Q3 2023 Permian Resources Corp Earnings Call

Yeah.

[music].

Good morning, 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 22nd 2023 by dialing 870, 76747070 and entering the replay access code <unk>.

608519 or by visiting the Companys website at Www.

Let me address dotcom.

At this time I will turn the call over to Hays Mabry.

With me on the resources Senior director of Investor Relations for some opening remarks. Please go ahead.

Thanks Lester.

And thank you all for joining us on the company's third quarter earnings call.

On the call today are will hickey.

And James Walter our Chief Executive officers.

<unk>, our chief Financial Officer.

Yesterday November 7th.

We filed a form 8-K.

With an earnings release reporting third 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 Dot Permian Brad's Dot com.

I would like to note that many of the comments. During this earnings call are forward looking statements that involve risks and uncertainties.

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 include.

Including our quarterly report on Form 10-Q.

Quarter ended September 32023, which.

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.

The 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 or presentation, which are both available on our website with that I will turn the call over to Wil Hickey co CEO.

Thanks, Dave before we jump into the slides I wanted to take a moment to thank our team for delivering the best operational quarter, we've ever had as a company, which I will expand on in more detail in a moment, but 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 operate.

<unk> groups, great work from top to bottom.

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.

I want to spend a few minutes talking about the <unk> acquisition, which we closed last week on November 1st.

As we stated during the announcement, we believe that the <unk> 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 forma balance sheet.

Importantly, we were able to complete the transaction the purchase price and structure that provides significant value to our combined shareholder base and are looking forward to delivering on the $175 million annual synergy targets laid out in August.

Meant that the past few months working with the <unk> team and preparing for integration and synergy capture phase of the acquisition.

M&A integration is something we consider a core competency of Permian resources, and we've already hit the ground running to leverage the playbook and lessons learned from the Colgate Centennial merger last year.

<unk> begun integrating <unk> 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 third 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.

First strong well results led to meaningful oil growth in the quarter with our new wells continuing to impress second.

Second continued operational execution in the field lowered controllable costs. Despite summer weather in Texas, which is a real testament to how prepared are 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.

Third and finally, our drilling and completions team is relentlessly continue to drive down cycle times and well costs throughout the quarter.

As a result, PR delivered total production of 172000 barrels of oil equivalent per day and oil production of 90000 barrels of oil per day, which represent 4% and 6% increases respectively compared to the second quarter. It's worth noting that we hit our Q4 'twenty four to Q4 'twenty three growth target of 10 <unk>.

<unk> quarter early due to strong operational performance.

The company generated adjusted EBITDAX of $584 million for the quarter total controllable cash costs were $7 92 per Boe, which decreased slightly quarter over quarter.

Overall, LOE GPT and cash G&A were in line with our expectations, we reported adjusted free cash flow of $165 million based on cash capex of $380 million in the quarter.

Lastly, we reported 29 of adjusted free cash flow per share on a cash capex basis, and 39 per share of adjusted net income.

Diving into the operations a little more our team increased efficiencies across the board continuing our positive momentum from the previous quarter. The joined 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 <unk> thousand 880 completed feet per day and over.

19 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 for the quarter, resulting in slight slightly higher capex spend for the quarter, but lower per unit well costs. This is a winning combination me sustained efficiencies should drive incremental value for shareholders going forward.

Now I'll turn it over to Guy to go to a return of capital.

Thank you well as you can see on slide nine strong Q3 results and increased free cash flow allowed us to deliver a total return of capital or <unk> 17 per share to shareholders during the quarter.

Our calculation begins with adjusted free cash flow of $165 million we.

We reduced that amount by our <unk> per share base quarterly dividend of <unk> $28 million we.

We are 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.

Share repurchase represents $2 2 million shares that we bought back $428 million alongside a sponsor secondary offering during the quarter.

Additionally, we will pay a variable dividend of <unk> <unk> per share, bringing the all in quarterly return of capital to <unk> 17 per share.

Consistent with our goal of delivering sustainable long term base dividend growth, we plan to increase our base dividend by 20% from <unk> to <unk> <unk> per share beginning in Q1.

