding it. Speaker 400:35:56And I'd say it's changed quite a bit over the past 9 months. I'd say we saw a Very long backlog of kind of large scale private deals come to market the 1st 9 months or so of the year. I do think that backlog is largely exhausted and slowing. I'd say for us, we looked at all those deals. I'd say we're focused on doing transactions that enhance the quality of our business and our inventory base and That's a really high bar today and didn't find anything outside of the Earthstone acquisition that fit that bar of scale. Speaker 400:36:25But I think what we're seeing that's really attractive is we're We continue to see the kind of small ball ground game be the most attractive opportunities that are the highest rate of return, the most inventory accretive and Ultimately set us best up for long term value creation. So I think we'll continue to be active on that front and we'll evaluate larger packages as they come, but I don't see anything coming down the pipeline that we think is a fit for us. Speaker 1200:36:48Okay, that's helpful. And then just on Q4 For PR standalone, you guys talked about kind of dropping a crew a little bit earlier, you kind of went faster, Obviously, a lot of efficiencies in Q4. Can you kind of help us out with sort of expected kind of standalone Hill count in 4Q in terms of number of wells, is that coming down a fair bit this quarter? And just per your earlier I wanted to sort of clarify given that the strength in 3Q, it seems like you're fairly confident that you're going to be kind of above midpoint of oil for full year for PRS Antoine. Speaker 200:37:26Yes. Q4 Q3 was our highest Till count quarter as a business and Q4 We'll come down from there as expected. And also, yes, we were you'll never PR standalone won't be a thing because in Q4 it will include PR plus 2 months of Earthstone. But on a PR standalone basis, we were headed for a Q4 beat relative to the 90,000 barrels of oil per day target that we put out at the early year guidance. So Yes. Speaker 200:37:57All of that driven by just acceleration of tills into Q3, some into Q4 and then obviously increase in well productivity And better downtime numbers than originally budgeted for. Speaker 100:38:10Okay, thanks. Speaker 1000:38:12You bet. Operator00:38:22Our next question comes from Paul Diamond from Citi. Your line is now open. Speaker 1300:38:28Hi, apologies for that. I had a bit of technical difficulties. Just wanted to touch base real quick on the ground game opportunities, 7 40 Acres, 20 Deals last quarter. Now with Earthstone in house, just want to get your idea or get you guys idea on how I guess what the opportunity is on kind of legacy operations or the new stuff and And is there kind of attention shift anywhere or will all be kind of an all inclusive type of event? Speaker 400:38:54Yes. I mean, I think I'd say the opportunity set is brighter for our ground game effort with Earthstone. I think just kind of a larger footprint creates More opportunities for bolt on acquisitions, for trades, etcetera. I think it's probably obvious that that's going to be exclusively focused in the Delaware today. I think that's where The full force of our operational and acquisition efforts are, but I think we're excited. Speaker 400:39:15I think there's a lot to do with these assets. We're kind of 1 plus 1 Equals more than 2. So we're excited and think the opportunity set only grows from here. Speaker 1300:39:25Understood. Thanks for the clarity. Just kind of one quick follow-up given the recent mechanics So, rising M and A in the market, are you guys seeing any of kind of fluctuations on those in those negotiations? Or is it still kind of Moving with the general market or kind of any deviation therein? Speaker 400:39:42I think small ball market has been really interesting over the 8 years. It's been a lot more steady kind of people. It's largely independent private sellers or kind of legacy Family owned oil companies, etcetera, unless we haven't seen kind of prices change as much. They don't prices don't fall as quickly when Commodity prices in the broader market falls and they don't rise as quickly when those markets are up into the right. So I think those opportunities have been steady and I think for us we're obviously in a pretty unique value proposition today. Speaker 1300:40:12Understood. Thanks for the clarity. Speaker 1000:40:21There are Operator00:40:21no further questions at this time. Handing it over to James Waller for the closing remarks. Speaker 400:40:27Perfect. Thank you. I like to conclude today's conference call on slide 11, which helps to reemphasize our value proposition for current and future investors. Since the formation of Permian Resources last year, we've delivered best in class And meaningfully outperformed the S and P 500. This outperformance was largely driven by successful execution and as a result our business continues to represent a compelling value Opposition against other large cap oil and gas companies. Speaker 400:40:50It's worth noting that Permian Resources now sits in a new class of large cap peers Enterprise value of almost $15,000,000,000 and 100 percent of our business focused on the Permian. It continues to be our belief that quality businesses such as ours Core assets, organic growth, efficient operations and a strong financial position have room to rerate to more competitive multiples, not only with our direct peers, but also with other sectors in the broader market. By continuing to enhance and cultivate these attributes through quarter in quarter out execution and opportunistic transactions such as Earthstone, We believe that we can continue to create outsized value for shareholders and solidify our position as a leader in the energy sector. Thank you again for your time today. Operator00:41:31Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.Read moreRemove AdsPowered by Conference Call Audio Live Call not available Earnings Conference CallPermian Resources Q3 202300:00 / 00:00Speed:1x1.25x1.5x2xRemove Ads Earnings DocumentsSlide DeckPress Release(8-K) Permian Resources Earnings HeadlinesAnalysts Set Permian Resources Co. 