Q1 2025 Permian Resources Corp Earnings Call

Speaker Change: [music].

Unknown Executive: Good morning and welcome to Permian Resources' conference call to discuss its first quarter 2025 earnings. Today's call is being recorded.

Good morning, and welcome to Permian Resources Conference call to discuss its first quarter 'twenty 25 earnings today's call is being recorded a replay of the call will be accessible until may 22nd 2025 by dialing 88866.

Unknown Executive: A replay of the call will be accessible until May 22, 2025 by dialing 888-660-6264 and answering the replay access code 27785 or by visiting the company's website at www.permianres.com.

06264, and entering the replay access code 27785 or by visiting the Companys web site at.

Speaker Change: W. W Dot Permian arrest Dot com at this time I will turn the call over to Hays Mabry Permian resources, Vice President of Investor Relations for some opening remarks. Please go ahead Sir.

Hays Mabry: At this time, I will turn the call over to Hays Mabry, Permian Resources' Vice President of Investor Relations, for some opening remarks. Please go ahead, sir.

Speaker Change: Thanks Angela.

Unknown Executive: and others. Thank you all for joining us.

And thank you all for joining us.

Unknown Executive: on the call today. are Will Hickey and James Walter.

Speaker Change: On the call today.

Will Hickey: Or will hickey.

Speaker Change: And James Walter.

Unknown Executive: Our Chief Executive. and Guy Oliphint, our chief.

Speaker Change: Our chief Executive officers.

Speaker Change: And guy altered our Chief financial Officer.

Unknown Executive: I would like to know. and many of the comms. During this call, our forward-looking... that could affect our actual results.

Speaker Change: I would like to note that many of the comments. During this call are forward looking statements that involve risk and uncertainties.

Speaker Change: Could affect our actual results or plans.

Unknown Executive: Many of these risks are beyond our control. and are discussed in more detail in the Risk Factor and the forward-looking.

Speaker Change: Many of these risks are beyond our control.

Speaker Change: And are discussed in more detail in the risk factors and the forward looking statements of our filings with the SEC.

Unknown Executive: Network Fund. The Expectations Express. are based on reasonable. They are not guaranteed. and Actual Results made different materials.

Speaker Change: Although we believe the expectations expressed are.

Speaker Change: Based on reasonable assumptions, they are not guarantees of future performance.

Speaker Change: And actual results may differ materially.

Speaker Change: I also refer to non-GAAP financial measures.

Unknown Executive: non-GAP.

Unknown Executive: For any non-GAAP measure, we... Reconciliation.

Speaker Change: For any non-GAAP measure we use a reconciliation to the nearest corresponding GAAP measure.

Unknown Executive: and the nearest corresponding cabinet.

William Hickey: can be found in our earnings release or With that, I will turn the call over to Will Hickey, co-CEO. Thanks, Hays. There is a lot we're excited to talk about. We delivered another strong quarter, outperforming expectations and achieving the highest free cash flow per share in PR history of 54 cents per share. driven by lower per unit cost and solid production. We did all this while strengthening the balance sheet with the highest liquidity, most cash, and lowest leverage in PR history. All the work we've done to date has put us in an incredibly strong position.

Speaker Change: It can be found in our earnings release or presentation.

World Hickey: With that I will turn the call over the World Hickey co CEO.

Will Hickey: In case, there is a lot we're excited to talk about today, we delivered another strong quarter outperforming expectations and achieving the highest free cash flow per share in PR history of 54 cents per share.

Will Hickey: Driven by lower per unit costs and solid production performance. We did all this while strengthening the balance sheet with the highest liquidity, most cash and lowest leverage N P or history.

Will Hickey: All the work we've done to date has put us in an incredibly strong position not just to navigate the current market, but to capitalize on it.

William Hickey: Not just to navigate the current market, but to capitalize.

William Hickey: And we've used this strength to start executing our downturn playbook already with our first opportunistic share buyback and the announcement of a New Mexico bolt-on, both with which James will hit. Moving to Q1 performance, production exceeded expectations with oil production of 175,000 barrels of oil per day and total production of 373,000 barrels of oil equivalent per day. Our strong production performance is mainly attributable to outperformance from our 2024 acquisition. driven by artificial lift optimization and stronger than expected. In addition to wins on the production side, our operations team continued to drive down costs. Compared to Q4, we reduced controllable cash costs by 4% and DNC costs by 3%, landing at $750 per foot for the quarter.

Will Hickey: We use this strength to start executing our downturn playbook already with our first opportunistic share buyback and the announcement of a new Mexico bolt on both which both which which James will hit in more detail.

Will Hickey: Moving to Q1 performance production exceeded expectations as oil production of 175000 barrels of oil per day, and total production of 373000 barrels of oil equivalent per day.

Will Hickey: Our strong production performance is mainly attributable to outperformance from our 'twenty 'twenty four acquisitions, driven by artificial lift optimization and stronger than expected well performance.

Will Hickey: In addition to wins on the production side, our operations team continued to drive down costs compared to Q4, we reduced controllable cash costs by 4% and D&C costs by 3% landing at $750 per foot for the quarter.

William Hickey: Strong production performance and further extending our Delaware Basin cost leadership resulted in adjusted operating cash flow of $900 million and adjusted free cash flow of $460 million, with $500 million of cash capped. Our outstanding operating performance and conservative financial strategy further enhanced our fortress balance. During the quarter, robust free cash flow generation drove an increase in cash on the balance sheet from $479 million at year-end to approximately $700 million on March 31. We also redeemed $175 million in principal of the 9-7-8 High Interest Legacy Earthstone Notes, which will save us approximately $17 million per year in reduced expenses.

Will Hickey: Strong production performance and further extending our Delaware basin cost leadership resulted in adjusted operating cash flow of $900 million and adjusted free cash flow of $460 million with $500 million of cash capex.

Will Hickey: Our our outstanding operating performance and Conservative financial strategy further enhanced our fortress balance sheet during the quarter robust free cash flow generation drove an increase in cash on the balance sheet from $479 million at year end to approximately 700 million on March 31.

Will Hickey: We also redeemed 175 million of principal with a nine and seven eighths high interest legacy or stone notes, which will save us approximately $17 million per year and reduced interest expenses.

William Hickey: These actions reduce leverage from 1x at year-end to 0.8x at the end of the year. We also highlight our updated credit ratings from BA1, from Moody's, and BB+, from S&P. With Fitch already at Double B+, we are one notch away from our investment-grade goal at all three rating levels. and you'll see in this presentation our credit metrics compare favorably to our investment.

Will Hickey: These actions reduced leverage from one times at year end to <unk> eight times at the end of Q1.

Will Hickey: We also highlight our updated credit ratings from B, a one from Moody's and double B plus from S&P with Fitch already a double B plus we are one notch away from our investment grade goals at all three rating agencies and you will see in this presentation, our credit metrics compare favorably to our investment grade peers.

William Hickey: Turning to slide 5, when we started the predecessor company Colgate back in the 2015-16 downturn, we built the company on a strategy of being prepared to play offense in any market. That mindset has benefitted us tremendously in previous downturns and remains a core part of PR's DNA. While we've been executing on an accretive consolidation strategy, we've also been pulling every lever to make sure we are ready for the next down. Since year-end 23, we have decreased leverage to 0.8 times and increased liquidity to $3.2 billion, all while more than doubling the size. Looking at our current hedge book, we have approximately 25% of 2025 oil production hedged at a price just above $73 per barrel.

Will Hickey: Turning to slide five when we started the predecessor company Colgate back into 2015, and 16 downturn, we built the company on a strategy of being prepared to play offense in any market that mindset has benefited us tremendously in previous downturns and remains a core part of Prs DNA today, while we've been executing on an accretive consolidation strategy. We've also been pulling every <unk>.

Will Hickey: To make sure we're ready for the next downturn since year end 'twenty three we have decreased leverage to <unk> eight times and increase liquidity to $3 2 billion, all while more than doubling the size of the business.

Looking at our current hedge book, we have approximately 25% of 2025 oil production hedged at a price just above $73 per barrel.

William Hickey: This hedging strategy allows PR to be more opportunistic during a downturn, when investments can earn the highest In addition, our high returning asset base and our ability to drive costs out of the business allows us to maximize cash return from every dollar invested. That's not just a talking point, it's material. At our current cost structure and consistent well. we can generate the same pre-cash flow this year if oil remains at 60 that we did last year at 75.

Will Hickey: This hedging strategy allows PR to be more opportunistic during a downturn when investments can earn the highest return.

Will Hickey: In addition, our <unk>.

Will Hickey: High returning asset based on our ability to drive cost out of the business allows us to maximize cash returned from every dollar invested that's not just a talking point, it's material at our current cost structure and consistent well performance. We can generate the same free cash flow. This year. If oil remains at 60 that we did last year at 75.

William Hickey: Thanks to our strategy, our people, and our relentless execution, PR is in the strongest position in company history to operate effectively and create value through a down market.

