Permian Resources Corporation (NYSE:PR) Q1 2024 Earnings Call Transcript

James Walter : Yes, I mean I think, I mean, I think it’s pretty obvious to either run the call pricing at Waha has been challenged this year and probably will be until we get closer to new pipes coming online in the fourth quarter. And I think that is what it is. We’re fortunate that dry gas only makes up about 5% of our revenue in any given year, so the business really isn’t affected. But I think kind of worth pointing out a couple other things, only about half of our gas is exposed to Waha pricing this year. Kind of other half is either covered by attractive basis hedges or sales at better regional hubs today. But yes, something we’re always trying to kind of focus on and work on. We sell about a quarter of our gas at hubs other than — today, and are constantly looking to find ways we can get that percentage higher.

We actually have a contract probably get signed in the next week or two that should allow us to get more volume sold at Houston pricing kind of next year. So kind of more to come on that front. I’d say that’s something we’ve been working on for a long time and continue to chip away at. But I think the most important thing is, we’ve got awesome partners on the midstream side. We’ve got firm capacity and our molecules are going to flow even if we saw regional constraints later this year.

Operator: We go next now to Scott Hanold at RBC.

Scott Hanold : I was wondering if we can go back to sort of the outlook through the balance of the year, and just holistically how you guys like to think about the business? Obviously, your cycle times are improving, so you pulled for a little bit more of your activity and production in 1Q. And so like, you kind of said it does taper and you have a soft decline in the back half of this year. But how do you think about like the setup then for ‘25 with that? Would you guys, or into ‘25 and over the long term, like to see more kind of flattish growth, do you want to see some more moderate growth? And if you could talk about like any kind of cadence variability through the year is would you like to see keep things constant or do you think there will be some cadence depending on the cycle times?

William Hickey : I mean first and foremost kind of as we think about the trajectory from a production perspective of the company, I’ve said it many times, I’ll say it again, like it really is returns driven input and production is just an output. Obviously, kind of in over the last — two weeks ago, I’d say the returns environment was extremely good, and we’ve made some headway on the service cost side kind of over the balance of the year. So it was looking good. I think that today it’s still good but not quite as good as it was a few weeks ago. And I don’t yet know what the world will look like six months from today as we go into ‘25. I would say that kind of the really, if you think about what happened over the course of this year so far is it’s just been the whole set schedule has shifted forward.

We’ve drilling wells faster, we’re completing wells faster and as such kind of just given the natural working interest changed over large scale development, the back half of the year are really kind of dip is just really a little bit less working interest under a few wells that moved in from the next year. And that naturally corrects itself. Said differently if we maintain the same pace, kind of call it 250 to 260 wells per year, like that actually does set up for a really good ‘25. It’s kind of a slight decline back half of the year and then bounces back in ‘25. I’m not saying that is our plan. We we’re going to spend a lot of time over the next six months figuring out exactly what to want to do to ‘25, and I think it could be anywhere from 11 to 13 rigs based on commodity prices.

And we’ll kind of see what it makes sense there. But as I think of — I wouldn’t think of this kind of slow tapering back half of the year as an indication of kind of future trajectory of the production profile in outer years.

Guy Oliphint : This plan’s great, it sets us up like we always try to do, it’s really good optionality because we don’t know what the world’s going to look like in ‘25 and it kind of puts us somewhere in the middle of that 0% to 10% growth of the long term that we’ve talked about and we can make a decision as we get closer to that year.

Scott Hanold : In your prepared comments, you also mentioned that you’re seeing some better performance or efficiencies in the Midland and that sounds like you weren’t necessarily expecting. Could you a little color and context behind exactly what that is and where the benefits were? Was it more well productivity or is it cycle times or just cost reductions on OpEx.

James Walter : It’s really just D&C CapEx, we were — we have not drilled a lot of wells in the Midland basins, so didn’t expect to be able to cut kind of near the amount of cost on the Midland Basin size we have on the Delaware. And we’ve been surprised to the upside in that regard. I still think we have a ways to go to catch up with where kind of the leading operators in the Midland Basin are on from a CapEx perspective, but we’ve made big strides that kind of surprised us to the upside.

Scott Hanold : And was that more on just the cycle times drilling and completion time of those walls?

James Walter : I would say it’s just cycle times casing design, kind of everything that would lead to a lower CapEx per foot on a Midland basin.

Operator: We’re next now to Gabe Daoud at TD Cowen.

Gabe Daoud : Understand it’s certainly a little bit too early to be thinking about ‘25, but I guess just piggybacking of Scott’s question here, if we just think about all the synergy capture and efficiency gains and maybe this year being a little bit heavier on midstream spend or infrastructure spend, I should say, is it fair to assume maybe ‘25, assuming similar activity levels CapEx is probably a bit lower than where we are today?

James Walter : Yes, I think kind of certainly maintenance CapEx would be lower than what we’ve outlined this year, just kind of given where the business sits, the efficiency we achieve, et cetera. I think, that’s definitely a fair assumption.

Gabe Daoud : Great. And then maybe as a follow up noted or talked about egress a bit just curious in that Northern New Mexico area in both Eddie and Lee, are you seeing any processing capacity tightness or any other ministry managers that are worth mentioning or recognize there’s no rigs over in Eddie County just yet? Is that driven by constraints at all or are you guys just planning on getting after that in the second half of this year?