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Sign up for Earnings360's daily newsletter to receive timely earnings updates on Permian Resources and other key companies, straight to your email. Email Address About Permian ResourcesPermian Resources (NYSE:PR), an independent oil and natural gas company, focuses on the development of crude oil and related liquids-rich natural gas reserves in the United States. The company's assets primarily focus on the Delaware Basin, a sub-basin of the Permian Basin. Its properties consist of acreage blocks in West Texas, Eddy County, Lea County, and New Mexico. The company was formerly known as Centennial Resource Development, Inc. and changed its name to Permian Resources Corporation in September 2022. 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There are 14 speakers on the call. Operator00:00:00Morning, and welcome to Permian Resources Conference Call to discuss its Third Quarter 2023 Earnings. Today's call is being recorded. A replay of the call will be accessible until November 22, 2023, by dialing 877-674 7,070 and entering the replay access code 6,08, within the company's website at www.permianres.com. At this time, I will turn the call over to Hays Mabry, Permian Resources' Senior Director of Investor Relations for some opening remarks. Please go ahead. Speaker 100:00:43Thanks, Lester, and thank you all for joining us on the company's 3rd quarter earnings call. On the call today are Will Hickey and James Walter, our Chief Executive Officers and Guy Ollison, our Chief Financial Officer. Yesterday, November 7, we filed a Form 8 ks with an earnings release reporting 3rd quarter results for the company. We also posted an earnings presentation to our website that we will reference during today's call. You can find the presentation on our website homepage or under the News and Events section at www.permianres.com. Speaker 100:01:33I would like to note that many of the comments during this earnings call are forward looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the Risk Factors and the Forward Looking Statements sections of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10Q for the quarter ended September 30, 2023, which is expected to be filed with the SEC later this afternoon. Although we believe the expectations expressed are based on reasonable assumptions, They are not guarantees of future performance and actual results or developments may differ materially. We may also refer to non GAAP financial measures that help facilitate comparisons across periods and with our peers. For any non GAAP measure we use, a reconciliation to the nearest corresponding GAAP measure can be found in our earnings release for presentation, which are both available on our website. Speaker 100:02:51With that, I will turn the call over to Will Hickey, Co CEO. Speaker 200:02:57Thanks, Hayes. Before we jump into the slides, I want to take a moment to thank our team for delivering the best operational quarter we have ever had as a company, which I will expand on in more detail in a moment. It's easy to get distracted when a big deal is announced, and our team didn't take their eyes off the ball. From accounting to IT to all of the operational groups, great work from top to bottom. Having a strong underlying business is critical as we expand our focus to integration, and we have a great team that exceeded expectations so far in 2023. Speaker 200:03:27I want to spend a few minutes talking about the Earthstone acquisition, which we closed last week on November 1. As we stated during the announcement, we believe that the Earthstone deal provided a unique combination of significant near term and long term accretion, Permian Basin scale, High quality assets in the core of the Northern Delaware Basin and accelerated return of capital, all while allowing us to maintain a strong pro form a balance sheet. Importantly, we were able to complete the transaction at a purchase price and structure that will provide significant value to our combined shareholder base and are looking forward to delivering on the $175,000,000 annual synergy target laid out in August. We spent the past few months Working with the Earthstone team and preparing for integration and synergy capture phase of the acquisition. M and A integration is something we consider a core competency at Permian Resources, and we have already hit the ground running to leverage the playbook and lessons learned from the Colgate Centennial merger last year. Speaker 200:04:23As we have begun integrating Earthstone's assets and team, We are more excited than ever about the improvement to our already great business that the combination provides. Shifting back to Permian Resources' 3rd quarter. I'm proud to announce that our team continued to deliver strong results. Operational outperformance across the board drove a meaningful increase in free cash flow for the quarter, resulting from a combination of wins. 1st, strong well results led to meaningful oil growth in the quarter with our new wells continuing to impress. Speaker 200:04:522nd, continued operational execution in the field lowered controllable costs despite summer weather in Texas, which is a real testament to how prepared and dedicated our field team is every single season. Weather in Texas is extreme, but predictable and our team has worked hard to put equipment and processes in place to mitigate downtime. 