Will Hickey: Thanks to our strategy, our people and our relentless execution Prs in the strongest position in company history to operate effectively and create value through a down market with that I'll turn it over to James to walk through a downturn strategy in more detail.

James Walter: With that, I'll turn it over to James to walk through our downturn strategy. Thanks, Will. We've discussed our views on balance sheet and cost leadership. But the third part of our strategy is opportunistically investing during the down cycle. If we step back for a second, we recognize that the oil and gas industry will always have volatility. And it is our belief that this volatility creates the potential for outsized value creation. We firmly believe that investments made during lower commodity prices drive greater long-term shareholder value. To capitalize on that opportunity, you have to have both the balance sheet capacity and the willingness to deploy capital when it is the natural reaction to pull back.

James: Thanks, well we did.

James: Just your views on balance sheet and cost leadership, but the third part of our strategies Opportunistically investing during the down cycle. If we step back for a second we recognize that the oil and gas industry will always have volatility and it is our belief that this volatility creates the potential for outsized value creation.

James: We firmly believe that investments made during lower commodity prices drive greater long term shareholder value with.

James: But to capitalize on that opportunity you have to have both the balance sheet capacity and the willingness to deploy capital whether its a natural reaction to pull back during times like this our goal is to buy the highest quality assets with long dated low breakeven inventory in the bottom half of the commodity cycle and we've recently done that in two ways first with our buyback of PR shares in early April.

James Walter: During times like this, our goal is to buy the highest quality assets with long-dated, low break-even inventory in the bottom half of the commodity cycle.

James Walter: And we've recently done that in two ways. First, with our buyback of PR shares in early April, and second, with our New Mexico bolt-on we announced yesterday. We'll hit both of those in more detail now. Yesterday we announced the $608 million bolt-on acquisition of New Mexico, directly offsetting and overlapping our existing acreage and operational... This acquisition was entirely in Eddy and Lee counties and consists of approximately 12,000 BOE a day, 13,300 net acres, and 8,700 net royalty acres. The proximity of these assets to our legacy position will allow us to quickly and efficiently bring our peer-leading cost structure to bear on the newly acquired assets, further enhancing return.

James: And second with our new Mexico bolt on we announced yesterday well at both of those in more detail now.

James: Yesterday, we announced the $608 million of bolt on acquisition in new Mexico directly offsetting an overlapping our existing acreage and operational footprint.

James: This acquisition was entirely in Eddy and Lea counties and consists of approximately 12000 BOE a day 13300 net acres and 8700 net royalty acres. The proximity of these assets to our legacy position will allow us to quickly and efficiently bring our peer leading cost structure to bear on the newly acquired assets further enhancing returns.

James Walter: This acquisition also adds over 100 new gross operating locations in our core operating areas that immediately compete for capital, while also materially increasing working interest in existing legacy PR units. In addition, the acquisition comes with another 4,500 non-op acres that provide the opportunity to leverage our highly effective ground game to maximize value through trades and further consolidation. The existing production has a lower decline than most acquisitions we have evaluated recently, but what really differentiates these assets is the quality and duration of the inventory. Strong well productivity combined with high NRIs and low development costs allow these acquired locations to break even as low as $30 per barrel.

James: This acquisition also adds over 100, new gross operated locations in our core operating areas that immediately could be for capital while also materially increasing working interest in existing legacy PR units.

James: In addition, the acquisition comes with another 4500, not a bakers that provides the opportunity to leverage our highly effective ground game to maximize value through trades and further consolidation.

James: The existing production has a lower decline the most acquisitions, we've evaluated recently, but we're really differentially differentiates. These assets is the quality and duration of the inventory strong well productivity combined with high <unk> and low development costs. Although these acquired locations to break even as low as $30 per barrel. This.

James Walter: This combination of high return investments and low declines will allow us to maintain production with just a 35% reinvestment rate over the long term. We're excited about the opportunity to invest in our core operating areas at below mid-cycle prices and think the purchase price metrics reflect that value proposition. The $608 million purchase price implies an attractive value of approximately $12,500 per net acre and $6,000 per net royalty acre.

James: This combination of high return investments and low declines, but allow us to maintain production with just a 35% reinvestment rate over the long term.

James: We're excited about the opportunity to invest in our core operating areas at below mid cycle prices and take the purchase price metrics reflect that value proposition.

James: The $608 million purchase price implies an attractive value of approximately 12500 per net acre and $6000 per net royalty acre. This works out to about $2 million per net location and all and we expect the deal to generate in excess of 5% free cash flow per share accretion in the near term midterm and long term.

James Walter: This works out to about $2 million per net location and all in we expect the deal to generate in excess of 5% free cash flow per share accretion in the near term, mid term and long term.

James Walter: We'd like to reiterate that we've been maintaining a very disciplined and consistent approach to M&A during our seven years as a private company and nearly three years as a public company. And as such, Slide 8 should be familiar to all of you. Given the high quality of our business today, and specifically the depth of our low break-even inventory, the bar is very high when it comes to potential acquisition. But we are confident this acquisition exceeds all of our rigorous investment criteria. First, we require these assets at an attractive valuation where we are highly confident we can exceed our returns threshold.

James: We'd like to reiterate that we've been maintaining a very disciplined and consistent approach to M&A during our seven years as a private company and nearly three years as a public company and as such slide eight should be familiar to all of you.

James: Given the high quality of our business today, and specifically the depth of our low breakeven inventory. The bar is very high way it comes to potential acquisitions, but we are confident this acquisition exceeds all of our rigorous investment criteria first we acquired these assets at an attractive valuation where we are highly confident we can exceed our return thresholds.

James Walter: Second, this transaction is accretive to all key financial metrics. Third, this allows us to add very high quality inventory that competes for capital immediately in areas that we know well. Fourth, we're able to execute this opportunity while maintaining our Fortress Balance Sheet and expect it to exit the year with over $3 billion in liquidity and leverage below one times. But finally, and most importantly, we believe this transaction makes our business better and will increase free cash flow per share and returns to investors over the long term. We have a very long and successful track record of M&A that creates value for our shareholders and are highly confident that this transaction builds upon that.

James: This transaction is accretive to all key financial metrics.

Third this allows us to add a very high quality inventory that competes for capital immediately in areas that we know well.

James: We're able to execute this opportunity while maintaining our fortress balance sheet and expect to exit the year with over $3 billion in liquidity and leverage below one times.

James: Finally, and most importantly, we believe this transaction makes our business better and will.

James: Increased free cash flow per share and returns to investors over the long term.

James: We have a very long and successful track record of M&A that creates value for our shareholders and are highly confident that this transaction builds upon that.

James Walter: Turning to slide 9, we want to continue to emphasize that protecting the balance sheet is a key component of our long-term strategy. Pro forma for the New Mexico bolt-on, our balance sheet remains strong at current prices, with leverage less than one times, and a dividend break-even of approximately $40. Comparing very favorably to our historical metrics and our...

James: Turning to slide nine we want to continue to emphasize that protecting the balance sheet is a key component of our long term strategy pro forma for the new Mexico bolt on our balance sheet remains strong at current prices with leverage less than one times in the dividend breakeven of approximately $40 comparing very favorably to our historical metrics and our peers.

James Walter: We are confident we have the dry powder to continue to execute on acquisitions or share by vaccine scale if additional opportunities were to arise.

James: We're confident we have the dry powder to continue to execute on acquisitions or share buybacks and scale if additional opportunities were to arise.

James Walter: The final piece of our downturn strategy is the opportunity to share buybacks, and we've been consistent and disciplined in our approach to buybacks since PR's inception. What we want to accomplish with buybacks is to increase ownership in our business in a cost-effective manner. To put it simply, we can buy back more shares for the same amount of money during a downturn when prices are lower.

James: The final piece of our downturn strategies opportunistic share buybacks and we've been consistent and disciplined in our approach to buybacks since <unk> inception.

James: We want to accomplish with buybacks is to increase ownership in our business in a cost effective manner to put it simply we can buy back more shares or to save a lot of money during a downturn when prices are lower and in a volatile industry like ours. We are confident the dislocations that opportunities were always present themselves over time.

James Walter: And in a volatile industry like ours, we are confident that dislocations and opportunities will always present themselves over time. Having prepared accordingly, we executed buybacks immediately during the period of heightened volatility in early April. In a relatively small window, we bought 4.1 million shares at an average price of $10.52. We want to use buybacks as efficiently as possible and we'll be ready to lean in during the next clear market dislocation.

James: He prepared accordingly, we execute buybacks immediately during the period of heightened volatility in early April and a relatively small window, we bought $4 1 million shares at an average price of $10 52.

James: We want to use buybacks as officially as possible and we'll be ready to lean in during the next clear market dislocation.

James Walter: We are very fortunate that our team's focus on balance sheet strength has left us in a position to not treat buybacks or acquisitions as an either or, but where we can actually get on both in scale as opportunities present themselves in 2025 and beyond.