An overview of our balance sheet and hedge book can be found in the appendix our third quarter results, both as a Standalone company and combined with our stone demonstrate our continued ability to maintain a strong balance sheet to support strategic flexibility, while pursuing accretive consolidation opportunities such as our staff.

We have no near term maturities and approximately $1 5 billion of liquidity on our RVO we.

We expect to continue to utilize excess free cash flow to pay down debt over time.

Notably our credit ratings were upgraded by all three agencies at closing of the Archstone 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.

Thanks Guy as you have all heard from both the first announcement call in this morning's earnings call. We're incredibly excited about the future of our business with the addition of <unk>. We're excited to get the deal closed last week and to begin to welcome the <unk> employees to the Permian resources team.

We view this transaction is consistent with our ultimate goal to do whatever it takes to 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.

On slide 10, we look back at a few of the key takeaways from our <unk> acquisition first.

First we acquired <unk> at a very attractive valuation, where we're 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 10, while adding significant high quality, Delaware inventory at little or no cost.

Second the transaction is accretive to all key financial metrics before synergies and highly accretive with synergies near term long term and midterm.

But finally and most importantly, we firmly believe this transaction will continue our track record of enhancing shareholder value through increased free cash flow per share and returns to investors.

It's worth noting that this transaction makes Permian resources, the second largest remaining Permian pure play one of the largest operators in the Permian basin.

So we've 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 second largest Permian pure play.

Before we move to Q&A I'd like to take a quick second to look back at 2023, so far.

This past February or keep it at a very strong and well received full year 2023 plan that maximize free cash flow for shareholders through high return cost effective development.

In February our team has executed extremely well and we are exceeding expectations against that budget.

We will not be providing stand on PR look back in our Q4 earnings call. This February since we have two months of contribution from Archstone 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 in its first full year as a public company.

We will not be addressing our 2024 plan on this call today, but expect to release, an updated business plan and guidance on our next regularly scheduled call in February invest.

Investors can rest assured that our philosophy has not changed we will be building a development plan that maximizes value for our shareholders over the near and long term as.

As we decided activity levels will put together a plan. That's also the highest free cash flow over the next 12 to 24 months.

We believe that by waiting until February we will have a much better idea of what that reinvestment environment looks like and be able to come to the market with the plan that maximizes value for shareholders in a way that we cannot do is effectively if we rolled out a plan today.

As 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&A.

Okay.

Thank you Nick.

<unk> and answer session will be conducted electronically.

If you would like to ask a question. Please do so by pressing Star then the number one telephone keypad.

If you would like to withdraw your question. Please press Star then the number two.

One moment for your first question.

First question comes from Sam <unk> from Jpmorgan. Your line is now open.

Yes.

Hey, guys congrats on the quarter and thanks for taking my question.

I guess first just a question operationally like you mentioned you hit the 10% exit to exit growth target a full quarter in advance can you just give us some some more detail on what drove that outperformance in <unk> was it well productivity what that cycle time that allowed you to bring wells online earlier or any other factors you would.

You would point to that allowed you to deliver that oil well above expectations.

Yes, Thanks Jack.

Really three things you hit on two of them.

Well side.

Acceleration of wells into the quarter, just given the operational efficiencies and then improved downtime numbers. We just we saw kind of <unk>.

Record downtime numbers for 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.

Got it thanks for that and then just one more on the Capex side, you talked about capex being a little higher than expected at <unk> 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&C cost per foot.

And maybe give us some thoughts on where those costs could go in 2024, given deflation and efficiency gains as well.

Yes, 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 et cetera. So I think thats still consistent today.

Obviously, the commodity prices moving around a lot and people are putting out full year budget, which I think will drive and have a lot of changes in that in either direction, but kind of call. It 5% on the deflation side feels like a safe assumption for next year and then on the operational efficiencies. The things we did in Q3 to reduce cycle times faster drilling faster Frac times et.

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 five plus percent on the deflation side just be a better overall kind of operational efficiencies to drive well cost down even lower.

Okay.