3rd and finally, our drilling and completions team has relentlessly continued to drive down cycle times and well costs throughout the quarter. As a result, PR delivered total production of 172,000 barrels of oil equivalent per day and oil production of 90,000 barrels of oil per day, Which represent 4% and 6% increases respectively compared to the 2nd quarter. It's worth noting that we hit our Q4 24% to Q4 2023 growth target of 10% a quarter early due to strong operational performance. Speaker 200:05:42The company generated adjusted EBITDAX of $584,000,000 for the quarter. Total controllable cash costs were $7.92 per BOE, Which decreased slightly quarter over quarter. Overall, LOE, GP and T and cash G and A were in line with our expectations. We reported adjusted free cash flow of $165,000,000 based on cash CapEx of $380,000,000 in the quarter. Lastly, we reported $0.29 of adjusted Free cash flow per share on a cash CapEx basis and $0.39 per share of adjusted net income. Speaker 200:06:15Diving into the operations a little more, Our team increased efficiencies across the board, continuing our positive momentum from the previous quarter. The drilling team increased drilled feet per day by 14% quarter over quarter by continuing to refine best practices. In addition, the completions team delivered their best quarter to date with 18 80 completed feet per day and over team pumping hours per day, which we believe are some of the best performance metrics in the Delaware Basin. Overall, these efficiencies meaningfully reduced cycle times to the quarter, Resulting in slightly higher CapEx spend for the quarter, but lower per unit well costs. This is a winning combination and these sustained efficiencies Speaker 300:07:01Increased free cash flow allowed us to deliver total return of capital of $0.17 per share to shareholders during the quarter. Our calculation begins with adjusted free cash flow of $165,000,000 We reduced that amount by our $0.05 per share base quarterly dividend or 28,000,000 We have committed to pay 50% of the remainder of free cash flow to shareholders via dividends or buybacks. This quarter, we achieved that target with both. The share repurchase represents 2,200,000 shares that we bought back for $28,000,000 alongside a sponsor secondary offering during the quarter. Additionally, we will pay a variable dividend of $0.07 per share, bringing the all in quarterly return of capital to $0.17 per share. Speaker 300:07:41Consistent with our goal of delivering sustainable long term base dividend growth, we plan to increase our base dividend by 20% from $0.05 to $0.06 per share beginning in Q1. An overview of our balance sheet and hedge book can be found in the appendix. Our 3rd quarter results both as a standalone company and combined with Earthstone demonstrate our continued ability to maintain a strong balance sheet that supports strategic flexibility while pursuing accretive consolidation opportunities such as Earthstone. We have no near term maturities and approximately $1,500,000,000 of liquidity on our RBL. We expect to continue to utilize excess free cash flow to pay down debt over time. Speaker 300:08:19Notably, our credit ratings were upgraded by all three agencies at closing of the Earthstone transaction, furthering our goal of achieving an investment grade credit rating within 12 to 18 months. With that, I'll turn it over to James. Speaker 400:08:31Thanks, Guy. As you have all heard from both the Earthstone announcement call and this morning's earnings call, we are incredibly excited about the future of our business with the addition of Earthstone. We're excited to get the deal closed last week and to begin to welcome the Ersan employees to the Permian Resources team. We view this transaction as consistent with our ultimate goal to do whatever it takes maximize shareholder value creation. Our business today is better than it's ever been and we expect to find ways to continue to improve it going forward. Speaker 400:08:57On Slide 10, we look back at a few of the key takeaways from our Urstone acquisition. First, we acquired Urstone at a very attractive valuation, where we are highly certain that we can exceed our return thresholds. Our purchase price at the time of announcement represented a slight discount to proved developed PV-ten while adding significant high quality Delaware inventory at little or no cost. 2nd, the transaction is accretive to all key financial metrics before synergies and highly accretive with synergies, near term, long term and mid term. But finally and most importantly, we firmly believe this transaction will continue our track record of enhancing shareholder value to increase free cash flow per share and returns to investors. Speaker 400:09:34It's worth noting that this transaction makes Permian Resources the 2nd largest remaining Permian pure play, One of the largest operators in the Permian Basin. Although we have been very clear we would never do a deal just to get bigger, we do expect to benefit from enhanced economies of scale and the strategic benefits of being the 2nd largest Permian pure play. Before we move to Q and A, I'd like to take a quick second to look back at 2023 so far. This past February, our team put out a very strong and well received full year 2023 plan that maximized free cash flow for shareholders through high return, cost effective development. Since February, our team has executed extremely well and we are exceeding expectations against that budget. Speaker 400:10:13We will not be providing a stand on PR look back in our Q4 earnings call February, since we have 2 months of contribution from Earthstone included in our financials, but it's worth noting and giving our team credit for the fact that PR standalone is on track to deliver an excellent and outperforming year and its 1st full year as a public company. We will not be addressing our 2024 plan on this call today, We expect to release an updated business plan and guidance on our next regularly scheduled call in February. Investors can rest assured that our philosophy has not changed. We'll be building a development plan that maximizes value for our shareholders over the near and long term. As we decide activity levels, we will put together a plan that solves the highest free cash flow over the next 12 to 24 We believe that by waiting until February, we'll have a much better idea of what that reinvestment environment looks like and be able to come to the market with a plan that maximizes value for shareholders in a way that we could not do as effectively if we rolled out a plan today. Speaker 400:11:06As always, our focus is on long term value creation. Thank you for tuning in today. And now we will turn it back to the operator for Q and A. Operator00:11:17Thank you. The question