James: We are very fortunate that our team's focus on balance sheet strength has left us in a position to not treat buybacks or acquisitions, as an either or but where we can actually get on boats and scale as opportunities present themselves in 2025 and beyond.

James Walter: Turning to slide 11, we're excited to roll out a revised plan where we project more production and lower capex than the original plan we rolled out in February. Our recent production outperformance allows us to reduce our capital budget by $50 million while maintaining production at the high end of our guidance range. This reduction in CapEx will come from a combination of reductions in completion and drilling activity in the second half of the year. As such, we still expect Q2 to be the highest CapEx quarter of the year, with a step down in CapEx in the second half.

James: Turning to slide 11, we are excited or at a revised plan, where we projected more production and lower capex in the original plan, we rolled out in February.

James: Our recent production outperformance allows us to reduce our capital budget by $50 million, while maintaining production at the high end of our guidance range.

James: This reduction in Capex will come from a combination of reductions in completion and drilling activity in the second half of the year.

James: As such we still expect Q2 to be the highest capex quarter of the year with a step down in capex in the second half.

James Walter: As we've outlined for the past several years, our reinvestment and capital allocation decisions are very dynamic, and we adjust our plans to reflect the returns we anticipate in the coming environment. Our business remains highly flexible to react to the ever-changing macro, and we will continue to monitor all of the moving pieces and adopt a plan that maximizes long-term shareholder value. We believe this strategy will position us to further our track record of outsized value creation for shareholders.

James: I'll answer the past several years, our reinvestment and capital allocation decisions are very dynamic and we adjust our plans to reflect the returns we anticipate in the coming environment.

James: Our business remains highly flexible to react to the ever changing macro and we will continue to monitor all of the moving pieces and adopt a plan that maximizes long term shareholder value.

James: We believe this strategy will position us to further our track record of outsize value creation for shareholders.

Unknown Executive: Thank you for tuning in today and now we will turn it back to the operator for Q&A. Thank you.

James: Thank you for joining us today and now we will turn it back to the operator for Q&A.

James: Thank you.

Unknown Executive: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touchtone phone, and you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchtone selling and you will hear a prompt that your hand has been raised should you wish to decline from the polling process. Please press the star followed by the number two if you use the speaker phone.

Unknown Executive: If you use a speakerphone, please lift the handset before pressing any keys.

Speaker Change: Lift the handset before pressing any key one moment. Please for your first question.

Neil Mehta: One moment, please, for your first question. Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Speaker Change: Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

James Walter: Good morning, James and Guy and Will and team. Just would love to build on your comments on the bolt-on in New Mexico. Just curious, how does this deal stack up against recent deals that you've done as you think about what it brings to the table? And, you know, spend a little bit more time kind of fleshing out what you think. might be underappreciated.

Neil Mehta: Good morning, James and Guy and will and team.

Neil Mehta: Just would love me to build on your comments on the bolt on in New Mexico. Just curious how does this deal stack up against that.

Neil Mehta: Recent deals that you've done as you think about what it brings to the table.

Neil Mehta: We spend a little bit more time kind of Flushing out what you think.

Neil Mehta: Be underappreciated here.

James Walter: Yeah, no, Neil, great question. We're really excited about this deal. I think it fits with exactly what we're trying to do with our kind of M&A strategy, which is make our business better. And I think as the market's evolved, I think one of the hardest things to continue to find is inventory that competes with what we've already got in our base business. And I think that's, to us, the best part about this deal. I think we love the low decline PDP base. I think I mentioned in my prepared remarks that the base declines here are lower than anything we've looked at in quite some time.

Neil Mehta: Yeah, No no great question.

Neil Mehta: Really excited about this deal I think it's fair to exactly what we're trying to do with our kind of M&A.

Neil Mehta: <unk>, which is make our business better and I think as the market evolves I think one of the hardest things to continue to find is as inventory that competes with what we've already got in our base business and I think that's the best part about this deal I think we love the low decline PDP base I think I mentioned in my prepared remarks that the base declines here lower than anything we've looked at in quite some time.

James Walter: But what we really like here is the kind of higher weighting of the purchase price to inventory and the quality of that inventory. I think we haven't seen deals that have breakevens in the low 30s like this in a little bit of time and kind of really excited about what it does. And, you know, it really does compete for capital. I think we've got a great inventory base to build upon.

Neil Mehta: Well, we really like here is a kind of higher weighting of the purchase price to inventory and the quality of that inventory I think we haven't seen deals that have break evens in the low thirties like this in a little bit of time and they got really excited about what it does and.

Neil Mehta: It really does compete for capital I think we've got a great inventory base to build upon and this fits fits great with our stack.

James Walter: And this fits great with our stack.

James Walter: And in terms of what do you think is kind of underappreciated in the asset or from an operational standpoint, what's got you excited about it? Yeah, I mean, this kind of fits with what we've talked about for a while in our Parkway asset in Eddy County. I think what's been underappreciated by the market about this area is the oil productivity is strong. But I think what really differentiates this area from a rate of return perspective is just how low the cost structure is. I think what our team's been able to do in Parkway and Eddy County, you know, we're kind of approaching Midland Basin level costs with what the team's doing out there.

Speaker Change: And in terms of what do you think is kind of under appreciated.

Speaker Change: In the asset or from an operational standpoint, with what's got you excited about it.

Speaker Change: Yes.

Speaker Change: It fits with what we've talked about for a while and our parkway asset in Eddy County, I think what's been underappreciated by the market up this areas. The oral product productivity is strong, but I think what really differentiate this area from a rate of return perspective is just how low the cost structure is I think what our team has never do in Parkway in Eddy County.

Speaker Change: We're kind of approaching Midland basin level costs with what the team's doing out there.

James Walter: And, you know, I think that really does help generate some of those outsized returns we referenced.

Speaker Change: I think that really does help generate some of those outsized returns we reference.

Neil Mehta: And then the follow-up just on share repurchases, you guys got, were aggressive in terms of starting following the early April sell-off and were able to pick off the stock at a really good price.

Speaker Change: So and then the follow up just on share repurchases you guys get aggressive in terms of Sterne.

Speaker Change: Following.

Speaker Change: The early April sell off and we're able to pick up the stock it had a really good price. So just think about.

James Walter: So just think about, maybe talk about your capacity to continue to buy back stock here with shares certainly trading. Yeah, I mean, I think, from our perspective, we have ample capacity to both pursue further acquisitions if the opportunities were to present themselves or to buy back shares in scale or really to do both. Like Rick said, we don't think of it as an either-or proposition, but we've been really patient on the share buybacks. I think people have seen that over the last two and a half years and expect to continue to be patient. I'd say we kind of started to dip our toe in the share buybacks that first week in April as we kind of thought we could be at the beginning of a longer-term downturn, and I'd say kind kind of went back to those levels or below that, we'd be kind of watching it and ready in the right environment.

Speaker Change: Maybe talk about your capacity to continue to buyback stock here with certainly trading at a discounted valuation.

Speaker Change: Yes, I mean, I think from our perspective, we have ample capacity to both pursue further acquisitions, if the opportunities present themselves or to buyback shares in scale or really to do both like I said, we don't think of it as an either or proposition, but we've been really patient on the share buybacks. If you will see that over the last two and a half years and expect.

Speaker Change: To continue to be patient I would say, we kind of started to dip our toe in the share buybacks that first week in April as we kind of thought we could be at the beginning of <unk>.

Speaker Change: Longer term downturn, and I'd say kind of at the market.

Speaker Change: It kind of went back to those levels or below that we'd be kind of watching it had ready and they're in the right environment, but I'd say, it's also there's a lot that goes into the decision to purchase shares. It's what is the balance sheet look like what's our take on the longer term macro and what's a broader opportunity set so it's not going to be.

James Walter: But I'd say it's also, there's a lot that goes into the decision to purchase reshares. It's what does the balance sheet look like? What's our take on the longer term macro? And what's our broader opportunity set? So it's not going to be a kind of perfect to pin down formula. But I think what you'll hear from us is we're going to continue to watch the market, we'll be patient. And I think when we do see opportunities, you should expect us to hit them pretty aggressively.

Speaker Change: Perfect to pin down formula of it I think what Youll hear from US is we're going to continue to watch the market will be patient and I think when we do see opportunities you should expect us to hit them pretty aggressively.

Neil Mehta: Awesome. Thanks, guys. Thank you.

Speaker Change: Awesome. Thanks, guys.

Speaker Change: Thank you. Thank you.

Kevin MacCurdy: The next question comes from Kevin MacCurdy with Pickering Energy Partners. Please go ahead. Hey, good morning, guys. Maybe to stick with the acquisition. Can you share anything on how this deal came about? Was this a process or a negotiated deal? And then maybe where these assets fit into the development queue? I appreciate that.

Speaker Change: The next question comes from Kevin Mccurdy with Pickering Energy Partners. Please go ahead.