Got it thanks, and then any color on where leading edge D&C costs are currently.

Yes.

I think kind of if you think about relative to where we were in and kind of earlier this year, it's probably down 10% something like that.

Okay. Thanks for that color. Thank you guys.

Your next question comes from Gabe <unk> from TD Cowen. Your line is now open.

Thanks, Hey, good morning, everyone.

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 the exit to exit basis.

Yes, I mean, I think 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 Thats advantageous are 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 on 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 low or zero growth and a higher better return environment. It could be as high as the kind of 10% we'd outlined previously I think despite additional scale. We've got incredible high return inventory based on our philosophy on that front hasnt changed.

Understood Thanks for that.

And then you mentioned the <unk>.

Ground game in the quarter 20, grassroots transactions just curious how.

How are you guys thinking about larger scale M&A at this point.

You noted the attractiveness and the strategic value of being a large Permian pure play so just curious how that.

And lends itself to your thinking on M&A.

Yes, I mean, I think the ground game is something we do quarter in quarter out 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 looked 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 an integration of the <unk> business, which we closed last week and continuing to execute I think we have a saying on it if we can't execute we can't do anything else.

I would say larger stuff at some point down the road could make sense 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. So I think that probably does narrow the potential scope of larger deals in the future, but we.

We continue to keep our eyes open and as we've always said, we're going to do whatever makes the most sense for shareholders.

Awesome, great. Thanks, guys.

Next question comes from Neal Dingmann from towards Securities. Your line is now open.

Good morning, guys. Thanks for the time My first question is on or stone assets I'm, just wondering well.

I know, you're definitely not giving 'twenty four but I'm just wondering sort of broadly speaking are you able to say just.

In broad strokes, how much of the total activity.

For by mid 2000 and for 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 operation.

Yes, thanks Neil.

Far as activity goes I think we've been pretty clear that where 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 Basin will be where the Capex spend is I think kind of within the Delaware as you think about capital allocation to the Earth's stone assets I think.

Plus or minus a third is probably the right.

Range It may be a little less in 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 where it will shake out and then <unk>.

For you 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 the synergies are very achievable and ones that we could even go beat so.

Quickest wins are going to be on just pricing pricing on things like sand fuel frac wireline et cetera 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 to drill faster shorts et cetera, what's kind of the economies of scale of the business and then.

Kind of I think it will bring up the rear will be the low changes a lot of those are kind of water disposal contractual based type deals or things that take a little more time, but.

We're we're one weekend today and I think we are feeling as confident as ever be able to go get this.

Yeah, certainly a lot of upside and then James maybe my second one for you just on shareholder return I'm. Just wondering do you believe the current your current 50% free cash flow payout will remain optimal going forward as you all will get larger as production increases.

The increase is that even goes down further or is there any reason you'd see maybe step that up in that case or potentially even lowered if you wanted to decided to boost production.

I think we really like our framework I think when we came out with a year and a half ago or so was 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 meaning.

<unk> substantial.

We nailed it with the plan and we have no plans to change it.

Yes, I think it's very steady it makes a lot of sense for you all thank you so much.

Thanks Neil.

Your next question comes problems.

<unk> from RBC capital markets. Your line is now open.

Thanks.

You, obviously all identified some opportunities too.

For the synergies, especially on the operating cost side and I know, you've only had <unk> for about a week, but like Big picture. How quickly do you think you can get the Earth stone operations up to speed to to your standards and especially on the Opex side, which has been certainly an area that's run high four.

For stone.

Yeah, I kind of break into three parts I think kind of if you think about just overall synergies from a cost perspective there is.

So I'm just kind of economies of scale pricing corrections that were already getting that are showing up kind of day. One just we're running two.

Two to three Frac fleets from the same company and there is some benefits from doing that that will get immediately.

I think the rest of kind of the efficiencies on the D&C side, probably come next if you think about in the last merger, we did with Colgate and <unk>, we were able to drop kind of down to rigs call. It six to nine months post close and here. We are a year post closing kind of better efficiencies than either company had on a standalone basis. So I think kind of call it plus.

Or minus six to nine months on that.