and answer session will be conducted electronically. One moment for your first question. First question comes from Zack Parham from JPMorgan. Your line is now open. Speaker 500:11:44Hey, guys. Congrats on the quarter and thanks for taking my question. I guess first just a question Like you mentioned, you hit the 10% exit to exit growth target of full quarter in advance. Can you just give us Some more detail on what drove that outperformance in 3Q. Was it well productivity? Speaker 500:12:03Was it cycle times that allowed you to To bring wells online earlier or any other factors you would point to that allowed you to deliver that oil well above expectations? Speaker 200:12:14Yes. Thanks, Zach. It was really 3 things you hit on 2 of them, well side, the kind of acceleration of wells into the quarter just given the operational And then improved downtime numbers. We just we saw kind of record downtime numbers For the year in Q3, just due to what the operational team did. And so kind of add all three of those together and it leads to what was a pretty big beat on the oil side. Speaker 600:12:43Got it. Thanks for that. Speaker 500:12:44And then just one more on the CapEx side. You talked about CapEx being a little higher than in 3Q because of those efficiency gains and getting more wells drilled and completed, but that well costs were also lower. Maybe could you quantify where leading edge D and C cost per foot are and maybe give us some thoughts on where those costs could go In 2024 given deflation and efficiency gains as well. Speaker 200:13:10Yes. Just as you think about inflation, kind of as we discussed last quarter, I think we were trending for next year to see about 5% deflation year over year on the consumable side, primarily driven by casing and then hoping to get kind of a little bit On top of that via some of the services or things like sand, etcetera. So I think that's still consistent today. Obviously, the commodity price moving around a lot and people are putting out full year budget, which I think will drive kind of a lot of changes in that in either direction. But kind of call it 5% plus on the deflation side feels like a safe Assumption for next year. Speaker 200:13:43And then on the operational efficiencies, the things we did in Q3 to reduce cycle times, faster drilling, faster frac times, Etcetera are the small little things that are really sticky. So I think our expectation is we'll be able to kind of continue that pace, drill more wells with less equipment and Kind of add to that 5 plus percent on the deflation side, just be a better overall kind of operational efficiencies to drive well cost down even lower. Speaker 500:14:10Got it. Thanks. And then any color on where leading edge D and C costs are currently? Speaker 200:14:21I think kind of if you think about relative to where we were in kind of earlier this year, it's probably down 10%, something like that. Speaker 500:14:29Okay. Thanks for that color. Thank you, guys. Operator00:14:36Your next question comes from Gabe Daoud from Citi Cowen. Your line is now open. Speaker 600:14:43Thanks. Hey, good morning, everyone. I was hoping that we could maybe get a bit more color on how you guys are thinking about Just at a high level, exit to exit growth going forward. I know the goal is to always maximize free cash flow with maybe growth being an output of that. But just curious Now as a larger entity, how you guys think about growth on an exotaglia basis? Speaker 400:15:08Yes. I mean, I think we've been pretty clear with the market that we're not going to put out a 2024 plan at this point. We don't think that's advantageous the right thing for our shareholders over the long term, but I do think that growth could certainly as we're bigger continue to be a part of the mix. I think we pride ourselves our ability to be flexible and react to Whatever the investment environment looks like at the time and I think that could be in a less attractive environment kind of lower 0 growth and in a higher Better return environment, it could Speaker 300:15:38be as high as the Speaker 400:15:39kind of 10% we'd outlined previously. I think despite additional scale, we've We have an incredible high return inventory base and our philosophy on that front hasn't changed. Speaker 600:15:50Understood. Thanks for that. And then you mentioned the ground game in the quarter, 20 Grassroots transactions. Just curious How you guys think about larger scale M and A at this point? You noted the attractiveness and the Strategic value of being a large Permian pure play. Speaker 600:16:08So just curious how that lends itself to your thinking on M and A? Speaker 400:16:13Yes. I mean, I think the ground game is something we do quarter in, quarter out and I think something we do exceptionally well and can be a real differentiator Over time, as we've mentioned time and again, those are, I think, the most attractive acquisition opportunities we look at often right ahead of the drill bit and really, really accretive. I think on the larger stuff, To be really clear, the first focus for us today is on integration of the Earthstone business, which we closed last week and Continuing to execute. I think we have a saying on here, if we can't execute, we can't do anything else. I'd say larger stuff at some point down the road could make Since again, I'd say for us, we are highly focused on our asset quality and I think remaining a Permian Basin pure play is important to us. Speaker 400:16:56I think that probably does narrow the potential scope of larger deals in the future, but we're going to continue to keep our eyes open. And as we've always said, we're going to do whatever makes the most sense for shareholders. Speaker 600:17:08Awesome. Great. Thanks, guys. Operator00:17:13Next question comes from Neal Dingmann from Zuwirth Securities. Your line is now open. Speaker 700:17:19Good morning, guys. Thanks for the time. My first question is on the I'm just wondering, Will, I know you're definitely not giving 24, but I'm just wondering sort of broadly speaking, are you able to say just In broad strokes, how much of the total