Kevin McCurdy: Hey, good morning, guys, maybe just stick with the acquisition can you share anything on how this deal came about was this a process or a negotiated deal and then maybe where these assets fit into the development queue.

Speaker Change: Yes sure sorry.

Speaker Change: So assets, we've had our eye on for a long time I think we've been in discussions with sellers on a smaller scale going back several years I would say for us.

Speaker Change: This discussion is probably going to going on again in earnest. The last six to nine months, we had some conversations around around potential trades other ways to work together, obviously with two large players in the Permian that have a lot of respect for what the other ones are doing but.

Speaker Change: Ultimately this denmark into something that I would call a process and we're able to reach a deal.

Speaker Change: That makes sense for us I think largely on the backs of our peer leading cost structure and I think these assets were really interesting where a good chunk of the acreage is in existing Permian resources units that were on the near term Joe schedule for us. So I think we had a nice competitive advantage there and the newly acquired inventory competes for capital day, one I think we're probably over allocate to some of these assets.

Speaker Change: In the near term just given how low the break evens are and how quick the payouts are.

Speaker Change: I appreciate that and then as a follow up I mean, it looks like to us that production is trending better than expected to start the year any observations on what is driving that better production compared to you know.

James Walter: And then as a follow up, I mean, it looks like to us that production is trending better than expected to start the year. Any observations on what is driving that better production compared to, you know, original expectations? Yeah, I tried to hit a little on my prepared remarks, but I'd say that the majority of the Q1 outperformance is outperformance localized to two of the larger 2024 acquisitions we did just, you know, we've now had those kind of under our wing with our operating practices for kind of three months and nine months respectively. And we've been able to swap out artificial lift and get our first kind of larger pads drilled on both of them.

Speaker Change: Original expectations.

Speaker Change: Yes, I tried to get a little on my prepared remarks, but I would say the majority of the Q1 outperformance is outperformance localized to two of the larger 2024 acquisitions. We did just we've now had those kind of.

Speaker Change: Under our wing with our operating practices for kind of three months and nine months, respectively, and we've been able to swap out artificial lift and get our first kind of larger pads drilled on both of them and I think what we've been surprised by is that the performance was better than expected and some of the artificial lift swaps had a meaningful uplift in production.

James Walter: And I think what we've been surprised by is the performance was better than expected. And some of the artificial lift swaps had a meaningful uplift in production. So I think these are the kind of the A little bit of the good assets tend to outperform more often. And we think that the deals we did in 24 were on good assets. And, you know, we had now had enough time to get our hands around them. And you saw the cost cutting immediately. And now you're seeing the production uplift three to six.

Speaker Change: So I think these are the kind of debt.

Speaker Change: The good assets tend to outperform more often and we think that the deals we get into 'twenty four we're on good assets and we had now we've now had enough time to get our hands around them and you saw the cost cutting immediately and now youre seeing the production uplift three to six months later.

Unknown Executive: Thank you, and great quarter.

Speaker Change: Thank you and great quarter.

Speaker Change: Thank you.

Speaker Change: Okay.

John Freeman: Thank you. The next question comes from John Freeman with Raymond James. Please go ahead.

Speaker Change: Thank you.

Speaker Change: The next question comes from John Freeman with Raymond James. Please go ahead.

John Freeman: Congrats on the acquisition. On the roughly one-third of this full-time deal that's non-op, can you speak to the line of sight you've got on being able to work some trades to increase your interest in the operating unit? Yeah, sure. I mean, I think with our existing footprint, we have meaningful overlap with every operator of scale in the Delaware Basin today, which is great. I'd say we really do have active ongoing trade discussions with I think everyone who's relevant and active in in the Delaware Basin. So as you take the roughly 4500 non-op acres we've acquired here, that just fits right into the discussions that we're already having.

Speaker Change: Congrats on the acquisition.

Speaker Change: On the the roughly one third of this this full time deal.

Speaker Change: Can you speak to the add a line of sight shelf.

Speaker Change: To work some trades to increase your interest in the operated units.

Speaker Change: Yeah sure I mean, I think with our existing footprint, we have meaningful overlap with every operator is scale in the Delaware basin today, which is great I would say, we really do have an active ongoing trade discussions with I think everyone, who is relevant and active in the Delaware basin. So as you take the roughly 4500 non op acres, we have acquired.

Speaker Change: Here that just fits right into the discussions that were already having and frankly I think should allow us to help optimize both the assets were newly acquiring as well as some of the legacy PR assets that we've been working to kind of trade and consolidate so I think I think that's a great deal and I think we also liked some of the consolidation of buying opportunities around what.

James Walter: And frankly, I think should allow us to help optimize both the assets we're newly acquiring, as well as some of the legacy PR assets that we've been working to kind of trade and consolidate. So I think, I think that's a great component of the deal. And I think we also like some of the consolidation and buying opportunities around what may appear to be a non-op asset today may very well not be a non-op when we unleash our our land team and our business development team, which I think are the best in the business on on growing some of those positions.

Speaker Change: They appear to be a non op asset today may very well not be a non op. When we unleash our land team and our business development team, which I think are the best in the business on growing some of those positions I think a lot of what we underwrote as non of acres could very well end up being operated and.

James Walter: I think a lot of what we underwrote is non-op acres could very well end up being operated, you know, and not and not too much time.

Speaker Change: Not too much time.

Speaker Change: Yeah.

James Walter: Got it. And then can you speak to kind of how y'all think about the trade offs of, you know, depending on what the oil price does from here, but just how y'all think about the trade offs of responding to like a weaker oil price environment with reduced activity versus not wanting to slow down, you know, the efficiency gains and all the momentum that y'all built up if y'all were sort of oscillating activity, kind of up and down with the macro. Yeah, I mean, that, I think at the very core, our development program and capital allocation through the drill bit is a very returns focused equation.

Speaker Change: Got it and then can you speak to kind of how you all think about the trade offs.

Speaker Change: Depending on what the oil price does from here, but just how you all think about the trade offs are responding to like a weaker oil price environment with reduced activity versus not wanting to slow down.

Speaker Change: Taking a look at all of them at the top if you all are sort of oscillating activity kind of up and down with the macro.

Speaker Change: Yes.

Speaker Change: I think it's a very core our development program and capital allocation through the drill bit is a very returns focused equation and and that hasnt changed in the new commodity price I would say returns are obviously getting somewhat compressed given oil is down however, which you would think 15 to $20 a barrel, but but the returns of our program.

James Walter: And, and that hasn't changed. In the new commodity price, I'd say returns are obviously getting somewhat compressed, given oils down, you know, however much you want to think $15 $20 a barrel, but, but the returns of our program are extremely resilient. Like if you, you know, go look at wellhead breakevens are in the low 30s corporate breakeven right around 40. So I mean, we are still generating great returns through the drill bit.

Speaker Change: Our extremely resilient like if you go look at wellhead breakeven or in the low <unk> corporate breakeven right around 40%. So I mean, we are still generating great returns through the drill bit.

James Walter: You know, for us, I think what you see us doing this year is just given the overall macro backdrop, we've let the, you know, improvements in capital efficiency of the business accrue to less capex. And so that's why you see us as opposed to letting it accrue to production and kind of blowing out the high side of our original production guide. I think where we're headed is we're going to hold the line on production and let it accrue to less capex for the year. Also, I think we can thread the needle of doing this in a way where we maintain kind of maximum flexibility with the ability to hit the gas pedal.

Speaker Change: For Us I think what you see is doing this year is just given the overall macro backdrop, we've let the improvements in capital efficiency of the business accrued of less Capex and so thats why you see us.

Speaker Change: As opposed to letting accretive production and kind of blowing out the high side of our original production guide I think where we're headed as we're going to hold the line on production and and let it accrue to less capex for the year also I think there is a we can thread the needle of doing this in a way, where we maintain kind of maximum flexibility with the ability to hit the gas pedal.

James Walter: anytime between now and next year, early next year, if we see things turn around. And, and similarly, you know, we, you know, we run our business with very few long term contracts. And so if we see kind of things get worse from here, we are prepared and able to dial it back. So it's not a, it's not a perfect equation you can plug into, but it's kind of a overall returns of the program. And then kind of after that, trying to, to maintain flexibility to react to what's been a pretty volatile market.

Speaker Change: Anytime between now and next year early next year, if we see things turnaround in and similarly.

Speaker Change: We run our business with a very few long term contracts until we see kind of things get worse from here, we are prepared and able to dial it back so it.

Speaker Change: It's not a it's not a perfect equation, you can probably get into but it's kind of starts with the overall returns of the program.

Speaker Change: And then kind of after that trying to to maintain flexibility to react to what's been a pretty volatile market.

Unknown Executive: Thanks, guys. Well done.

Speaker Change: Thanks, guys well done.

John Freeman: Thanks, John.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Scott Hanold: The next question comes from Scott Hanold with RBC.

Speaker Change: The next question comes from Scott Hanold with RBC. Please go ahead.

