Permian Resources Q1 2025: Unpacking Contradictions in M&A Strategy, Cost Efficiency, and Capital Allocation
Earnings DecryptMonday, May 19, 2025 11:54 pm ET
2min read
M&A strategy and deal size, cost reduction and efficiency gains, M&A strategy and acquisition costs, capital allocation and share buybacks, and M&A strategy and focus are the key contradictions discussed in Permian Resources' latest 2025Q1 earnings call.
Strong Financial Performance:
- (PR) reported the highest free cash flow per share in its history of $0.54 for Q1 2025, driven by lower per unit costs and solid production performance.
- The company's balance sheet showed a significant improvement, with an increase in cash from $479 million at year-end to approximately $700 million on March 31, and leverage reduced from 1x to 0.8x.
Production and Cost Reduction:
- Oil production reached 175,000 barrels per day, and total production was 373,000 barrels of oil equivalent per day, exceeding expectations.
- PR reduced controllable cash costs by 4% and D&A cost by 3%, landing at $750 per foot for the quarter, contributing to an adjusted operating cash flow of $900 million and adjusted free cash flow of $460 million with $500 million of cash CapEx.
Strategic Acquisitions and Investment:
- PR announced a $608 million bolt-on acquisition in New Mexico, consisting of approximately 12 Boe per day, 13,300 net acres, and 8,700 net royalty acres, offsetting its existing operations.
- The acquisition is expected to generate over 5% free cash flow per share accretion, enhancing PR's low-cost production base and long-term growth prospects.
Share Repurchases:
- PR executed a share buyback in early April, purchasing 4.1 million shares at an average price of $10.52.
- The buyback was part of a broader strategy to capitalize on market volatility by increasing ownership in a cost-effective manner and not treating buybacks or acquisitions as either-or propositions.
Strong Financial Performance:
- (PR) reported the highest free cash flow per share in its history of $0.54 for Q1 2025, driven by lower per unit costs and solid production performance.
- The company's balance sheet showed a significant improvement, with an increase in cash from $479 million at year-end to approximately $700 million on March 31, and leverage reduced from 1x to 0.8x.
Production and Cost Reduction:
- Oil production reached 175,000 barrels per day, and total production was 373,000 barrels of oil equivalent per day, exceeding expectations.
- PR reduced controllable cash costs by 4% and D&A cost by 3%, landing at $750 per foot for the quarter, contributing to an adjusted operating cash flow of $900 million and adjusted free cash flow of $460 million with $500 million of cash CapEx.
Strategic Acquisitions and Investment:
- PR announced a $608 million bolt-on acquisition in New Mexico, consisting of approximately 12 Boe per day, 13,300 net acres, and 8,700 net royalty acres, offsetting its existing operations.
- The acquisition is expected to generate over 5% free cash flow per share accretion, enhancing PR's low-cost production base and long-term growth prospects.
Share Repurchases:
- PR executed a share buyback in early April, purchasing 4.1 million shares at an average price of $10.52.
- The buyback was part of a broader strategy to capitalize on market volatility by increasing ownership in a cost-effective manner and not treating buybacks or acquisitions as either-or propositions.
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