activity by mid-twenty 24 these assets could represent? And I'm just also wondering, would you consider at this point, I know it's early, what would you consider sort of the initial low hanging fruit with that operations? Speaker 200:17:48Yes. Thanks, Neil. As far as activity goes, I think we've been pretty clear that we're going to kind of move rigs from Midland and reallocate that capital to Delaware. So Our development plan will be very Delaware focused, kind of 90 plus percent Delaware based will be where the I'd like to spend as I think kind of within the Delaware as you think about capital allocation to the Earthstone assets, I think plus or minus a third is probably the right Range, it may be a little less than that kind of at times, but I think kind of over the course of the year, that's probably a safe bet as to where it will shake out. And then Loeing, if you're on the operational side, I think everything we laid out in our rollout call around synergies is We're still very convicted that that was those synergies are very achievable and ones that we could even go beat. Speaker 200:18:37So the quickest wins are going to be on just pricing, pricing on Things like sand, fuel, frac, wireline, etcetera are wins that we were able to get kind of the day after we closed. Probably followed up by that, it will be rigs. I think we'll be able to go get efficiencies either by swapping out rigs or kind of applying best practices real fast or short etcetera with kind of the economies of scale of the business. And then kind of I think what will bring up the rear will be the LOE changes. A lot of those are kind of Water disposal, contractual based type deals or things that take a little more time. Speaker 200:19:12But we're 1 week in today and I think we are feeling as confident as ever Speaker 700:19:20Yes, certainly a lot of upside. And then James, maybe my second one for you just on shareholder return. Just wondering, do you believe the current your current 50 Free cash flow payout will remain optimal going forward as you all get larger, as production increases, as debt even goes down further? Or is there any reason you'd see to maybe step that up in that case or potentially even lowered if you want to decide to boost production? Speaker 400:19:45I think we really like our framework. I think what we came out with a year and a half ago or so was really the right balance and we're trying to strike the right balance of Making sure we maintain operational and strategic flexibility to take advantage of the opportunities that we see in whatever environment we're in, but while also returning Capital to shareholders in a way that's really meaningful and substantial. So I think we nailed it with the plan and we have no plans to change it. Speaker 700:20:12Yes, I think it's very steady. It makes a lot of sense for you all. Thank you so much. Speaker 500:20:17Thanks, Neil. Thanks, Neil. Operator00:20:21Your next question comes from Scott Hanold from RBC Capital Markets. Your line is now open. Speaker 800:20:29Thanks. Hey, you obviously all identified some opportunities For the synergies, especially in the operating cost side. And I know you've only had Earthstone for about a week, but like big picture, how quickly do you think you can get The Earthstone operation is up to speed to your standards and especially on the OpEx side, which has been certainly an area That's run high for Stone. Speaker 200:20:59Yes. I kind of break into 3 parts. I think If you're thinking about just overall synergies from a cost perspective, there's some just kind of economies of scale pricing corrections that we are already getting that Showing up kind of day 1. Just we're running 2 to 3 frac fleets from the same company and there's some benefits from doing that that we'll get immediately. I think the rest of kind of the efficiencies on the D and C slide probably come next. Speaker 200:21:26If you think about in the last merger we did with Colgate and CDEV, we were able to drop kind of down to rigs, call it 6 to 9 months post close and here we are a year post close seeing kind of better efficiencies than either company had on a standalone basis. So I think kind of call it Plus or minus 6 to 9 months on the kind of D and C side and then the LOE will be the slowest. I think that that will take Time just because a lot of that's contractual and things that we'll have to go work through on combining contracts and renegotiating things like that. But If you think about it, we lined out that we could achieve this $175,000,000 run rate by the end of the year next year. And I think we are, From everything we've seen, very confident that we will both be able to get that, likely get more than that and maybe even be able to get it quicker. Speaker 200:22:11So That's kind of how they would line out over time. Speaker 800:22:14Yes. And so on the operating cost side, just Clarify, you see more of that is contractual versus operational like that. You don't need to go out in the field No change, plumbing and everything else on those wells that you're inheriting? Speaker 200:22:31No, absolutely. There's a lot of That as well. I just think of it as if I think about the big needle movers being kind of artificial lift optimization failure rate, which is what you just described, that's In the field best practices, that will be stuff that we'll go kind of we're starting to work through in real time today. But the other big piece is water disposal. And water disposal is going to be more of a little longer lead time, finding the optimal SWD disposal or recycling process and kind of working through some small contracts along the way. Speaker 200:23:04So a little bit of both, I guess, to be the short answer. Speaker 800:23:08Okay. And just to follow-up on and I know obviously we'll get the better 2024 outlook as we get into early next year and I appreciate The need, it's a very dynamic market. But like when you think about whether you look at a 0% or 10% kind of growth rate range, Can you talk about the factors like is it some of it is at fundamental macro or is it price And how do you think about