Scott Hanold: Please go ahead. Yeah, I think relatively flat from where we were Q1 is fair. This is not a... We're not going to exit.

Speaker Change: Yeah, Hi, Thanks, two if I could build on Jon's question, there and just as you see obviously you talked about you're going to be tapering some of your.

Speaker Change: Activity in the back half of the year with that reduction.

Speaker Change: Does that keep your volumes on a fairly stable rate into 2026. So it's sort of a question on how you're positioned heading into 2026 is in the back half of the year is still a pretty good maintenance mode and into the next year.

Speaker Change: Yes, I think relatively flat from where we were Q1 is fair.

Speaker Change: This is not.

Speaker Change: We're not going to exit the plan as it stands today is not to exit Q4 at some meaningful decline from what we printed in Q1, if that's the.

Scott Hanold: The plan, as it stands, is not to exit Q4 at some meaningful decline from what we printed in Q1, if that's the question. Yeah, and I think as you think about 2026, I think our goal is to position ourselves to be able to, like Will said, quickly react to what the environment looks like at that time. We've obviously never given 2026 guidance, but want to be in a position if the market is calling for it and returns are high enough, we can return to growth, which we've done really successfully the last few years. And if it looks like something like today's environment, likely something more flat, and if things had really gotten worse, would consider even further reductions activities.

Speaker Change: Question you are asking.

Speaker Change: Yeah, and I think as you think about 2026 I think our goal is to position ourselves to be able to like will said quickly react to what the environment looks like at that time, we've obviously never given 2026 guidance, but want to be in a position. If the market is calling for it and returns are high enough we could return.

Speaker Change: Growth, which we've done really successfully the last few years and if it looks like.

Speaker Change: Something like today's environment likely something more more flat and if things had really gotten worse would consider even further reductions activities. So I think our position heading into the year will be one of kind of perfect flexibility, where we can quickly react to whatever the market looks like.

Scott Hanold: I think our position heading into the year will be one of kind of perfect flexibility where we can quickly react to whatever the market looks like.

Unknown Executive: Got it.

Speaker Change: Got it thank you for that.

Unknown Executive: Thank you for that.

Speaker Change: Just maybe your perspective on the.

Unknown Executive: And, you know, just maybe your perspective on the broad M&A landscape. I mean, you all have done a very good job over the last several years of not only doing a lot of ground game activity, but, you know, mid to larger size transactions. In this environment, like, what is, you know, your real-time feelers, you know, telling you that's out there?

Speaker Change: The broad M&A landscape I mean, you all have done a very good job over the last several years of not only doing a lot of ground game activity, but.

Speaker Change: Mid to larger sized transactions.

Speaker Change: In this environment like what is your real time dealers.

Speaker Change: Telling telling you that's out there and where do you think the market looks like say in the next six months if things are status quo from where they are today.

James Walter: And what do you think the market looks like, say, in the next six months if things are status quo from where they are today? Yeah, I mean, I think kind of starting probably longer dated, I think we expect to continue to see opportunities like this size deal over the long term in the Delaware Basin. You know, I think we've seen a ton of permeate consolidation in the last three years of a major scale. And I think on the back of consolidation, historically, you've seen non core asset sales come out of it. I think this probably fits that bill, and you'll see more of it.

Speaker Change: Yeah, I mean, I think kind of starting probably longer dated I think we expect to continue to see opportunities like this size deal over the long term in the Delaware Basin I think we've seen a ton of Permian consolidation in the last three years of a major scale and I think on the back of consolidation historically you've.

Speaker Change: Seen noncore asset sales to come out of it I think theres, probably fits that bill and Youll see more of it but I don't think I don't think we see anything like this coming down the pipeline in the next six months I think the likely opportunity set for PR in that shorter time period is really more of the ground game. If you think about we've had a really.

James Walter: But I don't think I don't think we see anything like this coming down the pipeline in the next six months. I think the likely opportunities that for PR in that shorter time period is really more of the ground game. If you think about we've had a really active ground game the last several years, I actually think in a downturn like this, there's the potential for that activity to actually pick up as you have potentially more motivated sellers. And I also think a big part of the ground game for us is gonna be we got a lot bigger ground game footprint as, as we've mentioned on the call today, like a lot more chips to play with a lot more areas to go focus on.

Speaker Change: Active ground game in the last several years I actually think in a downturn like this there is a potential for that activity to actually pick up as you have potentially more motivated sellers and.

Speaker Change: I also think a big part of the ground game for US is going be we've got a lot bigger ground game footprint as as we've mentioned on the call today like a lot more chips to play with a lot more areas to go focus on so I don't think it probably shows up next quarter, but in the six to nine month time period of the back half of the year I think we will really see a lot of opportunities on the ground game side to kind of grow the business organically, which is.

James Walter: So I don't think it probably shows up next quarter. But in the six to nine month time period, the back half of the year, I think we will really see a lot of opportunities on the ground game side to kind of grow the business organically, which is something we've done really well. And I think some of the best, best return opportunities that we tend to see.

Speaker Change: Something we've done really well and I think some of the best best return opportunities that we tend to see.

Unknown Executive: Appreciate the color. Thank you.

Speaker Change: I appreciate the color. Thank you.

Speaker Change: Thank you <unk>.

Zach Barha: The next question comes from Zach Barha with J.P.

Speaker Change: Next question comes from Zach Farha.

Zach Barha: Morgan. Please go ahead. Thanks for taking my question. Given the activity drops we've seen across the industry already, and there's probably more to come, can you talk about what you're seeing on the service cost side at this point? Have those started to move lower yet? I'd say that, yeah, they're just starting to kind of move lower, Zach, you know. exactly where it settles out. I think it's it's too early to say but Very much with the activity drop, I'd say service providers are aware and there's some that are taking a strategy if they'd like to kind of keep their market share and keep all their crews busy.

Speaker Change: JP Morgan. Please go ahead.

Zach Farha: Thanks for taking my question given the activity drops we've seen across the industry already and there's probably more to come can you talk about what youre seeing on the service cost side at this point have those started to move lower yet.

Zach Farha: I'd say that yes. They are just starting to kind of move lower zac.

Zach Farha: Exactly where it settles out I think it's too early to say, but.

Zach Farha: Very much with the activity drop I'd say service providers are aware and there are some that are taking a strategy if they'd like to kind of <unk>.

Zach Farha: Keep their market share and can keep all there.

Zach Farha: Crews busy and with those we are getting some price concessions and there are others, who are more drawing a hard line of they'd rather drop activity themselves as opposed to give price concessions until exact.

William Hickey: And with those, we're getting some price concessions. And there are others who are more drawing a hard line if they'd rather drop activity themselves as opposed to give price concessions. And so, exactly how it shakes out, I think, is TBD. There was a little bit left to give, it feels like, on that side, and we're starting.

Zach Farha: Exactly how it shakes out I think is TBD, but.

There was a little bit left to gate it feels like on that side and we're starting to see it.

William Hickey: Thanks, Will.

Speaker Change: Thanks will.

William Hickey: Next, just wanted to ask on OPEX, you were in the lower half of the full year range and 1Q. Can you talk about what drove OPEX lower and maybe give us some thoughts on how you expect OPEX to trend through the rest of the year? Yeah. We have, you know, again, just integration of the deals we bought and kind of overall just good operating practices. I'd say it led to a good quarter. The biggest drive on the OPEX on a per BOE basis down is just going to be the outperformance on the oil side. The fixed cost nature of some of those LOE costs, when you add more barrels, we just saw costs come down a little bit.

Speaker Change: Just wanted to ask on Opex you were at the lower half of the full year range. In <unk> can you talk about what drove Opex lower and maybe give us some thoughts on how you expect opex to trend through the rest of the year.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: We have again just integration of the deals we bought and kind of overall just good operating practices actually led to a a good quarter. The biggest drive on the Opex on a per BOE basis down is just going to be the outperformance on the oil side just.

Speaker Change: The fixed cost nature of some of those low cost when you add more barrels we just saw cost come down a little bit.

William Hickey: Thanks Will. Yep. Thank you.

Speaker Change: Thanks, a lot.

Speaker Change: Yep.

Speaker Change: Thank you.

Gabe Daoud: The next question comes from Gabe Daoud with T.D. Cohen. Please go ahead. Thanks. Hey, morning, everyone. I appreciate all the prepared remarks so far.

Speaker Change: The next question comes from Gabe Daoud with Cowen. Please go ahead.

Gabe Daoud: Thanks, Hey, good morning, everyone.

Speaker Change: Appreciate all the prepared remarks, so far.

James Walter: I was hoping we could go back to the acquisition. I was curious if you could just refresh us on some of the targets up there near and around the Parkway asset and what you guys are doing from a spacing standpoint up there. Yeah, I mean, I think kind of the primary zones we've been the most active in the last couple of years are the second bone spring sand, the third bone spring sand, and the XY, that's kind of where the bulk of our activities been and kind of will be for the foreseeable future. I think those are the best returning targets.