Kind of D&C side, and then the low youll be the slowest I think that that will take time, just because a lot of that is contractual and things that will have to go work through on combining contracts and renegotiating things like that but.

If you think about it what we lined out that we can achieve this $175 million run rate by.

At 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 a quicker. So.

But thats kind of how they would line out over time.

Yes, so on the operating cost side just to just to.

Clarify you see more of that is contractual versus operational like you don't need to go out in the field.

Change plumbing and everything else on the on those wells that you are inheriting.

No absolutely there's a lot of that as well I just think of it as well.

If I think about the big needle movers being kind of artificial lift optimization failure rate, which is what you just described thats in the field best practices.

That'll be stuff that will go kind of we're starting to work through in real time today, but the other big pieces water disposal and water disposal is going to be more of a little longer lead time, finding the optimal SWT disposal or recycling process and kind of working through some small contracts along the way so.

<unk>.

A little bit about I guess would be the short answer.

Okay, and just to follow up on and I know, obviously, we will get the better 2024 outlook as we get into early next year and I appreciate the the.

The need it's a very dynamic market, but like when you think about whether you look at a zero or a 10% kind of growth rate range can you talk about the factors like is it some of it is that fundamental macro or is that price and how do you think about hedging as you kind of think about that like if for example, if you were.

The 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.

Yes, I mean, I think our hedging strategy is 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 thats just good basic business sense, but as we see higher commodity price 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 we think about growth. It's really how good is the reinvestment wedge yet and I would say that's a combination of really equal parts that drive. The answer is what is what are the commodity prices. We expect to realize next year and probably the following and then what does the service cost environment look like I mean, we've seen over the past two 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 would say lower services costs higher commodity prices as a better reinvestment environment going to push us to the higher to that range and if you have the opposite it pushed us lower.

I appreciate that thank you.

Your next question comes from Derrick Whitfield from Stifel. Your line is now open.

Good morning, all and congrats on another solid quarter.

Thanks.

Starting with a bigger picture longer term outlook question on your pro forma asset base in recent quarters Theres been a heightened investor focus on asset productivity and durability with the benefit of the Archstone transaction is it reasonable to assume your re.

Reinvest at one year.

Ill assessment looks very similar to your two and five year.

<unk> assessments.

Yes, I think Thats a fair assumption.

Agree with that.

Terrific and then maybe staying on operations.

A 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 three mile lateral development into your operations.

Look we're watching this closely we've seen what others have done in other basins and then some in the Delaware I would say our position kind of has the benefit of its set up extremely well for two mile development across the whole position. We worked very hard over the last five years to 10 years to set it up accordingly.

So I think as you kind of scan both ours and <unk> positions pro forma just from a math perspective, youll see that it set up really well for two mile development, which I think makes it less likely and there's less opportunity to go ahead and extend to three miles.

I also think it is our belief still today that two mile lateral is the optimal kind of most capital efficient our risk adjusted return lateral length 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 two and a half or three over the near term. So look we're going to stay we're going to keep watching it will be <unk>.

Followers, I think theres, probably some small places where we could do things to incorporate longer idose. If we chose to do so but that's not a big part of the near term business plan for us and Derek I think a lot of where you're seeing the most important push to the extra long three mile plus laterals has been in place where people are really pushing the margins of the base in there.

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 it will be for the for the long for a long time. So I think for US. We're in the fortunate position that we don't need to do that and really liked the value proposition of the two milers, we have set up for today.

That's a fair point.

Congrats again on the quarter guys.

Derek.

Yeah.

Your next question comes from Phillips Johnston from capital One your line is now open.

Hey, guys. Thanks.

Realize you guys don't have detailed 24 guidance until February but now that the <unk> deal is closed can you maybe just frame up Q4, a bit give us a sense for either what volumes might look like today or what kind of year end exit rate, we should be staring towards.

Especially considering I guess the improvement.

Currencies.

The higher activity in <unk>.

Q3.

Yeah, I can give you kind of a few points I think it 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 would be safe to assume we were kind of trending towards on a standalone basis kind of a slight beat for Q4 oil productivity.