hedging as you kind of think about that? Like if for example, if you were able to hedge a high enough price, would you say go to the higher end of growth Regardless of what the macro looks like. So any kind of color on how you think about that strategy? Speaker 400:23:47Yes. I mean, I think our hedging strategy would be Pretty clear how we think about it, but no, you're right. I'd say we'd be biased to hedge more and grow more at higher commodity prices. I think that's Just good basic business sense, but as we see higher commodity prices, I think we've always said we're going to be opportunistic and would look to layer in incremental hedges both on the crude side and the gas side. I'd say and then I think as I think about growth, it's really how good is the reinvestment widget. Speaker 400:24:13And I'd say that's a combination of really equal parts that drive the What are the commodity prices we expect to realize next year and probably the following? And then what What does the service cost environment look like? I mean, we've seen over the past 2 years a wide range of service costs and kind of input costs that ultimately impact The rate of return and the payout of our projects in our development plan. So I'd say lower services costs, Higher commodity prices is a better reinvestment environment and going Speaker 300:24:44to push us to the higher of Speaker 400:24:45that range. And if you have the opposite, it pushes lower. Speaker 900:24:49Appreciate that. Thank you. Operator00:24:55Your next question comes from Derrick Whitfield from Stifel. Your line is now Speaker 900:25:00open. Good morning all and congrats on another solid quarter. Speaker 200:25:05Thanks. Speaker 900:25:07Starting with a bigger picture longer term outlook question on your pro form a asset base. In recent quarters, there's been a heightened investor Focus on asset productivity and durability with the benefit of the Earthstone transaction, is it reasonable to assume your Reinvestment 1 year out assessment looks very similar to your 2 5 year out assessments? Speaker 200:25:30Yes, I think that's a fair assumption. We'd agree with that. Speaker 900:25:34Terrific. And then maybe staying on operations. Long lateral development has been a growing theme over the last couple of quarters. As you look out over the next couple of years, what are your thoughts on the risk reward, Really, metrics associated with integrating more 3 Mile Lateral Development into your operations? Speaker 200:25:54Look, we're watching this closely. We've seen what others have done in other basins and then some in the Delaware. I'd say our position Kind of has the benefit of it's set up extremely well for 2 mile development across the whole position. We worked kind of very hard over the last 5 to 10 years to set it up accordingly. So I think as you kind of scan both ours and Earthstone Physicians pro form a just from a map perspective, you'll see that It's set up really well for 2 mile development, which I think makes it just less likely and there's less opportunity to go ahead and extend to 3 miles. Speaker 200:26:29I also think it is our belief still today that 2 Mile Lateral is the optimal kind of most capital efficient or risk adjusted return Later linked in the Delaware. I do think as technology continues to get better and we get better continue to get better at drilling wells that, that may shift to 2.5 or 3 over the near term. So Look, we're going to stay we're going to keep watching it. We'll be fast followers. I think there's probably some small places where we could do things to incorporate longer rattles if we chose to do so, but That's not a big part of the near term business plan for us. Speaker 400:26:59And Derek, I think a lot of where you've seen the most important push to the extra long 3 mile plus laterals has been in Plays where people are really pushing the margins of the basin and they're well into the kind of next tier of inventory and we're in the fortunate position. We're still drilling Our core of the core acreage that's extremely high quality will be for the long time. So I think for us, we're in the fortunate position that we don't need to do that and really like the value proposition of the 2 Myers we have set up for today. Speaker 900:27:30That's a fair point. Congrats again on the quarter guys. Speaker 400:27:35Thanks, Derek. Operator00:27:42Your next question comes from Philip Johnston from Capital One. Your line is now open. Speaker 1000:27:50Hey, guys. Thanks. I realized you guys won't have detailed 'twenty four guidance until February. But now that the Airstone deal is closed, can you maybe just Frame up Q4 a bit and give us a sense for either what volumes might look like today or what kind of year end exit rate we should be Steering towards, especially considering, I guess, the improvement in efficiencies that led to higher activity and volumes in Q3. Speaker 200:28:19Yes. I can give you kind of a few points I think will be helpful. Starting with just PR standalone, as you think about it, so we hit We kind of hit the Q4 target in Q3, so I think it'd be safe to assume we were kind of trending towards on a standalone basis kind of A slight beat for Q4 oil productivity or production. CapEx, I think similar story. We accelerated some wells from Q4 into Q3, so you're probably turning towards a slight beat on the CapEx side as well for PR standalone. Speaker 200:28:49And then as you think about Earthstone, what will be in that Q4 will be 2 months of Earthstone, so kind of the last 2 months of the year of the Earthstone assets. And Earthstone had a guide out there alongside their Novo acquisition that I think is still the right guide to use. So kind of Taking those pieces, you can do kind of PR plus 2 thirds Earthstone to get to what I think is a decent kind of round number for where we'll be in Q4. Speaker 1000:29:15Okay. So this might be too granular, but it looks like leading edge estimates for the quarter are sort of in a 2.60 to 2 70 day range for oil equivalent and 1.25 to 1.30 day for oil. Do those seem reasonable or is that a little bit $2 for you? Speaker 200:29:33I