Speaker Change: Was hoping we could go back to the <unk> acquisition was curious if you could just refresh us on some of the targets up there and around the Parkway asset and what you guys are doing from a spacing standpoint up there.

Speaker Change: Yes, I mean, I think kind of the primary Jones, who has been the most active in the last call.

Speaker Change: A years or the second bone spring sand, the third bone spring sand and the X Y that's kind of where the bulk of our activity has been and kind of will be for the foreseeable future. I think those are the best returning targets, but I think.

James Walter: But I think I probably should have said this on one of the earlier questions. I think one of the other things that's underappreciated, there really is a lot, a lot more beyond just those zones as you move further north. And they may be a little further down the stack for us, but really good targets like the first bone spring sand, the harky, which is a little more regional, but but we've drilled a handful of good harky wells, and then some of the deeper targets in the Wolf Camp. So I think it's an area that has a lot to continue to give.

Speaker Change: I, probably should have said this on one of the earlier questions I think one of the other thing. That's underappreciated is it really is a lot a lot more beyond just those zones as you move further north and maybe a little further down the stack for us, but really good targets like the first bone spring sand, the harkey, which had a little more regional but we've drilled a handful of good <unk> and then some of the deeper targets in the <unk>.

Speaker Change: <unk>, So I think it's an area that <unk>.

Speaker Change: Has a lot to continue to give and we're excited about what that looks like not just near term and the long term.

James Walter: And we're excited about, you know, what that looks like, not just near term, but long term. Got it. Okay. Yeah. No, that's, that's great to hear.

Speaker Change: Got it got it okay. Yeah, no. That's that's great to hear and then a follow up also just sticking to that region could you maybe discuss what gas processing capacity. It looks like around there I know one of your providers is bringing on.

James Walter: And then a follow-up also just sticking to that region. Could you maybe discuss what the gas processing capacity looks like around there? I know one of your providers is bringing on an additional capacity pretty, pretty soon, but just curious if you can maybe speak to that as well. Yeah, I'd say we've had no issues historically with gas processing capacity in the Delaware Basin. I think we've been really fortunate that we partnered up with kind of some of the biggest and the best gas processors in both Lee and Eddy County. So I think kudos to those guys, they've been growing alongside us, spending capital kind of prudently ahead of the drill bit that we've never had any gas processing or gas egress issues whatsoever and don't participate and don't anticipate having any going forward.

Speaker Change: Additional capacity pretty pretty soon but just curious if you can maybe speak to that as well.

Speaker Change: Yes, I'd say, we've had no issues historically with gas processing capacity in the Delaware Basin I think we've been really fortunate that we've partnered up with kind of some of the biggest and the best gas processors in both Lea and Eddy counties.

Speaker Change: Kudos to those guys they've been growing alongside us spending capital kind of prudently ahead of the drill bit that we've never had any gas processing or gas egress issues whatsoever, and don't participate and don't anticipate having any.

Speaker Change: Going forward.

Unknown Executive: Okay, great. Great to hear it.

Speaker Change: Okay, great good to hear thanks, guys.

Unknown Executive: Thanks, guys.

Speaker Change: Yes.

Unknown Executive: Thank you.

Speaker Change: Thank you the.

Leo Mariani: The next question comes from Leo Mariani with Roth. Please go ahead. Hi, guys. Let me just kind of sticking with the gas marketing, you know, side of the business here. I know you guys had brought on some more folks to try to kind of maximize the value of the gas molecules. I'm just kind of curious just kind of where you are, you know, in that process. Have you seen any progress at this point? And obviously, a lot of players are talking about trying to, you know, participate with data center deals and things like that in the Permian.

Speaker Change: The next question comes from Leo Mariani with Roth. Please go ahead.

Speaker Change: Hi, guys, let me just kind of sticking with the gas marketing.

Speaker Change: Side of the business here I know you guys had and brought on some more folks to try to kind of maximize the value of the gas molecules.

Speaker Change: Just kind of curious kind of where you are.

Speaker Change: And that in that process have you seen any progress at this point and obviously a lot of players are talking about trying to.

Speaker Change: Participate with data center deals and things like that in the Permian. So just trying to get a sense of where you think PR to fit in.

Leo Mariani: So just trying to get a sense of where you think PR could fit in.

James Walter: Yeah, Leo, thanks. That's a great question. And I think kind of something I'd say more to come there, I'd say it's absolutely been a focus of ours. The last six to nine months, I think we've said a lot of a lot of times on calls like this, that getting better prices for all of our molecules is a key part of our go forward strategy. That's, that's both kind of in-basin gas, but also crude and frankly, NGLs downstream as well.

Speaker Change: Yeah. Thanks, that's a great question and I think kind of sub debt I'd say more to come there I'd say, it's absolutely been a focus of ours. The last six to nine months I think we set a lot of a lot of times on calls like this that getting better prices for all of our molecules is a key part of our go forward strategy that that's both kind of in.

Speaker Change: Base in gas, but also crude and frankly ngls downstream as well. So we did a ton of work in the background don't have a ton to share with you guys and kind of specific updates. This quarter I think we were having the same call in August I think we do expect to have some meaningful updates that could.

James Walter: So we did a ton of work in the background, don't have a ton to share with you guys and kind of specific updates this quarter, I think we're having the same call in August, I think we do expect to have some meaningful updates that could change our longer term trajectory. But again, this stuff takes time, you know, I think actually Thoughtfully kind of downstream marketing and maximizing value of all your molecules is not something that kind of gets done as quickly as maybe we'd like, but I think we've got a really good long term plan and should have more to share in the near term.

Speaker Change: Change our longer term trajectory, but again this stuff takes time I think actually.

Speaker Change: Thoughtfully kind of downstream marketing and maximizing value of all your molecules is not something that kind of gets done as quickly as we'd like but I think we've got a really good long long term plan and should have more to share in the near term.

Unknown Executive: Okay, appreciate that.

Speaker Change: Okay I appreciate that.

James Walter: And I guess just in terms of your comment about returns on the business being fairly similar in the $60 oral world to what they were, you know, 12 months ago in a $75 oral world. Can you provide a little bit more detail and kind of what the key sort of quantifiable items are around that statement on the returns? Yeah, I mean, the biggest driver by far is going to be just the amount of costs we've cut out of business. Like if you follow, you know, from our previous earnings decks, what CapEx has done on a cost per foot basis is, I mean, we have meaningfully reduced CapEx per foot over the last 18 months.

Speaker Change: And I guess just in terms of your comment about returns on the business being fairly similar in the $60 oil world to what they were 12 months ago and is $75 oil world can you provide a little bit more detail and kind of what the key sort of quantifiable items around that statement on the <unk>.

Speaker Change: <unk>.

Speaker Change: Yes, I mean, the biggest driver by far is going to be just the amount of cost cut out of the business that can be follow from our previous earnings ex what capex is done on a cost per foot basis is I mean, we have meaningfully reduced capex per foot over the last 18 months and.

William Hickey: And I'd say that reduction, almost by itself offsets the reduction in crude prices. So, you know, similar to just longer laterals, same well productivity on a per foot basis with significantly less costs, and you kind of add all those together, and that that'll bridge the gap. And kind of not the same degree of impact, but continue to make really Meaningful kind of per unit improvements on controllable cash costs as well, and it's kind of This is the kind of business that you know every penny adds up, and we think our team's really optimizing across the entire value chain Okay, so I mean, outside of cost, there hasn't been any kind of shift or anything to target, you know, certain zones or kind of wider spacing or anything like that.

Speaker Change: That reduction almost by itself offsets the reduction in crude prices. So.

Speaker Change: Similar to this longer laterals same well productivity on a per foot basis with significantly less cost and you kind of add all those together.

Speaker Change: That will bridge the gap.

Speaker Change: It's not the same degree of impact for continuing to make really.

Speaker Change: The meaningful kind of per unit improvements on controllable cash costs as well and it's kind of this is the kind of business that every penny adds up and we think our team is really optimizing across the entire value chain.

Speaker Change: Okay. So I mean outside of cost there hasnt been any kind of shift or anything to target.

Speaker Change: Certain zones or kind of wider spacing or anything like that it's really just a cost issue is what I was getting at.

William Hickey: It's really just a cost issue is what I was getting at. No, yeah, we said it a lot, you'll probably stick it in, and we're kind of doing the same thing this year we did last year as we did the year before, and going to be doing the same thing next year and the year after that, kind of steady as she goes. Thank you.

Speaker Change: Yes, we started a lot of our Hiseq Ananda if we're kind of doing the same thing. This year. We did last year as we did the year before I got to be doing the same day next year and thereafter that kind of steady as she goes.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

John Annis: The next question comes from John Annis with Texas Capitol. Please go ahead. Hey, good morning, guys, and congrats on the strong quarter.

Speaker Change: The next question comes from John <unk> with Texas Capital. Please go ahead.

Speaker Change: Hey, good morning, guys and congrats on the strong quarter.