Our production.

Capex I think similar story, we we accelerated some wells from Q4 into Q3. So you are probably turning towards a slight beat on the capex side as well for Q for PR Standalone and then as you think about our stone.

And that Q4 will be two months of our stone so kind of the last two months of the year of the <unk> assets and <unk> 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 two thirds are starting to get to what I think is that a decent kind of round number for where it will be in Q4.

Sure.

Okay. So.

This might be too granular, but it looks like leading edge estimates for.

For the quarter sort of in the $260 to 70 day range for oil equivalent to.

125 to 130 days for oil do those seem reasonable or is that a little bit too Craig employer.

I think thats too granular for me, but I'm sure you're going to have a follow up Paul with lasers, there's somebody here make sure that youre not missing something yes, okay sounds good and then maybe just a modeling housekeeping question.

Natural gas differential.

Stepped down in Q3 versus kind of where it was in the prior two quarters.

Kind of a trend we should extrapolate going forward or were there. Some one off factors in the quarter, what sort of drove that.

Yes, just on commodity mix generally oil's 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.

The content of the gas were popping wells and the associated midstream contracts.

With a little bit of midstream constraints.

I think you will see some fluctuation there, but not that kind of a persistent trend off of one quarter.

Okay sounds good thank you.

Your next question comes from Oliver Huang from TBH. Your line is now open.

Good morning, James will and team congrats on a solid quarter and thanks for taking my questions.

Thank you I 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 that Q3 run rate going over the course of an entire year.

As we kind of thinking about think about how much activity a base program of 11 rigs could get done and 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 forma growth and I guess that kind of dovetail.

<unk>.

Uh huh.

Just kind of.

Just being tight lipped on the 2024 outlook at this point in time.

Yes, I mean, I guess I'll give you some color around it.

These efficiencies a lot of them are just like small things, but 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 theyre going to be pretty sticky Q.

Q3 was a quarter, where everything went right. So 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.

Go forward efficiencies will look more like Q3 than they did any of the previous quarters.

What does that mean for next year look I think the way that we.

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 in and then we will leverage these efficiencies to right size the amount of equipment to hit that cap.

Budget so.

The answer is everything is on the table, we may run less equipment and Joe more wells, because youre being more efficient that we may run the same amount of equipment and drill even more wells because we're trying to spend more capital because of their return on the capital et cetera. So.

You can you can feel rest assured that we're going to.

Keep these efficiencies and use the equipment, that's generating these efficiencies, but kind of how we use it and how much of it. We use is still kind of things we're working through in real time.

Okay. That's helpful color.

And just one more 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 all have running on a pro forma basis, when including <unk>.

And if there are any plans to pick backup spot or fulltime crew for next year.

Yeah.

Yeah, we're not going to do anything that doesn't make sense operationally, we're not going to do we're not going to 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 three frac fleets on PR Standalone for the majority of Q3 and were planning on dropping to two in Q4 <unk>.

Given the efficiency, we saw on the Frac side, we dropped down to two fleets a little bit earlier than expected in Q4. So I think this is going to be one 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 expectations were for full year Capex on PR Standalone, while also key.

Keeping all of our rigs and in our two 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.

Just on quarter to quarter budget.

Awesome, Thanks for the time.

Okay.

Your next question comes from Paul Diamond from Citi. Your line is now open.

Paul Diamond from Sydney. Your line is now open.

Okay.

Hey, Paul.

Hey, Paul I think you're on mute if you're there.

Your next question comes from Leo Mariani from Roth.

Your line is now open.

Hey, guys I was hoping you could maybe just discuss the M&A landscape a bit obviously, you guys have been pretty acquisitive throughout your history.

Going back to Colgate and now with PR. So how do you kind of see things out there now or are there deals available.

What's your appetite how would you kind of characterize some of these deals out there just any color thats great.

Yeah, and I said, it earlier, but I think worth emphasizing again I'd say, our very first priority and focus right now is on integration and execution that that comes first always but I would say, yes youre right.

We have been constantly in the market and understanding it and I'd say.