think that's too granular for me, but I'm sure you can have a follow-up with Hays or somebody if you're make sure that you're not missing something. Speaker 1000:29:40Yes, okay. Sounds good. And then maybe just a modeling housekeeping question. Your natural gas differential Step down in Q3 versus kind of where it was in the prior two quarters. Is that kind of a trend we should extrapolate going forward? Speaker 1000:29:55Or Were there some one off factors in the quarter that sort of drove that? Speaker 300:30:00Yes. Just on commodity mix, generally, Oil is up really just strong well productivity. Gas and NGL trends are really just a combination of oil cut in the areas where we're drilling. Specifically on NGLs, it's kind of the content of the gas where we're popping wells and the associated midstream contracts with a little bit of midstream constraint. I don't I think you'll see some fluctuation there, but not kind of a persistent trend off of 1 quarter. Speaker 1000:30:27Okay, sounds good. Thank you. Operator00:30:35Your next question comes from Oliver Wang from TPH. Your line is now open. Speaker 1100:30:41Good morning, James, Will and team. Congrats on the solid quarter and thanks for taking my questions. Just wanted to Start out on the ops front with respect to the efficiencies that you all kind of gained over the quarter. What's the confidence level in being able to keep Q3 run rate going over the course of an entire year. And as we kind of think about how much activity a base program of 11 rigs could get done. Speaker 1100:31:06And also, is there any sort of inclination to do something similar like you all did with the Colgate deal in terms of just dropping a rig once efficiencies are achieved? Or would the thought process be to just kind of take advantage of those efficiencies to drive a little bit more pro form a growth? And I guess that kind of dovetails into Just kind of, just being tight lipped on the 2024 outlook at this point in time. Speaker 200:31:30Yes. I mean, I guess I'll give you some color around it. These efficiencies, a lot of them are just like small things. We're just continuing to get buy in from the field, driving down flat time on both the Drilling side and downtime on the frac side. So I think they're going to be pretty sticky. Speaker 200:31:46Q3 was a quarter where everything went right. Can we maintain that exact same run rate for a whole year? That may be a little bit ambitious, but at the same time, I think we'll continue to find Small things to improve upon. So I do think that the go forward efficiencies will look more like Q3 than they did any of the previous quarters. Kind of what does that mean for next year? Speaker 200:32:08Look, I think the way that we run our budget and think about it is we're going to solve for what's the right amount of capital to spend and Kind of that will be dictated by how James laid out what is the ultimate kind of return on that capital, kind of how efficient is that widget in the calendar year in which we're doing it. And then we'll leverage these efficiencies to right size the amount of equipment to hit that capital budget. So the answer is everything is on the table. We may Run less equipment and drill more wells because we're being more efficient. We may run the same amount of equipment and drill even more wells because we're trying to spend more capital because of the return on the capital, etcetera. Speaker 200:32:43So You can feel rest assured that we're going to keep these efficiencies and use the equipment that's generating these efficiencies, but How we use it and how much of it we use is still kind of things we're working through in real time. Speaker 1100:32:57Okay. That's helpful color. And just when we're kind of thinking about Q4, given the year to date outperformance on efficiencies, Are there any concerns with respect to budget exhaustion that might drive a loss of efficiency with having to pull back a rig or crew? And could you also remind us How many crews you'll have running on a pro form a basis when including Earthstone? And if there are any plans to pick back up a spot or full time crew for next year? Speaker 200:33:27Yes. We're not going to do anything that doesn't make sense operationally. We're not going to do it. We're not Drop a very efficient rig or anything like that to kind of stay within quarter to quarter budget constraints. We do have the benefit that we were always planning on we ran 3 frac fleets on PR standalone for the majority of Q3 and we were planning on dropping to 2 in Q4. Speaker 200:33:50Given the efficiency we saw on the frac side, we dropped down to 2 fleets a little bit earlier than expected in Q4. So I think this is going to be one of these where we didn't we were able to kind of do both. We're going to kind of have a drop in CapEx in Q4 that kind of keeps us In line with where consensus and kind of expectations were for full year CapEx on PR standalone, while also keeping all of our rigs And our 2 dedicated frac fleets that were able to achieve the efficiencies you saw. So hopefully that answers your question, but we're going to We're not going to drop rigs or frac fleets that have seen these crazy levels of efficiencies, it's kind of based on quarter to quarter budget. Speaker 1100:34:31Awesome. Thanks for the time. Operator00:34:38Your next question comes from Paul Diamond from Citi. Your line is now open. Paul Diamond from Citi, your line is now open. Speaker 100:35:02Hey, Paul. I think you're on mute if you're there. Operator00:35:08Your next question comes from Leo Mariani from Roth MKM. Your line is now open. Speaker 1200:35:16Guys, I was hoping you could maybe just discuss the M and A landscape a bit. Obviously, you guys have been pretty Quizitive throughout your history, going back to Colgate and now with PR. So How do you kind of see things out there now? Are there deals available? What's your appetite? Speaker 1200:35:37How would you kind of Characterize some of these deals out there, just any color would be great. Speaker 400:35:43Yes. And I said earlier, but I think worth emphasizing again, I'd say Very