John Annis: For my first one, focusing in on the New Mexico bolt-on, I was wondering if you could help frame how the DNC design and well-spacing from the legacy operator compares to that of your existing assets in the northern Delaware, and are there any specific items that you would highlight that could drive cost savings or productivity improvements? Yeah, I mean, I think I actually think the legacy operator did pretty similar from a development spacing, especially in the parkway area to what we're going to do is pretty well delineated across zones for several years. And I think if you look at the results that well productivity from the legacy operating these assets was actually really strong.

Speaker Change: For my first one focusing in on the new Mexico bolt on I was wondering if you could help frame how big the D&C design and well spacing from the legacy operator compares to that of your existing assets in the northern Delaware and are there any specific items that you would highlight that could drive cost savings or productivity improvement.

Speaker Change: <unk>.

Speaker Change: Yes, I mean, I think I shouldn't those legacy operator did pretty similar from a development spacing, especially in the Parkway area to what we're going to do it it's been pretty well delineated across zones for several years and I think if you look at the results that well productivity from the legacy operating these assets was actually really strong so I think.

James Walter: So I think, you know, I think they're kind of, we're not Explicitly familiar with their cost structure, I think any changes is probably going to be to just apply the kind of peer-leading Permian Resources D&C cost structure to what was a similar spacing and kind of development program. Got it.

Speaker Change: I think they are kind of we're not.

Speaker Change: Explicitly familiar with their cost structure I think any changes is probably going to be to just apply that kind of peer leading Permian resources D&C cost structure to what was a similar spacing and kind of development program.

Speaker Change: Got it for my follow up you've certainly had success, adding inventory through M&A and your ground game. My question is how do you see the opportunity for organic inventory expansion through additions and secondary zones like the second bone spring shale or Wolfcamp D.

James Walter: For my follow-up, you've certainly had success adding inventory through M&A and your ground game.

James Walter: My question is, how do you see the opportunity for organic inventory expansion through additions and secondary zones, like the Second Bone Spring Shale or Wolf Camp D, driving inventory expansion from here? Great color. Thanks, guys. Thank you.

Speaker Change: Driving inventory expansion from here.

Speaker Change: Yes, I mean, I think that's something I think if there's one thing that surprised everybody to the upside with the Delaware Basin year end year out is that we continue to add.

Speaker Change: Inventory at a pace that frankly astounded me it seems like we find a new zone that is not a secondary or tertiary to undertake a true core competes for capital zone every year I think I think for us, what's maybe a little bit different and that is where kind of accruing those zones. What I would say, it's more to the back end of our inventory like we have got such a high rate.

Speaker Change: Return program today that yes, we are adding sticks to inventory and zones like you referenced today, but we're not we're not really making a meaningful part of our program because what we have in our base cases, so good but yeah. I think we're really excited about kind of the deeper wolfcamp stuff. The C D and both new Mexico, and Texas and some of the shale is the second bone.

Speaker Change: The third bone shale in both Texas, and New Mexico, and I think there are a couple of those are still I would say in the early innings of delineation, but I think excited about that pace continuing I would've told you five years ago that it's going to be hard to keep adding zones at the pace, we've added but it really hasn't slowed down yet and I think we're hopeful that that.

Speaker Change: Inventory additions continued and frankly in the Delaware basically we haven't touched the really deep stuff at all I think there's been a lot of trends in the Midland basin going deeper and deeper and we're probably not even in the first inning. It out of the Delaware. So I think for US appears in a fortunate position, we're not developing a lot of those zones today, because we've got a consistent plan we've been doing the last couple of year.

Speaker Change: Ears, and that's worked really well, but I think over time, continuing to inexpensively or basically for free adding additional inventory is a great part of the value creation story for a company like PR.

Speaker Change: Great color thanks, guys.

John Thank you.

James Walter: The next question comes from Joff J., with Daniel Energy Partners. Please go ahead. A quick question about sort of the acquisitions impact on your CapEx in the back half of the year. You know, just curious, I know it competes for capital, so I guess I'm curious if you sort of suspect you'll add some activity on that acreage or if you'll likely just shift some things around from existing acreage to work up there. Yeah, I think the kind of $20 million we outlined is kind of pre-baked stuff that was, I call it in the pipeline from the legacy operator.

Josh James: The next question comes from Josh James with Daniel Energy Partners. Please go ahead.

Josh James: Quick question about sort of the acquisitions impact on your Capex in the back half of the year.

Josh James: Just curious I know it competes for capital. So I guess I'm curious, if you've sort of suspect youll add some activity on that acreage or you feel likely just shifting things around from existing acreage to work up there.

Josh James: Yes, I mean, I think the 20 kind of $20 million. We outlined is kind of pre baked stuff that was I would call. It in the pipeline from the legacy operator, and I think for US before we really can kind of put a mark on the assets, it's probably going to be 2026 before you see that but yes I do think this asset is good enough you may see like I said, a little overweight.

James Walter: And I think for us, before we really can kind of put our mark on the assets, it's probably going to be 2026 before you see that. But yeah, I do think this asset is good enough. You may see, like I said, a little overweight activity to this asset and a tiny, modest pullback somewhere else. I think it kind of depends on how the full year 2026 shakes out. But I do think this is the kind of asset that should be neutral to overweight as we think about capital allocation next year, just given how, truly how high the NRIs are and how low the break-evens are.

Josh James: Activity.

Josh James: This asset.

Josh James: Heidi modest pullback somewhere else really kind of depends on how the full year 2026 shakes out but I do think this is the kind of asset.

Josh James: Should be neutral to overweight as we think about capital allocation next year, just given how it's really how highly in our eyes are and how low the break evens are.

James Walter: Gotcha. And then I was curious to just given how contiguous the bolt-on is to your existing acreage. I mean, do you foresee eventually kind of migrating to longer laterals up there or no? We've drilled some three-milers up there, which we may, at time to time, drill, but that area is pretty shallow, and so I think anything longer than three miles in that area is off the table, just given the TBD is such that you don't have the same amount of weight down there on the bit to go out longer than three. So it's a two- to three-mile area.

Speaker Change: Gotcha, and then I was curious to just given how contiguous bolt on is to your existing acreage.

Josh James: You foresee eventually kind of migrating to a longer laterals up there or no.

Josh James: We've drilled some three milers up there, which we may at time to time drill but that.

Josh James: That area is pretty shallow and so I think anything longer than three miles in that area is off the table just given the.

Josh James: TBD as such that you don't have the same amount of weight down there on the bit to go out longer than three.

Josh James: So it's.

Josh James: It's a 2% to three mile area. There are some areas, where maybe we were a mile and a half in this second year allows us to go to two and a half or two which is.

James Walter: There are some areas where maybe we were at a mile and a half, and this section here allows us to go to two and a half or two, which is a lot of the synergies as part of the deal.

Josh James: A lot of the synergies as part of the deal but.

Unknown Executive: I wouldn't expect that we're going to go to kind of anything crazy from a Ladderlink perspective. Excellent. Thank you. Thanks, Jeff. Thank you.

Josh James: I wouldn't expect that we're going to go to a kind of anything crazy from a lateral perspective up there.

Josh James: Excellent. Thank you.

Speaker Change: Thanks, Jeff.

Josh James: Thank you.

Unknown Executive: Once again, should you have a question, please press the star followed by the number one on your touchtone phone, and you will hear a prompt that your hand has been raised.

Speaker Change: Once again should you have a question. Please press the star followed by the number one on your attached one filing and you will hear a problem that you had has been race.

Paul Diamond: Your next question comes from Paul Diamond with Citi. Please go ahead. Thank you. Good morning. Thanks for taking the call. Just a quick one. I want to talk about the kind of the progression of your cost per lateral foot. Made some really good progress, 3% in the last quarter. How should we think about that going forward? Is that more linear? Should we be expecting that to kind of flatten out? Just kind of how do you view that? I mean, if you ask me... Two months ago, I would have said. It would have been flattening out, and then I'd expect kind of step changes in time with just kind of operational breakthroughs, which is kind of how we've seen the efficiency side of the equation go, where you find big wins, and then you kind of flatten out for a few quarters and find big wins.

Speaker Change: Your next question comes from Paul Diamond with Citi. Please go ahead go ahead.

Paul Diamond: Thank you good morning, and thanks for taking the call just a quick one and I'm going to talk about the kind of the progression of your cost per lateral foot made some really good progress 3% in the last quarter. How should we think about that going forward is that more linear should we be expecting that to kind of flatten out just kind of how do you view that.

Paul Diamond: I'm glad you asked me.

Paul Diamond: Two months ago I would have said.

Paul Diamond: It would have been flattening out and then I would expect kind of.

Paul Diamond: Step changes in time with just kind of operational breakthroughs that just kind of how we've seen the efficiency side of the equation go where you define big wins, and then you kind of flatten out for a few quarters and find big wins.