It has changed quite a bit over the past nine months I'd say, we saw a very long backlog of kind of large scale private deals come to market. The first nine months or so of the year I do think that backlog is largely exhausted and slowing I would say for us we looked at all of those deals I'd say, we're focused on on doing transactions that enhance the quality of our.

Business in our inventory base and that's a really high bar today and didn't find anything outside of the airtran acquisition that fit that bar scale, but I think what we're seeing that's really attractive as we're continuing to see the kind of small ball ground game.

Our most attractive opportunities that have the highest rate of return the most inventory accretive and ultimately set us best up for long term value creation. So I think well continue to be active on that front and we'll evaluate larger packages as they come but kind of does anything coming down the pipeline that we think is a fit for us.

Okay. That's helpful and then.

Just on Q4 for PR Standalone, you guys talked about kind of dropping accrue 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 til count in <unk> in terms of number of wells that coming down a fair bit.

This quarter and just per your earlier comments, one just sort of clarify given the strength in <unk>. It seems like youre fairly confident that youre going to be kind of above the midpoint of oil.

For full year for PR Standalone.

Okay.

Yes, Q4, Q3 was our highest til count quarter as the business in Q4 will come down from there as expected.

And also yes, we were.

But youll never PR standalone won't be a thing because in Q4. It will include PR plus two months of Archstone, but on a PR standalone basis. We are headed for a Q4 beat relative to that 90000 barrels of oil per day.

Target that we put out at the earlier guidance.

So yes, all of that driven by just acceleration of pills into Q3, some into Q4, and then obviously increase in well productivity and better downtime numbers than originally budgeted for.

Okay. Thanks.

You bet.

Our next question comes from Paul Diamond from Citi. Your line is now open.

Hi, I apologize for that I had a bit of technical difficulties just wanted to touch base real quick on the ground game opportunities 740 acres 20 deals last quarter now with our stone in house just wanted to get your idea or gets you guys idea on how I.

Thanks for the opportunity is on the kind of legacy operations or the new stuff and this is your kind of attention shipped anywhere it will all be kind of an all inclusive type of type of event.

Yes, I mean, I think I would say the opportunity set is brighter for our ground game effort with our stone I think just kind of a larger footprint creates more opportunities for bolt on acquisitions for trades et cetera. I think it is probably obviously that's going to be exclusively focused in the Delaware. Today, you know I think thats, where the full force of our operational and an acquisition.

<unk> are but I think we're excited I think theres a lot to do with these assets are kind of one plus one equals equals more than two so we're excited and think the opportunity set only grows from here.

Understood. Thanks for the clarity is kind of a quick follow up given the recent mechanics of Raj.

<unk> M&A.

And 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 there.

Yes.

Small ball market has been really interesting over the last eight years, it's been a lot more steady kind of people. It's largely independent private sellers are kind of legacy family owned oil companies et cetera, and we havent seen kind of prices changes might have stayed out prices don't fall as quickly when commodity prices in the broader market falls and they don't rise quicker.

When those markets are up into the right. So I think theres opportunity have been steady and I think for us represent a pretty unique value proposition today.

Understood. Thanks for the clarity.

Okay.

Paul.

Yeah.

There are no further questions at this time handing it over to James smaller for the closing remarks.

Perfect. Thank you I'd 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 returns for our sector and meaningfully outperformed the S&P 500.

This outperformance was largely driven by successful execution and as a result, our business continues to represent a compelling value proposition against other large cap oil and gas companies, it's worth noting that Permian resources now sits in a new class of large cap peers with enterprise value of almost $15 billion and 100% of our business focused on the Permian.

It continues to be our belief that quality businesses, such as ours with core assets organic growth efficient operations and a strong financial position have room to re rate to a more competitive multiples not only with our direct peers, but also with other sectors in the broader market by.

By continuing to enhance and cultivate these attributes through quarter end quarter out execution and opportunistic transactions such as <unk>. We believe that we can continue to create outsized value for shareholders and solidify our position as a leader in the energy sector. Thank.

Thank you again for your time today.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining you may now disconnect.