first priority and focus right now is on integration and execution. That comes first always. But I'd say, yes, you're right. We've been constantly in the market and understanding it. Speaker 400:35:56And I'd say it's changed quite a bit over the past 9 months. I'd say we saw a Very long backlog of kind of large scale private deals come to market the 1st 9 months or so of the year. I do think that backlog is largely exhausted and slowing. I'd say for us, we looked at all those deals. I'd say we're focused on doing transactions that enhance the quality of our business and our inventory base and That's a really high bar today and didn't find anything outside of the Earthstone acquisition that fit that bar of scale. Speaker 400:36:25But I think what we're seeing that's really attractive is we're We continue to see the kind of small ball ground game be the most attractive opportunities that are the highest rate of return, the most inventory accretive and Ultimately set us best up for long term value creation. So I think we'll continue to be active on that front and we'll evaluate larger packages as they come, but I don't see anything coming down the pipeline that we think is a fit for us. Speaker 1200:36:48Okay, that's helpful. And then just on Q4 For PR standalone, you guys talked about kind of dropping a crew a little bit earlier, you kind of went faster, Obviously, a lot of efficiencies in Q4. Can you kind of help us out with sort of expected kind of standalone Hill count in 4Q in terms of number of wells, is that coming down a fair bit this quarter? And just per your earlier I wanted to sort of clarify given that the strength in 3Q, it seems like you're fairly confident that you're going to be kind of above midpoint of oil for full year for PRS Antoine. Speaker 200:37:26Yes. Q4 Q3 was our highest Till count quarter as a business and Q4 We'll come down from there as expected. And also, yes, we were you'll never PR standalone won't be a thing because in Q4 it will include PR plus 2 months of Earthstone. But on a PR standalone basis, we were headed for a Q4 beat relative to the 90,000 barrels of oil per day target that we put out at the early year guidance. So Yes. Speaker 200:37:57All of that driven by just acceleration of tills into Q3, some into Q4 and then obviously increase in well productivity And better downtime numbers than originally budgeted for. Speaker 100:38:10Okay, thanks. Speaker 1000:38:12You bet. Operator00:38:22Our next question comes from Paul Diamond from Citi. Your line is now open. Speaker 1300:38:28Hi, apologies for that. I had a bit of technical difficulties. Just wanted to touch base real quick on the ground game opportunities, 7 40 Acres, 20 Deals last quarter. Now with Earthstone in house, just want to get your idea or get you guys idea on how I guess what the opportunity is on kind of legacy operations or the new stuff and And is there kind of attention shift anywhere or will all be kind of an all inclusive type of event? Speaker 400:38:54Yes. I mean, I think I'd say the opportunity set is brighter for our ground game effort with Earthstone. I think just kind of a larger footprint creates More opportunities for bolt on acquisitions, for trades, etcetera. I think it's probably obvious that that's going to be exclusively focused in the Delaware today. I think that's where The full force of our operational and acquisition efforts are, but I think we're excited. Speaker 400:39:15I think there's a lot to do with these assets. We're kind of 1 plus 1 Equals more than 2. So we're excited and think the opportunity set only grows from here. Speaker 1300:39:25Understood. Thanks for the clarity. Just kind of one quick follow-up given the recent mechanics So, rising M and A in the market, are you guys seeing any of kind of fluctuations on those in those negotiations? Or is it still kind of Moving with the general market or kind of any deviation therein? Speaker 400:39:42I think small ball market has been really interesting over the 8 years. It's been a lot more steady kind of people. It's largely independent private sellers or kind of legacy Family owned oil companies, etcetera, unless we haven't seen kind of prices change as much. They don't prices don't fall as quickly when Commodity prices in the broader market falls and they don't rise as quickly when those markets are up into the right. So I think those opportunities have been steady and I think for us we're obviously in a pretty unique value proposition today. Speaker 1300:40:12Understood. Thanks for the clarity. Speaker 1000:40:21There are Operator00:40:21no further questions at this time. Handing it over to James Waller for the closing remarks. Speaker 400:40:27Perfect. Thank you. I like to conclude today's conference call on slide 11, which helps to reemphasize our value proposition for current and future investors. Since the formation of Permian Resources last year, we've delivered best in class And meaningfully outperformed the S and P 500. This outperformance was largely driven by successful execution and as a result our business continues to represent a compelling value Opposition against other large cap oil and gas companies. Speaker 400:40:50It's worth noting that Permian Resources now sits in a new class of large cap peers Enterprise value of almost $15,000,000,000 and 100 percent of our business focused on the Permian. It continues to be our belief that quality businesses such as ours Core assets, organic growth, efficient operations and a strong financial position have room to rerate to more competitive multiples, not only with our direct peers, but also with other sectors in the broader market. By continuing to enhance and cultivate these attributes through quarter in quarter out execution and opportunistic transactions such as Earthstone, We believe that we can continue to create outsized value for shareholders and solidify our position as a leader in the energy sector. Thank you again for your time today. Operator00:41:31Ladies and gentlemen, this concludes today's conference call. Thank you for joining. You may now disconnect.Read moreRemove AdsPowered by