William Hickey: I think the one change that is just the body has changed so much in activity drops are happening so quickly that I do think we'll get a modest amount of service cost reductions kind of from now to the end of the year. And, you know, that that obviously would help on the well cost side. So kind of adding those together, maybe there's a Expectation of a slight reduction from the 750-foot that shows up in kind of Q3, Q4 with hopefully an operational kind of win somewhere over the next six to nine months on top of it.

Paul Diamond: I think the one change that is just the body has changed so much in activity drops are happening. So quickly that I do think we'll get a modest amount of service cost reductions kind of from now to the end of the year and that obviously would help on the well cost side, so kind of adding those together maybe there is a.

Paul Diamond: Expectation of a slight reduction from the 750, a foot that shows up in kind of Q3 Q4 with hopefully have an operational kind of win somewhere over the next six to nine months on top of it.

William Hickey: You know, again, I'm kind of putting my crystal ball and speculating here a little bit, but we were hoping to get to 750-foot for the year. We achieved that in Q1, and I think there's more downward pressure from there, just given where the overall macros Got it. Got it. Makes sense.

Paul Diamond: Again, I'm here I'm kind of put my Crystal ball and speculating here, a little bit, but we're hoping to get 700 deeper for the year, we achieved that in Q1 and I think there is more downward pressure from there just given where the overall macro sites.

Paul Diamond: Got it.

Speaker Change: Got it makes sense and then just a quick follow up and that was.

James Walter: So now just a quick follow up. And that was with this deal you guys have added again to your non-op position. I just want to get an understanding of how you think about that longer term. Is that more designed to help the land guys in the ground game with acreage swaps? There could be other some type of, you know, monetization event in the future? You know, for us, NAHOP's still a really small part of our portfolio. Our team's done such a good job of turning NAHOP into Ops that, you know, it's not something that is even a meaningful part of our go-forward, you know, CapEx programs, etc.

Speaker Change: Yeah, we can see or you guys have added again to non op position, we wanted to get an understanding of how you're thinking about that longer term.

Speaker Change: Got more designs.

Speaker Change: To help the land guys in the ground game with acreage swaps there could be other some type of monetization event that occurred.

Speaker Change: P J.

Speaker Change: For us it off still a really small part of our portfolio. Our team has done such a good job of turning non op and op that it's.

Speaker Change: It's not something that is even.

Speaker Change: Meaningful part of our go forward Capex programs et cetera, I think.

James Walter: I think... You know, for us, the goal is to have more pieces that we can feed our land team to go do trades and convert non-op into op in a way that makes sense. You know, I think Delaware Basin is a great place because I think there's a lot of win-wins out there like this transaction on a broader scale but on trades on the smaller scale and you know I think for us the overarching goal is we want to operate because we think our cost structure and our execution process truly is differentiated so the way to maximize value for PR is going to be overwhelmingly to operate.

Speaker Change: For us the goal is to have more pieces that we can feed our land team to go do trades and convert non op into off in a way that makes sense I think.

Speaker Change: The Delaware Basin is a great place because I think theres a lot of win wins out there like this transaction on a broader scale, but on trades on the smaller scale and.

Speaker Change: For us the overarching goal is we want to operate because we think our cost structure and our execution price truly is differentiated to the way to maximize value for PR is going to be overwhelmingly to operate. So I think that's the goal here and this is a great package of assets to kind of replenish.

James Walter: So I think that's the goal here and this is a great package of assets to kind of replenish the inventory of trade beta and things that were constantly working and you know I think our team will be all over it you know post-close. Got it. Makes sense. Appreciate the time. I'll leave it there. Thank you.

Speaker Change: The inventory of trade data and things that we're constantly working and I think our team will be all over it post close.

Speaker Change: Got it makes sense I appreciate the time I'll leave it there.

Paul Diamond: Thanks, Paul.

Speaker Change: Thank you.

Oliver Holm: The next question comes from Oliver Holm with TPH. Please go ahead. Good morning, James, Will, Guy and team and thanks for taking the questions. Just had a couple around the acquired assets. First off, just any sort of color you can provide on what the working interest on the operated locations look like, compared to the existing portfolio. And if you could maybe remind us how well cost up in that parkway area compared to your average 750 per foot just given the shallower depth. Yeah, sure. On the working interest, it's going to end up being, at least at close, lower the new operated location required or lower working interest than our average program, kind of call it 50-something percent working interest.

Speaker Change: The next question comes from Oliver Huang with BPH. Please go ahead.

Oliver Huang: Good morning, James will Guy and team and thanks for taking the questions just.

Oliver Huang: Just had a couple around the acquired assets first off just any sort of color you can provide on what the working interest on the operated locations look like compared to the <unk>.

Oliver Huang: The existing portfolio.

Oliver Huang: And if you could maybe remind us how well costs up in that Parkway area compare to your average 750 per foot just given the shallower depth.

Oliver Huang: Yes sure on the working interest is going to end up being at least at close lower the new operated locations require a lower working interest than our average program.

Oliver Huang: All at 50 something percent working interest, but I think for US that's again part of the opportunity here part of the opportunity to trade into that order to buyout. The additional working interest in those operated units to kind of call. It 50 something percent today, but I think over time, we're confident we can get that to 75% plus like the rest of our program.

James Walter: But I think for us, that's, again, part of the opportunity here, part of the opportunity to trade into that or to buy out the additional working interest in those operated units. So kind of call it 50-something percent today, but I think over time we're confident we can get that to 75 percent plus like the rest of our program. And then on cost, it depends a little bit kind of what zone you're talking and where you're comparing to, but call it $100 a foot cheaper than the broader program in Parkway, which obviously makes a big difference on returns and breakevens.

Oliver Huang: And then I costs, it depends a little bit kind of what zone, you're talking and where youre comparing it to have a call. It a $100 a foot cheaper than the broader program and Parkway, which obviously makes a big difference on returns and breakeven.

Oliver Huang: Yeah.

James Walter: Awesome. That's helpful, Culler.

Speaker Change: Awesome, that's helpful color and maybe for another follow up just.

James Walter: And maybe for another follow up, just looking at the acquired assets, is there a similar optimization aspect like we saw that drove the Q1 beat on some of the recent deals you did last year on the PDB on the PDP side? I think, like, from a street production win, a lot of the previous operators' practices in the parkway area are very similar to ours, so I don't expect we'll see, like, a big uplift from switching out artificial lift. You know, based on the work we did in the underwriting, I don't think we have any plans to change it out.

Speaker Change: Looking at the acquired assets is there a similar office utilization aspect like we saw that drove the Q1 beat on some of the recent deals you did last year on the <unk> on the PDP side.

Speaker Change: Okay.

Speaker Change: I think like from a straight production win.

Speaker Change: A lot of the previous operators practices in the Parkway area are very similar to ours. So I don't expect we'll see like a big uplift from switching on artificial lift based on the work we did in the underwriting I don't think we have any plans to change it out I think really the wins in this package is taking that 35% of the acres that are non op and trading them into operated acres.

James Walter: I think, really, the wins in this package is taking that 35 percent of the acres that are non-op and trading them into operated acres, whether that's operated within this package, or operated elsewhere in the PR portfolio, to kind of extract the max amount of value from every acre we bought. So that win probably shows up in ways that are less easy to quantify on a quarter-to-quarter basis, but just kind of overall adds more high-quality, low-break-even, top-quartile inventory. Awesome. Thanks for the time. Thank you.

Speaker Change: Whether thats operated within this package or operated other elsewhere in the PR portfolio to kind of extract the Max amount of value from every acre we bought so that when probably shows up in ways that are less easy to quantify on a quarter to quarter basis, but just kind of overall adds more high quality low low breakeven top quartile.

Speaker Change: Inventory for the business.

Speaker Change: Awesome, Thanks for the time.

Speaker Change: <unk>.

Speaker Change: Thank you.

Unknown Executive: There are no further questions at this time.

Speaker Change: There are no further questions at this time I would now like to turn the call over to James Walter Co CEO for closing remarks. Please go ahead Sir.

James Walter: I would now like to turn the call over to James Waller, co-CEO for closing remarks. Please go ahead, sir. Thanks, everyone. As you can tell by today's call, we're really excited with our team's performance during the first four months of the year. Our operational momentum builds on the progress we made last year, and we're excited about the opportunities that recent volatility has presented to Permian Resources. We truly believe that it's during times like these that the strongest companies can differentiate themselves and create outsized value for shareholders that compounds over the long term. Thanks to everyone for joining the call today and following the Permian Resources story.

Speaker Change: Thanks, everyone. As you can tell by today's call. We're really excited with our teams performance. During the first four months of the year, our operational momentum builds on the progress. We made last year that we're excited with the opportunities that recent volatility has presented the Permian resources, we truly believe that it is during times like these that the strongest companies can differentiate themselves and <unk>.

Speaker Change: Outsized value for shareholders that compounds over the long term. Thanks.

Speaker Change: Thanks to everyone for joining the call today and following the Permian resources story.

Speaker Change: Yes.

Unknown Executive: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.